Colorado Real Estate Journal -
Andy Van Gilder, after more than 20 years with his family’s storied and namesake Denver insurance firm, decided to make a career change a few years ago. His timing couldn’t have been worse. “I decided to start a private equity firm and the financial crisis that started in 2008 really hurt me,” he said. Van Gilder started looking for other growth opportunities with a strong model behind it. He wanted to be entrepreneurial and in control of his own destiny. “I started gravitating toward the food service industry, even though it had faced tremendous challenges given the recession,” Van Gilder said. As he dug deeper into that industry, he was more and more drawn to the hot frozen yogurt market. Last year, yogurt stores nationwide generated $1.6 billion in revenues, according to a research report from IBISWorld. Yogurt stores are the fifth largest product segment in the broader coffee and snack shops sector. “Demand is expected to jump in 2012 and will remain robust beyond as the economy improves, the unemployment rate declines and consumers begin to spend money on eating out,” according to the report. One of the reason the market is growing is because the popularity of new chains such as Pinkberry, Red Mango and Yogurtland, the report notes. Others include TCBY and Yogurt Guru. But the one that Van Gilder decided to go with was Ventura, Calif.-based Menchie’s. “I liked their business model and I liked how the franchisor works with the franchisees,” Van Gilder said.
It typically costs about $400,000 to open a Menchie’s. He recently opened his Menchie’s at Colorado Boulevard and East Eight Avenue. “There are seven other Menchie’s franchises in the Denver area including ones in Northfield, Loveland, Lafayette, the Highland neighborhood, Evergreen and the Cherry Hills Marketplace,” which are owned by different individuals, he said. “There are eight right now, but I believe we eventually will have about 50,” he said. “I signed up to build five.” All of the owners of the franchises in the Denver area use Sean Kulzer and Michael DePalma of SullivanHayes Brokerage to find the real estate for their stores. The average size of a store is 1,400 square feet, although Van Gilder’s is 1,775 sf. “It’s kind of a funky layout and we have a very large kitchen,” he said. Kulzer said this is the second “gold rush” in the yogurt craze. “It’s interesting that we saw a similar gold rush in the early ‘90s when TCBY and others started coming out of the woodwork and flooding the market,” Kulzer said. “In this recent upturn, we’ve seen a similar concept kind of come in to fill the cycle.” It’s not a question of if, but when, the market is flooded with too many yogurt stores and the fallout begins, he said. “It’s only a matter of time,” Kulzer said. This time, it will be the mom-and-pop shops that are forced to close their doors, he said. “I believe so,” Kulzer said. “There are a lot of people who went out there and thought they could do it on their own and save the franchise fee. But they are not going to have the buying power, the promotional branding power and the quality control of these big, well run franchises. In that respect, I think the gold rush already is over, at least for the people who think they can do it on their own.” Cyndi Hause and her husband, Rich, thought of traveling down the “mom-and-pop” yogurt road, but are now glad they opened a Menchie’s store instead. Last fall, Kulzer called Cyndi Hause and told her that she had found the perfect location for her first Menchie’s in the Highland neighborhood of Denver. “He said it was a home-run spot for me,” said Hause, who opened the store with her husband last October. “We used to live in Washington Park and so we are really partial to inner city neighborhoods.” She drove to the site at West 32nd Avenue and Clay Street, near North High School, at 11 p.m. the day she received Kulzer’s call, and initially was not impressed. “It was dark and cop cars were speeding by and I thought, ‘What am I getting into?’ But we came back during the day and just fell in love with the neighborhood and the building .And I have to tell you, we love it more every day.” Hause, who lives in Littleton, has hired three North High School students to “be part of our team” and has become a big booster of the school. “I had been in corporate America forever and Rich had been in construction for 30 years and we thought we needed to look at a Plan B and do something different,” she said. “We had seen a few yogurt places around town and we liked the buzz around them. We did a lot of homework, and the more we found out about Menchie’s, the more we liked it. We flew out to California to meet them and we felt more like we were joining a cool company.” She and her husband have agreed to open two more Menchie’s, but she is in no hurry. “Honestly, we have loved operating this one so much that we are taking our time before we open our second one. We want our next one to be just as special as this one.” Van Gilder, for his part, not only plans to open another four Menchie’s, but also create a larger platform beyond yogurt stores. “My larger goal is to build a real strong foundation that potentially can take on multiple brands and manage them, and not just be an operator of three or four stores. I really want to build an organization that operates and manages multiple brands.” He already has seen synergies with other food products with his first store. “We are right next to a Chipotle. Often, we will see parents eat a burrito at our table that they bought next door, while their kids get yogurts.”