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Frozen yogurt stores make $2,100 a day selling 500 cups at eight ounces each and it was the business that I almost started instead of starting my gym

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So I know a ton of about it and I will tell you how it works and when what you can use from psychology that I learned from yogurt stores that you can apply to your business today

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Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning

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I'm trying to build a billion dollar thing with acquisition.com. I always wish pesos must can buff it a document to their journey

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So I'm doing it for the rest of us. Please share and enjoy

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When I was 21 years old

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I decided that I wanted to be an entrepreneur and I was deciding between which business I should start and after looking at the entire world of

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Opportunities the three businesses that I was considering starting was either a test prep business because I'd done really well on my standardized tests

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And I thought I could teach other people to do it in charge money for it fitness because I was in shape

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I liked fitness people always talks to me about it

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And I thought maybe I could make something there open a gym and the third was frozen yogurt

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And so I did an extensive amount of research on how to open a frozen yogurt store and this was back in

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2011

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2012 right when you know frozen yogurt was just booming

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It was this brand new thing it made a big comeback and I wanted to ride that train

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So a couple quick things that you may not know about frozen your stores in general

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They on average make from 715 800,000 dollars a year

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They run margins between 10 and 15 percent the average menchie's owner for context makes 93,000 dollars a year take home

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Not as sexy as I thought it was when I was trying to get into it

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I thought 800,000 a year that means I make 800,000 a year. I'm gonna be rich, right?

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It doesn't really work that way and it's also a business that has variable costs that are high

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So the more more yogurt people buy the more actual cost of goods that you have in order to fill on it right now

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The reason that I think frozen yogurt is interesting is that they have a handful of psychological features for selling more product that I think anyone can use

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It's a for context 800 ish,000 a year the average store that we're talking about does

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2191 a day in revenue so

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2,000 plus dollars a day, but what does that mean in take home?

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What does that mean in owner pay means $328 a day in owner pay not as sexy, but still kind of cool

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But still not as sexy as you might think and so when you walk and you're like man these guys must be printing money

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Well, you've got strawberries that are going bad

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You've got machines that are breaking in the back. You've got hard cost of yogurt

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You've got a retail lease that's nice probably probably located with good signage good foot traffic

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Good track like actual traffic in front of it ample parking like there's lots of other things that go into this business

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And on top of that if you wanted to buy into a franchise most franchises have 6% ish of top line that goes straight to them

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Now that may not sound like much, but if you're running 10% margins that's 60% of your take home

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So they have figured out a way to take the majority of the profit and their franchisees and what most people don't know is that

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The franchises will structure their fees such that they will get it so you make just enough that you can keep going and maybe if you're a good operator open another location

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But not so much that you're going to get rich on it

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So they're only looking to optimize to beat the return on capital of the stock market by a decent amount

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And so if the stock market gets you 10 they're going to try and get 20 to 25 and they're going to squeeze off the top and take the rest because of how good their model is

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Things you didn't know now the flip side of that is that if you are into a franchise then

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Ideally, you should be saving enough on bulk purchasing because they're buying for 200 plus locations that they can save you on hard costs of things like yogurt, fruit, spoons, cups, machines, etc

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Right the converse of that though is that many times when you're starting the franchise

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They will upcharge you on all of those things because they're trying to make money too

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So there's the theory and then there's the practicality now a fun thing that I did when I was looking at opening my first yogurt store

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Is I went on a site called Rasmus.com

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And what they do is there it's a business foreclosure site and so I got my first gym equipment from that foreclosure site for 13 grand

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All the gym equipment from a gym that went under now

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I looked I did a cursory search on there and there were three frozen yogurt stores that were franchises that went under

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And the most expensive in terms of I could buy everything inside the store the most expensive the three was 20 grand

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So if you're trying to get into this world you want to go open a restaurant you want to open a gym whatever

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Go find foreclosure sites and if you're like oh, well, they don't there's no gym that's on there just wait

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There will be right or just wait there will be a yogurt store

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You just got to wait and I sat there and I'd refresh every week until eventually one came up and I bought it

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All right, and so if you can think like that

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One of the things is a franchise won't you do that because that's where they make their money

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But there are ways to open these things for cheaper

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Now the average cup size is eight ounces that people will buy

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The average split between toppings and yogurt is 75 25 so 25% of people's weight is topping 75% is yogurt

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It's best for the store owner to have as much yogurt as possible in the cup because the toppings are more expensive

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So toppings cost between 10 and 40 cents per ounce most places charge between 25 and 60 in ounce

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And so they can even break even or lose money depending on which toppings you're going to get the fruit

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It's costing them money right but they make up for it in the fact that yogurt costs them by eight cents per ounce

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And they charge 50 even 60 sometimes that's where the margin of the business exists

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But I will tell you when you're working on margins that are even like 70 percent

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That means that you have 70 percent left to cover everything out

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So if you want to run a 50 percent margin business for example

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Then you'd have to take 20 percent of your top line and pay every other bill very hard to do

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So for that 2100 dollars a day ish that means that they're selling roughly

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500 cups a day of yogurt on average with eight ounce cup

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Now you may have heard of some of these places golden spoon yogurt land men's cheese pink bearing like the number of yogurt stores or frozen

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Yogurt's are endless and the reason for that is because there's demand for it people want yogurt and they go for it

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If you search frozen yogurt store near you you probably have 30 locations that open up

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The thing is is that

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Most people and of all those brands most of them are commoditized meaning there's very little difference between a men's cheese and a yogurt land

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And a golden spoon there's just not a lot of difference and it's because in my opinion

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It's been a poorly competed marketplace

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solely done by franchisors who are trying to sell as many locations as they possibly could rather than build a brand

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So if you were to compare the yogurt world compared to the fast food world of like chicken sandwiches

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There is no Chick-fil-A of the yogurt world because if there were they'd be dominating

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And I think the underlying lesson is that if you look at any industry

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There is the potential to have an amazing business inside of it even if it is a commodity today

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You can't outcompete them all you have to do is walk into any yogurt land and see the floors are sticky

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The chairs are all over the place the cups are a mess the toppings are in between all the stuff

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Simple cups are stirring on the side

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Right and one of the one of the nozzles is out and it says out of order

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Right everywhere and the girl behind the counter is on her iPhone when when you walk in doesn't say hello

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Right like it doesn't take a lot to win

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Right and most times just to beat everybody you got to be worth better than the bottom 25% and you make money

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Right, so it's not hard to win there now one of my favorite things that I learned from these yogurt places

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One of the big breakthroughs that I think they had was actually how they priced all right, so hear me out

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They if you recall like the ice cream world the dessert world is usually sold by cup

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You get a small you get a medium and get a large you got a kind of want to have it got a want to have it got a love to have it

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Right, they all have their different little sayings for it. You got small medium large whatever they flip that and made it wait

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The reasons psychologically this is so important is that

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The consumer gets to pick how much they spend and so what happens is in a normal setting someone might fill up a cup

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Get to the counter and see seven dollars and be like oh, I'm such a fat ass

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Rather than when you buy one off the shelf and then you see the seven dollars and they're like wow this place is so expensive

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Because there's an element of control on the consumer side

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They are the ones who bear some of the accountability responsibility for that fact now the second thing that they did that I thought was brilliant

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And if you guys notice this but they used to have small normal size cups at your glance

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And this is what I'm guessing happened because this is probably how these types of innovations occur

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Someone I will bet you a few years ago ran out of small cups

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And then people only had the medium and large cups left and they realized that at the end of the day

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Their sales probably went up by 20 or 30 percent and they wondered I wonder why our sales went up

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It was because when you give people a bigger cup

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They will fill more of it because it is the projection of the expectation that they have they're like oh, I guess this is standard

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And so it shows you the default the the power of the default option when selling anything

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And that's why assumed closes and things like that are so powerful when you say hey do you want this or this if you say

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And you can even listen for this at fast food places. They're like hey, do you want a medium or a large coke

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They have a small option, but they want you to pick between the large ones

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You're a land and those ones went a step further and just remove the small option because it is self-served

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But if you got a small amount of yogurt in a bucket-sized cup

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It just looks weird you have to like get your hand inside of it just to just to scoop the darn thing out

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But they did that and by extension were able to raise the amount of yogurt that people bought probably by a large percentage

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Every single time and not take the blame for it because they're the one with the hand on the nozzle

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Now you'll also know that the order in which they present the items are reverse order of the cost to them

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So they start you with the cheapest option

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This is exactly how the phase work too

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They want you to fill up on the salad and then they put the seafood all the way at the end

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Because they want people to fill their plates before they get the most expensive item

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They'll attract you with the expensive thing

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But they'll put it at the end of your self-service line

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So you have the yogurt which is the highest margin first and then you'll have your dry items that don't go bad

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Waffle you know crumbled Oreos things like that whatever and then you have the fresh fruit that goes bad that cost more money by ounce

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And so they get people to fill up their cup in the beginning with the highest margin

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Then they sprinkle on a little bit of slightly lower margin

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And then when you have almost no room left then you put your few fruit on top because if you just filled the whole thing up with bananas

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They be breaking even right actually bananas the cheap fruit

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But you get the idea if they filled it up

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Well like if you get one of these little guy up hound of strawberries

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It's like if you get a retail it's like ten bucks

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Like who you put that pound on the machine

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ounces there cost you 60 cents

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16 ounces like they'd be pretty much breaking even on that right so think through it like that

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Amos in Asian quick break just to let you know that we've been starting to post on LinkedIn and want to connect with you

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All right, so send me a connection request and note letting me know that you listen to the show and I will accept it

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There's anyone you think that we should be connected with tag them in one of my or lalus posts

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And I will give you all the love in the world. All right, so let's get back to the show

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Now if you really want to have a fun fun experiment take one of the Hershey syrup things and just put it on

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Put it on the on the scale and you can see what they're making from just selling that bottle

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So you can actually see the retail price now you can buy pounds of Hershey's for like ten bucks like one of these huge gallon things

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And so that ends up being almost the same price as yogurt, but it's a fundamental exercise

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Corporate noted at the number one way that they are able to get more customers and the highest performing stores did so with better service

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cleaner stores

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More selection and the most important one word of mouth

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Because when you have an average ticket that's so low like yogurt cups right and you have margin even on that tiny little cup

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The only profitable way to really acquire customers is either word of mouth or affiliates meaning other businesses that send you business

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And so they double down on that

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Now when they started years ago Google search was cheap enough that they could actually drive paper click campaigns to get people to their locations

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But nowadays it's too expensive for most of them

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So they almost all have to rely on the quality of the product and the experience

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And so the store that I wanted to open the way that I was going to open my store was that I wanted to create a better experience for somebody walked in

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So I wanted to have Florida ceiling

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Kind of candy safe through

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Experiences and when someone walked in they were overwhelmed with these

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Appearance of selection right and they would just turn the nozzle on there which by the way

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I would have it so they'd be really clunky so too much would fall through so I get a little bit more weight on it

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Spin rail hey capitalist hey did you get too many Oreos? I'm sorry and I always felt like the

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That you should have more selection because the more selection you get people

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This has been proven with buffets people eat more the more options you give them

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So I would want to have one entire side that would be yogurt nozzles with more options because people have more desire

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To do more selection. They want to try a little bit of everything right and then on this side

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I'd have the Florida ceiling things right and at the very end and I might even consider removing fruit

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I would probably look at it

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but

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Then my promotional effort my plan was to go to the university

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So I wanted to be close to colleges and then I was going to partner with all of the fraternities and sororities and have competitions

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Between them to see who could get the most yogurt and then give some sort of swag or something for the fraternity or whatever

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That got the most yogurt during that period of time and I could do that

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I could repeat that process with companies

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I could repeat that process basically with affiliations and that is the cheapest form of advertising when you don't have a lot of money

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Is going to find places where there's buckets of people that you can give them some sort of promotion to bring them in right

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And so if I could do a strong incentive to get people to join my list like a text list

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I could send out coupons on a relatively regular basis and acquire them for next to nothing

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And so I'd run the competitions to bring them in I'd have a crazy incentive to get the text the text number because normally they

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The ask we have now is would you like to join our text list

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To which almost all of us are like nah, I'm good right because you don't feel like getting coupons

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But if you knew that your first order was half off like hey, do you want to say 50% today by joining our text list

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Then you could probably join them it now some people

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The the smaller short-term business might be like when would you give half my profit up well to me

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I just acquired a lead that I can get lifetime value on for two dollars

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I'll take it because I know that I'm going to be able to get them back right or get them to bring a friend

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And I wanted to be able to remind them of my store on a regular basis

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So if you're looking at stuff that you can model from the yogurt businesses and also not do that they're doing poorly

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Here's my list for you number one when you have the option to give a customer the ability to pick their own pricing

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By usage do it because oftentimes people will blame themselves not you when they overuse or overspend think about minutes back in the day or text messages

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Right like the over you if you have the power to use more especially if it's something people like they will do more of it

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But they will associate part of that responsibly with themselves rather than you

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Number two you want to direct the prospects attention in order of your margin

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So you want the most people to see the thing that makes you the most money first

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Not the thing that costs you the most money first because that's where they're most likely to purchase and then purchase the most of it

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So we want to use up as much of their spending wallet or spending power on the things that make us the most profit

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number three

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Selection can bite you in the butt but in a buffet or consumption setting more selection

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As long as they're not conflicting right if you have 26 jars of jam they can only pick one

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It's conflicting

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But if you can have a little bit of all of them like a buffet they eat more

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And so that's why the nuances of psychology are so important

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But if you have a type of product or service where someone can sample multiple things the more things you offer them

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The more things like a buffet they will ultimately buy and consume

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Number four if you were starting a business

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Unless it's something brand new and completely radical

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There's likely somebody who started a business just like yours who failed

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And you can oftentimes buy all their stuff for 10 cents or 5 cents on the dollar and dramatically

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Decrease your startup cost so if you're new or and you're like I only have 20 grand saved up

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You can start a business for that amount of money

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Right and you can get a decent amount of actual equipment for that amount of money when you go to the right seller

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And that is a motivated seller somebody who's lost all their money because they did a business because they weren't watching the right YouTube videos

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Because not part of the nation right and you can buy it from them at a huge discount and then you can start your next thing

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It's a great way. I always looked at that when I was like I'll bet you there's long care things

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There's whatever time of business you want going for business liquidation sales is a great way to buy those equipment back

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Number five the power of the default option

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So the fact that they went from removing the tiny cups to only giving large and bucket-sized cups for yogurt

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Encourage people to use more yogurt themselves and they do that because it looks silly in comparison

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And so whenever there's a possibility that you can set the default where someone would be encouraged by implication

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To use more just like the fast food upgrade of like you want medium or I'm assuming you want to meet him or I am assuming

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You want a 32 ounce when you give the default option many people just like organ donors

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Which by the way it went from I think it was like 10 or 15% of people opting in to being an organ donor

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To getting 80% of people to become organ donors by simply saying you not want to be an organ donor versus do you want to be an organ donor

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So if you have the potential to get seven times more people to say yes to something

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Just imply that that's what everyone else is doing and you can do that through these default options

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Which is one of the most powerful psychological selling tools in existence and no one even knows it's happened to them most of the time

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But you will it's part of the nation and you pay attention to this stuff

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When you're trying to promote something that costs very little money

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So this is very common in consumer businesses especially consumer products CPG et cetera most strategies

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It's very difficult to acquire customers with paid advertising profitably

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That's why a lot of these places race funding et cetera et cetera

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And they have to beg on lifetime value to pay back their cost of acquisition

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If you don't have tons of cash and you're not funded then the two most profitable strategies for acquiring customers

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Beyond just creating content and creating a brand which still is very difficult on a local level

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Is to get word of mouth which is referrals. It's good old-fashioned organic people like your yogurt and they tell other people about it

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Right, and you have a strong referral system in place and this is key

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It's not just having a very good product, which is important

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But reminding and encouraging people to share it. So I'll give you a quick context on this my podcast

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same podcast

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I just decided to say

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Hey guys if you can leave a review and share this with somebody that would be great

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As soon as we did that

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We 20x the number of reviews that we were getting and our growth skyrocketed

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Just because I asked and so step one is having a good product step two

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Ask people to share about it because people just don't think about you because they're thinking about a hundred other things

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But if you remind them at least they're more likely to do it by the way click subscribe and notification bell

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And all those things and share this on the story tag me. Okay cool back to the thing

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the second way

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Is through affiliates which means other businesses that have your other businesses or groups that have your desired audience

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So the difference between a referral is one customer tells another customer this isn't their main game

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An affiliate is somebody who has a bucket of people who are just like your ideal customer

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That's where if I was a yogurt store

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I would go after the fraternity or the sorority or the business groups or the

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The chamber of commerce for the local town

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I would go find those groups and it sounds silly

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But if you give those people a strong incentive and you say hey

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Just so you know at your clothing store

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Anybody goes to your clothing store? I'll give them a free yogurt

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All of a sudden like you just enhance the value with their selling and then you just get to

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Clink your cart to every other person's horse and you let a hundred businesses carry you as they flood you with all their customers

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Just give them something good enough that people actually want to consume it

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That's the key that's how all affiliate marketing works is you just have to make it good enough that it benefits the customer

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A and B that the affiliates actual thing becomes more valuable with the addition of your thing too

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And you could take I said yogurt with a clothing store

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But like you can think about that for anything if I was doing dry cleaning

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Then it would make sense that I go to all the luxury stores and say hey all your people need dry cleaning

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Tump they get the first two or whatever item they get here is on me for the first two

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Well, shit if we can just know that they just made a purchase they're going to have this need

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They probably have other

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Items that are just like that. They'll probably start shipping stuff to you

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And so the big thing is that if you don't have a lot of LTV on your customers

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And you just require a lot of them then you have to go with the more viral more grassroots ways

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But what you do is you systematize that within your business so that the system itself is what becomes duplicatable

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And as a bonus point

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I will tell you my favorite frozen yogurt store because I've been to all of them my favorite frozen your chain is orange leaf

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I believe that they have the best flavors and my opinion

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I think the founder of that franchise or whatever it is actually loves dessert

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Because you can tell by the attention to detail by the cookies that they bring in. They're all these

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Fire they're so good

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The flavors themselves are decadent

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They don't have all these weird fruit things like it's just like caramel chocolate peanut butter

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You know, I mean the good stuff

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And that is my personal favorite of all the different yogurt stores

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And if you haven't been to an origin leaf you should check it out they're very good

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I was not paid to say that they are very good though

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You