With credit tight and stiff competition from mom-and-pop frozen yogurt shops, Rocky Mountain Chocolate Factorys new franchise concept, Aspen Leaf Yogurt, hasnt yet taken off as the company hoped.
The companys net income for the first three quarters of this fiscal year declined 17 percent compared with the same period last year in part because its continued investments in Aspen Leaf Yogurt havent produced a boost in revenue.
The company would like to increase the number of franchisee-owned stores, but it recognized startup costs pose a potential obstacle for those who may be interested in the concept, said Bryan Merryman, chief operating officer for the Durango-based chocolate company.
The company has responded by reducing its franchise fees to equal to or less than the competition, Merryman said.
We want to make Aspen Leaf very low-entry cost for someone considering the opportunity, he said. The company wants to convince people considering opening a store independently that its worth it to have the strength of a franchise system behind them, he said.
The company also gave a credit to its current franchisees for the difference between the new reduced franchise fees and the old ones. The move resulted in negative franchise fee collections for the companys third quarter, which ended Nov. 30.
Franchise sales will determine when Aspen Leaf Yogurt will turn a profit, Merryman said.
Positive cash flow at the store level is expected to start in March, but it depends on franchise sales to offset the administrative and development costs the company sunk into the yogurt concept, he said.
Currently, there are five company-owned and four franchised Aspen Leaf Yogurt stores operating in five states, primarily in the West.
The company expects to open four more company-owned yogurt stores by end of its fiscal year in late February.
The company sees the most potential for expansion of Aspen Leaf Yogurt stores not in its home state, but in the Midwest, Merryman said. The yogurt markets in Colorado and California already are saturated.
The yogurt shop slated to open near Main Avenue and College Drive is not an Aspen Leaf, said Kenn Miller, senior vice president of operations. The company would like to open a frozen yogurt shop in Durango, but it hasnt found the right location yet, Miller said.
The chocolatiers newest overseas venture is a kiosk that opened in Japan just before Christmas.
The company is so encouraged by a strong first month of sales that it may consider extending its reaching into China and other Asian markets, said founder and President Frank Crail.
If the opportunity presents itself, well definitely expand Rocky Mountain Chocolate Factory into those regions, Crail said.
Rocky Mountain Chocolate Factorys revenues were up 4.6 percent for the first three quarters of fiscal year 2012 compared with the same period last fiscal year.
Excluding losses from Aspen Leaf Yogurt, the core of the Rocky Mountain Chocolate Factory business was basically flat in the first nine months of fiscal year 2012, Merryman said.
The company is traded under the symbol RMCF on the Nasdaq Global Market, and its franchisees currently operate 368 stores in 40 states, Canada and the United Arab Emirates.