After a couple lackluster years, Rocky Mountain Chocolate Factory is refining its business model when it comes to the companys new frozen yogurt venture.
The Durango-based chocolatier is taking a break from opening stand-alone yogurt shops in favor of co-branded stores featuring Aspen Leaf yogurt and Rocky Mountain Chocolate Factory confections, said Bryan Merryman, the companys chief operating officer during a conference call with investors Tuesday.
The company plans to open two small footprint co-branded locations in supermarkets in August and will test another company-owned, co-branded store in the coming months.
When the company opened the first Aspen Leaf Yogurt store in December 2010, it struggled to gain ground in a market dominated by mom-and-pop shops. Franchise fees also have deterred startup stores, and in May, the company reported that its Aspen Leaf Yogurt segment had operated at a loss of $586,000 since it opened.
Of the six new stores the company opened in the three months ending May 31, none were Aspen Leaf Yogurt stores. The lack of yogurt store openings drew questions from investors wondering whether springtime wouldnt be the best time to open those stores.
Tight credit continues to play a role, Merryman said.
There is some loosening of credit for certain types of individuals, but not a franchisee who is going to be in business for the first time, Merryman said.
Despite the unfavorable credit market conditions, Merryman reported that the company had double-digit revenue growth in the first quarter driven by increased product sales and an increase in Aspen Leaf yogurt sales. The companys total revenue increased by 12 percent compared with last year, while factory sales and retail sales increased by 11 percent and 16 percent, respectively.
The company also touted its latest ventures abroad: a 100-unit master development agreement covering the country of Japan. The company has opened two stores under the agreement and plans to open test stores in China, most likely in Hong Kong, in the fall.
Initial sales results suggest that the two stores opened in Japan, to date, should significantly outperform typical Rocky Mountain Chocolate Factory stores in North America, a news release to investors said.
The foreign stores also provide a boon to the chocolatiers Durango factory because they buy all their chocolate from the factory, rather than making some in-house. The factory is at about 50 percent capacity right now, so an increase in demand will boost the companys purchasing power for various commodities, Merryman said.