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Pinkberry sets sights overseas

Connection to Starbucks Coffee may help the yogurt chain grow abroad

Pinkberry is ramping up for aggressive global expansion with plans to be in as many as 17 international markets by the end of 2011.

Currently, Pinkberry is swirling its treats in 122 locations in eight countries, including the United States. Now, the chain is expecting to add as many as 30 international locations before the end of the year, in addition to continued domestic growth. Pinkberry opened in Moscow last month, for example, and this week a third location opened in Peru and a fourth unit in Kuwait.

Ron Graves, Pinkberry’s chief executive, spoke with Nation’s Restaurant News on Thursday to discuss the chain’s growth projections and its strategies for selecting international franchisees, which may include a little help from friends.

Putting wind in the frozen yogurt chain’s sails is an indirect relationship with Starbucks Coffee – another brand with booming growth overseas and that has connections with established international franchisees in various markets.

Starbucks Corp. chairman, president and chief executive Howard Schultz serves on Pinkberry’s board. He also co-founded Seattle-based venture capital firm Maveron LLC, which made a $27.5 million investment in Pinkberry in 2007.

Graves, a former general partner in Maveron, also joined Pinkberry at the helm that year.

Even at the time, just two years after Pinkberry was founded in Los Angeles in 2005, the frozen yogurt chain’s potential as a global brand was clear, said Graves.

“When we made the investment with Maveron, we knew it could be a global brand, but we also knew we had to build the right foundation,” said Graves.

Pinkberry does not have a specific strategy to partner with Starbucks’ international franchisees, Graves said. But it’s no surprise that such operators of American brands are familiar with Pinkberry, he added.

“A lot of the partners are aware of Pinkberry because of the investment [by Maveron]. But they partner with Pinkberry because they meet our management team,” he said. “They have gotten to know us and our team and what we’re doing.”

Graves said that while many of Pinkberry’s international franchisees also operate Starbucks locations, not all do.

“We’re looking for the best partners globally,” he said.

Pinkberry joins a growing number of U.S. foodservice brands racing to plant their flags in far-flung nations as the still-struggling U.S. economy attempts to recover.

Starbucks officials this week reiterated the priority of international growth, particularly in Asia. And companies ranging from McDonald’s and Yum! Brands, to Dunkin’ Brands and Brinker International have sights set on foreign markets.

That’s in part because growth overseas appears to be the most promising.

According to market research firm Technomic Inc.’s Top 500 restaurant chain study, sales among international locations in 2010 were up 3.1 percent, compared with a sales increase of 1.8 percent domestically.

Unit expansion abroad also grew by 3.7 percent in 2010, compared with 0.5-percent growth in the U.S., Technomic said.

Pinkberry is not the first frozen yogurt player of its kind to grow around the globe. In fact, the U.S. was somewhat late in its acceptance of the tart-style, healthful yogurt that Pinkberry has helped make popular, but was already known elsewhere.

The Ontario, Canada-based Yogen Fruz brand, for example, has more than 1,200 locations in 25 countries, according to its website. It began in the 1980s, growing rapidly around the globe but avoiding the U.S., which then favored the less-tart variation of frozen yogurt brands such as TCBY. Yogen Fruz didn’t open an U.S. location until 2008, after Pinkberry buzz was well established.

Pinkberry rival Red Mango was established in South Korea before investors imported the brand as a separate entity to the U.S., opening that brand’s first location in Los Angeles in 2007.

In fact, in the early days of the frozen yogurt revival over the past six years, some international bloggers pointed to the similarities between the Red Mango locations of Korea, and the original Pinkberry, a concept created by Korean Americans.

Such comparisons, however, do not appear to have diminished Pinkberry’s growth potential.

Graves calls Pinkberry the “youngest, fastest-growing global retail company that I’m aware of.”

Though the chain has steadily expanded over the years, Graves stalled growth somewhat in 2008 and 2009, in part because of the difficult economy, but also to build Pinkberry’s infrastructure. The chain worked to establishing its board of directors, the management team, the investor base and strong franchisees.

“That took some time,” he said. “But that infrastructure is what’s allowing us to scale right now without sacrificing quality.”

International franchisees, for example, include M.H. Alshaya, a group that plans to open as many as 35 Pinkberry locations throughout the Middle East. The group opened Pinkberry’s first international location, which debuted in Kuwait in 2009.

Graves said Alshaya is an operator of 59 brands with more than 2,000 retail locations, including those of Starbucks, The Cheesecake Factory and Shake Shack.

In Peru, Pinkberry’s franchise partner operates five brands, including Starbucks, Pizza Hut and Chili’s, said Graves.

In selecting franchisees, Graves said Pinkberry looks for more than financing. International franchisees must have multi-unit experience, a deep local knowledge of the market, and share “like-minded values,” said Graves. “We really get to know if people are in this to make a buck or if they bleed Pinkberry, and believe in the brand and where we’re taking it.”

Most of Pinkberry’s international growth so far has concentrated on the Middle East, such as Kuwait, the United Arab Emirates and Oman.

Graves said the location in Kuwait has the highest average unit volume of any Pinkberry in history – though he declined to give specific numbers.

Though international locations are very similar to those of the U.S., there are some regional variations, such as use of dates as a topping in the Middle East.

Graves said he envisions “idea sharing” globally down the road. “Maybe you’ll see something interesting from Lima end up in Moscow,” he said.

In addition to existing stores in Peru and Russia, the chain this year will be opening franchise locations in Turkey, the Philippines, Canada and Morocco, as well as more nations in the Middle East.

Pinkberry will also continue its growth domestically. Currently in 13 states in the U.S., the chain will expand to another six states before the end of the year, Graves said, though he declined to give specifics.

Next up is the first store in Washington, D.C., scheduled to open in May, he said.

Pinkberry is also scheduled to open its first college campus location at Bowling Green State University in Ohio, the first of several campus locations planned in partnership with Compass Group USA.

Other domestic non-traditional locations planned for Pinkberry are in airports. Pinkberry currently has five airport locations, including Los Angeles and San Francisco, and will be in another 10 by the end of the year, he said.

Contact Lisa Jennings at [email protected].

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