Selling organic, natural food through quick-service restaurants can be challenging because entrepreneurs need to educate customers on how their higher-priced food is a good value.
But six-year-old, 16-location franchisor Qoola is demonstrating that there’s demand for high-end natural food in shopping centre food courts.
Last month, the Vancouver-based company opened two restaurants, one at the University of British Columbia and one at Pacific Centre. Owner Warrick Chu told Business in Vancouver that the company also has “firm” contracts to open another 11 franchises in 2015.
“We want to be the Starbucks (Nasdaq:SBUX) of yogurt in the sense that you go to a Starbucks for coffee and end up buying other items such as some oatmeal and a compact disc,” the 31-year-old said.
“We’re known for our yogurt, but our customers can now leave with a chicken quinoa wrap, a coconut macaroon or a coconut water.”
Achieving Starbucks’ scale by selling organic food that has no genetically modified organisms (GMO) would be pioneering, restaurant analyst and Technomic Inc. executive vice-president Darren Tristano told BIV.
He said there’s a trend toward freshly made food but that marketing organic, non-GMO food pushes that envelope.
Indeed, recent earnings disappointments and gloomy outlooks have punished shares of traditional fast-food companies such as McDonald’s Corp. (NYSE:MCD) while the shares of companies serving fresher food, such as Chipotle Mexican Grill Inc. (NYSE:CMG), have risen.
Tristano said consumers are gravitating toward frozen yogurt because it is seen to be healthier than ice cream, but “the market hasn’t been saturated with organic or natural or non-GMO restaurants because the price point tends to be higher and the majority of consumers are looking for taste and flavour, not healthfulness.”
Qoola’s competition for frozen yogurt includes giants such as Menchie’s, Yogen Früz and Pinkberry.
Qoola not only uses fresh yogurt but it lists its supplier, Ontario’s Mapleton’s Organic Dairy Farm, on its website.
Sourcing organic and non-GMO products pushes Qoola’s prices at least 12% higher than those of competitors, Chu said.
Qoola’s first store opened in 2008, and within a year the company had three corporate stores and a first franchisee, who paid a reduced franchise fee from the current $50,000.
Eight separate franchisees now own a combined 15 franchised locations. Chu’s only corporate location is in Richmond.
He said his annual revenue from one-time franchise, 6% royalty and 1% advertising fees, coupled with sales of supplies to his franchisees, is in the $3 million range.
Chu also sells territorial rights to franchisees who want to open multiple locations.
Ontario’s Nutrition House manages Ontario and thus far has two locations. The 11 future Qoola locations are slated to include three in Ontario, one in Alberta, one in Saskatchewan and six in B.C.
So far, 13 of the company’s 16 stores are in B.C.
“When I started this, my dream wasn’t to open a frozen yogurt store,” Chu said. “My dream was to change the way people eat.”
Another Vancouver entrepreneur who had a similar dream, Preet Marwaha, invested under $1 million in December 2009 to launch a retail and wholesale company called Organic Lives, which produced raw vegan meals.
A fire in the building that housed Organic Lives’ café and manufacturing facility snuffed out that venture because insurance did not cover the damages.
“We had a successful business that was booming,” Marwaha told BIV. “We couldn’t keep up with demand. So, consumers are willing to pay for [organic, non-GMO food], but, as an entrepreneur, you have to clearly demonstrate that you really have done your research and you know where your ingredients come from.” •
