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Heidi's Makes Deal for Frozen Yogurt Franchises in Japan

October 06, 1987|JOHN TIGHE | Times Staff Writer

Japanese consumers soon will be tossing out tofu in favor of frozen yogurt if Laguna Hills entrepreneur Heidi Miller has her way.

And the 32-year-old, one-time world champion body builder's growing company stands to reap a considerable financial benefit from those changing tastes, officials of Heidi's Frogen Yozurt said Monday.

Under a franchise agreement with two Japanese partners, Heidi's--which currently sells frozen yogurt from 69 stores in the United States--will open as many as 350 stores in Tokyo and other Japanese cities over the next three years, company officials said.

Nissin Sugar Manufacturing in Tokyo and a second Tokyo company, which officials at Heidi's declined to identify, have signed a master franchising agreement that will make Heidi's only the second frozen yogurt seller in Japan--where the product is a popular but acquired taste.

The Tokyo companies have given Heidi's an initial deposit, and will pay a substantial development fee when final contracts are signed, according to Edwin Benson, Heidi's vice president of finance. Once stores open, Heidi's will receive ongoing royalties based on gross store revenues. Benson would not disclose financial terms of the deal.

In 1986, however, Heidi's collected $692,815 in fees from franchisees and booked an additional $3.5 million in revenue from the sale of yogurt and other supplies to about 50 franchise shops.

The 5-year-old company, which has yet to make a profit, went public in February.

In addition to the eight stores it owns and 61 shops that it has franchised, Heidi's has sold 96 franchises for domestic stores that have yet to open. The Japanese deal is by far the company's largest.

And the Japanese "want yogurt," said Jagdish Sheth, a professor marketing at the University of Southern California. "They don't like the taste of it. But they acquire it," he said.

Sheth said he believes that Japan is a healthy market for frozen yogurt because many Japanese consumers are striving to modernize their life styles, because the country's population is aging and seeking a healthier diet as it does so, and because the Japanese government has encouraged consumers to learn the food habits of the rest of the world.

Japan's craving for American frozen dairy products was ignited with the entry of Baskin-Robbins and Haagen-Dazs stores. "You see them all over, and they're very busy," said J. Mark Ramseyer, a UCLA law professor and frequent traveler to Japan.

Blend May Be Modified

Heidi's may have to modify its California-blend yogurt to appeal to slightly varying tastes of the Japanese consumer, but the change will be minimal "and we'll have to OK any changes they want to make," said Benson. He said company officials haven't decided whether to prepare the product at the company's current supply plants in California or to go to Japan for production.

The company's customer base, in Japan as in the United States, is one seeking healthful foods that are low in fat and calories, so Heidi's won't be competing with Baskin-Robbins in Japan.

Its competition will be J. Higbee's, a Rancho Cordova company that opened its first Japanese store in March and currently has 13 outlets there. "It's like starting your company all over," said Gary Nelson, president of J. Higbee's. But the effort has been worth it, he said, and several of his chain's top-producing stores are in Japan.

"It's not like going into Texas," Ramseyer said. "You must make sure you've teamed with a company that will work for you. And it takes a huge investment. Real estate is very expensive in Japan."

Frank Hickingbotham, president of TCBY, a 700-store frozen yogurt chain in Little Rock, Ark., said his company has investigated expansion into Japan, "but we have to move very slowly."

Hickingbotham said expanding in the familiar U.S. frozen-novelty market--valued at $1.6 billion annually--is easier than traveling thousands of miles.

HEIDI'S FROGEN YOZURT INC. AT A GLANCE

The 5-year-old company was started with a single shop in Irvine by Heidi Miller, former body-builder and athletic equipment sales representative. The company's name, a deliberate spoonerism, was selected to make it stand out from other frozen yogurt suppliers. Now headquartered in Laguna Hills after going public in February, Heidi's has 103 employees.

Year ended December 31: (in thousands) 1986 1985 1984 Revenue $4,242.2 $1,071.3 $350.5 Net loss 392.1 246.4 34.6

Assets $1.4 million

Employees 103

Shares outstanding 54.2 million

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