Derek Cha is a man on a mission.
Actually, the founder of frozen yogurt chain Sweet Frog is man on a lot of missions. Too many, some would say.
Cha founded the chain two years ago in Henrico County. Sweet Frog now has more than 50 company-owned and franchise stores.
But he expects to have about 200 locations in 20 states by the end of the year. And by 2020, he hopes to have 1,000 U.S. shops and 1,000 international shops.
But there is much more than frozen yogurt on Cha’s mind these days. The 46-year-old businessman is on a quest to create an empire.
That empire includes a gospel rap CD he’s produced, two children’s books coming out later this year and a line of Sweet Frog-themed products.
And, if that wasn’t enough, there are charitable endeavors, here and abroad, a Sweet Frog TV show in the works and talk of a Chuck E. Cheese’s-type establishment to be called Sweet Frog Land.
“He has great vision and he’s not afraid to go for it,” said Debbie Wann, who owns two Sweet Frog locations with husband Eric through a licensing agreement.
The ideas from Cha come so fast and so furiously that employees at the company’s Chesterfield County headquarters have a standard response when the boss drops a new idea on their desk: “What the frog?”
For Cha, juggling so many ideas is not a big deal. He said he has faith that a higher power will deliver what he needs to get things done.
“I’ve been in business since I was 20 years old. I’ve always relied on God to give me wisdom,” he said. “I pray for things and do nothing about it. People just show up and want to help. This has always been my experience. People are going to show up to help me to get to this goal.”
To hear Cha speak of his plans for Sweet Frog, it’s hard to imagine that just three years ago his world financially was turned upside down.
Cha, who moved to the U.S. from South Korea when he was 12, first got into business in 1986 when he opened a frame store near Washington.
He eventually grew the single shop into a national chain, Art & Frame Depot, with more than 80 locations.
But the chain began having problems in 2006. The company’s troubles got worse when the economy faltered and people stopped buying extras for their homes. Cha was forced to sell or close all but one store. He owns one store in Dallas.
He and his family moved out of their home in Potomac, Md, one of the wealthiest suburbs in the Washington market, and came to the Richmond region hoping to start over.
Cha said he was drawn to Richmond “by grace” and didn’t research the area before making the move.
Cha said losing almost everything he built was humbling and enlightening. A religious man, he said the turnaround in his life was a lesson.
“For 20 some years, I was doing so well I needed to fall,” he said.
After almost two years in business, the Richmond-based frozen yogurt chain Sweet Frog is expanding rapidly, looking to start a cartoon series and planning on opening shops in Asia.
“I was very discouraged, but in my heart I always knew that hardship is a blessing. Because through the hardships you come to terms with God. If I’m always doing great, I feel like I’m doing things for myself.”
Cha came to Richmond in early 2009 with the intention of opening another business. What that business would be was unclear.
He was aware of the frozen yogurt popularity, especially on the West Coast, but had no idea what the business was about.
Then one day, shortly after arriving here, he drove by an empty spot in the Downtown Short Pump shopping center in western Henrico County.
“It hit me. My goodness that’s the perfect spot” for a frozen yogurt or ice cream shop, Cha said. The space was next to the Regal Cinemas movie theater and he saw it as a natural gathering place for people.
Cha didn’t have the money needed to buy franchise rights for a yogurt or ice cream chain, so he decided to venture out on his own.
“I didn’t have any money but I signed the lease, sent a business plan and asked the landlord for $70,000 for build out,” he said about renovating the space.
The first Sweet Frog opened June 10, 2009.
Because he was short of funds, he borrowed money to buy seven used yogurt machines and other equipment to open the store.
Three of them, though, kept breaking down, meaning he needed to stay at the shop full time to repair the busted machines.
Even though he was emerging from a bad financial situation, Cha believed the business would be successful.
“I feel like this is the right time,” he said.
Recessions are a good time to start businesses because there is a lot of available space and landlords are aggressive, he believes.
Plus, Cha said despite the downturn in the economy “people are still willing to spend $3 to $4 for a dessert.”
While some might describe Cha as a visionary, getting into the frozen yogurt business is not like inventing the wheel.
Global research firm IBISWorld estimates that frozen yogurt industry’s revenue has risen an average of 5.9 percent annually in the last five years.
The firm said there were about 1,180 frozen yogurt establishments in the U.S. last year, up from 811 in 2002. It predicts there will be 1,200 establishments by 2016.
If Cha’s lofty ambitions for Sweet Frog are realized, he’ll be one of the largest frozen yogurt providers in the U.S., and nearly double the number of existing shops within eight years.
“I do think that’s an ambitious goal,” said Nikoleta Panteva, a senior analyst for IBISWorld.
While Panteva is not aware of Sweet Frog or its business model, she said there are many factors that can affect – positively and negatively – a company’s growth.
For one, big markets are already saturated, meaning the larger chains are moving into smaller cities, like Richmond.
Panteva said companies like Sweet Frog need “to be wary of the competition, which is big.”
The biggest U.S. chains are TCBY with more than 340 shops, Red Mango with about 145 locations and Pinkberry with about 110 shops, IBISWorld reported. TCBY and Pinkberry have Virginia locations, but none, for now, in the Richmond market.
Combined, the three control more than half of the frozen yogurt shops in the U.S.
Locally, the frozen yogurt trend is heating up here as shops continue to pop up in big numbers across the region.
So much so that “2011 might well be remembered as the year of the frozen yogurt treat,” Henrico County-based commercial real estate brokerage Cushman & Wakefield | Thalhimer said in a quarterly report released last month.
But the future is not completely bright and this could turn out to be a bubble, expert say.
Like IBISWorld’s Panteva, the Cushman & Wakefield report questions how much a market can handle. Its report stated that “brokers are wondering at what point this use category gets over saturated.”
And, even as Cha imagines continued growth, IBISWorld is predicting that that the industry will begin to cool off soon and then contraction will begin.
Heidi Thompson helps her son Corbin with his selection at Sweet Frog in Carytown.
“The number of stores is anticipated to shrink starting in 2015, as the market for frozen yogurt becomes overly saturated and small players struggle to remain open. Larger operators will survive, while unprofitable ones will likely consolidate operations or exit the industry altogether,” IBISWorld said.
Panteva said one of the biggest concerns is that the industry is based on consumer tastes.
Right now frozen yogurt is “the dessert of the moment,” she said. “But we go through these consumption” cycles, which means consumers’ tastes can change leaving frozen yogurt chains out in a lurch.
“This could die out,” she said of the frozen yogurt trend.
Cha didn’t always have grand plans for Sweet Frog.
When the first shop opened in 2009, Cha envisioned the chain growing, but nowhere near as fast as it did.
“The vision was to have 50 stores by 2020,” he said – a number the chain reached in about a three years.
He spent so much time at the shop because it was the best way to learn the business. Particularly important to Cha was seeing how the ebbs and flows throughout the year.
Cha and his wife practically lived at the store in the beginning which was tough for him as a father. “With my two young ones, it was difficult,” he said.
Sweet Frog opened in the summer, which is a naturally busy time, but “I wanted to know what would happen during the fall and winter seasons,” he said.
Sweet Frog creates its own self-serve flavors – about three dozen, from Luscious Lemon and Mountain Blackberry to Rootbeer Float and Georgia Peach.
But even from the start, Cha fended off inquiries from people who wanted to buy into the concept. The goal all along was to either sell licenses or franchises, but he wanted to get a feel for how the business worked before moving forward.
“I kept pushing interested parties away because I needed to learn the business so” he could perfect it and teach store operations to others, he said.
Sweet Frog opened its second location, on Hull Street Road in Chesterfield County, on July 7, 2010, a little more than a year after the first location opened.
Early on, the shop in Chesterfield confirmed what Cha believed: He had a winning product on his hands.
Within weeks, the Hull Street location was generating double the amount of sales as the original Short Pump store.
But it was when the third store – a licensed location in Lynchburg — opened that things really took off. That Sweet Frog shop drew more than customers looking for yogurt.
“From this location in Lynchburg, there were probably 20 to 30 people that wanted to open Sweet Frogs. That’s how we rapidly grew,” Cha said.
Cha said that gold-bearing vein of entrepreneurs produced shop owners who were willing to move to North Carolina and other parts of Virginia allowing Sweet Frog to grow at rate that even Cha couldn’t have imagined.
“That store in Lynchburg really made it possible,” he said.
Now, nearly three years after Sweet Frog opened the first store, the chain has 52 stores in four states, including North Carolina, South Carolina and Louisiana.
By this spring, plans call for stores in Tennessee and Maryland.
Ten of the chain’s 52 locations are company-owned. Cha plans to open 10 more company-owned locations.
With Sweet Frog’s rapid growth, Cha is switching over from a licensing company to a franchisor.
As a licensor, he allowed store owner to use Sweet Frog’s names and images. But as a franchisor, Cha and his company are able to have more control over what stores look like and how they operate. Chains like Dunkin Donuts and McDonald’s are franchisors.
For Cha, the next step for Sweet Frog is to grow on the West Coast, but he’s open to any opportunity.
“From coast to coast, north to south, everywhere,” he said. “If there’s a good area, we want to be there.”
Meanwhile, work continues on creating the Sweet Frog empire with new mascots to name, scripts to write and books to release.
While many of his ideas might seem a little far fetched to an outsider, Cha says there is a method to his madness.
“There’s a lot of vision in this company and we’re getting there,” said Raven Williams, senior sales and development manager for Sweet Frog who began in November.
“I’ll be completely honest, at the beginning of every day it runs through my head that there is so much on our plate [that things won’t get done]. But at the end of every day there’s this feeling that we’re doing it,” Williams said.
Cha, for one, is not surprised things get done.
“It just happens for me,” he said. “Miraculously.”
Louis Llovio is the retail reporter for the Richmond Times-Dispatch.