How to start a frozen yogurt business: your recipe for success

Starting a frozen yogurt business is an exciting venture that combines creativity in the kitchen with business savvy. The frozen dessert market is a multi-billion dollar industry, and there's a steady demand for frozen yogurt from families, health-conscious individuals, and students.

This guide will take you through the practical steps of securing funding, selecting the right location, obtaining necessary licenses, and acquiring equipment to help you launch a successful frozen yogurt business in the U.S.

Step 1: Create your business plan and validate your idea

Before you do anything else, you need to understand your local market. Spend a week visiting other frozen yogurt shops. Go during the afternoon, after dinner, and on weekends. Note their customer flow, pricing, and what toppings are most popular. This is your ground-level data.

Market and competitor analysis

For a wider view, look at industry reports from sources like IBISWorld. You can also get demographic data from your local chamber of commerce or the U.S. Census Bureau. Many new owners misstep by not truly understanding the foot traffic and income levels of a potential neighborhood.

Estimate your startup costs

With this in mind, you can start to budget. A frozen yogurt shop's startup costs typically run from $50,000 to over $250,000. Mapping these figures out early helps you build a realistic financial picture. Your main expenses will be equipment and the physical space.

Here is a sample breakdown of initial costs:

• Frozen Yogurt Machines: $5,000 - $15,000 per machine
• Refrigeration and Cold Topping Bar: $3,000 - $12,000
• Initial Inventory (mixes, toppings): $5,000 - $10,000
• Lease Deposit and Build-Out: $20,000 - $150,000+

Here are 3 immediate steps to take:

• Scout three local competitors and document your observations.
• Download a demographic report for two potential neighborhoods.
• Create a preliminary budget spreadsheet using the cost categories above.

Step 2: Set up your legal structure and get licensed

You should consider forming a Limited Liability Company (LLC). This structure protects your personal assets if the business faces debt or lawsuits. An LLC also offers pass-through taxation, meaning profits are taxed on your personal return, which simplifies your accounting.

Many new owners start as a sole proprietorship to save on initial fees, but this leaves their personal finances exposed. Filing for an LLC with your Secretary of State typically costs between $50 and $500 and is a foundational step for protection.

Secure your permits and licenses

Your main point of contact will be your local county health department. You will need a Food Service License, which requires an inspection and can cost from $200 to $1,000. The process can take several weeks, so apply early.

You will also need a general business license from your city or county, which usually runs $50 to $400 annually. In addition, ensure your location has a Certificate of Occupancy and that all employees obtain a Food Handler's Permit, which costs about $10-$15 per person.

Here are 4 immediate steps to take:

• File for an LLC with your state's Secretary of State office.
• Apply for a free Employer Identification Number (EIN) on the IRS website.
• Contact your local health department for their food service application packet.
• Check your city's website for business license fees and application forms.

Step 3: Secure your insurance and manage risk

You will need several types of insurance. General Liability is non-negotiable, as it covers customer accidents like slips and falls. A standard policy provides $1 million in coverage and can cost between $500 and $1,200 annually for a small shop.

In addition, you need to protect your physical assets. Commercial Property insurance covers your equipment and build-out. A frequent misstep is skipping endorsements. You should add coverage for equipment breakdown and food spoilage, as a freezer failure can wipe out your entire inventory.

If you have employees, Workers' Compensation is required by law in most states to cover on-the-job injuries. You might consider a Business Owner's Policy (BOP), which conveniently bundles general liability and property insurance together, often for a better price.

Find the right insurance provider

It is best to work with an agent who understands food service. General agents may not grasp your specific risks. Look into providers like the Food Liability Insurance Program (FLIP), The Hartford, or NEXT Insurance, as they specialize in the restaurant industry.

Here are 4 immediate steps to take:

• Get quotes for a Business Owner's Policy (BOP) from two specialized insurers.
• Confirm your general liability coverage is at least $1 million per occurrence.
• Ask providers about adding endorsements for equipment breakdown and spoilage.
• Check your state's website for its workers' compensation requirements.

Step 4: Find your location and buy equipment

Aim for a space between 800 and 1,500 square feet in a zone approved for food service, often labeled "Commercial" or "Retail." You can check your city's planning department for specific zoning maps. High foot traffic near schools or shopping centers is a great advantage.

Many new owners get locked into bad leases. When you negotiate, you might want to ask for a Tenant Improvement (TI) allowance. This is money from the landlord to help pay for your build-out, which can save you thousands upfront.

Select your machines and supplies

Your frozen yogurt machines are your main production assets. A reliable new machine costs between $5,000 and $15,000. Buying a used one can be risky if you do not get a warranty. You will also need a cold topping bar, refrigerators, and a walk-in freezer.

• Soft-Serve Machines (2-3 units): $10,000 - $45,000
• Refrigerated Topping Bar: $3,000 - $12,000
• Walk-In Freezer/Cooler: $5,000 - $15,000
• Point of Sale (POS) System: $1,000 - $3,000

For supplies like cups and spoons, look at distributors like FrozenDessertSupplies.com. They often have low or no minimum orders for basic paper goods, which helps manage cash flow when you start.

Here are 4 immediate steps to take:

• Identify three potential locations with high foot traffic.
• Ask a commercial real estate agent about typical Tenant Improvement (TI) allowances.
• Get quotes for two new soft-serve machines that include a warranty.
• Browse FrozenDessertSupplies.com to price out your initial inventory.

Step 5: Set up your payment system

Your customers will expect fast, easy payment options. Most transactions will be small and paid with credit, debit, or digital wallets like Apple Pay. Your payment system needs to be quick to keep lines moving, especially during peak hours after school or on warm evenings.

Choose your payment processor

Many new owners don't realize how much transaction fees can impact profits. Traditional processors often charge between 2.5% and 3.5% plus a fixed fee per sale. For a high-volume, low-margin business like frozen yogurt, these costs add up quickly. Look for a solution with transparent, low rates.

For a business that needs to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done.

At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for handling quick lines at the counter or at pop-up events. This rate is significantly lower than the industry average, leaving more money in your pocket.

Getting started is straightforward:

• Get Started: Download the JIM app for iOS.
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.

Here are 3 immediate steps to take:

• Compare the transaction fees of two traditional POS systems with JIM's 1.99% rate.
• Download the JIM app on an iOS device to explore its interface.
• Decide if you will need to accept payments at off-site events like farmer's markets.

Step 6: Secure your funding and manage finances

The SBA 7(a) loan is a popular choice for new food businesses. Lenders typically want to see a 10-20% down payment and a strong business plan. Interest rates often hover a few points above the prime rate. You might want to start with your local bank.

For your machines, consider equipment financing. Here, the equipment itself acts as collateral, which can make approval easier. This frees up your other capital for operational needs. Loan terms usually match the equipment's expected lifespan, from three to seven years.

Plan your working capital

A frequent oversight is to focus only on initial build-out costs, leaving little cash for the first few months. You should have at least six months of working capital set aside. This covers rent, payroll, and inventory before your sales are consistent, often between $30,000 and $60,000.

In addition to loans, look for local or state-level grants for small businesses. The SBA's free Lender Match service can also connect you with approved lenders in your area. These resources can supplement a traditional loan and reduce your debt burden.

Here are 4 immediate steps to take:

• Contact your local bank to inquire about the SBA 7(a) loan process.
• Request a quote for equipment financing for your soft-serve machines.
• Calculate your six-month working capital needs based on your budget.
• Use the SBA's Lender Match service to find potential lenders.

Step 7: Hire your team and set up operations

Build your team

You will likely need two or three part-time "Team Members" to start. Their duties include greeting customers, restocking the toppings bar, running the register, and keeping the shop clean. In most areas, you can expect to pay between $12 and $16 per hour, plus tips.

Every employee who handles food must have a Food Handler's Permit. The process is usually a short online course and test. Make this a condition of employment to ensure you comply with health department rules from day one.

Manage your daily operations

Many new owners misjudge staffing during peak hours, like after school or on weekend evenings. This leads to long lines and lost sales. A good target is to keep your total labor cost between 25% and 35% of your revenue.

To organize schedules, you might want to use a system like Homebase or 7shifts. These platforms are designed for restaurants and help you manage availability and shift swaps easily. Also, create a detailed training plan, especially for cleaning the soft-serve machines, as improper maintenance is a frequent cause of breakdowns.

Here are 4 immediate steps to take:

• Write a job description for a 'Team Member' position.
• Check your local health department's website for Food Handler's Permit courses.
• Explore the features of a scheduling software like Homebase or 7shifts.
• Create a daily and weekly cleaning checklist for all your equipment.

Step 8: Market your business and attract customers

Plan your grand opening and local outreach

Your grand opening sets the tone. A "Buy One, Get One Free" (BOGO) offer during the first weekend creates immediate buzz. Promote it with flyers in local community centers and on social media about two weeks in advance. The goal is to get people in the door.

Once you are open, you can build local partnerships. Connect with nearby schools or sports leagues for a "spirit night," where you donate 15% of sales back to their organization. This builds goodwill and brings in families.

Use simple digital and physical marketing

You do not need a large marketing budget. Start with an Instagram and Facebook page, focusing on colorful, high-quality photos of your yogurt and toppings bar. Consistency is more important than a high ad spend here.

Many new owners focus too much on digital and forget physical marketing. A simple punch card loyalty program, like "buy nine, get the tenth free," can increase repeat visits. Also, a well-placed A-frame sign on the sidewalk can boost walk-in traffic.

Here are 4 immediate steps to take:

• Plan a "Buy One, Get One Free" offer for your opening weekend.
• Draft an email to a local school's PTA to propose a fundraiser night.
• Create an Instagram account and post three high-quality photos of your product.
• Design a "buy nine, get one free" loyalty punch card.

Step 9: Set your pricing strategy

Most frozen yogurt shops price by weight. A common range is $0.55 to $0.75 per ounce. This model is fair to customers and protects your profits. Some new owners price too low to attract traffic, but this can make it difficult to be profitable.

Your target food cost should be 20-25% of the menu price. This leaves a 75-80% gross profit margin on the product itself, before you pay for rent and labor. You might want to track your costs carefully to maintain this margin.

An alternative is to charge a fixed price per cup size, like $5 for a small and $7 for a medium. This is simpler for customers. However, it can be less profitable if people load up on heavy toppings like gummy bears or cheesecake bites.

To find your sweet spot, visit three local competitors. Buy a standard cup from each and weigh it to calculate their effective price per ounce. This gives you real data to base your own pricing on, ensuring you are competitive but profitable.

Here are 4 immediate steps to take:

• Visit three competitors to calculate their price per ounce.
• Decide if you will price by weight, by cup size, or use a hybrid model.
• Calculate your target food cost, aiming for a 20-25% benchmark.
• Set a final price per ounce or per cup size for your menu.

Step 10: Maintain quality and plan for growth

Establish your quality standards

Your yogurt's taste and texture must be consistent every day. Mandate daily taste tests for each flavor. Also, keep a temperature log for your machines. They should hold the product between 17 and 22 degrees Fahrenheit to maintain the right consistency.

To measure service, monitor your shop’s Google and Yelp pages. Some owners ignore negative reviews, which is a mistake. Respond professionally to all feedback. You might also place small feedback cards near the register to gather direct input from customers.

Know when to scale

Once your business is stable, you can plan for growth. A key signal to hire more staff is when your labor cost consistently drops below 25% of revenue. This indicates you can afford more help without hurting your margin. Consistently long lines are another clear sign.

Before you think about a second location, your first shop should be profitable for at least 18 to 24 months. You also need a trusted manager who can run the original store without your daily presence. This is a big step, so your foundation must be solid.

As you grow, basic spreadsheets become difficult to manage. You might want to look at systems like Toast or Square for Restaurants. Their advanced sales and inventory analytics can help you manage a larger operation or multiple locations more effectively.

Here are 4 immediate steps to take:

• Create a daily quality checklist for taste tests and temperature logs.
• Set up Google Alerts for your business name to track online reviews.
• Calculate your labor cost as a percentage of revenue at the end of each week.
• Review the inventory management features of a system like Toast or Square for Restaurants.

Starting a frozen yogurt shop is about more than just dessert; it's about creating a fun experience. Remember that your topping bar is your stage, so keep it fresh and exciting. You have the steps, now go build your dream, one swirl at a time.

And when you open your doors, a simple payment process keeps lines moving. JIM lets you accept cards right on your smartphone for a flat 1.99% fee, with no extra hardware. It makes getting paid easy. Download JIM and get started.