Pinkberry's Success Story

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Failing at one business venture is enough to ruin most people, but not Shelly Hwang. The 33-year-old Southern California entrepreneur ran two unsuccessful franchises before hitting the jackpot with the wildly popular frozen yogurt shop Pinkberry. But before the shop even opened its doors more than two years ago, it seemed doomed. Despite threats coming from all directions, Hwang and her business partner, Young Lee, have managed to expand Pinkberry to more than a dozen locations in California and New York and develop a cult following along the way.

After graduating from the University of Southern California and losing money on two stores, Hwang actually had her mind set on opening a teahouse. She found a place straddling business and residential neighborhoods, a spot she hoped would attract a mix of clients. "It was the worst location I've seen in my entire career," says Lee of the 650-square-foot West Hollywood location.

Lee, a 46-year-old South Korean bouncer turned architect, met Hwang when she asked him to help redesign the former tattoo parlor. "I advised her strongly not to do anything over there," he says. The tiny, rundown shop wasn't visible from the street, and the traffic pattern kept cars from being able to make left turns to reach it. But Hwang couldn't be persuaded to drop her idea of a formal English teahouse, so in 2003, Lee set about getting necessary city permits.

When the city denied the partners a liquor license and neighbors wouldn't let them open up a patio crucial for extra seating, Hwang finally relented, and the pair moved on to what for Hwang was Plan D. Pinkberry yogurt isn't a revival of the 1980s' cloying sweet treat but a more modern version. It pairs tart, fat-free plain or green-tea yogurt with toppings like fresh fruit or cereal. Not a bad idea for the perfect climes of Southern California, except that it rained nonstop when the shop finally opened in January 2005.

"In the winter, opening up a cold-dessert shop, it was the worst business decision we ever made," says Lee. Pinkberry's sales were only $70 the first month, mostly from neighbors who felt bad for the owners after having opposed their city permit applications. The partners' fortunes quickly turned, though, and by the next month Pinkberry was already turning a profit.

Within a year, neighbors had new complaints–the shop's popularity created congestion and parking problems. Plus, there were the pink-swirled paper cups left strewn about yards. Something about Pinkberry makes customers willing to wait in long lines. And it's not cheap to get a fix of the low-calorie treat dubbed "Crackberry." The addiction starts at $5 a pop, not counting toppings or parking tickets.

In one month Pinkberry's customers incurred about $175,000 in parking tickets, prompting the Los Angeles Times to write a story about it.

Lee says Pinkberry's appeal goes beyond yogurt. Like any good retailing concept, it often has more to do with the experience of shopping than the purchase itself. He designed the interior for the "iPod generation," with lots of reflective glass surfaces and Philippe Starck tables. "It's like when you get something at Bloomingdale's," he says. "It makes you feel special."

To keep up with growing demand, Hwang and Lee franchised out the concept. Pinkberry has 16 stores, including three that opened in New York within the past seven months. By the end of the year Lee expects 40 Pinkberrys to blanket California and dot Manhattan, with about 18 owned by the pair. The stores get between 800 and 1,500 customers a day, with 16-year-old students lining up next to middle-aged lawyers and celebrities.

The rapid growth has spawned an entirely new set of challenges for Hwang and Lee. Competition has cropped up, including imitators like Kiwiberry, and the Korean shop Red Mango plans to move into the United States and is suing Pinkberry, alleging that it stole Red Mango's concept. Even though Pinkberry's menu bears a striking resemblance to Red Mango's offerings, Lee insists that he borrowed the idea from the Italian gelato tradition and that it can be no more copyrighted than sushi can. While Lee takes the competition seriously, he doesn't think Pinkberry will fold to the pressure. "One problem became another, but in the end those problems became solutions for us," he says.

TAGS:
Los Angeles
small business

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