Sweet CeCe’s Frozen Yogurt & TreatsStrategic Analysis

7/15/10

Scott Hancockscottdhancock@gmail.com

www.Twitter.com/IknowScottwww.LinkedIn.com/in/IknowScott

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Introduction

Since opening its first location in June of 2009, Sweet CeCe’s Frozen Yogurt & Treats has certainly brought “a new culture” (one of the company’s catch phrases) to the middle Tennessee area. Sweet CeCe’s is, at its core, a self-serve frozen yogurt shop. But describing it in this way is akin to describing Starbucks as “a coffee shop” or Apple as “a computer and electronics company;” one fails to adequately capture the loyalty among its fans or the speed of the company’s growth. However, short-term growth does not always translate to long-term success, and strategy can often be the deciding factor. This paper will analyze Sweet CeCe’s from a strategic viewpoint to determine what strategy the company may currently have in place, what forces are at work in its industry, what competitive advantage may exist for Sweet CeCe’s, and what strategic action could be taken to sustain profits. It should be noted that Sweet CeCe’s is a privately held company; without the benefit of public financial reports, SEC filings, and shareholder meetings, much of this information will be inferred based on knowledge of the local area, information available on Sweet CeCe’s corporate website, and articles about the company in local news media.

Current Strategy: Five Elements of a Frozen Yogurt Empire

In Donald Hambrick and James Fredrickson’s paper, “Are You Sure You Have a Strategy?,” the authors detail the five main elements of a strategy.1 These elements consist of the company’s arenas, vehicles, differentiators, staging, and economic logic. This section will analyze Sweet CeCe’s through the lens of these five elements.

1) ARENAS : Hambrick and Fredrickson challenge executives to “be as specific as possible about the product categories, market segments, geographic areas, and core technologies, as well as the value adding stages…the business intends to take on.”1 Sweet CeCe’s defines part of its arena—namely, its product category—in its full name: “Sweet CeCe’s Frozen Yogurt & Treats.” Sweet CeCe’s operates in the frozen dessert sector (or, perhaps, in the wider realm of gourmet/specialty dessert sector) of the quick service restaurant industry. The inclusion of “treats” within the corporate name could refer to the plethora of yogurt toppings available at the store, or it could hint at the organization’s plans to offer a broader array of sweets or desserts in the future. Based on the gender profiles of the company’s Facebook.com fans and Yelp.com reviewers, the company’s website and store color palette (pinks, greens, and whites), and observations made during a few store visits, Sweet CeCe’s appears to be targeting a market segment of women ages 25-40.2,3 Additionally, given that the majority of its stores are located in Tennessee, it appears that the greater Tennessee area is its current geographic area of focus. Finally, Sweet CeCe’s is active in the last link of the value chain; it serves as the connecting point between a finished product (yogurt) and the end user (customers), while enabling the customer to customize the product through the addition of candy and fruit toppings.

2) VEHICLES : The authors challenge executives to consider, “How will we get there?” 1 In other words…what methods will be used to operate in the chosen arenas? After owning and operating the company’s two original locations, Sweet CeCe’s founders have expanded by “offer[ing entrepreneurs] a license agreement to operate a frozen yogurt business under the single Sweet CeCe’s trademark.” 4

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3) DIFFERENTIATION : Differentiators make up the aspect of strategy that involves “up-front, conscious choices” about “how the firm will win in the marketplace—how it will get customers to come its way.” 1 Many traditional frozen yogurt and ice cream shops carry a large selection of product flavors (e.g.—Baskin Robbin’s iconic “31 flavors”) with a small variety of traditional toppings. 5 Sweet CeCe’s, on the other hand, has chosen to offer a smaller number of rotating flavors (which change daily or weekly) and a dazzling assortment of unique toppings ranging from the traditional (strawberries, chocolate chips, sprinkles) to the peculiar (“Hot Tamales” candy, gummy worms, breakfast cereals). According to the company’s website, this creates over 46,200 possible combinations.6 Ice cream and yogurt desserts at most competing stores are prepared behind counters by employees and served in a choice of three sizes (small, medium, or large)—each with a pre-defined price. Sweet CeCe’s, however, puts the customer in charge. Customers serve as much yogurt as they desire into a “one-size-fits-all” heavy-duty paper bowl, then add toppings to their satisfaction by twisting the dials on dispensers that could be perhaps most closely compared to gumball machines. The customer’s creation is then weighed and sold at a fixed price per ounce. Compared to most ice cream and other gourmet dessert shops, the frozen yogurt offered at Sweet CeCe’s can be considered a relatively healthy alternative; additionally, compared to traditional frozen or gourmet dessert shops, Sweet CeCe’s stores are much more modern in design and layout. However, as will be discussed later, the relative healthiness of the yogurt and the modern store design is not a differentiating factor compared to competing national frozen yogurt chains.

4) STAGING : Staging addresses “the speed and sequence of major moves to take in order to heighten the likelihood of success.”1 “Explosive” may be the only word that adequately captures the speed at which Sweet CeCe’s has expanded as a business. In June of 2009, Sweet CeCe’s opened its first location. Just one year later, the company now has around ten licensee locations open (or opening soon) throughout Tennessee; new licensee stores will also be opening soon in Nebraska, Mississippi, Pennsylvania, and Florida.7 While Sweet CeCe’s guarantees licensees a “protected defined trade area” to prevent cannibalization and over-saturation of a given market, it is unclear if there is a defined strategy as to which markets will be entered in what order.4 The company’s website states that the company “is passionate about finding the right people to help us grow our brand,” but no mention is made of the places they are strategically targeting for brand expansion.8 It appears that potential licensees are screened, met, and approved on a case-by-case basis, with business acumen and financial wherewithal being some of the most important factors.

5) ECONOMIC LOGIC : Economic logic is “at the heart of a business strategy” and is the “clear idea of how profits will be generated…above the firm’s cost of capital.”1 For licensee store owners (and the founders of the company who operate the flagship locations), a Sweet CeCe’s store offers a rather attractive model for earning profits. Since customers serve themselves instead of relying on employees, each store should be able to operate with a minimal staff. In addition, these employees should not need to have any special skills that would require extensive (expensive) training or demand a higher per-hour wage. While specific profit margins on the sale of Sweet CeCe’s frozen yogurt are known only to the business owners, one can make assumptions based on known costs of other frozen dessert

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products. For example, a 1.5 quart container of high-end gourmet ice cream at a typical grocery store costs approximately $6 to $7. Sweet CeCe’s customers happily pay roughly this cost for a bowl of frozen yogurt (estimated at around two cups) sprinkled or mixed with a small amount of toppings. This translates to retail cost of between $18 and $21 for a 1.5 quart container of Sweet CeCe’s frozen yogurt and toppings. Assuming that the wholesale costs of gourmet ice cream are similar to that of gourmet frozen yogurt, it is clear that Sweet CeCe’s is able to earn a rather attractive profit margin by charging a premium retail price.

Sweet CeCe’s founders (the owners of the trademark and the two flagship locations) also have the benefit of an even more lucrative revenue stream: the licensing of the Sweet CeCe’s name to store operators. To open a Sweet CeCe’s store, operators must pay an up-front, one-time fee of $30,000 and an unspecified “continuing monthly royalty.”4 With new stores opening at a rate of almost one per month, the private owners of the company should easily earn over $360,000 in annual revenue in licensing fees alone…and the main expenses associated with this revenue are the costs of marketing and branding the Sweet CeCe’s name. Most of this marketing is done online through Facebook.com, Twitter, and the company’s own website, which are rather inexpensive or free to use (aside from the payroll costs of a dedicated marketing employee or freelancer to maintain/update those sites). Additionally, much of this marketing would likely be done anyway if only the two flagship stores existed; the licensing arrangement allows the private owners of the company to spread these costs among a chain of individual store operators and earn a healthy profit in excess of these costs.

May the Force(s) Be With You: Sweet CeCe’s and Michael Porter’s Strategy Theory

Harvard economist Michael Porter holds that “industry structure, manifested in the [five] competitive forces, sets industry profitability in the medium and long run.”9 A company’s strategy, then, must “build…defenses against the competitive forces or find…a position in the industry where forces are weakest.” 9 This section will analyze Sweet CeCe’s through the lens of Michael Porter’s five competitive forces. For the sake of this analysis, we will adopt a three to five year time frame and broaden Sweet CeCe’s geographic reach to the southeastern United States (assuming that the company will expand into several southeastern states during that time).

1) THREAT OF NEW ENTRANTS : According to Porter, “new entrants to an industry

bring new capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete.” 9 In other words, the possibility of new competitors entering the frozen yogurt or ice cream market could reduce the profitability or long-term success of Sweet CeCe’s. Given the sudden, newfound popularity of frozen yogurt, the apparent ability to generate high profit margins in the frozen yogurt business, and the current absence of a viable competitor in the local area, the threat of new entrants is very high. In fact, Pinkberry, the California-based frozen yogurt chain that may have been the inspiration for Sweet CeCe’s, has already announced planned store openings in Georgia, North Carolina, Florida and Nashville, TN.10 Red Mango and Yogen Fruz, two more frozen yogurt chains, are expanding rapidly throughout the U.S.11,12 In addition, Tasti D-Lite—a national chain with over fifty locations—just opened its first two Tennessee locations.13 While the threat of new entrants is high, there are a few barriers to entry faced by potential new competitors.

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First, Sweet CeCe’s does enjoy some supply-side economies of scale; given that most of its stores are currently located in the middle Tennessee area, the costs of its promotional and branding efforts are spread among several stores (in turn, the benefits of those efforts are also enjoyed by multiple stores). Pinkberry, Red Mango, Yogen Fruz, and Tasti D-Lite will be able to scale this barrier to entry fairly easily; given that they have a large number of existing stores and experience in promoting them, they will be able to leverage internal economies of scale for branding and promotion. New independent entrants—those attempting to start their own yogurt shop apart from any license or franchise affiliation—will find the economies of scale associated with their own promotional efforts to be much more challenging. Sweet CeCe’s also tells potential licensees that they have “signed a national [yogurt] distributor and will continue to work on reducing prices as our purchasing power grows.”6 This would seem to indicate that Sweet CeCe’s benefits from economies of scale with its yogurt supplier; ordering greater quantities (due to having multiple store locations) brings lower wholesale pricing. Pinkberry, Red Mango, and Tasti D-Lite likely have similar (or greater) economies of scale with their yogurt suppliers, making this barrier to entry a non-issue; new independent yogurt shops, on the other hand, would find this barrier to entry a bit more challenging.

Sweet CeCe’s may benefit slightly from demand-side benefits of scale, another barrier to entry. Namely, as more and more people learn about Sweet CeCe’s (often through word of mouth) and become customers, it becomes more likely that larger groups and networks of friends will also become Sweet CeCe’s yogurt aficionados. Those who frequent the restaurant are passionate evangelists for the brand; those who haven’t visited may be left with the impression that they are “missing out” and often visit just to see what all the talk is about. These new visitors are often compelled to spread the word about this unique new experience and (perhaps unintentionally) become part of a larger grassroots promotional network.

Capital requirements may pose another barrier to entry for potential new entrants. Independent yogurt shops could open without a large capital investment, but due to the other barriers listed here, they likely would not seriously threaten the long-term viability of Sweet CeCe’s. The real challenge for Sweet CeCe’s is the risk of Pinkberry, Red Mango, and Tasti D-Lite store locations flooding the market. However, this risk may be somewhat mitigated due to those companies’ own high barriers to entry. For example, Pinkberry franchisees must have minimum liquidity of $400,000, minimum net worth of $800,000, and the ability to open multiple stores.14 Pinkberry licenses are also 50% more expensive than Sweet CeCe’s licenses ($45,000 vs. $30,000), and store operators must fly to Los Angeles for two to three weeks of training.14 These stringent requirements might persuade potential Pinkberry store operators to simply open a Sweet CeCe’s instead.

Porter mentions that “incumbents may have cost or quality advantages not available to potential rivals.”9 Potential new entrants to existing Sweet CeCe’s markets will certainly face this barrier; most Sweet CeCe’s customers had their first gourmet frozen yogurt experience at a Sweet CeCe’s store. As such, these customers may have a “first love” for Sweet CeCe’s that creates in a deep loyalty. New entrants could find it difficult to persuade existing Sweet CeCe’s customers to visit their stores.

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Customer switching costs and unequal access to distribution channels are two relatively weak barriers to entry. Sweet CeCe’s does have a customer loyalty card program, but the rewards for multiple visits are unlikely to be strong enough to keep a customer’s business if he/she has otherwise decided to satisfy his/her yogurt craving elsewhere. As mentioned above, however, customer loyalty due to Sweet CeCe’s “first mover” advantage may create intangible customer switching costs (feelings of being disloyal, etc.) Additionally, while Sweet CeCe’s mentions that they have “signed a national [yogurt] distributor,” there is no reason to believe that this is an exclusive agreement, or that new entrants could not secure distribution from the same vendor.6 Finally, there is no reason to believe that the final barrier to entry, restrictive government policy, applies in this industry.

2) BARGAINING POWER OF SUPPLIERS: In some industries, suppliers can become powerful enough to wrest more profit out of the value chain by “charging higher prices, limiting quality or services, or shifting costs to industry participants.”9 Depending on the number of yogurt suppliers used by Sweet CeCe’s and the agreements with each supplier, this could be a powerful force. Sweet CeCe’s references the signing of “a national [yogurt] distributor;” if we are to assume that Sweet CeCe’s does indeed source all of its yogurt from one supplier, it is possible that the company could have “all of its eggs in one basket” that is held by their yogurt supplier.6 This is particularly true if the distributor is a diversified food supplier that earns only a small fraction of its overall revenue from the frozen yogurt industry (or if Sweet CeCe’s makes up only a small portion of its frozen yogurt sales); the supplier may be tempted to raise prices for the short term with little concern for the impact such an action may have on the long-term viability of one of its customers or the industry overall. It is interesting that both Sweet CeCe’s and Pinkberry both make their “Original Tart” flavors available at all times (while most other flavors are served on a rotating basis). The supplier(s) of this “Original Tart” flavor may have an even greater amount of bargaining power, as the respective yogurt shops will be unwilling to switch vendors (resulting in a change in flavor) and unable to stop offering the much-promoted flavor in their shops.

3) BARGAINING POWER OF BUYERS : Porter notes that “powerful customers…can capture more value by forcing down prices, demanding better quality or more service…and generally playing industry participants against one another.”9 At this point, it is unlikely that Sweet CeCe’s customers have any bargaining power. The company serves a large number of individual customers, so no single customer has enough power to drive down prices. Since the product is not a necessity, there is little chance that a single customer will try to band together a larger group of like-minded yogurt fans in an attempt to demand lower prices. It should be noted, however, that once Pinkberry, Red Mango, and Tasti D-Lite shops begin to open in Sweet CeCe’s geographic area over the next five years, customers may have a viable frozen yogurt alternative in terms of taste and price. As a result, customers may begin to play the pricing game and seek out incentives to frequent one store chain or the other; this is especially true since switching costs are rather low.

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4) THREAT OF SUBSTITUTES : Substitutes “perform…the same or similar function as an industry’s product by a different means” and “may appear to be very different from the industry’s product.”9 The threat of substitutes to frozen yogurt is actually very high. Customers are all too willing to try the latest craze as far as unique, specialty desserts are concerned. Fondue-themed shops may be popular for a time…followed by gourmet chocolate…followed by cupcakes…followed by frozen yogurt…etc. It is hard to know when the next dessert craze will appear, but when it does, it is always possible that customers may abandon one dessert option (frozen yogurt) for a substitute. Additionally, if casual dining restaurants keep moving toward “all inclusive” meal pricing (appetizer + entrée + dessert for a fixed price), customers may no longer see the need to drive to a separate establishment for dessert. It should be noted that Sweet CeCe’s and other frozen yogurt companies do have the unique advantage of being able to make some health-related claims about their product. Until someone creates a somewhat-healthy donut, cupcake, or pie, it will be difficult for customers to find a substitute for the health claims of frozen yogurt.

5) RIVALRY AMONG EXISTING COMPETITORS : Right now, rivalry in this region’s frozen-dessert industry is fairly low and not very intense. Traditional competitors such as Dairy Queen, Baskin Robbins, and TCBY offer a relatively generic experience that is much different than that of Sweet CeCe’s. Other area frozen yogurt shops (Krave, Tasti D-Lite, Yogurt World Café, and Yogurt Oasis) that offer a product selection and customer experience similar to that of Sweet CeCe’s also seem to be “playing nice” at this point. The competing shops do not directly compete against each other by name in any promotional or branding efforts and seem to share a mutual understanding that price-based competition will drive down profitability for all involved. The rivalry will heat up, however, as more Tasti D-Lite, Red Mango, and Pinkberry locations open in Sweet CeCe’s territory. At some point, the overall market for frozen yogurt will stop growing, and these three chains will—in all likelihood—start to compete against each other in a more direct way for market share. Porter notes that “when all or many competitors aim to meet the same needs or compete on the same attributes, the result is zero-sum competition [where] one firm’s gain is often another’s loss, driving down profitability.” 9

Interestingly, Tasti D-Lite, Red Mango, Pinkberry, and Sweet CeCe’s seem to be competing on similar attributes. All serve their products in similar-looking bowls, tout the health benefits and superior taste of their yogurt, offer a smorgasbord of toppings, target 25-40 year old women, and utilize the same modern, minimalist imagery and graphics (think “Real Simple” magazine). These similar attributes may result in an eventual “zero sum game” with low profitability.

Sweet CeCe’s: The Resource-Based View and Competitive Advantage

According to professors David Collis and Cynthia Montgomery’s “resource-based view, companies “are different collections of physical and intangible assets and capabilities.”15 Those companies that have “the best and most appropriate stocks of resources for its business and strategy” are the most likely to succeed; a company’s competitive advantage relative to others in the industry, then, “can be attributed to the ownership of a valuable resource that enables the company to perform activities better or more cheaply than competitors.”15 This section will

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define Sweet CeCe’s strategically valuable resources and then name the corresponding competitive advantages enabled by these resources.

An initial list of Sweet CeCe’s resources is shown below:

Recognized, valuable brand name Modern store design Desirable, great-tasting, healthy product Young, friendly staff Unique store layout and equipment to enable “do it yourself” service Protected licensee territories to prevent market over-saturation and store competition Fun, unique, interactive store experience that turns customers into eager participants Entrepreneur-friendly licensing terms Selection of demographically-appropriate (but “under the radar”) markets Proficient in word-of-mouth and Web 2.0 marketing

However, this list of resources must be narrowed to a list of strategically valuable resources—those that pass the tests of inimitability (Is it hard to copy?), durability (Does it depreciate slowly?), appropriability (Does the company capture the value the resource creates?), substitutability (Can a unique resource be trumped by a different resource?), and competitive superiority (Whose resource—the company’s or a competitor’s—is really better?). 15 The refined list is below. An explanation is given beside each resource that did not pass these tests.

Regionally recognized, valuable brand name [Passed…but refined a bit to reflect local superiority of Sweet CeCe’s brand name; on a national level, competitors such as Pinkberry, Tasti D-Lite, Red Mango, and Yogen Fruz have more valuable brand names.]

Modern store design [This isn’t hard to copy, may depreciate quickly, and is not markedly superior to modern designs of competitors such as Pinkberry, Red Mango, etc.]

Desirable, great-tasting, healthy product [Sweet CeCe’s frozen yogurt is likely not noticeably more tasty to the general public or considerably more healthy than that of competitors making similar claims.]

Young, friendly staff [This is quite easy for competitors to copy.] Unique store layout and equipment to enable “do it yourself” service Protected licensee territories to prevent market over-saturation and store competition Fun, unique, interactive store experience that turns customers into eager participants Entrepreneur-friendly licensing terms Selection of demographically-appropriate (but “under the radar”) markets Proficient in using “Web 2.0” and social networking sites as marketing tools [This is

easy for competitors to imitate, and many already use Twitter, Facebook, and related sites.]

These strategically valuable resources combine to yield competitive advantages on which Sweet CeCe’s strategy should be based. The first competitive advantage held by Sweet CeCe’s is their stores’ ability to operate with a smaller—and less expensive—staff than most competitors. This competitive advantage is based on the resource of “Unique store layout and equipment to enable “do it yourself” service.” Competing yogurt chains must pay additional

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employees to scoop, swirl, or blend frozen dessert products (and must train them on how to prepare more complex products). But in Sweet CeCe’s stores, both the frozen yogurt machines and the topping dispensers are designed for customer self-service. Sweet CeCe’s customers are eager to carry out functions that are done by paid employees at competing yogurt shops. While a savings of one or two employee per shift at each shop (relative to the competition) might seem insignificant, this “lean and mean” staffing is a definite advantage for Sweet CeCe’s. While existing competitors could attempt to adopt this “serve yourself” model, it would likely require the purchase of additional equipment and fixtures…and would perhaps even necessitate store redesigns.

The second competitive advantage for Sweet CeCe’s is a highly-engaged customer base eager to share the Sweet CeCe’s experience with others. This advantage is based primarily on the resource of a “Fun, unique, interactive store experience that turns customers into eager participants and brand evangelists.” This may sound similar to the resource of “do it yourself” equipment and fixtures mentioned above. However, it is not enough to offer self-service equipment. Automated teller machines (ATMs) and self-scan checkout lines at discount stores have been in existence for years; however, no one raves about the use of such equipment to their friends and invites them along to participate next time. The key here is that Sweet CeCe’s yogurt machines and topping dispensers are fun (or at least engaging) to use; customers pop their bowls out of wall-mounted holders, pull levers to swirl their yogurt, twist knobs to dispense dry toppings, scoop fruit toppings out of bowls, and press buttons to coat their creation in hot fudge or melted caramel. Each shop is a celebration of this unique product creation, and customers are invited to participate in the fun. In this way, the process is almost as important—or more so—than the product. Almost without fail, customers end up describing their experience to their friends and family; this word of mouth marketing creates intrigue and buzz around the Sweet CeCe’s experience, increasing store traffic and reducing the amount that the company needs to spend on paid advertising.

The final competitive advantage for Sweet CeCe’s is their ability to expand quickly into Southeastern markets by opening shops with a very low risk of failure. This advantage is based on the resources of a “Regionally recognized, valuable brand name,” “Entrepreneur-friendly licensing terms,” and “Selection of demographically-appropriate (but “under the radar”) markets.” While Sweet CeCe’s may not have the national reach or Hollywood glamour of other frozen-yogurt chains, it is—for the moment—the most recognizable brand name for frozen yogurt in the middle Tennessee (and surrounding) area. For all of their star-power, the Pinkberry, Red Mango, and Tasti D-Lite brand names are not as valuable in cities where those stores do not yet exist. In fact, many Sweet CeCe’s customers have likely never even heard of those competing national chains. The regionally-valuable Sweet CeCe’s name—coupled with less demanding financial requirements compared to other frozen yogurt chains—make it rather easy for a would-be entrepreneur to open a Sweet CeCe’s location. Additionally, the “protected defined trade areas” guaranteed to licensees allow each store to celebrate, welcome, and promote new store locations in other cities without fear that their own profits will suffer. 4 The company has also proven adept at teaming with would-be licensees to select markets and locations that are ripe for a Sweet CeCe’s location but may be “under the radar” or invisible to national chains. For example, Hendersonville, Tennessee may not be as sexy as New York City or Los Angeles; however, local residents know that it is a great place to open a frozen yogurt shop targeting

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women age 25-40…and it is insulated (for the time being) from direct competition with national frozen yogurt chains who may be focusing on larger cities. All of these factors put the company in a position to expand quickly throughout the Southeastern United States and find a great deal of success with each store opening.

In Closing: Strategic Recommendations

Analysis is wonderful, but without specific, actionable recommendations, companies may be no better off than they were before the exercise. Having viewed Sweet CeCe’s current strategy through Hambrick and Fredrickson’s “five elements” framework, analyzed the industry through Porter’s “five competitive forces model,” and taken a resource-based view of the company to identify competitive advantages, the recommendations below will add action to the analysis. These recommendations will ensure that Sweet CeCe’s remains profitable through the next five years as they expand and begin to compete more closely with national frozen yogurt chains.

#1) Use a hybrid “Island-hopping / Blue Oceans strategy” for expansion. In World War II, the Allies adopted an “island-hopping” strategy for its invasion of Japan; moving from one strategic island to another enabled the Allies to use previously-won neighboring islands as a base for taking the next one.16 Sweet CeCe’s should seriously consider adopting this strategy for its expansion. Sweet CeCe’s licensee store openings will be successful when stores are located closely enough together to benefit from previously-established locations (existing positive experiences and “buzz” within a nearby community, local press coverage, etc.) but far enough away from each other to prevent possible competition between stores. There is a risk that Sweet CeCe’s will begin to view its success thus far as a license to begin opening individual stores in far-flung locations, assuming that these will be equally successful. Social networking has certainly lowered some of the barriers to entering new markets; however, opening individual stores in distant locations at this point is, in many ways, as difficult as opening an independent store and building a business from scratch. It may be very difficult to leverage the Sweet CeCe’s brand (which is fairly well known in the Tennessee area) for quick success in states/cities that are entirely unfamiliar with the concept and hundreds (or even thousands) of miles away from the company’s base of brand evangelists. Opening occasional “lone ranger” new stores in distant cities may not be a bad idea altogether, but such stores should be opened sparingly and strategically as a “home base” for expanding into the surrounding region.

Sweet CeCe’s should also avoid the temptation to over-saturate the middle Tennessee area with store locations. The Allies did not take every single island in their march to reach Japan. In the same way, Sweet CeCe’s should not invest the time and energy necessary to open a shop in every attractive middle Tennessee city at this point. Although flooding the middle Tennessee market may be tempting from the standpoint of short-term profitability, any resources spent toward saturating this smaller market cannot be used to expand Sweet CeCe’s geographic reach. Instead, Sweet CeCe’s should focus on strategically expanding outward from the middle Tennessee area, enlarging the company’s territory a bit more with each store opening. Given the relative youth of this frozen yogurt craze, there are significant benefits to being the first mover in a given city or region. It is likely that the relative geographic strongholds of each national chain will be firmly established in the next year or two, after which any changes in regional market share will come at a great cost. Pinkberry and Red Mango, for example, will likely be the

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dominant players in the western United States, and Tasti D-Lite will likely continue to be the major chain in the Northeast. Sweet CeCe’s has the opportunity to establish itself as the preferred frozen yogurt chain in the Southeast, but it must move now to spread its branches into these states before other competing chains do so.

Finally, as part of this strategy, Sweet CeCe’s should strive to open stores in “blue oceans”—those cities in which no national competitors currently have locations.17 At some point, the potential frozen yogurt market will stop expanding; at that time, head-to-head intra-city competition may likely become necessary. Over the next three to five years, however, there is ample room to grow without directly engaging a competitor that may be better positioned financially and geographically for a long-term battle.

#2) Seek to diversify the sources from which Sweet CeCe’s purchases frozen yogurt. If the company uses only one distributor as the source for all of its frozen yogurt, that supplier may become too powerful (see page 6). Using different distributors for different flavors of yogurt may allow Sweet CeCe’s to play those suppliers against each other to drive down wholesale prices, and will give the company a credible threat with which to fight attempts by suppliers to take more profit from the value chain (by raising prices, changing terms, etc.).

#3) Focus on what makes Sweet CeCe’s unique—the self-service experience. Almost every other national frozen yogurt chain is competing based on taste, health claims, and a modern store design. This will eventually result in a “zero sum game” (see page 7) in which competitors start to compete on price; profitability will inevitably be squeezed from the industry. While Sweet CeCe’s should be nearly equal with the leading national chains on these three elements, it should focus on developing, promoting, and enhancing the uniqueness of its customer-focused, engaging self-service approach. Tasty, healthy, frozen yogurt in a modern setting can be found anywhere; the fun, engaging self-service experience can only be found at Sweet CeCe’s.

#4) Answer this question: What if the frozen yogurt craze burns out by the end of next year? As mentioned on page 7, consumer palettes can be notoriously fickle, and today’s hot new food trend may be tomorrow’s suddenly un-hip fad. In fact, this is not the first time around for the frozen yogurt restaurant industry. Some may remember that frozen yogurt stores spread rapidly during the 1980’s, only to fade soon thereafter from the specialty-dessert landscape (with the exception of TCBY and a few others). Sweet CeCe’s should prepare for the possibility of history repeating itself by selectively testing other desserts, foods, and drinks in its shops. These items, however, need to fit within and enhance the Sweet CeCe’s core experience (self-service, hands-on, customer engagement). For example, Sweet CeCe’s could test opening its stores for breakfast and brunch, turning its topping dispensers into cereal dispensers and encouraging customers to fill their bowls with cereal, milk, and the unique toppings/fruits of their choosing. They could also use Belgian waffles as the “base” (instead of frozen yogurt) upon which toppings are piled in the morning hours. A waffle-maker could be placed in the store alongside cups of pre-measured waffle batter; to make a fresh waffle, the customer simply adds the mix to the waffle iron and sets a timer (this approach is utilized by some hotels as part of their continental breakfast). Finally, Sweet CeCe’s stores could install gourmet single-serve coffee machines; to brew a cup of gourmet tea, coffee, or hot chocolate, the customer simply buys a “K-cup” or pod and loads it into the machine; the beverage brews automatically into their cup, and

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the customer then has the option of shaking/grinding appropriate spices or flavors (nutmeg, cinnamon, sugar, chocolate etc.) into the beverage as desired.17 If demand for frozen yogurt begins to level off or wane at some point in the future, Sweet CeCe’s can then simply begin de-emphasizing its frozen yogurt (perhaps dropping/changing its “Frozen Yogurt & Treats” tagline) and start promoting other menu items a bit more prominently. In anticipation of the menu broadening over the next few years, it might also be a good idea to start considering a new logo; the current logo is simply a non-descript bowl of frozen yogurt that has little branding or customer recognition potential when used apart from the store name.

#5) Counter national competitors’ prominence, history, and ubiquity by stressing regional roots, adopting a “frozen yogurt for the rest of us” approach, and developing deep ties in local store communities. Sweet CeCe’s will likely never be the go-to frozen yogurt of Hollywood actresses (like Pinkberry), the “original” modern frozen yogurt shop (like Red Mango), the largest chain (like Yogen Fruz), or the frozen dessert making a cameo appearance in “Sex in the City” (like Tasti D-Lite). However, Sweet CeCe’s can learn a valuable lesson by looking at the gourmet coffee shop industry. Faced with the national reach, self-importance, and ubiquity of Starbucks, other chains have found success by stressing their regional roots (like Caribou Coffee in the Northwest), adopting an ‘everyman/average joe’ approach (like Dunkin’ Donuts), and developing deep ties with the communities in which stores are located (like Tim Hortons). Sweet CeCe’s should be proud of and perhaps play up its regional roots; this could potentially head off any attempts by national competitors to brand the chain as a knock-off or imitator. On this same note, the company should perhaps stop mentioning that it was inspired by frozen yogurt stores in California; once those California-based stores arrive, Sweet CeCe’s customers may want to visit the competition to “taste the original.” Like Dunkin’ Donuts, Sweet CeCe’s should not be tempted to outclass competitors like Pinkberry and Tasti D-Lite, who seem to ooze glamour and Hollywood sophistication. Instead, the company should assume a posture of self-confidence (and perhaps bemusement at Hollywood excess and star-power) and position itself as a place where people from all backgrounds and economic strata feel welcome. Finally, Sweet CeCe’s should make a concerted effort—before the arrival of competing chain stores—to become a vital part of the local communities in which its stores are located, using Tim Hortons’ “local programs” as a template.19 If the local Sweet CeCe’s coordinates clean-up days at the local park, sponsors local Little League teams, and provides store gift cards at a discounted rate for the local Cub Scout troop to sell as a fundraiser, local residents will be compelled to stay loyal even when the much-hyped national chains open glitzy stores across town.

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WORKS CITED

1) Hambrick, Donald, and James Fredrickson. "Are you sure you have a strategy?" Academy of Management Executive 19.4 (2005): 51-62. Print.

2) "Sweet CeCe's | Facebook." Facebook.com. N.p., n.d. Web. 10 July 2010. <www.facebook.com/SweetCeCes>.

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4) "Sweet CeCe's License FAQ." SweetCeCes.com. N.p., n.d. Web. 9 July 2010. < http://sweetceces.com/wp-content/uploads/2010/05/Sweet-CeCes-License-FAQ.pdf>.

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9) Porter, Michael. "The Five Competitive Forces That Shape Strategy." Harvard Business Review 86.1 (2008): 79-93. Print.

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11) "Find a Red Mango Near You." RedMangoUSA.com. N.p., n.d. Web. 10 July 2010. <http://www.redmangousa.com/locator/showAllLocations2.php>.

12) "Looking for a Yogen Fruz?." YogenFruz.com. N.p., n.d. Web. 10 July 2010. <http://www.yogenfruz.com/storelocator/allstores.php?country=USA&frozen-yogurt>.

13) "tasti -- Find a Center." TastiDlite.com. N.p., n.d. Web. 10 July 2010. <www.tastidlite.com/index.php/Find-a-Center/Find-a-Center.html>.

14) "Pinkberry Frozen Yogurt | Franchise FAQ." Pinkberry.com. N.p., n.d. Web. 10 July 2010. <http://www.pinkberry.com/franchise-faq.html>.

15) Collis, David, and Cynthia Montgomery. "Competing on Resources." Harvard Business Review Vol. 86.7-8 (2008): 140-150. Print.

16) "Battle of Kwajalein." History.com. N.p., n.d. Web. 12 July 2010. <http://www.history.com/topics/battle-of-kwajalein>.

17) Kim, W. Chan, and Renee Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. New York: Harvard Business School Press, 2005. Print.

18) "Keurig K-Cups - gourmet coffee & teas from premium brands." Keurig.com. N.p., n.d. Web. 12 July 2010. <http://www.keurig.com/coffeetea.asp?mscsid=Q3QKGXPEN03X8HRLFSVR4QJVAQNK1LN5>.

19) "Tim Hortons - Local Programs." TimHortons.com. N.p., n.d. Web. 12 July 2010. <http://www.timhortons.com/ca/en/difference/local-programs.html>.

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