Cold product, hot company - TCBY frozen yogurt

Nation's Business,  Sept, 1988  by Michael Barrier

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Cold Product, Hot Company

It is a familiar scene: A company's president is reminiscing about those early days, when he and the founder were getting the company off the ground. "I was there nailing the Sheetrock up," he says, smiling at the memory, "and carrying out the trash, and all those things that were necessary to open that first store"--the first, as it turned out, of more than 1,000 stores, enough to make this company by far the largest of its kind.

You could almost fill in the rest of the picture yourself: the luxurious paneled offices, the mellow white-haired man behind the desk, the portrait of the long-dead founder on the wall. But this time it's different.

The offices are handsome, but new, and they have the air of a place where everyone is too busy to finish that last bit of unpacking. The founder has not gone to his reward but sits in an office just around the corner; he is many years shy of a typical retirement age, and, as chairman and chief executive officer, he is immersed in running his company. The company's president--whose hair is dark--is not looking back over the decades, but over a much shorter span. The company is 7 years old; its president, who is the founder's eldest son, is 29.

The company is TCBY Enterprises, which Frank D. Hickingbotham started as a single frozen-yogurt shop in Little Rock, Ark., in 1981. Hickingbotham's son Herren, now TCBY's president and chief operating officer, managed that first store, but he was there mostly in the evenings and on weekends, because he was starting what he hoped would be a career as a securities salesman.

Herren Hickingbotham had been working at his father's side since he was 12, and a career in frozen yogurt was not in his plans. He did not expect the company to grow to anything like its present size.

For that matter, neither did Frank Hickingbotham.

He started TCBY almost as a hobby. Following two successful careers, first in insurance and then in food processing, he had sold his holdings--"put all my hay back in the barn," Hickingbotham says--and "pretty much retired," at the age of 44.

He had become acquainted with frozen yogurt a couple of years earlier, on a visit to Dallas. He tasted some of the confection at a Neiman-Marcus store and exclaimed, according to company lore, "This can't be yogurt!" That was the name he gave his first store, which sold yogurt made by the same company that supplied Neiman-Marcus.

That first store "was something to do, something to play with, and then go play golf every day," Hickingbotham says. "But the customers just kept coming in."

By the time the store had been open a month, Hickingbotham had decided to open a second one, across the Arkansas River in North Little Rock; he talked his brother-in-law into managing it. Then he opened a third store in Conway, Ark., northwest of Little Rock, with Herren's younger brother as manager.

"After we opened those three stores," Hickingbotham says, "that was all I was going to ever do. By that time, I'd run out of relatives. But customers just kept coming, and finally, by the summer of '82, we were franchising."

The company went public in 1984, after weathering a lawsuit filed by I Can't Believe It's Yogurt, a smaller but older Dallas-based chain; the suit accused TCBY of appropriating ICBIY's name and mimicking its menu and decor. When the litigation ended, TCBY had agreed to rename its stores: "TCBY" The Country's Best Yogurt.

After six years of franchising, systemwide sales this year will approach or pass $200 million. At the current rate, TCBY's own revenues will be well above $50 million, and net income will far exceed last year's $13 million. The number of stores will pass 1,200 sometime late this year. There are now TCBY stores in all the states except North Dakota and Vermont, as well as in Canada and the Bahamas. The first store in Taiwan is scheduled to open this month. No other frozen-yogurt chain is even one sixth as large. TCBY's only real rivals are old and well-established ice-cream chains such as International Dairy Queen and Baskin-Robbins.

And that is exactly the point. Hickingbotham has always regarded ice cream, and not other brands of frozen yogurt, as his real competition. When TCBY rolled out its first national television advertising campaign last spring, its theme was: "Say goodbye to ice cream."

Hickingbotham's strategy has been to battle ice cream to a standstill where ice cream has always been strongest--in its appeal to the taste buds--and then call on frozen yogurt's lower calorie count to administer the coup de grace. Another TCBY slogan sums up this strategy nicely: "All of the pleasure. None of the guilt."

(Although ice cream and frozen yogurt are both frozen dairy products and they do not differ radically in composition, under federal law a product cannot be called ice cream unless it is at least 10 percent fat, by weight. Many premium ice creams are as much as 20 percent fat. TCBY yogurt is only 4 percent fat.)