Case study: Menchie’s tackles Chinese market
Menchie’s CEO’s mantra, for lack of a better term, he says, is: “Go big or go home.” Amit Kleinberger admits he no longer wants to just play in the Southern California sandbox where self-serve frozen yogurt is a dime a dozen (that’s an old adage, not the cost of a cup of yogurt, which anyone who has ever done-it-themselves knows quickly adds up).
Kleinberger wants to attract the momentum that comes from being first to market. The Encinco, California-based chain expanded first in Canada, where they have 75 units open. “That’s a high number for a company that’s only six years old,” Kleinberger says. Pakistan, Australia and Singapore followed.
Menchie’s opened in Guangshou to long lines. The menu was altered to appeal to the “Western Island palate,” a more tart flavor.
The chain recently signed a deal in China. Their master franchisee agreed to open 180 units over the next five years. The first unit opened in Guangshou.
While six years is young for a company to expand internationally, so is 30 years for a country, which is about how long ago the first U.S. franchisors landed in China. Menchie’s, however, had interest from a viable investor there and pursued the relationship.
Kleinberger lists the challenges: Rent is expensive, even in third-tier cities; the sheer size of the country makes it difficult to get a concentration of stores; and a spotty local supply chain means most products must be imported from the U.S. While the preference is always to find local sources for food, Kleinberger says the milk from China is not perceived as high-quality as U.S. milk—and that’s the sentiment of the customers, not the franchisor.
Importing, of course, adds to the price, which complicates his strategy to make yogurt an everyday purchase, not an occasional treat.
Price point is sensitive, he adds, because while luxury brands are flourishing, the other spectrum is cost-sensitive consumers.
The Chinese love brands with good messaging, which is why his “we make you smile” tagline translates so well there.
His advice: Get to know your partners as people; expect to spend significant money on training; and understand the legal landscape, because there are laws specific to China.