Rogue Yogurt

Page 3 of 5

In 1985, the business paths of the Brices crossed those of the Gunns.
Dr. Marvin Gunn, a radiologist from Salina, Kansas, set up his oldest son Greg with an ICBIY franchise in Tulsa, Oklahoma. Dr. Gunn put up the franchise fee, and Greg Gunn operated the store. Frozen yogurt stores were faring well at the time, and Greg's success was noticed by brother Mark, working for an Oklahoma pipeline company at the time.

Mark decided to try his hand in the yogurt business. In 1986, Dr. Gunn again paid the franchise fees--this time $32,500--so that Mark could open two ICBIY stores in Colorado. Mark's twin brother Frank ended up taking over one of those franchises in 1991.

In the meantime, yet another Gunn brother --Doug--paid $20,000 for the franchise rights in Boulder, Colorado.

At their business' peak, four Gunn boys were operating four different ICBIY stores, three in Colorado and one in Oklahoma.

The Oklahoma store encountered relatively few problems, and Greg Gunn remains a member of the ICBIY "family." He recently renewed his franchise agreement for another 10 years.

But the Colorado Gunns did not reap the bounty they expected from their franchises. In part, they fell victim in the 1990s to the glut of frozen yogurt outlets that were springing up across the countryside. As frozen yogurt caught on with the public, more and more stores opened up. Then, everyone from grocery stores to corner markets started selling the stuff, and stores selling only frozen yogurt lost much of their drawing power.

Across the country, such stores started going belly-up as quickly as they had opened. Several chains went into bankruptcy or were forced to sell out to competitors.

ICBIY managed to stay in business, but Colorado was never a stronghold for the Texas-based company. It was able to open only seven stores in the state, three of those belonging to the Gunns.

As a result, Mark Gunn says, the brothers had problems getting their supplies of frozen yogurt from the Dallas factory. ICBIY supplies its stores through a network of independent distributors across the country. The distributors buy ICBIY's products from the Dallas factory, then resell them at a markup to the individual stores.

With so few stores in Colorado, Mark says, the ICBIY contract wasn't very profitable, and the company had trouble keeping a distributor to supply the Colorado operations.

Once, he says, the distribution system broke down completely, right before a holiday weekend. Faced with one of his heaviest sales periods and no yogurt, Mark Gunn convinced his twin brother to rent a U-Haul trailer and drive a supply of frozen yogurt from Kansas to Colorado.

Other times, Mark says, he had to drive to Colorado Springs or Phoenix, Arizona, to pick up his supplies. ICBIY was not acting too kindly toward the Colorado members of its "family," Gunn says.

Not only were supplies unpredictable, he says, but there were quality problems as well.

In 1990, some of the ICBIY cartons that did arrive in Colorado were not full. Since franchise owners paid for the yogurt by weight, Gunn says, he was effectively paying for yogurt he never received.

After complaining to ICBIY and getting no response, Gunn says, he called the Colorado Department of Agriculture, which sent one of its weights and measures inspectors to check out a load of ICBIY yogurt.

The inspector found most of the cartons in the shipment underweight, Agriculture Department records show, and would not allow it to be sold in the state. The load of yogurt had to be shipped back to Texas. Underfilled cartons were also found by inspectors in Florida and Oklahoma. ICBIY officials attributed the problem to a faulty valve on a new packaging machine. The company ended up offering reimbursements to its stores for the yogurt they had been shorted.

The ongoing problems got even worse by 1994, when Mark and Doug Gunn owned the only two ICBIY stores left in Colorado. Frank Gunn had turned his ICBIY franchise into a regular convenience store, and the other owners had all closed theirs down completely.

The supply line to Denver kept getting stretched thinner and thinner, Mark Gunn says. "We would run out of cups and stuff," Gunn says. "We were just scrounging to keep things going."

Under the franchise agreement, the Gunns were not allowed to buy anything but ICBIY supplies. Given the problems Mark says he and brother Doug were having with ICBIY's supply chain, however, they decided to cover their bases.

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David Pasztor