16 Handles Aims to Win in Frozen Yogurt Consolidation

NEW YORK (TheStreet) - Up and coming frozen yogurt chain, 16 Handles believes that it has what it takes to be successful in the crowded industry.

Founder and CEO Solomon Choi opened the first store in Manhattan's trendy East Village in 2008. It now has 37 locations across six states through franchising. It plans to more than double that amount by the end of 2014.

16 Handles has some big shoes to fill though. Frozen yogurt sales topped $760 million in 2012 with TCBY, Red Mango and Pinkberry controlling half of the industry, according to IBISWorld.

IBISWorld forecasts that while industry will see 4.2% growth in revenue over the five years between 2012 and 2017, margins are eroding, given the rising cost of milk, consumers' finicky preferences and competition.

Choi is optimistic about the company's prospects. He says 16 Handles was actually the first store to implement the popular self-serve model whereby customers create their own frozen dessert by pulling the "handle" of one of the store's 16 daily flavors. Self-serve models now make up the largest segment of frozen yogurt stores (at just under 40%).

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16 Handles welcomed TheStreet to its Murray Hill location (which ironically had a Tasti D-Lite down the street) for our weekly Test Kitchen.

An edited transcript of the conversation follows.

With 37 stores now, what are the plans for growth?

Choi: The plan for growth is we'd like to be at a 100 stores by end of next year and at 150 stores by 2015 and also in a couple different countries at that point.

Let's talk about that self-serve model. It's one of the big parts of the resurgence of frozen yogurt. Why do customers love it?

Choi: I think people love it because of the personalization and the customization factor. We all have our different needs and our wants, whether they be dietary restrictions, whether they be satisfying a different type of sweet tooth, so I think having 16 different rotating flavors along with 50-some odd toppings, the combinations are endless depending on one's mood. Maybe I came from a workout and I want to treat myself or I'm really watching my weight and so I want to have something healthier -- people like to be in control of what they intake.