The Yard Milkshake Bar
DEAL
EPISODE SUMMARY
🕓 Air Date: November 10, 2019
Asking For:
$400,000 for 10%
Investor:
Mark Cuban
Deal:
$400,000 for 22% in the new franchise business
PRODUCT SUMMARY
The Yard Milkshake Bar offers extravagant and customizable milkshakes with a variety of toppings and flavors, creating a unique and visually appealing dessert experience.
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Background Story
The Yard Milkshake Bar was founded by Chelsea Green, Logan Green, and Ali Rose Green. Chelsea started her first ice cream shop with her mom in 2010, and in 2017, they opened The Yard Milkshake Bar in Gulf Shores, Alabama. Recognizing the need to stand out in a competitive market, especially during the seasonal influx of tourists, the founders aimed to create an exciting and extravagant dessert destination.
Logan Green’s background includes working in his father’s electrical contracting company, instilling a strong work ethic. Ali Rose Green, married to Logan, joined the team as the Chief of Operations when the demand for their milkshakes soared. The Yard Milkshake Bar combines Southern charm with creative, picture-worthy milkshakes, attracting customers who eagerly wait in line for visually stunning and delicious treats.
The Product
The Yard Milkshake Bar offers a unique dessert experience where customers can design their own milkshakes or choose from pre-designed options. The process is similar to a Chipotle-style setup, with customers filling out menus to customize their milkshakes.
The milkshakes feature various toppings such as edible cookie dough, sprinkles, chocolate drizzle, and more. The menu also includes pre-designed options like the “Old School Banana Split.” The shakes are known for their thickness and richness, with calorie counts ranging from 650 to 1,800 calories.
The franchise model includes a $45,000 franchise license fee for a 10-year license, a 6% continuing royalty on net sales, and an additional 2% royalty for national marketing, making the total royalty 8%.
The average cost to open a franchise ranges from $140,000 to $315,000, including the license fee. The company’s margins on its best-performing store range from 25% to 28%, and a good store can generate sales of $1.4 million annually. The Yard Milkshake Bar has successfully expanded through franchising, with locations in Gulf Shores, Panama City Beach, Fairhope, and Austin.
How It Went
The company’s position before Shark Tank
The Yard Milkshake Bar has demonstrated substantial success, with total lifetime sales of $6.4 million, $3.4 million in sales for the current calendar year, and an estimated profit of approximately $400,000. The company owns four corporate stores and has sold one franchise with another franchise in progress. The business model includes a unique partnership with the ice cream supplier, providing free equipment to franchisees as long as they purchase the supplier’s product.
The corporate store model started in a 1,000-square-foot space, later expanding to 3,500 square feet to accommodate the seasonal demand in Gulf Shores. Franchisees pay a $45,000 license fee for a 10-year term and are subject to a 6% continuing royalty and a 2% royalty for national marketing.
The Yard Milkshake Bar has successfully navigated the challenges of seasonal demand, with the larger square footage ensuring high-volume sales during peak times. The franchise model is structured to provide comprehensive support, including help with finding locations and designing physical spaces.
The Negotiations:
The Sharks were captivated by the delicious and visually appealing milkshakes presented by the founders of The Yard Milkshake Bar. Chelsea, Logan, and Ali entered the Tank seeking $400,000 for 10% of their company. Mark Cuban, recognizing the potential and expressing a desire for a comprehensive deal, made an offer of $400,000 for 22%.
Kevin O’Leary and Lori Greiner were initially interested but became hesitant when they realized that the deal structure might exclude ownership of the existing successful stores. Daymond John opted out due to a strategic conflict with the Sugar Factory’s products. Cuban’s offer was accepted, with the negotiation centered on obtaining a percentage of the new business rather than the existing stores.
Chelsea negotiated Cuban down from 25% to 22%, and the deal was sealed with excitement from both parties. Despite concerns from some Sharks about the deal’s structure, The Yard Milkshake Bar secured a strategic partnership with Mark Cuban, who not only invested but also expressed a shared vision for the business’s future growth.
