Once Block-busted, now yogurt king
David Kahn
Then: Owner, Blockbuster and Subway franchises
Now: Founder, Yogurt Mountain

Until David Kahn's business model cracked like a defective DVD, he'd been doing just fine as one of Blockbuster's biggest franchisees. "I had a huge mansion with five plasma TVs; I was driving around in a Hummer," Kahn, now 49, recalls. "I was getting my picture taken with President Bush."

There was just one problem: His business was doomed. Blockbuster's model, Kahn realized, hinged on the notion that it often didn't have your first choice, though it might have your second or third. Netflix, by contrast, gave you exactly what you wanted. In the spring of 2006, Kahn decided he had to get out. His bank let him do a workout, so he didn't go bust. But this career was over.

With no idea what came next, Kahn announced a family austerity plan. Goodbye went the mansion, the club, and the Hummer. Kahn converted credit card points into California Pizza Kitchen gift cards, just so he could treat the family to an occasional dinner out. But he refused to obsess over the loss of social status. "You don't say, 'This is where I'll always be.' You say, 'This is where I am now.'"

Next Kahn looked hard at his skills, deciding that his expertise was in franchises, not videos. He bought six Subway franchises in mid-2007 and did a stint at the company's training school. "A few months earlier, I had 500 employees," he says. "Now, you've got mustard on your shirt and you smell like bread. But I was fine with that; I was reinventing myself."

It wouldn't be the last time. Six months later, Subway rolled out its "$5 Footlong," smashing Kahn's profit assumptions. He sold the franchises for a small profit, but it was back to square one. What Kahn had going for him was a financial cushion, a supportive family, and a deep belief that he would figure it out. So he cashed in more miles and told his wife, Carol, "I'm going to fly to Los Angeles, and I don't know when I'll be back. All the trendy things start in L.A."

In L.A. he drove the streets to see what young people were eating. He was awed by Yogurtland, where people create their own desserts, and filled out a franchise application on the spot. But Yogurtland never called back, so Kahn decided to go it alone. Unfortunately, it was 2008; nine banks turned him down for a loan. Unfazed, he put his house -- actually owned by his wife -- up for collateral for a $300,000 government loan. "I always told him he could do it," says Carol. "But just in case, I hid $10,000."

The Age of Disruption taketh away, but it giveth too. Kahn was able to conduct research, source his product, and find distributors, all online for free. His marketing budget was a $100 "Now Open" banner -- and a Facebook page manned by his teenagers.

Yogurt Mountain opened on Sept. 10, 2009. By that weekend there were lines out the door, and a second store soon opened. In March 2010, Kahn sold 40% of his business to a private equity group for $3 million, a line of credit, and help opening new stores (there are now 35). He tinkers with yogurt flavors, but he has just one reinvention recipe: "You've got to go into survivor mode, and you've got to reprogram yourself. What's your alternative?"


Last updated June 29 2011: 2:03 PM ET
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