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Welcome to Cold Stone Facts!

Somewhere between the Sutherlands dropping the first scoop of ice cream on a cold granite stone and today - the executives at Cold Stone went too far with their "profit-increasing" new-product mandates.  Somewhere the line for any kind of profitability was crossed with no possibility of returning without serious corporate reforms.  Basically, there are just so many creations, cakes, cupcakes, smoothies, shakes that can be sold in a day and whatever that number is, it is NOT ENOUGH to compensate for the labor intensive, name-brand product intensive, electricity-sucking intensive, corporate-fee intensive business model.  It is hard to tell when that profitability line was crossed and it really doesn't matter, this site is about recording the facts about the Cold Stone's business model and Cold Stone's business dealings with current and past franchisees.  In the end, the hope is to act as a sentinel to would be franchisees and provide a comprehensive site of Cold Stone Facts and stories of franchisees who have traveled the road already and dealt with Cold Stone Corporate.
 
Cold Stone depends on facts and information about the business model to fade into the past where they are forgotten by the latest franchise disaster story - this site will resist the information fade and obscure spin of information dished up from Dan Beem and his "profitability" finance team. 

Everything on this site is factual or direct experience oriented.  There is no desire ruin the Cold Stone brand (corporate is doing that all by themselves!)  and there is no need to spin facts as the details of the facts will speak for themselves.  Each news article or forum opinion has the link to the original posting so each visitor can see the context which the facts were derived.


Another Banner Year for Cold Stone Franchise Profitability

posted Sep 14, 2013, 4:13 PM by Cold Stone Facts

Another Banner Year for Cold Stone Franchise Profitability

 How is that Cold Stone Franchise working out? 

                                                        PROFIT:  $0

Eatz & Associates Franchise Sales


Worst 25 Franchises to Buy with the Highest Failure Rates, 2012

posted Feb 1, 2013, 7:05 PM by Cold Stone Facts

Cold Stone Again Amongst the “Worst 25 Franchises to Buy with the Highest Failure Rates, 2012”

 For at least the fifth consecutive year, Cold Stone is among the 25 worst franchises in the nation based on SBA failure rates (here).  In addition, in a trend has become familiar to those who have paid close attention to the brand’s fall from grace, Cold Stone’s failure rate rose again—this time from 37% to 42%.

Kahala:  Rapidly Falling Store Counts

In addition to Cold Stone, Kahala’s Blimpie also made the list of the 25 worst franchises with an even higher failure rate of 46%.  Both concepts have become perennial members of a list that no franchise wishes to be associated with.  But it’s alarming to know that Cold Stone and Blimpie are the flagship brands for Kahala and therefore account for the overwhelming percentage of the company’s franchises. 

 According to Entrepreneur.com, Cold Stone and Blimpie make up 2,483 of the total 3,188 Kahala franchises for which the portal provides statistical data.  Therefore, Cold Stone and Blimpie account for approximately 78% of Kahala’s total stores.

 As if this is not bad enough, Kahala’s remaining brands do nothing to engender greater confidence.  Of the nine concepts for which Entrepreneur.com includes data, only one (Nrgize Lifestyle Café) had a net gain in stores between 2008 and 2011.  Even that brand though has begun to close stores.  The sad reality is that the nine Kahala brands have lost a total 815 stores during the given period.

 Brand


2008

2009

2010

2011

Stores
Gain/(Lost)

Cold Stone Creamery

1,394

1,221

1,163

1,049

(345)

Blimpie

1,089

1,089

847

733

(356)

Taco Time

170

170

170

164

(6)

Samurai Sam's

70

63

49

37

(33)

Great Steak

190

190

133

122

(68)

Surf City Squeeze

151

151

121

122

(29)

Nrgize Lifestyle Café

47

71

105

99

52

Ranch One

25

25

17

15

(10)

Frullati Café & Bakery

52

46

37

32

(20)

Total




2,373

(815)

 

Is Kahala Delusional or Straight Up Intending to Mislead Franchisees?

You decide!

 For years, Cold Stone Creamery’s propaganda machine has broadcasted messages that simply do not comport with many franchisees’ experience: “profit by making people happy” (here); “Cold Stone’s franchise opportunities are about as solid as they come” (here); and statements that may easily lead potential investors to falsely believe that each of their operating stores is profitable (here).  I truly believe that these messages are intended to give potential franchisees the impression that the risk of failure as a Cold Stone Creamery franchisee is very small.

 With that backdrop, Kahala has a fresh brand of propaganda that tells a far different story than the data provided above.  “The future looks bright at Kahala. But we know that our future lies in the success of our franchisees”, Kahala states on its website (available here); or “[w]hen you partner with Kahala, you have access to world-class, proven brands in the Ice Cream, Asian, Mexican….  So, start your application today” (available here);  and finally “[a]s one of the fastest growing franchising companies in the world, Kahala is a privately held corporation dedicated to developing proven business models while providing the right tools for our franchisees.”  (Available here.)

 It is astounding how these people make up their own reality despite the many franchisee testimonies to the contrary posted to numerous websites as well as reliable data from numerous trustworthy organizations including the SBA and Entrepreneur.com.  Why are such obviously misleading statements not a crime?

 The time passed long ago for Dan Beem, Kevin Blackwell and David Guarino to go.  They have ruined the lives of so very many families.  It is indeed, time for them to go!

 Think Before You Act

 Given the data provided above, I don’t think any franchisee should consider expanding with Kahala.  Even if you assume there is such a thing as a highly profitable Cold Stone franchisee, if Kahala fails, it is highly unlikely that any stores will survive.  All unprofitable and underperforming franchisees should be planning their exit from the system in September.  Trying to sell your store is a waste of time and money.  You must close your store and sell the equipment in order to make a clean getaway.

 As long as Dan Beem, Kevin Blackwell and David Guarino are in the driver’s seat, I think Kahala will continue to falter.  They are the proverbial kid with the keys to the Porsche.  They’ve had plenty of opportunities to turn this thing around and they have failed miserably while destroying many families along the way.

 Franchisees should not be willingly go done with them.  Instead, franchisees should plan to close their unprofitable and underperforming stores in September and end the Kahala-Cold Stone Creamery nightmare.  I am happy to assist you in that effort.

Credit:  Cecil Rolle

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We encourage each visitor to send us additional information or factual corrections - see the contact link HERE.

Also, please participate in our "Be Counted Program" - find it hereThanks!

The Cold Stone Franchisee Experience

posted Jul 7, 2012, 8:29 AM by Cold Stone Facts

The Cold Stone Franchisee Experience

"Opened big!  Sales plummeted"

"
costing me ...  $3,000-$5,000/ month JUST to keep the doors open"

These experiences come from the CSF "Be Counted" program - there are many just like these - these are only a sampling of what the Cold Stone Creamery Franchise ownership experience is really like.

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"Opened big!  Sales plummeted, AD said work harder, market more.  did that, hired a marketing manager, still lost money.  Equipment continually broke down, worked our asses off, only to put 2K to 5K per month into the store, no paycheck, just loans to the store.  Lived the Core Values, hired and trained according to CS standards, food and labor in line with CS stated goals, followed system to a T, rent was appropriate, nothing worked, lost money every month. Then, we thought another store, with efficiency and economy of scale, might be profitable enough to offset the losses at this store, so, stupidly we opened another one.  Ironically, it only doubled our losses.

Closed both stores without warning to CS, then found another franchisee to buy one for $20K and other for $35K, CS was not happy that I sold after closing and being terminated, but they just wanted the stores open ASAP  I never signed a transfer doc or paid a transfer fee or signed any kind of release or waiver, though they tried. Joel S was pissed how this deal got done as I kind of snookered them.  On the plus side, I can now sleep at night, my depression has abated, my marriage is better, I have avoided bankruptcy, my wife got a "paying job" with benefits, our family is happier and healthier, and closing the stores was the best decision I ever made.  No regrets in pulling the plug, life only got better." 

-Michigan Franchisee   *   Closed 2009

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"STORE WAS LOSING MONEY FROM THE START IN SEPT. 2004. WE WERE ONE OF THE STORES TO HAVE A CUSTOMER HOSPITALIZED FROM SALMONELLA TAINTED CAKE BATTER ICE CREAM. THIS MADE THE FIRST AND SECOND PAGES OF OUR LOCAL NEWSPAPERS ON THE FOURTH OF JULY WEEKEND. SALES DROPPED OVER 30% OVERNIGHT AND NEVER RECOVERED. COLD STONE DID ABSOLUTELY NOTHING TO HELP ME RECOVER.

THEY TOLD ME TO DO MORE "LOCAL STORE MARKETING"  (GIVE AWAY MORE ICE CREAM). THEN COLD STONE PUT ANOTHER STORE A LITTLE OVER 3 MILES AWAY FROM MINE. THERE WERE 4 STORES IN A LINE OF 14 MILES IN LITTLE DAYTON OHIO.

I ALSO HAD GHEA COMPRESSORS BLOW (5 IN 3 YEARS). CAKE COMPRESSORS THAT WENT BAD, NOT TO MENTION THE BRUTALLY EXPENSIVE BUILD OUT AS MY STORE WAS FAIRLY LARGE. I DUMPED ALL MY LIFE SAVINGS INTO BUILDING THE STORE AND OPERATING IT AT A LOSS FOR THOSE 4 YEARS. I FINALLY WAS ABLE TO SELL IT FOR A LITTLE OVER $40,000 AND COUNT MYSELF AS VERY LUCKY. I AM STILL PAYING THE BANK OVER $2600/MONTH TO PAY OFF MY LOANS."

-Ohio Franchisee  *  Sold 2008


*********************************************************************************

"The first 3 months were phenomenal ~ largest Grand Opening of any new business in our small , but growing community.  Opened July '06, by Oct. '06 things were going downhill fast.  My Field Rep, Eddie M, tried to figure it out, had been trying to get me to open a 2nd location in San Marcos, Tx and by Oct., he had changed his tune completely, by the latter part of Oct., Eddie was GONE completely, Jeff L took his place and we very rarely saw him~ he was oblivious to how the store should even be run, much less offering any suggestions as to why the numbers were just not adding up.

A few months later, Jeff was gone and we had Scott take his place again, got No support from him, was begging Corporate for help to figure out WHAT was going on, they suggested doing more Local Store Marketing ie....giving product away ~ I was the Queen of Local Store Marketing, every organization, churches, schools, clubs ALL knew where my store was and what it was about ~ definitely not the problem. 

The store was soon costing me anywhere from $3,000-$5,000/ month JUST to keep the doors open.  Keep in mind this is all above and beyond the initial build out, franchise , legal, broker and many other bogus fees charged by Cold Stone.  In a nutshell NEVER received any support and Corporate  came in in late 2007 and paid me $35,0000 for my store, they continued to run it for approximately 6 months then closed it for good.  As my store was closing in Aug. or Sept. an Austin franchisee, told me that when I first opened and was doing such big numbers (those first 3 months), he called Eddie Mendoza and asked why he was not given the opportunity to purchase the Bastrop Area first, (he had 3 sites but only opened 1) as he could see in those early months how well I was doing,  Eddie asked Corporate what he should tell the Austin franchisee and their response to him via Eddie was "Tell him not to worry about Bastrop store, the smaller towns always open big, then fizzle down to nothing "  They knew exactly what was going to happen before I ever even opened the door for the first time, all while telling me the complete opposite!"

-Texas Franchisee   *   Closed 2007


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It's very draining to be a Cold Stone franchisee

posted Aug 21, 2011, 9:08 AM by Cold Stone Facts


It's very draining to be a Cold Stone franchisee

"Profit? What's that?"

This comment thread come from the Blue Mau Mau Franchise News site:

http://www.bluemaumau.org/comments/recent#comment-117418

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By West Coast Franchisee

2011-08-09 17:23

I did 12 years of mid-management for a large company before becoming a Cold Stone franchisee. When I had a nice size nest egg put aside, I started looking for an easy going-low stress business I could operate while making a decent income. When I visited a Cold Stone while on vacation in Florida, I thought I had hit the lottery. There were long lines and singing and lots of fun. Even though the franchise had an enormous price tag, I thought this business was right for me.

Nothing could have been further from the truth. Being a Cold Stone Creamery franchisee is at least twice as difficult as my life as a corporate guy. As if that is not enough, at least I got paid for doing that and received great benefits to boot. In this business, no hobby, I do nothing but put money in my store to make payroll and other expenses. Profit?; what’s that? In Cold Stone, only the franchisor makes a profit and then calls it competitive advantage.

Words cannot express how utterly disappointing and exhausting this venture has been. I cannot believe how absolutely abysmal Cold Stone’s management is. If I had performed anywhere close to this with my prior company, I would have been fired long ago. It’s amazing to me that Cold Stone’s BOD tolerates this. Why? Management as competent as Dan Beem can be found at the corner liquor store.

Every quarter they’re in my store harassing me. Every week we’re in the news about stuff that management should be able to control. I wish I had never heard of Cold Stone because this is undoubtedly the biggest and most costly mistake of my life.


Hey Cold Stone Management; It’s Time!

posted Aug 9, 2011, 9:31 AM by Cold Stone Facts   [ updated Aug 10, 2011, 8:19 AM ]

This comment thread come from the Blue Mau Mau Franchise News site:

http://www.bluemaumau.org/node/10537/talk#comment-116418

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By Interested Industry Observer
2011-07-16 22:31

Cold Stone makes for interesting viewing in a train wreck kind of way. But one has to seriously question Kahala’s and Cold Stone’s management. All is not right there.

Let’s assume the scuttlebutt is true that the company’s business model is broken. There are plenty of franchisors that operate successfully for decades with a broken business model. Some franchisees who fall victim will undoubtedly cause a fuss. Skillful franchisors manage disgruntled--verbose franchisees through litigation and/or settlement agreements containing well constructed non disparagement and confidentiality clauses all the time.

I was recently discussing Cold Stone’s situation with several veteran industry colleagues. We were not able to recall a circumstance when a franchisor had stood idle and watched one disgruntled franchisee take the entire brand down. Yet that is exactly what is happening here. Cold Stone has substituted its ego for good judgment at the expense of the company’s shareholders and stakeholders.

I understand the battle between Cold Stone and Mr. Rolle has caused some deep wounds on both sides and that Cold Stone would probably rather pay the Taliban than to settle with him. I’ve been there. Cold Stone won the legal battle but Mr. Rolle is winning the war. So where does sound agent/principle concepts fit in here? Cold Stone’s management has an obligation to do what is in the best interest of the shareholders, not what responds to their anger towards a single individual.

Prior to its battle with Mr. Rolle, Cold Stone was an attractive appreciating investment. Currently, due at least in part to no fewer than two national news stories (both of which appear to have been orchestrated by Mr. Rolle) and a staggering number of online comments that paint the Cold Stone franchise experience in a gratuitously negative light, the company is unable to sell franchises. As we all know, the inability to sell licenses is the beginning of the end for any franchisor if it is not immediately addressed. The lost revenues due to Cold Stone’s management allowing this to persist have to be approaching nine figures considering the decline in licensing fees alone.

It’s time for management to put an end to this; otherwise, the ship is going down. Mr. Rolle has proven he is not going away. If Cold Stone does not settle with him, the company will no doubt find itself dealing with yet another crisis in the coming months that will again cost them additional millions to manage. More importantly, every time these crises emerge, a large number of franchisees lose faith in management and shutter their doors. An even greater number of potential franchisees turn away from the brand and the company takes a giant step towards extinction.

Some kids fight back when bullied and eventually take down the aggressor. They are not intimidated by the fight. They seem to wear the occasional bloody nose or black eye as a badge of honor. Mr. Rolle strikes me as the type.

It appears Cold Stone has tried everything except engagement. It’s time.

Cold Stone: Delicious but Financially Questionable

posted Jul 22, 2011, 1:02 PM by Cold Stone Facts   [ updated Aug 10, 2011, 8:23 AM ]

Cold Stone: Delicious but Financially Questionable

The FranchiseHound   admin

January 28, 2011
 
Coldstone or Baskin Robbins? The Hound took an internal company vote and Coldstone was the unanimous decision. With an ice cream base of French Vanilla, Chocolate, Cake Batter and additions of Kit Kat, Snickers, brownies, Oreos, how can you really go wrong? The toppings and ice cream combinations are endless offering way more flavor creations than Baskin’s 31!

Unfortunately, you’ll need to sell ice cream 24-7 in the sun and the snow to cover the $350,000 store opening/build-out costs. Let’s dig in.

While we love the Coldstone experience, the facts about Coldstone paint a totally different story. We were able to speak to several different franchisees who wish to remain anonymous.

Franchisee #1: “I paid above market prices for ingredients from the company’s distributor. I also paid too much for equipment. Coldstone actually profits on both the ingredients and equipment, putting us, the franchisee, at a significant disadvantage. Kahala, their parent company, owns the supply chain.”

Franchisee #2: “I simply did not talk to enough franchisees when doing my due diligence. The few that I did speak to were happy because they were profitable. Little did I know these were the minority of the total franchise population.”

Franchisee #3: “I bought into the sales techniques. They put a dream in my head that I couldn’t see past. I was stupid for believing.”

Started: 1994
Total Investment: $294k-$439k
Initial Franchise Fee: $42k
Royalties/Advertising: 6%/2%
Net Worth Requirement: $120k liquid

Coldstone management is said to have the best salesmen. Selling a dream with no substance. They grew the business too fast and stores started cannibalizing each other. Furthermore, their national ad campaign was met with scorn. In 2008, the Company released a 2 for 1 deal destroying franchisee profits. To no surprise, we are seeing a tremendous amount of Coldstone franchises for sale. Also, not surprising is the 30+% failure rate per the Small Business Administration (SBA). But hey they were ranked #1 by Entrepreneur in 2007 as best franchise to own in the ice cream sector (and they continue to market their 2007 ranking)!

Operationally, the concept is a mess. While Baskin Robbins can operate with 2-3 employees during peaktime, Coldstone needs an additional 1-2 employees. To make matters worse, the execution time from when an order is placed to a customer receiving their food is much longer at Coldstone because making the product is quite labor intensive. So perhaps Baskin, while serving a slightly inferior product, is the way to go?

READ THE WHOLE ARTICLE HERE: 
 

"No one really understood how to make the model profitable..."

posted Jun 29, 2011, 6:11 AM by Cold Stone Facts   [ updated Jun 29, 2011, 6:13 AM ]

"No one really understood how to make the model profitable..."

"I was also involved with an unsuccessful store. Apart from high royalties and rebates what I found unusual was that I could not find anyone on the Franchisor’s management team with formal business training. It was as though no one really understood how to make the model profitable.

For example, one of the profitability consultants touted former job experience as a bartender. I could not identify one person with an M.B.A. within the entire organization.

A strange part of the business model was that it seemed that as store sales would increase, so would direct and indirect labor costs proportionately. In other words, the labor required to prepare and serve customers was so high that the more that was sold, the more it had a negative impact on the bottom line.

The food expenses were not only high but out of control. There were no repeatable process controls – it required human skill or someone “jumping through hoops” to serve the appropriate serving size. Often customers would get 30% to 50% of extra serving size because of mistakes. In comparison, how many times have you had extra pickles on your Big Mac?

Revenue – Expenses = Profit. When the store first opened, the Area Developper recommended to copy the ice cream prices from another store, an hour away. This was despite a different expenses for rent, staffing, utility rates etc. The first day was the beginning of the end as the revenue structure of the store was formulated to a different set of books.

I remember a slogan something to the effect of “profit by making people happy”. Not sure who that was intended for…"

http://www.justelementary.com/franchising-cnbcs-inside-look-at-it/#comment-157

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