CNBC: Behind the Counter Dec 15, 2010
NEXT Showing on CNBC: CNBC has pulled this show from it's regular rotation.
One-Hour Documentary Reported by CNBC’s Darren Rovell to Premiere on CNBC on Wednesday, December 15th at 9PM ET/PT
" The documentary also examines the dark side of the franchising business showing how the American Dream can very quickly become a nightmare. Rovell tells the cautionary tale of Camp Bow Wow, a franchise built around America’s love affair with its pets and reveals some of the potential pit falls of the franchising industry.
Rovell also uncovers how a well-known franchise like Cold Stone Creamery may not be what it seems. With little protection or support from the Federal Trade Commission along with hidden expenses, steep nonrefundable franchise fees and more, even some of the most successful franchisees can’t get out of the red. "
Article source: http://feedproxy.google.com/~r/Tvbythenumbers/~3/_WYyP_gzdJQ/74212
CNBC Site: http://www.cnbc.com/id/39911155/
11/03/11 Update from the Legal Minds behind the Cold Stone - CNBC showdown:
Cold Stone Creamery and Its Franchisees Take Joint Action Against Negative Publicity: A Behind-the-Scenes Look
Watch V1.0 (December 15, 2010) here:
Notable Points from V1.0 BTC:
At 0:27 - Cold Stone depends on "Fans of the Brand" to become franchisees
At 0:45 - "what you see is not always what you get"
At 01:25 - the underbelly of Cold Stone and the franchise industry as a whole can be exposed.
At 01:50 - cecil explains the 3 levels of profiteering by Cold Stone
At 02:24 - Kahala reported revenues of $70.4 Million in 2009 - 18.5% came from kickbacks
At 02:31 - Cold Stone requires 2% to service the store's lease - "wait a second here! you are telling me..."
At 03:06 - up to $140,000 in equipment from a company controlled by Cold Stone
At 03:55 - Cold Stone's eroding store base - from 1402 stores in 2008 to 1198 in 2009 (see below for 2010 figure)
At 04:06 - Cold Stone's response: "CSC's primary focus is creating the best conditions and opportunities for franchise owner success"
At 04:46 - Second best store in the nation in sales - but still could not turn a profit
At 5:01 - Cold Stone franchisees SBA failure rate from 2000-2009 was 30.6%, "one of the highest rates among well known franchises"
At 5:18 - the FTC "non-answer", Q: "what is the obligation by the franchiser, if any, to make sure they succeed?"
A: "I don't think anyone out there legitimately wants the franchisee to fail"
At 5:40 - the deck is stacked against the franchisees from the start - the business model is a failure
Watch V2.0 (March 14, 2011) it here:
Notable Points from V2.0 BTC:
At 01:22 - Cold Stone web site claims that CS franchise opportunity is "about as solid as they come".
At 01:30 - Dan Beem says Cold Stone franchising allows the franchisee to spend "quality" time with family and kids while making a good living.
At 02:08 - ExFranchisee: "not all the costs were what they were project to be, and there was not room for profits"
At 03:20 - Question to Dan Beem: "So you don't know on an individual basis how your franchisees are doing on a net basis?" Dan Beem: "No, they are independent business owners"
At 03:48 - Franchise Attorney: "Reality is that every aspect of your business is controlled by the Franchiser"
At 04:16 - Franchise Attorney: "I call them kickbacks"
At 05:09 - Cold Stone profiteering on proprietary Kohler cream is explained on 3 levels of distribution.
At 06:20 - One time second largest grossing store still could not make a profit
At 07:31 - NIACCF and Cold Stone Corporate Attorney "believes that rebates are fine"
At 07:57 - Cold Stone attorney Zarco blames theft by franchise employees for lack of profitability - "product going out the backdoor is substantial"
At 08:11 - Question to Beem: "Have you ever told the franchisees how much you make on the sweet cream, how much you make on other parts of the rebates?" Answer: "No, that's competitive advantage"
At 08:36 - "Cold Stone does NOT provide information regarding projected food costs, or any other detailed financial information"
At 09:14 - "Puig is a current franchise with whom Cold Stone ALLOWED us to speak" (Gag order lifted)
At 09:53 - "In the US their store count has fallen from 1163 stores in 2009 to 1102 stores by the end of 2010"
At 10:41 - ExFranchisee "I know many people that have gone bankrupt, lost there homes, lost their 401k ..."
At 11:09 - "there is a level of desperation in these people [ExFranchsees]"
At 11:19 - Beem blames it on the econony (again)
Robert Zarco, Rudy Puig, Dan Beem
Zarco with a smile on his face, spending the Cold Stone NIACCF retainer on the "Legal Eagle"
Links to read: