"The essence of due diligence is to provide the information that is needed for the franchisee to make an informed decision about the business investment. If that information is not available for any reason - or is not sought out - then the 'angels who fear to tread' start getting nervous.
The problem with 'informed decisions' is that is relies heavily on objectivity - which is often in short supply with an excited, ready to rock'n'roll, prospective franchisee. Sometimes 'don't do it' is the best, and only, advice you can give that cuts through." -By simon young
This section will bring additional detailed information and hopefully an increased dose of objectivity to the decision making process.
[CSF- this is pathetic, someone's hard earned investments on the block all because of the broken business model of Cold Stone Creamery. Think before you buy!]
"Complete Cold Stones!!" ... "Don't Miss these bargains!"
By Visitor 2013-08-21 12:22
Canadians tend to think of American consumer prices as somewhat
pricey. It will be interesting to see if Serruya's instinct tells him to
lower menu prices in order to attract more traffic back to the brands.
Quiznos' former CEO from Canada did just that when he came south to run
the Quiznos business.
I take it that Serruya bought Kahala and its brands in an auctioned
bid on the cheap. Nonetheless, Serruya will want to raise fees in order
to put Kahala on a healthier financial path. The new franchisor owner
pretty much has carte-blanche in increasing franchise fees in various
ways, even if the franchise owners don't like it.
People get married believing they will remain married and happy the
rest of their lives. Over 50% of marriages end in divorce; a higher
percentage “fail”. People start businesses believing they will succeed
and achieve financial independence. Approximately 85% of those
businesses fail within five years. People buy franchises believing that
the name, the system and economies of scale will help assure their
business success. Approximately 85% of those franchised businesses fail
within five years. So, what is your strategy, your “Plan B” if your
franchised business does not thrive—and you need a way out?
Let’s look at what you probably will have signed. First, you will
have signed a franchise agreement. Under that agreement you will be
personally liable (even if you transferred it to a corporation or LLC)
for operating the business and paying the franchisor all of the fees for
the full term. In many cases, that agreement also has you personally
guaranty all obligations to all of the vendors and suppliers of your
business. Increasingly, that agreement probably contains an obligation
to pay minimum royalties—that may exceed what you would pay in the
percentage royalties you tend to focus on. It is not unusual for those
minimums to be $200,000 to $1,000,000 over a ten year franchise term for
a small investment franchise. In many cases, the franchise agreement
obligates you to sign a lease for the full term of the franchise.
Read it all - here.
By Guest2012-09-01 16:09
When discussing large franchise systems in trouble, the problems are normally widely known including at franchisor headquarters.
We all know what the problems are with Cold Stone unit profitability.
Since fixing those problems would result in the franchisor running in
the red, those problems are unlikely to be fixed.
As with many franchise concepts, the zor does not care about unit
profitability so long as they are selling franchises. We may admire the
optimism of Ms. White and Mr. Gordon, but the fact is that some business
models are not fixable.
Nobody has shown how CS can be a profitable model for both zor and
zee. The comparisons which some have made to Haagen Dazs and Ben &
Jerrys are flawed in that although the retail product is similar, the
business model of CS is much more labor and capital intensive, both in
terms of initial capital requirement and the ongoing operating expense.
CS is much more like Coffee Beanery: a business model which must be
revamped to obtain a much smaller footprint and labor cost. CB has tried
to institute a downsized model with mixed results, as Harry Rifkin can
tell you. In addition, the seasonality of CS suggests that it is best
co-branded, but given Kahala's poor stable of brands it is not going to
help much to pair CS with a "Cereality" type of franchise either.
[CSF]- Cold Stone business model fails where another frozen yogurt shop
takes over. Notice the CS logos are still on the doors while the other
shop moves in.
New frozen yogurt shop takes over former ice cream location
The former Cold Stone Creamery store at 14224 Pearl Rd. will be occupied soon by Menchie's Frozen Yogurt.
A sign on the window says the store will celebrate its grand opening Aug. 18 and 19.
Cold Stone left its Strongsville location without notice in mid-June.
Menchie's offers frozen yogurt made with milk from the company's
California dairy, where cows are not treated with growth hormones.
It features dozens of flavors and mix-ins, and will be Strongsville's third frozen yogurt specialty shop, joining Lemonberry and Yogurt Vi.
The company's website says the husband-wife owners opened their first
Menchie's in California in 2007, and now have more than 200 franchises,
with another 250 in development around the world.
Menchie's will be located in the plaza with LaKabob Lebanese Grill and Antonio's Pizza.
The success of all franchise systems is based on a mutually
advantageous relationship among all brand stakeholders. Typically:
Franchisor, Franchisee, Vendors, Employees, Customers and Communities
all benefit from a successful franchise brand.
Kahala's action against Coldstone Creamery franchisee association leaders is a catastrophe for all of franchising.
Clearly you cannot have franchising without franchisees and franchisors.
One of the foundations of any relationship, especially a franchise
relationship, is mutual respect. The IFA’s Code of Ethics states “IFA
members believe that a franchise system should be committed to help its
franchisees succeed, and that such efforts are likely to create value
for the system and attract new investment in the system. IFA’s members
are committed to showing respect and consideration for each other and to
those with whom they do business.”
Kahala Corp. and its franchise brands don’t appear to be IFA Members,
therefore they probably don’t even consider the IFA’s Code of Ethics.
That is one of the reasons Fair Franchising Laws are needed nationwide.
To ensure that basic American Rights are available to all franchisees.
Clearly the right to associate is an American Right, and it is Number 1
of the Universal Franchisee Bill of Rights. Kahala’s action against
Coldstone Creamery Franchisee Association leaders is not only against
the IFA Code of Ethics, it’s Un-American!
Endorse the Universal Franchisee Bill of rights today at www.franchiseebillofrights.org
By Guest2012-08-01 04:43
If the franchisee cannot make money, the franchise will
sputter out and die. You can only churn a unit so many times. Look at
Quiznos or Coldstone Creamery. Those franchise models are broken
because they treat franchisees like marks.
There ae those who say that small operators are meant to be conned,
and franchising is only that: a con intended to part people from their
That means that the franchise model is broken for most people.
Either it gets repaired, or it disappears as a way to grow a
business. That may the creative destruction that erases franchising
from the face of the global economy. However, it won't be because of the
usually positive things that wreak havoc, like new technologies that
disrupt business models (for example, Blockbuster Video franchise stores
It will because the industry allowed itself to be poisoned.
It would be a shame. Leaving money on the table is just stupid.
What I Like About the Cold Stone Creamery Franchise
1. Cold Stone Creamery offers an extensive line of ice cream treats
from personalized Cold Stone creations, to ice cream cakes, pies and
cupcakes, to sundaes, shakes and smoothies. I admire the franchise’s
creativity because, from the same basic ingredients, they’ve created
product extensions that appeal to their customer base, without requiring
a huge additional investment in equipment on the part of the
2. An ice cream shop, by its very nature, is a relatively simple business to run.
In the case of Cold Stone Creamery, since most of their creations are
made-to-order, not a lot of prep work is required before opening their
doors for the day.
3. The “theatrical” aspect of the whole experience appeals to the young
and attracts a large number of enthusiastic teenagers eager to work
there part time. I’ve been to several Cold Stone Creamery locations and
I’ve always been impressed by the enthusiasm and energy of the young
people working there.
4. Cold Stone has a very large and engaged customer base
as evidenced by their over 1.5 million Facebook fans. To put this into
context, Cold Stone’s cousins in the frozen yogurt category are more
fragmented, have fewer stores and Facebook fans (Menchie’s has 65,000+
fans, Yogurtland has 175,000+, and Yogen Fruz has almost 400,000).
What I Don’t Like About the Cold Stone Creamery Franchise
1. Just like any other ice cream shop, Cold Stone’s business is seasonal.
A typical store is going to be really busy during the summer but slow
in the winter, especially in parts of the country with harsh winters.
2. An ice cream shop like Cold Stone needs to be in a high traffic
location to generate the volume needed to stay in business. This makes rental expense a huge fixed cost. This can be a drag on the bottom line, particularly during the months of the year when business is slow.
3. An ice cream store is typically busy right after lunch and
dinner, and perhaps in the middle of the afternoon. The rest of the day
is pretty quiet. In the case of Cold Stone Creamery, they have to make
sure that the store is sufficiently staffed since most of their
products are made-to-order. This makes staff scheduling a challenge.
Franchisees have to strike a delicate balance between having enough
staff to customize orders quickly when it’s busy, and not having too
many idle employees when the store is dead. (A self-service format like
that of Yogurtland and Menchie’s makes this far less of an issue.)
4. Another concern is the huge number of existing stores,
now numbering more than 1,500 in 17 countries. This limits the number
of lucrative territories still available, and existing stores will
likely suffer whenever a new store opens nearby. Other franchise
concepts may have far more units, but Cold Stone sells ice cream treats
that are probably a weekly indulgence at most, as opposed to Subway and
Starbucks which are more frequent destinations.
By FuwaFuwaUsagi2011-09-07 00:26
Some unsolicited advice.
You really should get all your numbers together and then go away for a
night to a hotel, buy yourself a good meal and go over them very
carefully. And then review the business model. By the way, it is
really helpful to get away and do this analysis. You get a different
perspective and when you are in the trenches it is often hard to see the
reality of the situation.
My opinion, you need to come to grips with the fact ColdStone has a
dysfunctional business model. Do you have reason to think that will
change? They have a unfair cost structure, and a buildout/design that
is energy inefficient and horribly expensive that contributes next to
nothing to the bottom line. Next consider the product, they have a very
pedestrian to lame product at premium price.
Sometimes you cut your losses and move on. Only you can determine that.
A few years ago I had a chance to acquire ten of these on decent
terms, after partial analysis of the locations and a review of the FA,
even if they were free I would not have touched them. IMO, the business
model, is simply broken. I would have been interested in acquiring
these if I could have easily broken the FA and taken over the equipment
etc and rebranded with some concepts that were less asinine. As is,
IMO, this is a site specific model and your location will determine your
By Current Franchisee2011-09-06 18:16
I was surprised to read that Cold Stone is back to issuing BOGOs. I receive a ton of them in my stores over the weekend.
Didn't Cold Stone come out a year ago and say they would no longer
issue BOGOs? Now they want us to join in distributing these coupons with
My LSM. I will not participate in my own demise.
I am struggling financially just to keep my stores open. I have to
put several thousand dollars into them every month just to keep them
open in the hopes of selling them. We get no help from Cold Stone and
now this. They are trying to run us all out of business so they can take
over our stores.
A Current Franchisee wrote:
"I am struggling financially just to keep my stores open. I have to
put several thousand dollars into them every month just to keep them
open in the hopes of selling them."
Who do you think would pay to buy stores that not only don't make any
money, but lose "several thousand dollars ... every month"? Unless the
reason you are losing money is that you are a Bad Operator and the next
guy can fix what you are doing wrong and make money instead of losing
it, then your stores (not you) are losers.
The longer you stay open the more you will lose. What you have lost is
increasing by "several thousand dollars ... every month". You are NOT
going to get more for you stores by losing even more. No fairy
godmother is going to come along and tap the wand 'bing' and make you
whole for all that you have put into your stores. The longer you stay
open the more you will lose. Please think about that and act