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Inside the Community

In this segment we take you inside the Cold Stone Community to see what is said by franchisees who are in the trenches - working it everyday, dealing with corporate and working 15 hours a day.  These discussions come from public forums (public to the franchisees with no copyright or IP restrictions) - they are discussions between franchisees trying to figure out to how keep their franchises open, agonizing about how to pay the next bill, trying to turn a profit or just trying to get out by selling or closing them.

(names have been removed and highlights are by CSF).

An Open Letter to the Cold Stone Community ...

posted Mar 16, 2011, 6:05 PM by Cold Stone Facts   [ updated Mar 16, 2011, 7:00 PM ]




All Forums >> [How to operate your store effectively] >> Profit Center

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Pxxxxx.xxxxxxy -> An Open Letter to the Cold Stone Community (12/18/2006 6:02:20 PM)

This is an open letter to the Cold Stone community. I am writing this now, in advance of the 2007 AFM in Las Vegas, because I do not know whether I will still be here to write this for the next AFM in 2008. This is not meant to be a rant, but rather my attempt to communicate some points that I think are important and that the Creamery should take to heart. You may not agree with everything I have written here, and I don't expect you to. But hopefully this will generate some useful discussion and perhaps even encourage some important changes to take place.

A year ago at the 2006 AFM I was awed by the Cold Stone image and message communicated superbly by Cold Stone's highly-polished marketing machine. I came away convinced that my wife and I had made the right choice in signing with the preeminent force in the ice cream business. A year later I have the following observations to convey on my first year as a Cold Stone Franchisee:

Profitability

* After investing my life savings and working almost non-stop 7 days a week for an entire year, I have actually lost money, not made money.
* We have endured a year of no income, my wife having a nervous breakdown, and nearly losing our home. Only significant financial help from my family has kept us afloat during this difficult period.
* Virtually every new idea that the Creamery promised would add to my profitability this year has cost me money, not made me money.
* Over-portioning: Yes, we know we over-portion. Using flat spades to pull ice cream will always result in over portioning. "Weighing-in" is not an effective solution - it is more of a way for the Creamery to pass the buck back to the franchisee. If you really want to make an impact on over-portioning, give us some 6 oz scoops we can use to pull the ice cream with before mixing it on the stone with our spades.
* If I saved every drop of ice cream that we are over-portioning and was able to always hold Labor + Food cost to below 50% of net sales, it would still not be anywhere close to enough to keep us in business. There simply aren't enough top-line sales to begin with to pay for all the overhead.
* My Profit Keeper and Prime Pay: I have tried them both and gone back to Quickbooks for both accounting and payroll. From my experience, it is a far better way to go but that is only my opinion.


The "Q"

* In spite of having an ultra-clean store, on a recent Q inspection we were almost rated as unacceptable because I took down the "Corporate Pyramid" signs hanging in my store. (I took them down because they kept sending me a subliminal message that I had invested my life savings in a pyramid scheme!)

* On this same inspection most points were lost because the Q inspectors were unimpressed by one of my daytime crew member's execution of the PCST. This particular crew member is intellectually challenged and not particularly handsome. As a result, he is shy and has low self esteem. Working at Cold Stone is the best thing that has ever happened to him. He is the most reliable employee I have and will do anything I ask of him without question. In spite of his handicaps, he has learned to do almost every thankless job in my store. I have never received one customer complaint about him. Customers who encounter him will almost certainly notice his social handicaps and lack of polish, but they probably also appreciate that he does a good job of making their ice cream in a timely fashion. I expect they also appreciate the fact that we have given this worthy, deserving young man an opportunity to work when many other employers would not. None of these factors are considered by the Q, but these are the factors that matter most to me.

* Q inspectors often get hung up on exact temperature settings for the freezers. They don't seem to understand that these readings fluctuate all day long due to people constantly going in and out of them during the day, defrost cycles, ambient temperature in the store, and the location of the product in the freezer / Ghea. We try to set the thermostats to produce an optimal consistency across all the ice cream / sorbet products based on our real life experience working with these products every day in our store.

* The Q inspectors keep telling us that our dipping chocolate temperature is too high when they measure it. The reality is that we have to turn up the temperature or the chocolate won’t melt. We turn it back down again once it has melted.

* The Q inspectors always seem to get upset that we have a Decopac display cake in our store that I accidentally ordered once when trying to order some cake toys. It has served as a good example to show customers what our medium rectangle kids cakes look like when they are flipping through the cake display. Nevertheless, our various Q inspectors never miss an opportunity to take a point off because we have this display cake in our store. Now how important is that really, and is this something you really want your Q inspectors to worry about? What does this have to do with saving my business? (That is the only thing I really care about.)


Singing

* Singing at Cold Stone is a double-edged sword. When done well, it is usually appreciated. When done poorly, it is never appreciated. In general, as many people hate it as love it and it has no bearing on whether or not I will survive as a business next year. When I have hired crew members because they were entertaining and good at singing, I have usually had to get rid of them because they were so into themselves that they didn't want to do the real work and also had a habit of irritating customers and their fellow crew members with their constant self-indulgence. Some of my best crew members would never have passed a Cold Stone audition, but I couldn't run my store without them.

The New Drink Program

* The new smoothies are a bust. The system used to make them is infuriatingly slow and cumbersome, hard to control, and produces smoothies that taste different depending on who is making them. In general they taste OK, but not great. Sales spiked initially on their introduction but have settled back down to where they were before, after customers came to these same conclusions on their own.

* The new shakes are good and sales are about double of what they used to be. It's hard to say though if we have attracted many new customers with them or just converted existing ice cream customers to shake customers. In any case, we didn't see any noticeable change in our total sales after their introduction. As a side note, over-portioning is worse on shakes than almost anything else we make.

Marketing

* Cold Stone marketing seems to spend a lot of time generating monthly packets of information that I don't have time to read. They spend money running national promotions that few of our customers show interest in (e.g. Shake it up Dance Contest) and that have little or no affect on my bottom line. They push novelty cakes and pies that few customers buy and that cost me money to produce. They ship me very expensive, colorful signs to hang in my store that usually just add to the clutter and an already overwhelming array of information that bombards customers when they walk in.

* Last year we were told that LSM was the way to go when marketing our store because advertising on TV was too expensive. A year later, I am here to tell you that LSM, while helpful, is nowhere near enough. I can also tell you that running radio spots from time to time has very little impact as well.

* The mass-couponing that the creamery has done in the fourth quarter of this year HAS helped bring in new business. For that I am grateful. I am concerned, however, that we are training our customers to not come in without a coupon.

The Cold Stone Business Model

* I do not believe Cold Stone's current business model is viable in most locations. The initial investment is way too high, the build-out is too expensive (the creamery is working on this problem I'm told), stores are too large and fancy, too much labor is required, there are too few "non-stone" products for sale in our stores (see Starbucks), and the system of running a Cold Stone is WAY too complex.

* Making minor changes to the "Stone" business will not save Cold Stone. Besides adding new "non-stone" products for us to sell in our stores, Cold Stone needs to reinvent itself by turning its stores into ice cream distributors, not just ice cream parlors. They need to enable local franchisees to sell Cold Stone products through local restaurants and other suitable venues in their community. The franchisees function in this regard does not necessarily need to include manufacturing and delivery, but should focus more on the sales aspect – building relationships and servicing orders.

* To help boost sales, Cold Stone needs to allow our customers to place orders via the web. Done correctly, I believe this could possibly double our cake business and enable us to run a highly profitable catering business - both to consumer and corporate / restaurant accounts. It would probably also give a boost to our take-home container sales.

* In general, coming up with a Cold Stone Catering business model would be extremely helpful. Right now everyone out there doing catering has to figure it out on their own and basically re-invent the wheel.

Final Thoughts

Cold Stone - in your quest to become the #1 ice cream brand in America, you have grown too fast, built too many stores too close together, set up new franchisees for almost certain failure by putting them in bad locations and saddling them with excessive debt and high rents. The net result has been devastating on a personal level for a lot of families that bought in to all the hype. In many cases this devastation has resulted in personal bankruptcy, divorce, loss of homes, depression, nervous breakdowns, and even thoughts of suicide. I implore everyone working at the Creamery to think hard about what you are working on. Are you working on something that could add $100,000 or more in net sales to every struggling store in the country? If you aren't, then your efforts will probably have little significance to people like me. Are you spending your time on trivial details or frivolous programs of one kind or another? If so, you are just making my job harder. From my perspective, if more folks at the creamery don't start thinking along those lines, then the Creamery itself could well end up facing bankruptcy just as many of its own franchisees already are. The time to deal with these issues is running out quickly and has already run out for many of my fellow franchisees.




Mxxxxx.xxxxxn -> RE: An Open Letter to the Cold Stone Community (12/18/2006 9:24:19 PM)

Pxxxxx,

Unfortunately, you are 100% correct on most of what you have said. Cold Stone is teetering on the brink.

I myself just closed my store on Saturday. Even though I will be filing bankruptcy and could lose my house, it was by far the best decision I have made in a long time. Cold Stone simply was not worth the stress - physical, mental, financial, marital. I feel as though a huge burden has been lifted and look forward to starting the new year fresh.

Know that you are not alone. If you would like to talk, feel free to call me at xxx-xxx-xxxx or email me at mxxxxxx@xxxxxx.xxx.

Good luck,

xxxx.



Txxxxx.xxxxxxn -> RE: An Open Letter to the Cold Stone Community (12/19/2006 8:56:01 AM)

Pxxxxx and Mxxxxx,

I usually don't reply on here unless I have something to say as I can be fairly opinionated.

I am truly sorry that things have not/did not work out for you in this venture.

No matter what we do in life, the most important things are our health and family.

I pray these things improve.

My involvement with CSC started 4 years ago. Prior to that my Wife and I took 8 months learning
what we could about CSC, being in business for one's self and working with a Franchise System.
That time paid dividends, as we came into this with conservative expectations.

I would guess 99.8% of us would do things differently if we had it to do over, including Donald, Susan and Doug.

As time unfolds, it becomes clearer to me that in order to become successful at this you have to have three
things.

1. Location: 100 ft. can make a big difference. If its not right - don't sign.
2. Realistic Expectations: or, a back up plan if things don't take off. If worse case does not feel comfortable - don't sign.
3. Plans for Multiple Units: I could not remain in the system with the notion of owning just one store. ( just my opinion - I apologize to the singles)

Our 3 stores are doing well. The reality of it is I'm not driving around in an Escalade, its a '95 Buick. I'm fine with that however.  The mortgage gets paid and there's food on the table, and a few extras during the year. For most of us the payoff comes in asset values and when our SBA loans get paid in full. Until that time its more of an investment than a living.

We would still make the same choice as we did 4 years ago.

Txxx Cxxxxx



Pxxxx.xxxxxxo -> RE: An Open Letter to the Cold Stone Community (12/19/2006 11:25:30 AM)

okay i own one store slated for another store
to become a multi unit owner
Please explain the concept that multi store will make you money
if one store is all ready losing money

Mxxxxx and Pxxxxx
a typical creamery answer is that we spend too much time on creamery talk and not enough time running the store
not my word
Pxxxx Cxxxxx




Mxxxxx.Txxxxx -> RE: An Open Letter to the Cold Stone Community (12/19/2006 12:01:29 PM)

Multiple stores is not the only answer or the end-all answer. We have a profitable store and a very not profitable store. Location is the major difference. The 'bad' store will be moved in another year to a new and far better location, at considerable expense to us. We still believe in the Cold Stone concept and will continue to give it all we have( or until we can't borrow anymore).

We have been able to teach all of our crew, and they change often, how to portion correctly using the flat spades. It takes practice and bosses that insist they get it right or loose their job. There is no excuse to not be able to get this right. Changing our portion sizes will only make us look like BR!

I agree that catering can help our profitability, but I don't think it is the final answer. We need to be "unique" again. We have lost that with all the stores opening. Our niche was our entertainment factor and our "fresh-made ice cream". We need to focus on letting the public know what we are about again. I am hearing customer say "isn't your ice cream just all chemicals?"

This is just my thoughts, but I do believe we need to get back to the basics that made Cold Stone great in the first place. A wonderful fresh product and a happy, fun environment.
I won't be at the AFM because we simply can't afford it this year, but I would love to hear what new ideas come from it.



Rxxxxx.xxxxxxn -> RE: An Open Letter to the Cold Stone Community (12/19/2006 2:29:20 PM)

I do believe that there are good people at CSC working very hard to make us successful. I also believes that it maybe too late for stores that are in trouble like mine and others out there. Yes, they did grow to fast. I see the number of stores decreasing to a number that will be profitable. That is just business! We are not Mcdonald or Starbuck. We cannot use their model to grow.




Pxxxxxx.xxxxxxxy -> RE: An Open Letter to the Cold Stone Community (12/19/2006 3:00:02 PM)

I agree Rxxxxxx. Cold Stone will shrink to an equilibrium of stores that can make it. I also agree that Cold Stone has many highly intelligent and wonderful people working for it. I believe the vast majority are there for the right reasons too and are working hard to correct things. Hiring Jim Flaum, in my opinion, was an excellent decision and a good first step. I just think the Creamery has been moving in the wrong direction for a long time and doesn't know what to do to turn things around. In the mean time, the lives of a lot of other good, hard working people are being destroyed in the process. I'm sure this wasn't anyone's intention, but it is happening nevertheless. No doubt there will be a lot of discussion about this at the upcoming AFM. The really sad thing for me personally is that I still love the concept of Cold Stone. I love working with my crew members and serving my customers. I still even look forward to getting up and going to work. But sadly, I am going broke in the process. It's really a shame. And people still regularly come in and tell us what a great location we picked for our store. Unfortunately, there are two other Cold Stones within 5 miles of us which is most likely our number one problem.




Sxxxxxx.xxxxxxr -> RE: An Open Letter to the Cold Stone Community (1/7/2007 5:53:28 PM)

Pxxxxxx

You are 100% correct and since you are telling the truth we do not see a valid response from the leadership on this topic. I am sure that if we ask for help, the answer will be Local Store Marketing or the Creamery is working on new plans that will make us profitable.

I remmember the T-Shirts, Music downloads, etc that failed. Maybe someone will figure out another way to increase sales without giving a way the farm.

The creamery is aware that franchisees are not happy with the marketing plans that have failed consistantely. There are more store for sale everytime I log into the intrantet which confirms the community feelining.

The Creamery will only make money if the franchisees are. There will be a time that this fad will be over and there will not be new franchisees added to the system and the current franchisees will start filling for bancruptcy.

I have been at this for 18 months, working 7 days a week like everyone else without any profit. The interesting thing is that i have increased sales in a time that everyone else has lower sales but it still does not pay my mortgage.

Good luck to all.




Cxxxxx.xxxxxxxn -> RE: An Open Letter to the Cold Stone Community (1/8/2007 12:57:30 AM)

Pxxxxxx,

It was a bit eerie reading your post because so much of it reflects our situation. I know and feel your pain and wish you peace and hope that 2007 will be a better year. In spite of how incredibly humbling it has been to have to ask family to loan us money sometimes just to buy groceries, I can sleep at night because, in the end, I have a family that I love and adore. Although I may end up losing everything that I've worked for my entire life, I always remember that the most important things in life aren't things. I hope you can find strength in each other and please know that our thoughts are with you and your wife.

If you haven't already done so, I would suggest sitting down with your AD to see if there are any options they're aware that can help. We were incredibly surprised and pleased with the level of support/guidance/assistance we've received from our AD after we came in to meet with them and put all our cards on the table.

We're still in it to win, still believe in the concept and desperately want to make it to a point where our debt service is paid off, but like you, every single day is a fight for survival right now -- personally and professionally. I try to keep hope alive and sincerely hope that there will come a time when we can both afford to attend the AFM and look back on this particular time in our lives and toast that we made it through our darkest days. Our thoughts are with you.





Pxxxxxx.xxxxxxxy -> RE: An Open Letter to the Cold Stone Community (1/8/2007 4:36:13 AM)

Thank you Cheryl. I appreciate your thoughts and sentiments. Sadly I have encountered numerous other franchisees who are even in worse shape than we our. We are very fortunate not to have any debt service whatsoever. Nevertheless, we would not have been close to break-even last year if not for $30K worth of Tenent Improvement money that we received from our landlord after opening our store. Hopefully now that I am more experienced with operations, maybe we can eek out some kind of a profit this year if we can grow by 10% or more. Of course if Congress raises the minimum wage as they have promised to do, we might have to fold our tent before finding out. I often tell my employees that they all make more than I do working at Cold Stone and they think I am joking! I wonder how many Cold Stone executives would ever dream of working under the conditions that its franchisees do. Not many I suspect.




NEED AN INVESTOR!!! Please help!

posted Mar 7, 2011, 10:34 AM by Cold Stone Facts   [ updated Mar 16, 2011, 5:58 PM ]

[CSF]-  This is another in our continuing series of posts from the Creamery Talk of Fall of 2006.  These are discussions between franchisees trying to figure out how keep their franchises open or try sell them. (names removed and highlights by CSF).

NEED AN INVESTOR!!! Please help! (Full Version)

All Forums >> [Getting your store open] >> Buying/ Selling/ Transfering Stores

Message


Mxxxxxx.xxxxxxxn -> NEED AN INVESTOR!!! Please help! (11/7/2006 12:43:40 PM)


Well, I just watched the webcastand I do feel better about the future of Cold Stone.

Alas, my store is on the verge of bankruptcy and locking the doors. Without help, I will not be able to experience the new programs.

I know it's a long shot, but if anybody out there is willing and able to make an investment in my store, I would love to stick around for a while and hopefully reap the benefits of what The Creamery has planned. I love Cold Stone and don't want to close my store, but, on my own, I do not have the funds to keep it open much longer.

Should anybody be serious about helping, please contact me via email at mxxxxxxxxxx@xxxxxx.xxx or call me directly at xxx-xxx-xxxx.

The store is located in St. Louis, MO.


 


 

Jxxxxxx.xxxxxxxxa -> RE: NEED AN INVESTOR!!! Please help! (11/7/2006 9:35:14 PM)


Hey buddy, hang in there. It's tough in MN too. I feel the pain as do others. I know these are just words and don't mean much, but there is always the light at the end of the tunnel. I'm still at the other end in the darkness, but I know that light is there.

You are not alone.


 


 

Mxxx.dxxxx -> RE: NEED AN INVESTOR!!! Please help! (11/7/2006 11:48:07 PM)


I ditto that. I still don't know how I'll get through the winter. Many bills are already very behind, and I don't see any way to pay them. If I had just the one store, I'd probably be closing my doors too. I feel for you. Hang in there.


 


 

Cxxxxx.xxxxxx.xxxxxxxg -> RE: NEED AN INVESTOR!!! Please help! (11/8/2006 3:51:05 PM)


I hear people talk about closing the doors ,but its probably a serious issue. As a franchise whose had stores for four years and am in the process of selling them . I'm finding its difficult to transfer them for a profit. The Creamery has an equation based on the net times 3 or 4 . If the sale price does'nt fit there equation they don't approve the sale. In many instances this is below establishment costs. I really thought I owned my businesses and could sale them when I wanted at a fair value. I was wrong. I'd appreciate some feedback on this equation.


 


 

Cxxxx.xxxxxxi -> RE: NEED AN INVESTOR!!! Please help! (11/8/2006 6:29:14 PM)


I have a big issue with the Creamery giving numbers and ranges to potential buyers. When we bought our stores they did not give me multiples based on net income. I have a store for sale and they were actually trying to do the valuation. Valuation ranges are all over the board, they should not be discussing this with potential buyers. In South Carolina AUV and net income was very low when I bought my stores, and still is, but they were more than willing to let me build a couple of 350K stores. Based on their model I should of not purchased unless I could build for undre 175K. If the Creamery loses you a potential purchaser, I would be calling your attorney ASAP! They have no place to get involved in this!


 


 

Nxxxxx.xxxxxxs -> RE: NEED AN INVESTOR!!! Please help! (11/9/2006 8:43:15 AM)


Just so I understand what you are saying... For the sake of round numbers if my net sales are 100,000 the Creamery is saying I have to sell for $300,000 to 400,000? Even though I essentially just want to get out from under my debt which is 200,000. I get a buyer who agrees to the price of $200,000 and is financially sound to run the store the Creamery can reject them because my price isn't high enough? Is that what is happening to you now?


 


 

Mxxxxx.xxxxxh -> RE: NEED AN INVESTOR!!! Please help! (11/9/2006 9:52:16 AM)


I have no idea what the real answer is to your question Nancy, but what I do know is that it is nearly impossible to sell a store to break even let alone make a profit.

There is a store in my area that did 600k two years ago and now does about 475k and accepted an offer for somewhere around 300k for the store yet the person could not get approved for financing from and bank. Cold Stones are too risky for any bank right now. Also, apparently many people show interest in the store until you have to show them your tax returns, then they pretty much laugh.

I have no interest in selling at this point, not that I could, I still enjoy owning the store and am still able to pay all the bills. I just hope that when the time is right for me to move on that I can actually sell.


 


 

Mxxxx.xxxxxxt -> RE: NEED AN INVESTOR!!! Please help! (11/9/2006 11:07:34 AM)


I have heard the same numbers. What the Creamery is trying to do is get the next wave of franchisees in without much debt, so they can "claim" to be more profitable, when the loan essentially isn't part of net profit. I think we all now realize that the current business model for Cold Stone isn't working. The buildout and operating costs are far too high to make good money and sell your business. You'll get a good price for those buyers that are emotionally involved (highly passionate), but you won't get top dollar for the business savvy who see that the bottomline isn't good enough at this point. Combine that with decreasing sales nationwide and we are all looking at a dim future right now. Maybe in a few years it will turn around. We'll see. I was always told and have heard that if you can pull 20% net from your store, that's pretty good. Let's see how that fits into the numbers mentioned above.

20% of our AUV of 380,000 = 76,000 net profit. (AUV information from my AD, but I think it's not that high)

76,000 x 3= 228,000 selling price or
76,000 x 4= 304,000 selling price.

Now, I know that two years ago, I couldn't build my store for that price. So, what that tells me is that the average Cold Stone will sell for less than it cost to build. Take out any transfer fee you might share, or any broker fees if you have a broker and you are at a severe loss. I can also guarantee that if you are doing 380,000 AUV, that it's pretty tough to pull a 20% net profit. A 380,000 store on average might net 10-15%, depending on rent and things of course. Add that into the equation and you can see that we are all going to be here for awhile, or we're closing our stores. It's that simple. Cold Stone is taking care of the future franchisees with this equation, not us. Hate to be straight forward, but those are the brutal facts. What they should be doing is helping us by reducing that exhorbitant transfer fee and franchise renewal fee. I was told that the transfer fee is as high as it is because it was designed several years ago to deter people from buying stores, opening them, and trying to flip them for an instant profit. Now, we can see that isn't the case at all, so I am hoping the Creamery will reevaluate the transfer fee. It is more costly to own a Cold Stone over a 10 year period than almost any other major franchise. I did a lot of research and found that our franchise fee, transfer fee, and renewal fee combined is outrageous compared to most franchises. We were put up on a pedestal, but now we are all getting knocked off one by one. I hope it can be turned around. I've been trying to sell my stores for over a year now. I have had so many close calls, but in the end, people aren't taking the risk. For this reason, I am somewhat happy to say that I will be here for awhile. Hope to meet some of you at the AFM. The only reason I am able to go is because I won 2 free registrations last year. I'll stay at the Stratosphere like I did last year and as long as I can sell one of my kidney's before the end of the year, I should be able to afford it!





Sxxxx.xxxxxt -> RE: NEED AN INVESTOR!!! Please help! (11/9/2006 12:56:49 PM)


I have heard that the formula is net sales x 1.0.... so yes, basically your net sales.

I believe that the policy was set up at a time when CSC was a super hot commodity. This was to avoid a franchisee from selling the store to an over-zealous prospective franchisee that would pay ANY price for a stone just because they wanted one so bad. The new franchisee would then be unable to pay the crushing debt and go out of business.

Interestingly enough, even with that policy in place, I know of one franchisee in the market that is falling victim to this very phenomenon.

Also of interest is that we have had 3 stores close in our metro area within the last month and there have been no new suitors, even after offering the stores for basically nothing. So I wouldn't subscribe to the "new franchisees with no debt" theory just yet - you have to have new franchisees first. To be fair, maybe someone will eventually step up to the plate, however, I wouldn't hold my breath.

Bring on Gene Krantz!

xxxx


 


 

Pxxxx.xxxxxxo -> RE: NEED AN INVESTOR!!! Please help! (11/9/2006 1:44:29 PM)


and since there are up to 236 stores/agreement for sale on this website and growing
the creamery is trying to stop the hemmorage
and hopeful not by just saying dont give up
or spending my money
xxxxx xxxxxx
covington la


 


 

Bxxxxx.xxxxxg -> RE: NEED AN INVESTOR!!! Please help! (11/9/2006 11:28:03 PM)


When the creamery sets a price range for a potential buyer, it is for a number of reasons, but it seems the main one is avoid having a new owner that is overburdened by excessive debt. The Creamery's interest lies in the future franchisee, the one that is looking to enter the system, and the creamery certainly doesn't have an interest in trying to get a higher selling price for the person leaving the system at the expense of the new franchisee that is going to operate the store.

The current system appears to be 2.5-4x EBITDA earnings. Basically what your profits would be without debt service, taxes, depreciation and amortization. They also allow you to add back in items such as management salary and salary the franchisee may have given themselves to increase the EBITDA. While this number does correlate indirectly to sales, it more closely correlates to profits. Two stores with identical sales but different rent or labor levels will be valued differently. Also, an owner that feels that they may be just breaking even after paying their debt service would actually have a positive EBITDA because the debt service would not be factored in the formula. Depending on your profit levels, this number could quite possibly be much less than the cost to build a new store.


 

Sally.Bell -> RE: NEED AN INVESTOR!!! Please help! (11/10/2006 12:03:15 PM)


The November issue of Behind the Stone will provide information regarding the transfer program and the valuation estimate tool that will clarify most of your questions. You should receive your copy next week. Further, I'm happy to meet with you and your Area Developer via conference call if you have additional questions or concerns. Just let me know.

Thank you,

Sally Bell
Cold Stone Creamery
Vice President - Store Transfers & Renewals
sxxxxxx@coldstonecreamery.com


 

Page: [1]

Does Anyone actually make a profit??

posted Mar 5, 2011, 5:40 PM by Cold Stone Facts   [ updated Mar 16, 2011, 6:02 PM ]

[CSF]- This 2006 discussion thread comes from the "Creamery Talk" before it was sanitized by Corporate executives.  It is an internal  forum for franchisees - this thread comes from Fall of 2006 after a terrible summer for sales.  The Cold Stone fad was in full fade mode at this point.  (names have been removed for privacy considerations).  It took us another 12 months to close our store, in retrospect, I should have closed it the year prior to this.  A pathetic mistake on our part...  take a look at some candid conversations between franchisees during this period.


Does Anyone actually make a profit?? (Full Version)

 

 

 

Message


xxxxx.xxx -> Does Anyone actually make a profit?? (9/22/2006 2:41:10 AM)


Hi all,

I've been at this for a couple years now and there's no profit in sight. As I talk to the franchisee's around me, I hear the same thing. We're all losing money. Many of us are running out of cash to "invest" in the stores and don't know how we'll pay the bills this winter. Of course, they've decided to open ANOTHER store between two stores that can't make a profit as it is (and yes, that is just a bit over 3 miles from my store...)!!

When I went to AFM last year, the only people I saw that gave the appearance of doing well financially were the creamery employee's and the vendors.

Now, my definition of profit may differ from others. My definition of profit is when there is more money in the bank this month than there was last month (and I didnt have to put more capital in).

Are there people really making cash doing this? Is it a family wage? If so, what's your sales volume? I'm talking about an annual profit - not just what happens during the good or bad months.

My wife has decided that this is a very expensive hobby and I need some evidence to encourage the both of us.

Cheers,

xxxxxxxxxxxxxxxx


 

Sxxxxxxxxxxxt -> RE: Does Anyone actually make a profit?? (9/22/2006 5:20:05 AM)

 

quote:

ORIGINAL: Jxxxxxxxxxxxx
Are there people really making cash doing this?


(Sound of crickets)



Cxxxx.xxxxi -> RE: Does Anyone actually make a profit?? (9/22/2006 6:30:44 AM)


I make a bit of money in the summer but not enough to get through winter without putting money back in the system. I am hoping to find a way to at least break-even until the bank notes are paid. I think it will be smooth sailing in about 7 years when my stores are paid off. But yes I had to go back in the corporate world to support my family. Not fun, but I think the Creamery is starting to really focus on the problems, hopefully same store sales will start going up. My hopes are:

1.) Interest rates go down next year. (Will most likely happen)
2.) Same store sales go up 10+%. (Hopefully this is possible with our enhanced marketing efforts)
3.) Operating Cost go down through better vendor pricing and hopefully a continued drop in Sweet Cream pricing.
4.) Labor goes down through initiatives like the pre-made cakes, brownies, and perhaps other effeciencies which we can develop.

Yes it is far fetched, put it could happen!

I am hoping that we all look back at this time in Cold Stone history as the low point.


 


 

Jxxxxx.xxxxxx.xxxxxa -> RE: Does Anyone actually make a profit?? (9/24/2006 5:59:14 PM)


post deleted



 

Nxxxxx.xxxxxxs -> RE: Does Anyone actually make a profit?? (9/25/2006 6:29:40 AM)


It is getting very scary. I am into my 15th month. For the past 3 that I have been able to track my SSS they are down 30-35%. How can you put money away for the slow season when your busy season has done a nose dive? I'm in the northeast and the top selling store in my state and struggling. I have no additional funds to infuse into the business and quite frankly am unwilling to go into further debt since I'm already struggling with the debt I have. Granted we had a very raining spring and no one can control that. Our biggest reason is the debt to income ratio. Between my SBA loan and my equipment loan there is very little left. My payroll is with in the acceptable % amount as is my food cost which I am watching like a hawk. I have cut out every extra expense from a payroll company - I now do it myself to the water dispenser I had for the staff - they now get tap water. My floor cleaning people are down to my three busiest nights Friday Saturday and Sunday and by next week will most likely be cut all together. I have even cut the number of trash pick ups and every few days climb into the dumpster to stomp it all down so more will fit! What more can I do?

What is minimum wage in MN? Here in RI it's 7.25 with my payroll for Sept almost double yours. As I lie awake at night worrying about the next few months and what I can do better or different I try to remind myself to take each day as it comes. My husband and I made the decision last week to put our store on the transfer list. It was a hard decision, but the best desicion. I just hope we can hang in there until a buyer is found.

All the best to everyone who is having a hard time.


 


 

Mxxxxxx.xxxxxxh -> RE: Does Anyone actually make a profit?? (9/25/2006 10:59:54 AM)


Do I make a profit? Depends what one considers a profit. Does one consider 80 hour work weeks at about $4 an hour profit at the end of the year? The concensus seems to be that VERY few stores are making a profit, let alone the 10-20% that the Creamery says we should be making. I have been at this now for nearly 3 years and my sales continue to drop with NO relief in sight. Is it all Cold Stones fault? NO, they can't do anything about the economy, but they set ALL of us up for failure with the astronomical cost of buildouts. And now they just keep pushing more expenses at us. In my case this new insurance will cost me as much as $10,000 to $15,000 more per year. Any idea where I can get that type of money from?

Good luck with selling your stores if you are up for transfer. My guess is that at least 25% of all stores across the country are up for sale. Unless you are willing to take a loss, which might be a wise descion at this point, I would speculate that you are stuck with your store(s).


 


 

Txxx..xxxxxk -> RE: Does Anyone actually make a profit?? (9/25/2006 12:38:20 PM)


SSS are down in Arizona, actually we were up thoughout most of the year, but when the Creamery opened a new location 2 miles from one of my existing stores, sales took a dive. I agree if the overhead and cost of buildouts were less, it would be much easier to make a profit. I know more stores mean more money for the creamery, but I think an impact study should be completed prior to the decision to open locations within a 2-4 mile radius from existing stores. It would also help greatly if store square footage requirements could be reduced to 1000-1100 sqf. I am sorry you are not doing well, it makes me so sad. I have been with Cold Stone for over 10 years, don't give up. If I can help you in anyway, please feel free to call me (xxx) xxx-xxxx.


 


 

Mxxxx.xxxxxxn -> RE: Does Anyone actually make a profit?? (9/25/2006 7:33:34 PM)


Well, Jxxxk, I felt like I should post something up here for you, so I held on the email I got with your original posting. However, it looks like everybody has already said it.

I have been open for nearly a year and a half. Cold Stone was my dream of owning my own business, but it's turned into a nightmare. I have put my entire life savings into the store and haven't made a penny. SSS are about 20% below what they were last year and I honestly don't know if I will make it through the winter. Lots of people have told me to get a LOC of some type, but I'm in agreement with Nancy (earlier post). I have no security and see no reason to take on more debt. Being that my house is cosigned on the SBA loan, bankruptcy and losing my house are two very real possibilities. That's not exactly what I signed up for. I also had to put my store up for transfer. I am willing to take a loss to get out of it, but it doesn't look good.

My bit of advice to anybody that doesn't have a lease set in stone yet - DO NOT assume the Creamery will get it right!! Especially if you are in a brand new shopping center. INSIST on a graduated lease, with the rate you pay directly tied to the vacancy rate of the center. I didn't know any better and my terms are about 40% above comparable rates in the area and my center is over 50% vacant.

Good luck everybody.

Mxxxxx xxxxxxn
St. Louis


 


 

Txxxxxxx.xxxxy -> RE: Does Anyone actually make a profit?? (9/26/2006 7:58:03 AM)


Lets face it. $ 300 - 400K revenue is realistic # on higher side for any ice cream store. That is what more than 70% stores doing in our system. $ 450K was fade and it is gone. There are few stores making $ million is just because of locations. I think I am set for failure and will not be able to survive. Way to much in buil out cost. On top of that I have 1600 Sq. ft store to support (rent is 22% of revenue thanks to AD and creamery team). Now there is added $ 5000 on insurance. We act like having all store doing $ million revenue.


 


 

Jxxxxxx.xxxxxx.xxxxxa -> RE: Does Anyone actually make a profit?? (9/26/2006 9:37:07 AM)


Hopefully the economy picks up


 


 

Jxxxxxx.xxxxx.xxxxt -> RE: Does Anyone actually make a profit?? (9/26/2006 1:39:08 PM)


Jxxxxk, I feel for you, I guess I should feel pretty lucky. I been in the system for over 5 years -- I have 3 stores with sales of $1.5 million. My net profit is 18.7% before debt service. The key for us making money is labor control. We run a little less than 23% payroll (taxes included). Rent runs 8-14% of sales depending on the store. Our sales have grown every year and we're up 1.5% this year, although our region is down 6%. We spend zero hard dollars on advertising, instead we use the power of free ice cream to promote in our communities. We have worked a lot with grade schools and youth organizations to build our sales.

I have many of the same concerns about the future as others. For the first time, I feel vunerable to competion, even yogurt shops. I've seen many people come and go, but I know of numerous people who are making money and are still here after five years. I know today, I couldn't justify the buildout costs if we couldn't guarantee a 450k a year store. We built our first store for $230k. We've had five solid years in business. If sales had dropped double digits the second year in business, we'd have been in big trouble.

If your not making money the questions you should be asking are:

1. Is the population growing around your store?
2. What your rent factor? If you got a big nut there, it's going to be tought to overcome.

I know a lot of people need help in a big way to keep going in this business. It's sad to see so many good people in trouble and hurting.

Bottom line, is that the Creamery is going to have to make a committment to a full scale marketing program to bring stores back. That means committing big $$ to advertising including TV and reaching out to people who don't know about us. Everything continues to be in the box-- trying to squeeze every last penny out of our existing customer base. This year, I've seen a lot of panic marketing and poor execution. If you really want to move the needle on sales, let's talk Cakes and Catering. To date, we have no Catering programs, and cakes seem to have disappeared off the marketing radar. Businesses love Cold Stone and there is good money in it for both the franchisee and the Creamery. I think the move to reach out to kids and families is really positive -- although the summer kids discount promo was the wrong approach. The Creamery needs a long-term marketing calender (which they've never had), to build sales and turn things around. It will be interesting to see what's ahead for 2007 at the AFM. Best wishes. Hang in there.


Jxxxx xxxxxt
Northern California


 


 

Mxxxxx.xxxxxxn -> RE: Does Anyone actually make a profit?? (9/26/2006 1:54:21 PM)


The new insurance requirements should not be costing you thousands….the requirements changed very minimally and with the underwriting concessions from our national program, you should save money. If your insurance costs went up, it is because you have a coastal location (e.g., like Florida). If you send us your premiums broken out by type of coverage, this point will be very clear. On average, the new requirements are about $158/year in additional premiums, but the national program saves over $1000/year.


Melanie Hansen, General Counsel
Cold Stone Creamery
Facsimile: (480) 362-4767
mhansen@coldstonecreamery.com




 

Jxxx.xxxx -> RE: Does Anyone actually make a profit?? (9/27/2006 12:24:53 PM)


Mxxxx,

Thanks for the encouragement!! There are some stores out there that are making it. I wonder if the profitable stores just don't spend time on creamery talk.

I'd love to hear more about what they do and don't do...

I'm less concerned about rent factor and growing population because they are not something I can control or influence at this point. My population is growing but since they are opening another store 3.3 miles away, that positive will be overwhelmed...


 


 

Sxxxxx.xxxxxxr -> RE: Does Anyone actually make a profit?? (9/28/2006 5:10:58 PM)


Profit-what a joke!!!!!

Think about this- if there were any profit for our franchisee comunity, why would there be so many stores for sale???
Even the multi unit owners are jumping ship and do not tell me it is for personal reasons because not all of these sellers are selling because their personal situation has changed.

If anyone out there was making money they would not sell??

Personaly, I have been in this for 13 months now and I am considered number 1 in percentage sale increase in my community. it is the result of hard work and long hours, but it does not pay my mortgage so it does not matter.

If I were to breack it down to hourly wage, I bough myself a minimum wage job sorry to say.

Thus far all i hear is marketing initiatives that are suppose to help increase sales. Can anyone name a marketing plan that really worked in 2005 or YTD.

By the way, if you ask for help, the answer is LSM!!!!!!

I think there are some people that are wishing for the best. First chance i get I am out.....


 


 

Pxxxxxx.xxxxxxk -> RE: Does Anyone actually make a profit?? (9/29/2006 6:09:36 AM)


Nxxxxx,

I was so sad to hear that you would be leaving the franchise community. We'll be losing a bright, caring , vital team member. I, too, have many sleepless nights worrying about how to pay college tution for two children. I am committed to sticking with Coldstone. I still believe that it is the best product of its kind out there and I love working with my Crew. They are the greatest kids on the face of the earth. I've spoken with many of the retailers and restuaranteurs in my town and all have said that their sales are down 20-25%. With gas prices lowering and a mid-term election on the way my hope is that consumer confidence will go up, as well as our sales. I may be unrealistically optimistic but with another store opening in the spring I'm going forward wioth hopes of sales I heard about when I signed on.

I understand your decision but am saddened by it. I wish you all the best and want you to know how much I've enjoyed my contacts with you, afterall we are O.J.E. buddies! Please stay in touch.


 


 

Dxxx.xxxx.xxxxxxn -> RE: Does Anyone actually make a profit?? (10/1/2006 4:18:28 PM)


nc


 


 

Jxxx.xxxxxxx.xxxxxn -> RE: Does Anyone actually make a profit?? (10/2/2006 4:45:50 PM)


Yes! I am going to tread very lightly. I agree with everyone. Those who make money, like myself, and those who don't. How? Well I have talked with many of the top operators in the South. College campus locations that do over 600K gross. Big city theater locations that do 525K gross. Others that are on the beach and do over 55K month all Summer. The sentiment is pretty much all the same. Yes we get a return and some cash flow but at the end of the year when you look back, 15% is not enough for the amount of work that this takes. Unfortunately it has gotten more and more complicated. Both to operate CSC and to run a business in general. Perhaps with some of the operational changes (pre-made cakes) things will get easier and more profitable. In the end I think it is just to expensive to operate a store. If you don't get a location that does north of 500K yearly and run it so tight that it makes you crazy, you will just have bought yourself a job. Two years ago it was a different story. You would never have seen this post. Since then yearly revenue has dropped. For some of us as much as 50K a year. At the same time COG has gone up and rent, insurance, utilities, and labor. If you haven't already don't quit your day job. The extra cash flow will make it easier for you to adjust and see if you can completly transition to CSC. The Creamery, and myself included, believe that you need to be hands on in your stores daily to be successful. So this is the daily challenge. How to be involved full time and have a top dollar store, and at the same time provide a source of consistent reliable income. So far I have held off from reentering the rat race. I fear however my days are numbered. Also, as a side note, if you do quit your day job it is highly unlikely that you will be able to provide health insurance for your family with the income from your business. This may be one of the sadest realities of small business today. If you had a million dollars and opened 3-4 CSC it might make some sense, then again who knows. Remember that everyone's situation, motivation, and financial situation is different. You must do your own soul searching and decide what is right and acceptable for you and your family. No two of us are the same in that regard. What we all do agree on is that we want to see some money for our time and investment. How much is going to be acceptable will vary for all of us. But, again cautiously, as I am sure others out there do very well, I don't think Cold Stone is the vehicle if you want to make a load of money or retire well off. Make a living without answering to anyone else, perhaps if done right and worked hard. In the end I wouldn't trade any of the last three years. Will I say this in three years from now? Ask me then.[;)]

Jxx xxxxxxxn

xxx


 


 

Txxxxxxx.xxxxy -> RE: Does Anyone actually make a profit?? (10/2/2006 7:00:47 PM)


I am from N. Texas market and I would share this market's performance.
out of 26 stores, 20 are makeing loss, 4 closed or walked out and atleast another 10 - 12 stores in financial perils.


 


 

Mxxxxxxx.xxxxxxn -> RE: Does Anyone actually make a profit?? (10/9/2006 9:36:52 AM)


Txxxxxxxa,

You say several in your market, that 4 have either closed or walked out. What exactly do you mean by "walked out"??


 

Axxxxxxxxxxxxxxs -> RE: Does Anyone actually make a profit?? (10/22/2006 8:48:03 AM)


In my opinion, a franchise relationship should be a win-win relationship between franchisee and franchisor

These are my questions:

1 - Are net profits supposed to equal royalties?

2 - When we discount $3 - $5 on a cake sale who should subsidize that? Franchisee's net profits or royalties or both? I agree it's good for lost leaders but who should pay for it?

3 - Does increasing sales volume by discounting increase/decrease net profit or royalties or both? should there be a limit to how much discounting we can afford?

4 - Is there any real certified comparitive analyses of the new programs to net profit ? i.e. 5=10 cake sales, fruitcake freedom, drinks, pepsi, kid's summer pricing, birthday club, sygma?

5- Are there any goals, plans and timelines to develop new ways to optimize net profitablity. Something like the plans in to increase gross sales

What can we do to make this a win - win for everyone involved?


125

 

 

 


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