Changes at Cold Stone Too Late for Some Franchisees

Board Ousting CEO Fails to Silence Franchisees   

TALLAHASSEE (Blue MauMau) - According to a recent news article, a franchisee of Cold Stone Creamery had to shut his doors at the Tallahassee mall three days prior to Black Friday, the unofficial start of the holiday shopping season. Cecil Rolle, at one time owner of three franchises, agrees with other operators that Cold Stone's theme of fun and excitement to draw people in does not translate into profitability. He attributes part of the problem to franchise owners paying nine percent of all revenue--not profit--directly to the company.  And added to that, when franchisees are paying employees to customize orders for patrons, it forces them to pay higher labor costs than other retailers.

Rolle is not the only franchisee experiencing financial problems. This fall locations in Athens, Georgia, Loveland, Colorado, and three cities in Connecticut have also closed. One franchisee was quoted saying their store isn't as profitable as they expected it to be. Although sales have been decent, expenses are not under control. He said they haven't had much support from corporate to guide them through it.

One analyst in the ice cream industry said Cold Stone was now realizing what it takes to make a trend instead of a fad. He said, "They tend to pay very high rent and they wanted to grow very fast. The product is very expensive and the base product doesn't taste very good."  But he feels there are pluses to their concept, in that kids are having fun mixing all these toppings in the ice cream.

But Rolle disagrees saying, "Cold Stone does have very good ice cream and customers share in that passion." But he said, "On the flip side, it's tough to keep a business open when it's not making money."

Cold Stone's Changed Direction, Management

Following the Kahala, Cold Stone Merger last May, Kahala*Cold Stone announced last September that Kevin Blackwell, founder of the Kahala Corp. would serve as Chief Executive Officer for Cold Stone. He replaced long-time executive Doug Ducey who joined the company in 1995.  It was also reported that the Board of Directors exercised an option of the merger agreement to end its relationship with Mr. Ducey.

Mr. Blackwell was recently quoted saying, "This is a change of direction. After the merger I thought I wanted to slow down, but I realized that I want to remain active in the day-to-day operation."

Cold Stone, an Arizona-based company founded in 1988, operates over 1,400 stores worldwide.