Cold Stone COO Tightens Reins

Self-described cowboy rides back to help ice-cream company focus on sales, franchisee selection

Here's a story that shows that Cold Stone Creamery is doing an about face, from concentrating on expansion in the mature ice-cream industry to focusing more on franchisee profitability and selecting the right franchise buyer. (Passive investors will not be welcome.) In their quest for store profitability, they've brought in the big guns with its new COO, Jim Flaum and a new emphasis.

[via The Arizona Republic] Jim Flaum, a self-described cowboy who loves challenges as much as horses, is knee-deep trying to rebuild sales for ice-cream franchiser Cold Stone Creamery.

It's early, but Flaum expects sales and profits to turn around. "I believe we have the programs in place to make it happen," Flaum said.

But so far, average store sales are expected to be down 5.3 percent to $360,000 this year, a spokesman said. Last year, stores averaged $380,000, down 6.5 percent from 2004. The downturn is a huge contrast to Cold Stone's year-after-year growth through the 1990s and into 2004.

...in 2004, it set out another goal: become the best-selling ice-cream brand by the end of 2009. That would mean toppling franchise giants such as Dairy Queen, Baskin-Robbins and McDonald's, as well as grocery store darlings Dreyer's Grand Ice Cream and Breyers. Cold Stone claims to be No. 6 right now.

But by the end of 2005, the company lowered its sales forecast. It also announced plans to focus on store sales rather than opening stores. As a result, 53 corporate employees, including a few executives, lost their jobs.

"The bubble has burst, as far as the hype," franchise consultant Kent Craven said. "It's in a mature, tough industry."

He notes efforts by industry giant Baskin-Robbins to revitalize its 2,700 U.S. stores and introduce new products. At the same time, smaller players such as Carvel, which has about 570 stores, launched huge expansion plans only to struggle in the static $21 billion ice-cream business.

...Flaum, who built his restaurant expertise at McDonald's, is viewed as the man who will be able to break Cold Stone out of its doldrums.

Flaum started at McDonald's picking up parking-lot trash. He ended a 30-year career as a senior vice president in operations to stay close to his Arizona ranch, which has five horses.

"He brings knowledge and passion to move us forward," said franchisee Martha Mariscal, who knew him from her days working for McDonald's.

Cold Stone's Chairman Doug Ducey also knew of Flaum's experience shaving costs and building breakfast sales for McDonald's and sought him to replace Sheldon Harris, who decided to leave his post as president this summer.

"We needed to transform from a company that has been excellent opening stores to a company excellent selling ice cream," Ducey said.

Sales have been the key focus since Cold Stone's convention in Las Vegas in January. That is where shakes, gift cards and other ideas were unveiled.

Franchisees reported being cautiously optimistic, but some said the ideas needed strong marketing, something they felt was lacking.

The company is developing a national advertising campaign to build brand awareness.

With Flaum's return, even more changes are coming.

Mariscal expects more focus on helping franchisees squeeze out profits. That means more business-skills training and scrutiny of prospective franchisees.

"The people have to be the right people," said Mariscal, whose sales at her three Phoenix stores are up 22 percent the past two years.

She is among the franchisees who felt too much of the system's success relied on owners who didn't understand business basics and thought selling ice-cream would be easy.

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Read More of this article at the The Arizona Republic