A Recovering Cold Stone Creamery Franchisee

My real job frequently sends me to Shanghai and I have long (jet-lag) Shanghai nights to peruse the Blue Mau Mau site and scratch my head and wonder "how the hell did I get sucked into the Cold Stone Creamery spiral of death".

I am now a recovering Cold Stone Creamery Franchisee.

When I last posted, we were under contract to sell our Cold Stone Creamery to a second generation buyer.  Since then, I have seen the Cold Stone Corporate classic "churn" in full operation.

Our first buyer (yes, the first of three since I last posted) put cash on the table in April and was ready to jet off to Chattanooga and Phoenix for 3 weeks of training.  This buyer had small business experience in the Hotel franchise sector and had comparable communication skills as other local CS franchisees, one of which is 15 miles to the north and became an owner 12 months ago.  This buyer was required to pass a "attitude profile" (FranchiZe Profile, by Dynamic Performance Systems) test before he could continue in the Cold Stone approval process.  He failed the 132 question test filled with subjective, rambling and random questions.  At first I was shocked!  Until I realized that this was the typical Cold Stone persona - that is, what's the latest new fangled gadget to spend money on (more on that in future posts).  In reality this profile test is a slick way of discriminating against potential buyers ….and against franchisees eager to leave the system.   And, IMHO, a violation of Section 17, unreasonable denial clause.

Our second buyer, had cash on the table and was also ready to jet off to Cold Stone University for training.  He had family Marble Slab ownership experience and had developed a close relationship with the regional Cold Stone training store in Chattanooga, who encouraged him to pursue our store.  Again, he had better experience and better communication skills than existing CS franchisees … he also failed the "Attitude Profile".  We talked the area CS reps into giving him a second chance at the test.  This time, with the help of my wife and our broker, he missed by a single point.  The CS Area Reps approved it and gave him the go ahead.  He passed the in-store evaluation, language test, the food safety course.  He was now ready for the 23-day training….we were THRILLED and thought that we would be out by the end of July.  BUT…before he could registered for training he needed to have an over-the-phone interview with corporate and then receive corporate approval.  In late June we were shocked to learn that he had been turned down by corporate.  We appealed to the corporate Ombudsman for assistance on this situation.  Her only comment was "that's why we have tests, to find the right franchisees".  I was shocked.

Our third buyer was a local franchisee who owns a store about 20 miles to the east of us.  He did not have cash to put down and would need assistance from Corporate to get financing from one of the preferred lenders - and perhaps direct assistance from Corporate.  Corporate told us that they were working with this franchisee and they should have things worked out by the end of August, which just happened to coincide with the last bit of credit to our name.  In early August, a shot across the bow came from the Cold Stone director of transfers who said, "you are aware that just because he is an existing franchisee does not guarantee that he will be approved".  I knew right then and there that they would not approve him.  In late August we received word that corporate would not assist the local franchisee and they would not approve him for purchasing our store.  I did not understand the "about face" from their willingness to assist earlier in the month….until later.

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We closed the doors on Monday, August 27th.

By Friday August 31st, the Cold Stone area reps had the locks changed, inventory completed and the floors clean.

The week of Sept 14th, they had a buyer of their own up and running.

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I have been keenly interested in the past year in the Quiznos and UPS discussions.  One could easily substituted "Cold Stone Creamery" in either of those discussion forums in discussing product costs, labor percentages, kickbacks, franchisor horrors and the non-viable business models.  Yet, this "golden child" of the ice cream industry continues to go undetected in their ruthless business practices, their flawed business model and their total disregard for the profitability of the franchisee.  Well, with some help that will stop here, I have passed too many wounded (failing) and, indeed, dead (closed) franchisees on this road to remain silent any longer.

I am opening up two forum topics: 

1) a "Cold Stone Creamery - Tales of Gore"  topic and invite other Cold Stone veterans to speak out - and help would-be future franchisees with operational details and Cold Stone relationship insights and to lend a hand in the post-traumatic rehabilitation of other CS franchisees coming in from the "Cold". 

Tales of Gore Topics:

Failed marketing attempts - cakes, shakes, red pan, smoothies, grab and go

Corporate Inexperience - failed TV ads, gift card fiasco

Churning - 2nd, 3rd generation owners

Franchise transfer nightmares, the CS transfer process

The CS lifecycle - honeymoon, recruitment, break even, try to sell, … death spiral

What did you pay and what price are you trying to sell?

Inability to organize a franchisee association or to successfully litigate

Ability to successfully litigate (tell us how!)

 2) and a "Cold Stone Creamery - Due Diligence" - this  topic will attempt to deal strictly with the facts and figures related to owning (and closing) a Cold Stone Creamery.  Over time this will help the general public and would be franchisees understand why it costs most franchisees $7.50 to sell a $5.00 ice cream in a Cold Stone Creamery Franchise.  I invite both Cold Stone pro and CS con to join in and defend or refute the discussed due diligence topics. 

Due Diligence Topics:

Training cycles (hire, train, layoff, hire, train, layoff)

Pro forma breakdowns, Labor breakdowns, product breakdowns

Product costs, Sygma and Sysco markups

Buildout costs

Chronic equipment failures

Compressors = electric bill

Smoothies, shakes, cakes, soups, coffee - other losing attempts at profitability

What SBA did you use?

I encourage Cold Stone Creamery franchisees to post regularly with product costs, franchisor issues, insane marketing abilities and updates on legal proceedings.

-jm