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Franchising firm Cold Stone Creamery has not been able to sell franchises for months after it lapsed in renewing franchise disclosure documents. Reporter Josh Kosman writes in this morning's New York Post:
Michael Reagan, Kahala's executive vice president and general counsel, confirmed the company was late in filing the statements -- a delay it blamed on its outside accountant -- but said the company was filing the completed audit today. "Six months is a long time without a financial disclosure statement," Reagan said. "There was an unfortunate delay and it had nothing to do with our financial condition." The company provided The Post with the just-completed 2010 financial statement showing the results for a subsidiary, Kahala Franchising LLC, which doesn't include results for Cold Stone Creamery.
Franchising firms are prevented from selling franchises in States when they fail to renew their franchise disclosure documents and let their old statements lapse.
As the chain and its franchise owners fall into a dead winter, Cold Stone Creamery now has only 1,500 shops, according to the New York Post. That number shows that over a third of its franchises have melted away compared to when the company self-reported having over 2,300 ice cream shops in the International Franchise Association's Spring/Summer 2008 Franchise Opportunities Guide.
During last year's holiday season and spring of this year, Cold Stone found itself under the scrutiny of multiple airings of a CNBC documentary on franchising in which franchise owners declared that they could not make money and that the business model was seriously flawed. Cold Stone's president Dan Beem rebutted that the stores were economically healthy, although his firm didn't track or know the profits of its franchised shops.
Cold Stone told the Post that the franchising firm has plans to open sixteen international stores in countries where disclosure of the franchising company's condition is not required.