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Due Diligence: Cold Stone Creamery - Utilities

 The Monthly utilities in this small ice cream franchise are extremely high and at times can account for as much as 10% of your monthly revenues.  When you look at the equipment list you will begin to see why.  Let's take a look at each one and what each utility will cost you.

Electricity (monthly)  -  ($900-$1300)

The electricity bill by far is the largest utility expense - this expense should easily deter any logically thinking wannabe franchisee.   A typical Cold Stone store has following electricity requirements:

Freezers:

    Walk-in Freezer  (24 hours @ 6 degrees F)  (1 compressor)

    Masterbuilt Upright Blast Freezer (15 hours @ -35 degrees F) (1 compressor)

    Carpagianni Ice Cream Batch Freezer  (4 hours @ 10 degrees F) (1 compressor)

    Ghea Lobby Display Freezer  -  (24 hours @ 8 degrees F) (2 compressors)

    Backline smoothy freezer (24 hours @ 10 degrees F) (1 compressor)

    Masterbuilt Upright Cake display Cake Freezer (24 hours @ -4 degrees F) (1 compressor)

    Stone #1 freezer units (10 hours @ 15 degrees F, 7 days per week)  (1 compressor)

    Stone #2 freezer units (10 hours @ 15 degrees F, 3 days per weekend) (1 compressor)

Refrigerators:

    Walk-in Refrigerator  (24 hours @ 41 degrees F) (1 compressor)

    Back line refrigerator (24 hours @ 40 degrees F) (1 compressor)

    Pepsi upright refrigerator (24 hours @ 40 degrees F) (1 compressor)

Air Conditioning:  2 - 10 ton Air Conditioners (2 compressors) - 1600sf

Backline Counter Equipment:

    3 Waffle Makers (11 hours @ 350 degrees F)

    2 Hi-performance blenders (85 shakes or smoothies per day) 

Convection Oven  (discontinued in 2007 in profit increasing scheme)

    Brownie (3 hours @ 325 degrees F)

2 Cash Registers

1 POS computer system    

2 CC Gift Card machines

1 Video Camera computer system  & 4 cameras

1 Muzak system with tuner and speakers

General florescent lighting and store signage

In case you lost count  - that was 14 (FOURTEEN!) compressors - 6 of which run 24/7/365.   Seven of the fourteen compressors are in the main lobby area and cause a very noisy environment - one of the complaints by some customers.

One thing to consider - at least Subway, Blimpies and Quiznos can turn off their ovens at night.  Ice Cream requires 24 hour sub freezing temperatures. 

Do you really want an Ice Cream franchise?  Let's continue...

Gas (Monthly) - ($50)

Gas is negligible as in store heating is usually low because of ambient in store heat (all of those compressors humming away hour after hour!) and hot water is used at a minimum.

Water (Monthly) - ($350 - $400)

Water usage is high because it is used to flush the gutters around each of the two granite stones and to flush the dip wells used to clean the spades in between scooping.  These water taps run during all "business hours" - that is 11 hours per day.  In some areas the health department will require that the water runs during all business hours, most owners will get a few water bills and start mandating that water is on only when there is a line.  Water is also used to cool Carpagianni batch freezer, there is a single batch freezer per store and is used to make ALL the ice cream sold in the store - the batch freezer is often used for 4-6 hours per day and even more during summer months.  

The water usage calls into question the business model in a drought (Atlanta) area where high water usage is charged a premium.

1 3-compartment restaurant sink  (2 are re-filled every 4 hours)

2 employee hand sinks

2 customer restroom sinks and toilets

40 Gallon Grease Trap (monthly) - ($150)

Many county health departments require that grease traps be used for waste water containing dairy products.  There are two issues with grease traps, first, it's a $150 per month to have it pumped and the health department will track how often you are cleaning your trap. Second, the residual ice cream waste is trapped in it - in the humid summer months this trap will give off a foul odor that your crew will continually remind you about.

Linen Service (towels and mats) (Monthly) - ($80)

What choice to you have?  Wash them yourself?  Perhaps, the towels easier than the mats.  The mats will have a grease build up and become harder and harder to clean.  Eventually, you will sign up for a service.

 100 towels and 4 mats picked up weekly.

Bellsouth Phone Lines (2) (Monthly) and DSL Internet (monthly)  ($189)

2 phone lines are required if you are going use credit cards and gift card processing. 

DSL is required only so CSCorp can pull your weekly sales information.  Years ago, before AlGore and the internet, CSCorp only required a fax from franchisees with the weekly sales generated by their POS system. 

As our sales declined I felt like $189 for phones and DSL in a small ice cream shop was excessive.  I pushed to go back to the fax, of course, it fell on deaf ears since it would cost CSCorp too much to process, and heck, "why spend money at corporate when it can be pushed to the franchisees" - I believe that is the CSCorp vision statement.

Lease expense - Common Area Maintenance (CAM)  ($425)

The CAM expense comes with each lease and will be quoted to you above and beyond your lease square footage quote.  Including CAM in utilities since it includes trash pick up, building maintenance, landscaping,  and some property companies even throw their property taxes into the CAM - there's that hog snorting up as much as he can.  Watch your CAM expenses - it raised on us each year of our lease - and there was very little the lease holders can do about it.

Totals 

Total Monthly Utility Expense:  $2594

Total Monthly Regular-sized Creations:  639

Total Daily Regular-sized Creations:  21

** That's 21 regular creations ($4.06) sold per day just to cover your monthly utility expenses.

*********

Conclusion:  one thing to consider is to go no larger than 900sf store - this will limit some of the expenses listed above, however, there are still the same number of freezers and refrigerators required by CSCorp.  A smaller store will cut back on AC and heating requirements.  Water and electricity will roughly stay the same - even if you have none or one public restroom.   In creating your monthly pro-forma make sure your utilities are properly accounted.  Even second and third generation owners cannot avoid this bloated business model which  sucks up a huge utility foot print.

Opinion:  I was always surprised that CSCorp never really took into account the huge utility burden placed on the franchisees.   As you can see, the list of energy-sucking equipment is staggering and is unsurpassed by any other franchise concept.  When the new smoothie program was introduced a backline freezer became a required item - it's sole purpose was to hold cups of premade frozen fruit - I would venture to guess that some stores don't sell enough smoothies to even cover the cost of the electricity of the smoothie freezer much less see any profit.  The new Pepsi drink program added a 5-foot upright refrigerator and at one point, in a "profitability improvement" program they introduced pre-made brownies so the convection oven could be removed and the 60 minutes of usage could be eliminated.  CS Franchisees now groan at the thought of adding $5000 in coffee and soup equipment … you can now see why.

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