He describes perfectly how the premediated contract terms in franchise agreements allow franchisors to acquire the assets of failures for pennies and then sell the assets to a new franchisee of THEIR choice when the failed franchisee finally terminates. This is kind of a PERK for franchisees who are standing at break-even who want to spread their risk and become multiple unit owners in CSC.

If Montgomery has the resources to get to court and to sue CSC, I think this performs a public service because it makes the courts look at the ugly status quo of franchising that is perpetuated by the package of a government disclosure document and an adhesory contract, neither one of which discloses the “KNOWN” risk of the investment as represented by the UNIT performance statistics in the possession of the franchisors.

I believe JBMontgomery is a good man who looked into himself and who looked into franchising and who knows that he was DEFRAUDED by experts.

…the upsurge of negative talk and the lawsuits… it’s hurting those people who are hanging in there, trying to make it work.
In other words, shut up and die quietly? Don’t let the word out that you are really in business FOR yourself and BY yourself?

To vent about blame is futile, it’s prohibiting franchisees who have profitable stores from selling.
Why would it prevent someone with solid financials to share from selling their store? Aren’t you really saying “It’s keeping us from passing these money pits on to some other unsuspecting sucker”?

What we should be doing is telling customers that even though we are franchises and a % of the money goes to Kahala, it’s still a mom and pop ice cream shop…
I agree that locally that’s a good idea… raise the profile of the owner… get involved with community groups… stay in front of the media… use that local owner advantage over corporate-owned competitors… That’s a good idea to be doing all the time, not just troubled times.

However, Alison, your argument that everyone should just keep quiet and put on a happy face is troubling. I don’t think these complaints would be the same if franchisees perceived that Kahala and the Zees were “all in this together.” I’m sure that’s the message in their franchise marketing. If a franchisor knows that they are going to be discussed openly – including where future prospective franchisees are reading – they are going to be incentivised to respond to the franchisee’s need for assistance. If they are not committed to creating a win-win situation, people are going to know it. Franchisees should also be vocal about sharing things franchisors are doing right.

Alison, no one blames Kahala for the challenges of a tough economy, especially when lots of competitors are struggling as well. But this should be the time when franchisees are thinking “Man, I’m glad I paid a premium for this franchise, because I’ve got the brand, the buying power, the marketing expertise and the dedicated support behind me, just like they promised.”

If that’s not what franchisees are saying, I think it would be constructive for them to share what it is that Kahala could do to help them compete? What do you guys want?

What we should be doing is telling customers that even though we are franchises and a % of the money goes to Kahala, it’s stilla mom and pop ice cream shop and not a corporate entity like Chipotle. Frequenting Cold Stone store will keep our dream alive.

In the past 12 months we were under contract to sell our Cold Stone Creamery to a second generation buyer. During that time I saw Cold Stone Creamery Corporate stoop to an all-time low – and have seen first hand the cruelty of “corporate churning” at the expense of those who were “supposed” business partners.

Our first buyer (yes, the first of three in a span of 6 months) 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 MO – that is, what’s the latest new fangled gadget to spend money on. In reality this profile test is a slick way of discriminating against potential buyers from a cultural and racial point of view….and against franchisees eager to leave the system. And, in my opinion, 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 business broker, he passed 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 business…”. I was shocked.

Our third buyer was a local Cold Stone franchisee who owns a store 15 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. They netted a cool $42,000 off a “new” franchisee rather than “allowing” us to sell to one of the qualified buyers.

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I have been keenly interested in the past year in the Quiznos and UPS law suits. One could easily substituted “Cold Stone Creamery” in either of those law suits in revealing the 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.

If you are thinking about buying a CS franchise – DON’T DO IT!!!