COLD STONE CREAMERY: Should Failing Franchisees Keep Quiet?


Frequently, commenters make the point that open discussions by unhappy franchisees on sites such as this just make matters worse and hurt those who are still struggling to survive.

The most recent of these commenters, posting as Alison, made this point about Kahala owned Cold Stone Creamery, making some points I agree with and others I don’t. Valid points can be made on both sides. What do you think? Share your opinion below.

Here are some of the points and my responses.

Alison said: For all those franchisees still hanging in there, this message board can do no good.
It allowed you to anonymously express your opinion to a number of other owners, prospective owners and even management. Isn’t that good?

Alison said:…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?

Alison said: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”?

Alison said: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 DO YOU THINK? SHARE A COMMENT BELOW.

8 thoughts on “COLD STONE CREAMERY: Should Failing Franchisees Keep Quiet?

  • August 13, 2008 at 10:55 pm
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    Always! The conflict of interest is obvious between the franchisees who are breaking even and those who have profits and the franchisees who are not surviving and who stand to lose everything in failure and then want to approach the courts because they feel they were misled and defrauded when the franchise was sold to them.

    Franchisees standing at breakeven or with profits feel that anything negative on sites like Franchise Pick or Blue Mau Mau can hurt their businesses but this probably isn’t true. The customers of Cold Stone Creamery are not roaming around on Franchise Pick. and very little of this negative talk gets into the main media. The customers of Cold Stone Creamery will not be aware that there are lawsuits and this negative talk on the Internet will not hurt the businesses of the franchisees who are standing successfully in the economy. .

    The negative talk does however somewhat impact on new sales of franchises if prospective buyers research for negatives on the Internet and find negatives here on Franchise Pick or Blue Mau Mau and other excellent websites. But, of course, those who post negatives are looking for moral support from other franchisees who are failing and also trying to warn others about what has happened to their investment in Cold Stone Creamery.

    If you will forgive me, I again say that if unit performance statistics were required to be disclosed to NEW buyers of franchises, the new buyers would invest knowing the possibility of survivability and profits and would not be so shocked and angry when their businesses fail. It is because franchises are sold and the risk and the rewards in terms of historical UNIT financial performance are NOT required to be disclosed under law to the new buyers that franchisees are shocked and surprised and angry when their franchises fail in the first months or years of the contract.

    When franchisors system sales come under pressure, the first thing they do is try to sell more franchises and they CAN survive as long as they can sell NEW franchises out of the front door and highly discounted units of the failures out of the back door. Franchisors “churn” to survive and retain their system sales. This process can be obscured from the view of the new buyers because the UNIT performance statistics of the SYSTEM are not required to be disclosed to new buyers.

    The Internet has changed things for the franchisors and they no longer have the assurance of the silence of those who fail as long as these failures have computers and “free speech” websites like Franchise Pick that permits them to air their grievances against their franchisor whom they feel tricked them into a bad investment and a malicious legal trap.

    The Internet presents a “reputational” vehicle that the franchisee can drive and allows the franchisees to have a “voice” that they have never had before and this is a good thing —for franchisees!

  • August 13, 2008 at 11:52 pm
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    According to the Cold Stone website:
    “Cold Stone’s franchise opportunities are about as solid as they come.”

    “…Cold Stone owners are backed by a business structure and track record of stability and growth.”

    “we consider owners our partners in the common cause of Cold Stone’s ongoing success.”

  • August 14, 2008 at 9:29 am
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    I couldn’t agree more Carole!
    In the Meal Assembly biz- this seems to be a favorite strategy of bigger operations like Dream Dinners or Super Suppers. It would seem that brand recognition feeds this monster of churning failed, under-performers or closed stores for the these two companies in particular. Second generation buyers it would seem, consider a re-sale as a way for them to open a store with less investment, thus increasing their chances for success. Sadly from my research that doesn’t seem to be the case. Second generation owners of a Meal Assembly business seem to have the same massive failure rate as an original fracnhisee. The analogy used for these buyers is like buying a used car to let the original owner take all the depreciation, but in the Meal Assembly business, the only winners consistently are the Franchisors who continue to collect franchise fees on stores that will NEVER be money makers or even break even.
    I find this practice abhorrent.
    Unfortunately it would seem that no amount of evidence on-line about the prat-falls of buying a Meal Assembly business seems to matter. Stupid people still think they have what it takes to make this thing succeed. The Meal Assembly industry too still tells folks it’s a good solid investment, but they temper that with the qualifier that “any business is a risk and we can’t guarantee anyone’s success.” They encourage people to buy while telling them they need to moderate their expectations of the time it will take to make a profit, that this business is not all about making money-it is also more importantly about making a contribution to your community. What a bunch of hooey! They CAN say that because they continue to make money even when the business is failing!
    Their fall back position I guess, is that they can always try to sell it again if the second batch of owners fail.
    I guess in that case you really can’t fix stupid.

  • August 14, 2008 at 12:51 pm
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    You got it, Kelly! The very nature of the business model renders the franchisor always a winner originally, no matter how long the franchisee survives. Franchisees don’t understand that franchisors CAN make money even as franchisees fail as long as they can continue to sell new franchises. When, finally, the word gets around about all of the failures, the franchisors themselves finally fold and then everybody is a loser. But! this takes time, and in Recessions, where families are looking for a way to earn income, the Meal Assembly Business looks like an answer for many women and men to do something constructive that will help others and to earn money as well. The franchisors play on this need and make “constructive earnings claims” outside of the contract with immunity and impunity under our laws, and then disclaim them in the boilerplate contracts that come packaged in a government disclosure document.

    I think franchising has been so successful and so DURABLE as a business model because the franchisors are subsidized by regulatory policy in an effort by government and the powerful interests to overcome the dismal statistics concerning the startup failure rates of ALL small businesses. (See Business Trends –Startup Failure Rates by Scott Shane –Western Reserve University, Cleveland) Franchisors have an opportunity to beat these brutal odds because they don’t bear the brunt of the failure of the first-owner franchisees and they do survive in the economy for a longer time period. Government considers that this serves the “greater good.” The little fish are allowed to be eaten to keep the bigger fish alive and swimming in the economy.

    Unfortunately, it looks like public policy premeditates franchiSEES as merely resources for franchisors who, under regulatory policy, are allowed to hype and sell their franchises to the public and TRY to “prove” them as long as their signed contracts protect them in arbitration or the courts from any recourse from those who fail.

    The appetite of the “beast of franchising” is getting out of control and franchisees are being destroyed in great numbers these days, but the government turns a blind eye to the regulation that allows franchisors to cheat and exploit their franchisees, as needed, in order to survive themselves.

    If franchisors had tro disclose their internal proprietory historical UNIT performance statistics to new buyers on a timely basis, prospective buyers would have access to information that would protect them from buying unviable and unprofitable franchises. But, the government has deemed that this is NOT MATERIAL INFORMATION that has to be disclosed to new buyers of franchises and prospective franchisees continue to be cheated and exploited by the “system.”

    Apparently, if buyers of franchises really understood the risk and rewards involved in terms of actual performance statistics, the franchisors couldn’t sell as many franchises and this is why government has given franchisors the subsidy of government regulation that permits franchisors to withhold MATERIAL information from new buyers, with immunity and impunity under the law.

    Even some exceptionally smart and educated and successful people have been “tricked” by appearances and feel “stupid” when they understand what has happened to them. There have been $l,000,000.00 losses to some franchisees as demonstrated by the SonaMedSpa scandal that can be read on Blue Mau Mau. Ask yourself, Kelly, does government regulation, the disclosure document, act somewhat as a “shill” to help franchisors to sell their franchises to the public?

    Carol

  • August 14, 2008 at 1:44 pm
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    There’s a very simple concept that gets overlooked time and again.
    The franchise veterans know this yet remain quiet, because this mini-economy has built up around it.
    It’s called the Hot New Franchise. Meal Prep is one poster child. Ebay Drop off another. The Cereal Cafe is my all-time favorite.
    The concept of franchising is that a would-be business owner pays a premium for a proven business concept that has stood the test of time, had the kinks ironed out, etc.
    In exchange for these benefits, the would-be business owner accepts the burden of franchise fees, royalties & some loss of autonomy… they give up their free will and individual identity.
    This is all based on the premise that the benefits of the proven, established system will more than offset the potential negatives of opening an experimental, unproven business.
    The “Hot New Franchise” delivers the worst of both worlds – the high fees and loss of autonomy of a franchise with the uncertainty of an unproven concept.
    Franchisors like Make & Take openly admit they have no clue and that they are figuring it out as they go – yet they encouraged people to open unproven concepts as if the bugs were worked out – then blamed THEM when they failed.
    Michael Probst charged a $60K franchise fee for Cork & Olive, an experimental wine store concept, then abruptly closed, leaving franchisees in the lurch.
    Cuppy’s Coffee is selling an experimental drive-thru concept that has never been proven viable nor profitable. Do the industry vets point this out?
    To the contrary. They give them a Fair Franchising Award because they’ve got a pretty pretty contract.

    People need education, and a reality check. The blogosphere is the only only thing providing either.

  • August 14, 2008 at 3:06 pm
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    Admin,
    I couldn’t agree with you more. As I have said before IF iIwas a LEGITIMATE franchisor with a proven concept to sell to a willing buyer I would be pissed as HELL with outfits like Make & Take Gourmet, and any other franchisor in the MAK industry. In my opinion, there needs to be a serious outcry from longstanding franchisors to stem the tide of flim flam artists masquerading as legitimate franchisors with a proven, properly developed and vetted concepts.
    One article I just read stated that Super Suppers has SOLD 265 stores
    http://www.authorizedmovers.com/articles/Meal-Assembly-Goes-Mobile-Super.htm
    -when Tuckerbox at http://www.mealassemblywatch.com did the math, there are only 120 remaining stores open. The difference between stores sold and still open is as maw so big you could run a fleet of 18 wheelers through it.
    AND YET potential buyers look at the articles and “industry” websites and see numbers like 200 plus stores sold and it is an instant marketing boon for the franchisor-it gives them artificial legitimacy in my opinion. Then you have the instance of “brand recognition” like Dream Dinners who prospects go to by default and buy a store because of the same ill-gotten legitimacy.
    Prospective buyers need to differentiate and discern the difference in those franchises sold numbers and the number of store still opened/operating and the artificial projected numbers of other MAK industry experts.
    It begs the question: If a person wanted to invest money in a business and realize a ROI is the MAK business a good investment?
    Just for example sake: say you have a company called “Make it Your Own Dam Self” (I know the name alone is an attention getter!) they have a concept/model and decide to start selling franchises in 2000. As of 2008 they have 100 stores currently open/operating but have claimed stores “sold” as 400, what has happened to over 60% of their stores?
    For most that 100 stores currently operating looks darn good, and they say well it must be a good investment, BUY!
    But what about the number of stores “sold”? How do you find the fact that they “sold” 400 units in 8 years but now only 100 remain open? Is that really a good investment, is it something I would invest money in?
    Due Diligence is an absolute MUST for prospective investors in any Franchise situation especially. This website and others like it are a must read for anyone who is looking to invest in a business opportunity.
    Sadly, it looks to me as if Cold Stone Creamery-a company that did it the right way initially, has hit the skids-Admin how do you explain that situation? Do you have an opine?

  • August 14, 2008 at 3:51 pm
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    Yes! When the so-called franchisor hits the skids like Kelly says, in order to save themselves they have to SELL more unviable franchises to keep their system gross systems sales up and survive in the marketplace.

    Apparently, franchisors are not guilty of FRAUD when they do this because the regulatory policy premeditates that the franchisee are merely resources on which to stand up the franchisors that feed the economy. Franchisors are considered “legitimate” as long as they can prepare a Franchise Disclosure Document for State government, as directed by the FTC Rule.

    This has been going on for over thirty years —will this ever be fixed?

    How can this be fixed when nobody wants to fix it because the only ones to lose and to lose big are the franchisees?.

  • August 14, 2008 at 7:04 pm
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    I think the cry of every franchisee with a legit beef should be ” HELL NO WE WON”T GO!”
    Go quietly? That’s not even an option for me…I’m a loud mouth southerner. Did I hear someone say Red Neck? You bet!
    That’s what every FranniZor counts on…for the frannieZee to go quietly and lick their wounds in silence.
    Uh, No, not gonna do that either.
    I will tell everyone I meet my experience with franchising
    I have to disagree with the Mom & Pop statement as well. When I owned a Stone Cold franchise I found that most stores were multi-unit owned. How can it be a Mom & Pop when your soul is owned by a conglomerate who tells you what to do and how to do it?
    Do these little soiree hurts current franchisees? I think Carole is correct-the only customers who have posted here have been staunch supporters of the concepts that are discussed here.
    I don’t think dissatisfied franchisees talking about their true experiences are going to sway the public to stay away from these places en masse.
    We’re here we’re zee-ers get used to it!
    CB

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