Cold stone Creamery: Heartache and financial Failure Ping MA1N0232

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Cold stone Creamery: Heartache and financial Failure

Ping

Minh, NghiemVan

Chaipat Jingjitra

Ly, Pham Hien

MA1N0232

MA1N0234

MA1N0238

MA1N0241

INTRODUCTION

• Founded in 1988

• First franchise in 1995

• Quick growth:

• ( late 1990s to mid-2000s)

• Stores number doubled from 2003 to 2005

• 1400 franchise stores

SITUATIONS

• Financial difficulties

• Up to 60 closed stores in 2006

• 100 closed stores in 2007

• Disgruntled franchisees

• Owners: success depends on operating a store

Question 1

If you were thinking about buying a franchise, like a Cold Stone

Creamery store, what financial information would you look at and analyze before you completed the purchase?

- Initial and Ongoing Costs

The costs involved in starting and operating a franchise, including deposits or franchise fees that may be non-refundable, and costs for initial inventory, signs, equipment, leases, or rentals. It also explains ongoing costs, like royalties and advertising fees.

- Estimate your operating expenses for the first year and your personal living expenses for up to two years. Compare your estimates with what other franchisees have paid and with competing franchise systems. You may be able to get a better deal with another franchisor. An accountant can help you evaluate this information.

Question 1

If you were thinking about buying a franchise, like a Cold Stone

Creamery store, what financial information would you look at and analyze before you completed the purchase?

-

Earnings Information

You might want to know how much money you can make if you invest in a particular franchise system. Look at some figures of both your future franchisor and it’s franchisees: Sample size, Average

Incomes, Gross Sales, Net profits…

Question 1

If you were thinking about buying a franchise, like a Cold Stone

Creamery store, what financial information would you look at and analyze before you completed the purchase?

-

Financial History

Find explanatory information about the franchisor’s financial status in notes to the financial statements. Investing in a financially unstable franchisor is a significant risk; the company may go out of business or into bankruptcy after you have invested your money.

It’s a good idea to hire a lawyer or an accountant to review the franchisor’s financial statements, audit report, and notes. They can help you understand whether the franchisor:

•has steady growth

•has a growth plan

•makes most of its income from the sale of franchises or from continuing royalties

•devotes sufficient funds to support its franchise system

Question 2.

After reading the case, are you sympathize with disgruntled Cold Stone franchisees, or do you believe the company explanation?

• Franchisor

• The ultimate success of an individual store depends on how well it’s operated

• For-sale number of franchise as “at par with industry expectations”

• Franchisees

• High prices in tough economy: rent issue

• Saturated market: shops too close, competitive market.

• Believing the hype.

• Franchisor control: Pepsi bottles issue, 2-for-1 coupon $40,000

OUR CONLUSION

• Business is Buniness , Lost is Lost

• Both sides (franchisees and franchisor) need to sit back together to negociate.

• Franchisees need to do better in financial management to ensure profitability in highly competitive market.

• Franchisor need to reconsider their franchising management for sustainable development

.

Question 3

Do you think that some businesses that have financial trouble might never have had a chance to begin with?

If so, what can a business owner (including a franchisor of a Cold Stone Creamery) do ahead of time to make sure the business is financially feasible? Use the concepts conveyed in this chapter and Chapter 3 to formulate the answer

Primary financial objectives of

Entrepreneurial Firms

Business Owner or Franchisor can use this method to make sure the business financial feasibility

Forecasts

The process of financial management

Question 4

Answer of question 4

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