Heartache and Financial Failure When Financial Challenges Become Overwhelming GROUP 1

Heartache and Financial Failure: What Happens
When Financial Challenges Become Overwhelming
HUNG 黎阮維雄
Cold Stone Creamy
0 American-based company founded by Susan and Donald
Sutherland in 1988
0 Main product is premium ice cream
0 In 1995 it had the first franchise store. The number of
franchisees grew quickly in the late 1990s and early to
0 As its peak it had 1,400 franchise stores.
0 However, it was a mess later on with a large number of
franchisees who have to quit due to several financial losses
and emotional distress.
Franchisees’ challenges
0 High prices in a tough economy
0 Saturated market
0 Believing the hype
0 Franchisor control
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?
Answer to question 1
0 Timeliness of entry into the target market
0 Franchisor’s requirements
0 Cost and revenue of existing franchisees
Question 2
After reading the case, are you sympathize with
disgruntled Cold Stone franchisees, or do you
believe the company explanation?
Answer to question 2 (1/3)
Cold Stones franchising management has
received a lot of complaints from franchisees:
0 From UnhappyFranchisee.com:
“According to many who believed the deceptive
advertising hype and bought a franchise, Cold Stone
Creamery is one of the worst franchise investments in
recent history”
0 Websites like BlueMauMau.org, ColdStoneFacts.org
contain numerous horror franchise stories.
Answer to question 2 (2/3)
Cold Stones explanations:
“Cold Stone insists it doesn't provide profit potential to
prospective franchisees. It also says the revenue figures it
gave for existing stores were based on franchisee
“Costs will depend on how well a store is operated”
"We want all franchisees to succeed. However, minimal
restaurant experience, a lack of desire to do local-store
marketing or the inability to be operationally excellent
can all contribute to a franchisee's inability to succeed.“
Source: R. Gibson, “The inside scoop”, Wall Street Journal, June 12, 2008
Answer to question 2 (3/3)
Our conclusion:
0 Both sides need to work together
0 Franchisees need to do better job in financial
management to ensure profitability
0 Franchisors need to reconsider their franchising
Question 3
0 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 Store Creamery) do ahead of time
to make sure the business is financially feasible?
Answer to question 3(1/2)
0 No investor wants to invest to a company if they think
it doesn’t have any future or financial growth, people
are tend to be attracted on what is famous and
0 Most of company doesn’t show all of their financial
Answer to question 3 (2/2)
0 As an investor(franchiser), doing research is more
suggestible before buying the business.
0 Doing more feasibility and market might help change the
way you understand the company.
0 Every country has their own culture, so before trying to
franchise, think first the factors that may affect you
Question 4
0 Answer some points in your career, could you see
yourself buying a franchise ? If so, what type of
franchise do you think you’d enjoy owning ?
Answer to question 4 (1/2)
0 Buying a franchise = do
business with low risks
Good management
 Good products or
 Good support
0 Choose
franchise to base on
customers’ need at the
suitable time
Answer to question 4 (2/2)
0 However, I’m interested
 Drinks
 Food
 Services
Because customers
always have those needs,
but they have different
needs at different times.