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COLD STONE CREAMERY: Another Franchise to Close

(UnhappyFranchisee.com) The Cold Stone Creamery franchise in Los Gatos, CA will stay open until Labor Day, then close forever.

According to The Patch, Cold Stone Creamery franchise owner Charles Hamm, of San Jose, said sales were declining and the business environment has “made it impossible to continue operation.”

The store has been in Los Gatos since 2006. Hamm bought it in March of 2007 from a previous owner who also had been losing money. At the time, there were two Cold Stone Creamery stores in Los Gatos. According to Hamm: “They had mediocre sales and I thought if one closed, those customers would come over. In the summertime it’s not too bad, but I just can’t afford the winters.”

[Read more articles on Cold Stone Creamery]

Hamm owns another Cold Stone Creamery in Rivermark Plaza, in Santa Clara. Lamented Franchisee Hamm:”We’re hanging in there … We’ll continue operation there, but it’s a tough time, it’s been tough since 2008.”

Commenting on The Patch article, Cold Stone Creamery ex-franchisee David Klein wasn’t so quick to let the franchisor and parent company, Kahala, off the hook for the franchise failure. He stated::

I understand Mr. Hamm’s struggle and I feel very badly for him, but he is wasting his time and money trying to keep the second store open. It will never make it. I owned three stores. Two of them were among the top stores in the nation and the third operated at well above the average unit volume. Still we could not earn a profit.

I think overwhelmingly, most Cold Stone franchise owners are not profitable due to the actions of Kahala and Cold Stone Creamery. It may even be that no stores are profitable because it was discovered that Cold Stone accepts kickbacks from the distributors that it forces the franchise owners to use. This was reported on CNBC but also in the Wall Street Journal. That causes Cold Stone franchises to become unprofitable. In many cases, this results in the loss of $500,000 or more in savings and other assets and leads to bankruptcy and ultimately the loss of the owner’s home. It’s corporate greed at it worse.

As Cold Stone continues to engage in kickbacks and until the federal government steps in says “no more kickbacks”, this will continue to happen.

Are you familiar with Cold Stone Creamery and Kahala? What do you think? Share a comment below.

unhappyzee

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Mr SUB says:

July 2, 2011 at 11:52 pm

Most Franchise Concepts are scam. I would say a staggering 90% .Why on earth would somebody get into a retail business and only have customers from a radius of 2 km come to them.That is not the way you are going to make money.Anytime the radius of your customer is less than 20 kms you are never going to make money simply because of the law of numbers.

There will never be customers coming to you beyond the 2 km radius because
in a franchise system there will be another franchise location to service that area.Simply you have doomed yourself for paltry revenues if not failure.