Cold Stone Creamery Franchise Assets Seized, to be Auctioned

Cold Stone's stores are financially failing throughout the nation. The Southgate Cold Stone franchisees did their very best under extremely difficult--perhaps impossible circumstances. The closing of their store however is NOT THEIR FAULT. In my opinion, the problem here is that Cold Stone put so much financial pressure on them that it made it nearly impossible for them to turn a profit.

I am an Ex-Cold Stone Creamery franchisee. I am currently suing the company in federal court for among other things: (1) fraud in the inducement (i.e. for selling to potential franchisees based on statements such as "profit by making people happy" and "Cold Stone's franchise opportunities are about as solid as they come"); and (2) Cold Stone effectively charges more than the 9% enumerated in their franchise agreement because they negotiate and receive "kickbacks" from the very vendors that they require franchisees to use. Those "kickbacks" drive up food cost for its franchisees and makes many of them unprofitable. This is apparent by the large number of stores that are closing down throughout the nation.

Cold Stone has known for years that its franchisees have had serious profitability issues, yet they go out and negotiate deals that make their franchisees even more unprofitable. In my view, there is something inherently wrong with a company that negotiates deals with vendors that increase the cost to their franchisees. Those deals effectively pad the company's own profits at the expense of its franchisees who suffer life altering financial failures and many are filing bankruptcy at an alarming rate. In my opinion, that is completely contrary to their core value to supposedly "do the right thing". Cold Stone's lack of care and concern for their franchisee's well being is inexplicably disingenuous in my view.

The Southgate Cold Stone franchisees were completely dedicated to their store. As an ex-franchisee, I know how difficult it is to win one Golden Spades award. These franchisees have won four. That says it all because I can assure that is a rare occurrence of the mark of outstanding management. Golden Spades awards are given to only the finest--most operationally sound franchisees as compared to Cold Stone operators throughout the nation. The family that operated this store worked long hours to serve their community. Cold Stone owes this family a heartfelt gesture of thanks for their valiant effort, but instead Cold Stone attempted to paint them as bad operators even knowing that they had earned four Golden Spades awards. Why?, in my opinion to give fraudulent value to their assets in an effort to ensnare their next victim.

On its website, Cold Stone boasts its average store generates $381,985 in annual sales. We had three stores and they were performing well above the national average. Two of our stores did $500,000 each in annual sales, which is more than $100,000 above the company's national average. We operated a store near a large college campus that was among the top Cold Stones in the entire nation. With $1.4 million in sales between the three stores--Cold Stone Creamery repeatedly recognized us as outstanding performers among stores throughout the nation and within our region. Yet when we left the system, Cold Stone attempted to paint us as bad operators. Does this sound familiar?

There are Cold Stone Creamery franchisees who are pumping several thousands into their stores each month just to cover their losses. One franchisee told me, after investing $300,000 to open his store, he is losing $4,000 to $7,000 per month. A franchisee in Florida recently told me that he lost nearly $132,000 in just one store during 2007. That's alarming.

We are also suing Cold Stone for scuttling a sale to a potential buyer. According to this comment ( http://www.bluemaumau.org/a_recovering_cold_stone_creamery_franchisee ) we are not alone in that complaint.

The Southgate franchisees are not alone by any means as Cold Stone operators who could not will their business to profitability. In my opinion, that is due to Cold Stone's corporate greed. In my view, despite this family's Herculean effort, they did not stand a chance. Why? In my opinion, Cold Stone's business model is a failure. Yet, I would imagine that they are selling new and failed franchises to unsuspecting investors--who are paying hundreds of thousands of dollars for stores. In my opinion, they will likely be worth only a fraction of their cost by the time they begin operating the store.

I think Cold Stone is a DISASTER from an investment standpoint!!! If I had a penny to invest in a franchise, Cold Stone would be very last on my list.

I wish the Southgate franchise owners the very best as they go about recovering from such a bad investment. They are extraordinary business managers and very special people. They deserved so much more from Cold Stone.

Cecil Rolle
Tallahassee, FL
cecilrolle@aol.com