Heartache and Financial Failure: What Happens When Financial Challenges Become Overwhelming

GROUP 1JOEY 陳清水 MA1N0207JACK 阮陳福 MA1N0214HUNG 黎阮維雄 MA1N0204AARON 林志聰 MA1N0237HA 陳黎燕河 MA2N0235

IntroductionCold Stone Creamy0 American-based company founded by Susan and Donald

Sutherland in 19880 Main product is premium ice cream0 In 1995 it had the first franchise store. The number of

franchisees grew quickly in the late 1990s and early to mid-2000s.

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

0High prices in a tough economy0Saturated market0Believing the hype0Franchisor 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

0Timeliness of entry into the target market0Franchisor’s requirements0Cost 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:0From 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 reports.”“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:0Both sides need to work together0Franchisees need to do better job in financial

management to ensure profitability0Franchisors need to reconsider their franchising

management.

Question 3

0Do 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)

0No 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 trending.

0Most of company doesn’t show all of their financial studies.

Answer to question 3 (2/2)0As an investor(franchiser), doing research is more

suggestible before buying the business.0Doing more feasibility and market might help change the

way you understand the company.0Every country has their own culture, so before trying to

franchise, think first the factors that may affect you business.

Question 4

0Answer 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)

0Buying a franchise = do business with low risks Good

management process Good products or

services Good support

0Choose to buy a franchise to base on customers’ need at the suitable time

Answer to question 4 (2/2)

0However, I’m interested in Drinks Food Services

Because customers always have those needs, but they have different needs at different times.