The Perils of Choosing the Wrong Franchise

You may be asking yourself “Why do I need a Franchise Consultant?”  The interview below is from the February 2017 issue of Business
This article is not as much about Stone Cold Creamery as it is about choosing the wrong franchise the wrong way. Many people are successful with Stone Cold, but this couple had no idea what they were getting into. They bought the franchise for the worst possible reason (they liked the product), and they failed to do the proper research into the way the company operates because, frankly, they didn’t know where to look.
Committing your hard earned money to a franchise is a serious business. Why wouldn’t you want the guidance and advice of someone who understands the industry, the process, the players and especially the mistakes that can cost you big money?

What’s it really like to own a Cold Stone Creamery Franchise?

Self Interview from former owner of a Cold Stone Creamery Franchise – Laurie Bennett

What type of experience did you need to start your Cold Stone Creamery Franchise?

I had a college degree in business and I had owned a clothing store for 5+ years when I had my first taste of Cold Stone with my husband. We loved it! My husband really wanted to go into business for himself and we felt Cold Stone Creamery was perfect. I already had a lot of business experience so it was an easy decision for us to make.

 How much capital was required for the total business and how much cash did you need?

We were told (in 1998) the cost to build a store was $185,000 in the FDD and by Doug Ducey the Cold Stone President.  However, we later learned those were outdated numbers. In actuality, it cost upwards of $325,000 to open a store and we had to learn that from the other franchisee’s that were in the system, opening stores and were finding out themselves. It was a scary time for all of us. Honestly, if we had known the true costs in advance, we would not have gone forward with a franchise. We simply could not have afforded it.

We ended up getting half way though our build-out and learned from the actual invoices and existing franchisee’s that the actual costs were $325,000+. My husband and I were scared to death. We had a 2 year old and a new born, my husband was still working full time, I was running my clothing boutique and we were in the process of building our Cold Stone. I kid you not – we had to quickly sell our house to get enough money to finish the store. Honestly, I learned then and there the importance of doing a TON of due diligence when you buy into a franchise BEFORE you agree to invest.

 Did you have to get financing?

The franchise was so new back then and we talked to a few banks but no one would finance that concept. We had $200,000 cash so we really thought we had plenty of capital since the FDD listed the high side of the cost to get a store open as $185,000. Turned out the actual cost was much higher and Cold Stone knew that – they just never told us.

 What other franchises did you look at before deciding on the one?

Honestly, none. I had never really considered a franchise before. But I loved the Cold Stone product, environment and vibe and so did my husband. We stumbled onto it, loved it and went for it. We honestly thought we were getting in on the ground floor of something amazing. A few years later, after we knew everything there was to know about Corporate Cold Stone, we decided we needed to leave the system.

 What was your worst customer experience?

We didn’t have too many but I remember one from the day we opened. One of our first customers came in and we were giving out free ice cream the first hour as a promotion. Yes…it was FREE and this lady still was complaining. My husband made her a super duper ice cream treat and mixed in her favoring things (according to her specifications). She took one bite and just about spat it in his face. She yelled out that she hated it. We went on to sell more than $5,000 of ice cream that day but it was a horrible way to start our first day in business. Of course we laugh about that now but that day it literally broke our hearts.

 What was your relationship like with the Corporate Franchise?

It started out really good but unfortunately, it turned downward after the first year. We had a very high volume store as we were in a very nice outdoor mall location. Because our traffic and sales (and rent) were greater than many other stores, our needs were very different. We needed to be highly efficient and that is how I like to work anyway. The franchise did not agree with us however. I would ask them for things like franchise approved ice cream cake boxes or to-go lids for the ice cream – which seemed like must have items to me. Cold Stone Corporate would respond to my requests by saying things like, “well no one else needs those things so you can’t have them.” It was an absurd way to run a business.

I already owned a clothing store so I knew that when I had a business problem, I found a solution to fix it immediately.  Cold Stone’s philosophy was the opposite and that would have been nice to know before going into it. They down right refused to spend the energy or look into products the higher volume stores could use to bring up our efficiency and lower our cost of goods. But they had no trouble finding the time and energy to harass us and tell us we could not use “non” corporate approved products or help us fix the problems we were experiencing. Eventually corporate would agree to let us use lids on to-to items but can you imagine having to argue with a franchise for such a simple thing you had requests for hundreds of times a day? I often told them they should be asking the busy locations for input on how to get better and not trying to threaten us for solving problems in the franchise. The whole thing was very upside down.    

 Do you have any regrets?

It was a heck of a learning experience but knowing what I do now, I would not have opened a Cold Stone Creamery. My husband and I both had to work a million hours a week to keep it going. I had to neglect my clothing store (which provided us our livelihood) and I missed out on so much with my babies those first few years. The franchise had alluded to the fact that we would be hiring a manager to run the show for us and we would be overseeing things.  Trouble was we didn’t feel we made enough money to pay a full time manager. My husband and I both worked 65+ hours a week and we were exhausted all the time. We were open 12 hours a day plus one hour of prep and one hour of cleaning. We hand made the ice cream, brownies and cones so it was extremely labor intensive.  Just thinking about it now gives me the willies.

 How many other franchisees did you speak to before buying in and do you think they were honest with you?

That is where I feel we really went wrong. I only spoke to 3 franchisees and one had not opened their store yet so they didn’t really count. The other 2 were vague and a bit strange and I could not seem to get straight answers from them. Turns out I was asking all the wrong questions. I honestly believed they were trying to keep new people out of the system because it was so great and they didn’t want to share the territory. Realistically, I had already made up my mind that I was going to open a store and so was not really listening. HUGE MISTAKE! Later, after I opened my store, they told me they had tried to warn me but I refused to hear them. They were right. I took what they said and twisted it to suit my needs. Turns out they were actually leveling with me the entire time.

What was the most difficult part of the business?

At one point we had 22 employees all under the age of 17. For them, work was not a priority. It came after homework, school, football, cheerleading, prom, spring break, parties, movies, travel etc. The kids were great but they were young and Cold Stone Creamery is hard work. Our turnover was very high and we were constantly hiring and training. That for me was extremely difficult.

What do you wish that you knew before buying in – that you do know now?

As I said, if we had known the true cost, more about the corporate dynamic and the atrocious work load – we would not have gone through with it. But…we live and we learn and boy did we learn!

What did you like about the franchise?  

I loved the ice cream – it was delicious. At our store we worked hard to make sure the quality was second to none and were very proud of that. I also really enjoyed the other franchisees. Most of them were terrific people and we were all in the same boat. We had no choice but to work together to find solutions, cut costs and grow sales.  One time, after we had been open approximately six months, another franchisee sent 4 of their BEST crew members to our store to work so my husband and I could go eat dinner together. It was one of the nicest things anyone had ever done for us. It was an amazing gesture and we so appreciated it. Dave and Howie if you are out there somewhere – thank you so very much from the bottom of our hearts.

 Would you tell someone else to open one?

I could not in clear conscience tell someone to open a Cold Stone Store. I know there was a class action lawsuit at one point and many franchisees sued the franchise as they felt they had been misled. That was years after we owned our store so we were not a party to that.

Hopeful franchisees would call our store on a daily basis and ask us if we “like the franchise.” We had to be careful of what we said, and not make corporate mad, as they would retaliate on franchisees who did. Still, we needed to be honest with people so we had a saying, “it is the hardest work we have ever done in our lives for the least amount of money.” It was the truth. I’m sure we scared people off but we just wanted them to know the truth. If that still sounded good to them, then by all means open a store. If not, they could move on.

How much work was required of you per week on average?

It never ended. I had someone watch my kids during the day almost every day. Then my mother and my husband’s mother would alternate evenings watching our children until 1am when we got home after cleaning up and closing. On weekends, my husband had to go back at 4am to start making more ice cream as our equipment and systems were inadequate for our volume. It was a tremendous work load.

Any words of advice to prospective franchisees looking into any franchise brand?    

I am definitely not saying all franchises are bad. I am sure there are hundreds, if not thousands that are great. I just want people to know that when you buy into a franchise, you are buying their system, culture and integrity.  If they are honest and forthright and the business model works, as long as you follow the system you should do great. However, if they are a misleading bunch and their business model does not fit your lifestyle (e.g. working 70+ hours a week) you need to ask enough questions in the due diligence process to discern that too. Remember…you get the truth from the existing franchisees NOT the franchise itself.