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

1. Heartache and Financial Failure: What Happens When Financial Challenges Become Overwhelming GROUP 1 JOEY 陳清水MA1N0207 JACK 阮陳福MA1N0214 HUNG 黎阮維雄MA1N0204 AARON 林志聰MA1N0237 HA 陳黎燕河MA2N0235

2. Introduction Cold Stone Creamy • American-based company founded by Susan and Donald Sutherland in 1988 • Main product is premium ice cream • In 1995 it had the first franchise store. The number of franchisees grew quickly in the late 1990s and early to mid-2000s. • As its peak it had 1,400 franchise stores. • 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.

3. Franchisees’ challenges • High prices in a tough economy • Saturated market • Believing the hype • Franchisor control

4. 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?

5. Answer to question 1 • Timeliness of entry into the target market • Franchisor’s requirements • Cost and revenue of existing franchisees

6. Question 2 After reading the case, are you sympathize with disgruntled Cold Stone franchisees, or do you believe the company explanation?

7. Answer to question 2 (1/3) Cold Stones franchising management has received a lot of complaints from franchisees: • 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” • Websites like BlueMauMau.org, ColdStoneFacts.orgcontain numerous horror franchise stories.

8. 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

9. Answer to question 2 (3/3) Our conclusion: • Both sides need to work together • Franchisees need to do better job in financial management to ensure profitability • Franchisors need to reconsider their franchising management.

10. Question 3 • 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?

11. Answer to question 3(1/2) • 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 trending. • Most of company doesn’t show all of their financial studies.

12. Answer to question 3 (2/2) • As an investor(franchiser), doing research is more suggestible before buying the business. • Doing more feasibility and market might help change the way you understand the company. • Every country has their own culture, so before trying to franchise, think first the factors that may affect you business.

13. Question 4 • 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 ?

14. Answer to question 4 (1/2) • Buying a franchise = do business with low risks • Good management process • Good products or services • Good support • Choose to buy a franchise to base on customers’ need at the suitable time

15. Answer to question 4 (2/2) • However, I’m interested in • Drinks • Food • Services Because customers always have those needs, but they have different needs at different times.