Summary
Case 8.1
Heartache and Financial Failure
Introduction
When a business struggles financially, not only is its budget stressed but the people who own and operate the business are often stressed as well. That’s why it’s so important that a business practice prudent financial management.
Cold Stone Creamery
Cold Stone Creamery was founded in 1988 by Susan and Donald Sutherland. The couple liked ice cream that was neither hard-packed nor soft-serve, and opened the first Cold Stone Creamery in Tempe, in the U.S. state of Arizona. In 1995, Cold Stone opened its first franchise in Tucson, Arizona, and grew quickly through the late 1990s and early to mid-2000s. in June 2008, a Wall Street Journal article, by Richard Gibson, examined the unusually high number of Cold Stone Creamery franchises that had closed or been put up sale by their owners, many of whom had severe financial losses and emotional distress.
Challenges Facing Cold Stone Creamery Franchisees
The following are the financial challenges confronting Cold Stone Creamery franchisees: 1. High prices in a tough economy. It’s hard to sell enough $4.00 scoops of ice cream in a difficult economy to support the overhead of a business that has a high overhead. 2. Saturated market. Cold Stone expanded rapidly and many franchisees complain that the stores are too close together. Its competitors also expanded in the 1990s and early to mid-2000s. 3. Believing the hype. Many Cold Stone franchisees bought in when the buzz surrounding the company was the strongest. 4. Franchisor control. In regard to specific financial issues, Cold Stone Creamery franchisees have complained about the way they are required to operate their businesses.
The cumulative result of this point is that many current and former Cold Stone franchisees say that it’s extremely difficult to make money owning and operating a Cold