Cold Stone Creamery

Introduction

Our team has chosen to research the franchising of Cold Stone Creamery. The first thing that we had to do was find out what franchising really was. We all had a basic understanding of what franchising was and to become a franchisee, but after further research we realized there was a lot more that we didn't know. We researched everything we could about Cold Stone Creamery. We conducted a survey to find out if Cold Stone really was everyone's favorite ice cream place. We found out the mission and the vision that Cold Stone Creamery has for their company and all of their franchised stores. One of the most important parts was to find out the history of the business and how it all got started. We had then researched about what the initial investment would be if you were to open your own Cold Stone Creamery. We picked out what would make your store a successful one. One of our group members had the chance to interview an owner and operator of a Cold Stone Creamery in California. This is very important to the research because it is a primary source and he was able to give us a better understanding of what it takes to run your own franchise. After reading this, we hope that you have a better understanding of what a franchise is and why Cold Stone Creamery stands alone as the fastest growing super-premium ice cream concept in the country.

Franchising

Franchising is the right to own and operate a business using the name, trademark and system developed by the franchisor. "Franchising is not a business but rather a method of doing business." When you buy a franchise you are buying only what is written into the franchise agreement (Rust 6). A franchising agreement is a contractual agreement between two parties in which one party, the franchisee, pays the other party, the franchisor, for the right to sell the franchisor's product and/or the right to use its trademarks and business format in a given location for a specified period of time (Blair 3).

Business format franchising occurs when the franchisor primarily sells a way of dong business to its franchisees. It not only includes the product, service and trademark, but the entire business format itself - the marketing strategy and plan, operating manuals and standards, quality control and continuing two-way communications (Blair 6). Business format franchising included a very large number of firms that provided a wide variety of goods and services such as, fast food restaurants, ice-cream parlors, hotels, child care services and car rental services. In exchange for the business format, franchisee does usually pay a relatively small lump sum fixed fee at the beginning of the contract period. They also pay running royalties that are calculated as a fixed percentage of their sales revenues (Blair). Franchisees may also contribute an additional fraction of their sales revenue toward an advertising fund for the chain as a whole. The advertising carried out with these funds benefit all franchisees and therefore benefit's the franchisor as well (Blair 8).

Figure 1

We surveyed 100 people and asked them what their favorite ice cream place was. As you can see, Cold Stone Creamery came out on top with 35% of the votes while Baskin Robbins and Carvel came in second with nearly a tie. Friendly's was more popular with the older adults and the other category had consisted of TCBY, Rita's, and Haggeen Daz.

Competitors

Cold Stone Creamery franchises ice cream parlors at which customers create their own combinations with mix-in ingredients. Customers like the novelty of creating their own ingredient-laden ice cream flavors. Franchisees are attracted by the lines that are often out the front door. In May 2005, the number of Cold Stone Creamery franchises hit 1,000, even with CEO Doug Ducey accepting less then 1% of all franchise applications he receives.

Innovation is known in all the ice cream flavors for any company. It's not just flavor innovation that is required to make the business successful, it has to be creative throughout the entire customer experience. There is a never ending focus on fun, combined with commitment to innovation. Quality customer experience is also very important when you're considering investing in a business. But just how much innovation is necessary in the ice cream business? These franchise company's have stayed true to our heritage while being a relevant, contemporary brand. There are many competing ice cream names in this industry such as Rita's, TCBY, and Haagan Dazs. Cold Stone Creamery's biggest competitors are Carvel, Friendly's, and Baskin Robbins.

Carvel, which was founded in 1934 by Tom Carvel, filled a vending truck with ice cream, and drove off in search of the American dream. Carvel ice cream has established itself as one of America's favorite ice cream brands. Carvel is set apart by their premium soft ice cream and their uniquely shaped ice cream cakes. Today, it is one of the most recognized and popular names in the ice cream industry. With over 400 Carvel stores and distributions in over 5,000 supermarkets, Carvel is one of the fastest growing ice cream brands to exist. With over sixty-five years experience, their vision to be the premier brand of unique, quality ice cream cakes and desserts is becoming a reality. Carvel believes in promoting through multiple types of venues. Their unique concepts allow their franchisees to offer delicious ice cream products in a wide range of locations and opportunities. Carvel currently operates over 500 franchised and food service locations. One of the most important aspects of owning a franchise is to have support of your operation. The Carvel franchise operations department provides you with many areas of support, including field and corporate operations, design and construction, purchasing, marketing and many others as well as the Carvel Franchise Advisory Council.

Friendly's was started in 1935 by Prestley and Curtis Blake. They had opened an ice cream shop in Springfield, Massachusetts called Friendly which had served double-dip cones for five cents. The brothers had then opened a second shop five years later in West Springfield, Massachusetts in which they added food to the menu. Within a decade, locations opened throughout western Massachusetts and Connecticut. In 1988 Donald N. Smith, the company's current CEO, purchased the company and a year later had added an 's' to the name, which is now today's