Cold Stone Creamery burning mad at CNBC

It is interesting over that past few years in watching the Quiznos litigations. One could easily substituted "Cold Stone Creamery" in these cases in allegations of product costs, labor percentages, product kickbacks, franchisor horrors, unethical transfer denials and the non-viable business models. Yet, this "golden child" of the ice cream industry continues to go undetected in their ruthless business practices, their flawed business model and their total disregard for the profitability of the franchisee. And now, they strong arm the media to continue the cover-up.

New York Post
December 28, 2010

Cold Stone Creamery burning mad at CNBC
Josh Kosman

A new CNBC documentary on franchising has one Scottsdale, Ariz., company ice-screaming mad.

Cold Stone Creamery and a franchisee group are threatening legal action against the business cable network, claiming this month's documentary, "Behind the Counter: The Untold Story of Franchising," incorrectly portrayed the company as a cold-hearted firm that charges franchisees hidden expenses, relies on kickbacks from vendors and requires franchisees to purchase equipment from a company it controls.

Lawyer Robert Zarco, who represents the Cold Stone franchisees, said the program unfairly put the big chill on their businesses by relying solely on a former Florida franchisee Cecil Rolle, who already lost a legal battle against the company making similar, if not identical, charges.

Rolle says he talked five franchisees out of committing suicide, Zarco said.

Both the company and CNBC agree Cold Stone was given a chance to participate in the one-hour program — but declined. Rauch, though, said he did not know that CNBC would be reporting the suicide angle.

A CNBC spokesman said: "After the initial airing, Cold Stone reached out to us. Despite having time to talk to the New York Post and others, they have not agreed to a time, date or place for an on-camera interview. Assuming they do, we will include their comments in all future airings in the coming years."

Still, CNBC is responding to the pressure. First, the network edited the show to reflect Rolle had lost a lawsuit against Cold Stone. Then, CNBC, beginning Dec. 25, pulled the show from its documentary rotation.

Comments

1. rivi8840
01/04/2011 11:54 AM

Cold Stone is in the business of destroying people and their families. I bought a store and they constantly threaten you with legal action and how they can hurt you. They are like the mafia.

2. togetitback
12/30/2010 6:45 PM

The comments below forward to Kahala Cold Stone management Blackwell & Beem few month ago. We are former franchisees, like hundreds out there, with one feet closer to be in the street with three children. This evil greedy franchise and fraud should pay back every cent they stole and shut down immediately.

"I received a new nick name the other day. "Low life". Low class. Someone heard that we file for bankruptcy and that our home is in foreclosure. So they call me a low life for not be able to fulfill my obligations. My 13 years old daughter was there. You see, we try to keep it away from the kids as much as possible. She always knew that we were successful, respectable business people that did pretty good. The people who decide to put a new name tag on me and called us insulting names knew it as well.

This is nice that in our society the culture of scams and fraud by banks, wall street, Bernie Madoff, Kahala Cold Stone are so acceptable, appreciated and admired. The real American idols.

  • Clearly YOUR ADMINISTRATION ARE THE LOW LIFE'S!!!

This culture of greed, arrogance and stealing money by trash like you at all costs from many regular people like us who trusted you with everything they had is amazing.

My daughter know that we always did well. Then lost it all to Kahala / Cold Stone. Lost the business, over $1,000,000 in savings and investment, our house, credit everything to this massive scam. And yet we are the low life's. (Low) Life will be good some day".

3. bactor
12/30/2010 9:21 AM

Amazing that Cold Stone was given a chance to go on air with CNBC, decided not to and now they are mad with the documentary. As the saying goes where there is smoke there is fire. Keep up the pressure Cecil and all the other franchisees and ex-franchisees. It is very disturbing to hear how many people share the same stories and experiences with Cold Stone/Kahala.

4. This is NOT what I bought in to!
12/30/2010 12:48 AM

Another franchisee here. I have 2 open stores. We have been in business for more than 5 years, and have yet to turn a profit. We are consistently bullied and "reminded" of Kahala's power to squash us, and they get away with it because they can. I am a current franchisee, and yet I have never heard of this National Association of Independant Cold Stone Franchisees…I wonder why? This is a joke.

5. Jerz
12/29/2010 6:38 PM

Another former Coldstone owner here. I'm singing Cecil's praises for going on air to talk about our ordeal. I would have gladly agreed to talk if invited. Where can I begin, 3% of the daily gross taken by Kahala and collected the end of the week. Paying rent to Kahala instead of the strip mall owners (suspect). Being charged 30% above RETAIL for our mix-ins and toiletries through Sysco. Being forced to buy from them or suffer penalties. Having your AD check your weekly orders to ensure (enforce) that you're buying from the overpriced supplier. Forced into buying more of their expensive cakes then the demand called for. Suffering through the lean winter months with no assistance when help is needed the most. Then being robbed in gross royalties in the summer when we need that revenue the most to recoup all of the losses during the winter months. It's a vicious cycle season to season. As one owner stated earlier, only making enough that's only comparable to minimum wage. Any future owners please heed the warnings posted in this Blog. We are all good hardworking people that invested in a Loanshark.

6. michael53
12/29/2010 6:17 PM

Just a note from a former CSC franchise owner – the “single disgruntled former owner” is NOT alone. There are MANY of us out here. And he is not alone in his lawsuit. It is a class action suit with a few hundred participants. I personally was assured that while I probably couldn’t make a hundred thousand, I could make at least a 10% operating margin. This NEVER occurred. I lost everything that I had put in and more and filed business and personal bankruptcy. CSC jerked me around for almost a year with promises of “independent financing” that never occurred. They made specific promises to meet with my wife at the annual franchise meeting in January 2008 and then when she was there, told her they had no news and no time to meet with her. We closed in March 2008 after being advised to run without paying our creditors until summer to try to make it. We were advised by our Area Developer (I won’t name him here but could) that we would have at least 60 days before anyone took any action and then probably another 60 days before anyone stopped service so that would get us into the summer. But given the experience in summer 2006 and 2007, summer 2008 wouldn’t have helped. And after all of that, we are told by CSC that we failed because of our poor work ethic. My wife was at the store at least 80 hours a week. I had a full time job and worked at the store on the weekends and holidays and closed many nights. We were #1 in our area for service and cleanliness and were the only store to receive 100% (or better) on every “secret shopper” visit. I doubt it was our work ethic. I would be glad to be on any show to support the CNBC show or take part in any court case on their behalf.

7. USS Titanic
12/28/2010 7:39 PM

No surprise on this one.

Cold Stone Creamery hit the iceberg years ago and is now on a slow and steady descent and is only a matter of time before it settles on the bottom long with other franchises sunk by terrible management, corporate greed, constant lawsuits against store owners, and number of looming class action suits.

Most store owners (myself included) now would be happy just to be able to "walk away" and sacrifice the capital\equity investment… problem is, once a potential buyer has a look at the financials for these stores - they laugh and walk away. Most business brokers now won't even take a Cold Stone on as a client.

-Deck Hand on the USS Cold Stone

8 froyo2000
12/28/2010 6:49 PM

Cold Stone Creamery was the worst investment I made for my family. There is major truth in regards to the CNBC episode, even BP took the hard questions from the media and stated their case. However the big wigs at Cold Stone issue a blanket statement and hire an attorney to cover up the financial devastation they have brought to many. Unlike Ray Kroc, there are few franchise models that successfully attempt to make the franchisee profitable while creating a household name brand. This company is ridiculous, in my region - Southern California. Our area developers were former Cold Stone Franchisees that were promoted as the brand grew. These individuals had no experience in regional operations or regional business management (they just owned 2 or 3 stores - WTH), yet Cold Stone gave them authority to oversee my business. We paid $42,000 to get the Cold Stone DBA name and another $400+ to purchase the store plus miscellaneous fees and the brand hires mom and pops to run their South West division? It truly is a joe, I hope the truth comes out and I hope Kevin Blackwell looses hours of sleep like I have.

9. ExCSzee
12/28/2010 6:09 PM

It is interesting over that past few years in watching the Quiznos litigations. One could easily substituted "Cold Stone Creamery" in these cases in allegations of product costs, labor percentages, product kickbacks, franchisor horrors, unethical transfer denials and the non-viable business models. Yet, this "golden child" of the ice cream industry continues to go undetected in their ruthless business practices, their flawed business model and their total disregard for the profitability of the franchisee. And now, they strong arm the media to continue the cover-up.

CNBC, just say NO! And continue to air this program, better yet, dig deeper and put them on "AMERICAN GREED: Cold Stone Creamery".

I fully support Cecil Rolle and each of the is pointed comments in your CNBC show, and actually see his comments as only the “tip of the iceberg” of what you could really be exposing.

10. marandalaw
12/28/2010 2:43 PM

Can't we all just,,,"Get Along"??Lol

11. Robert Zarco Sucks!!!!!
12/28/2010 1:57 PM

I SUPPORT CNBC WITH EVERY FIBER OF MY BODY!!!!!

I owned five Cold Stone franchises. They never made as much as a dime. I put them up for sale and there they stayed for 19 excruciating months. We poured thousands each month into these stores to keep them from going under. Finally we found a buyer who was willing to buy three of the stores for $90,000. Btw, we paid nearly $1.2 million to build those three stores. We notified Kahala of the impending sale as was required. What did they do? Within two days, they made an unscheduled inspection on our store even though week had just undergone our quarterly inspection a couple weeks earlier. They mysteriously found mold near the sewer that they had somehow missed on the previous 16 inspections. As the sale approached, Cold Stone terminated all five franchises, walked into our store and demanded the keys. Then they turned around and sold the stores to the same buyer we had waited 19 months for and invested more than $200,000 keep the stores open.

As for Robert Zarco, he is nothing but a millionaire trader lawyer who has no credibility. Kahala owns him like a slave and he has sold his sole to the devil. Nice going Zarco. Stand tall CNBC and keep up the fight Cecil!!!! The franchisees are with you both all the way!!!!

12. devasted by ice cream
12/28/2010 12:49 PM

EVERYTHING Cecil knows about and on Cold Stone is correct !!!! Shame on Cold Stone Creamery~ I found out after closing my store after 18 months that Cold Stone Corporate told another franchisee in my area, that "THEY SHOULD NOT WORRY ABOUT ME(my store #'s were good in the beginning and this concerned the other franchisee, because he was in a larger community than I) BECAUSE THE SMALLER TOWNS ALWAYS OPEN BIG (I did), THEN FIZZLE DOWN TO NOTHING(again I DID )! Corporate told him this just in my 3rd month of business ~ Cold Stone is scam artist, nothing more, nothing less~ they have ruined me and my kids future financially~ they will answer to someone much higher than our court system one day. I was a young widow with 4 kids just trying to provide for them with the money my husband's life insurance left us, I think it's biblical about not taking adavantage of widows and orphans, so I'm praying that I won't be on the same row as them on judgement day . I begged them to send someone to my store to tell me what I was doing wrong ~ to no avail. After they get their initial franchise fee and $110,000 for equipment (that was only worth $35,000 a few months later in mint condition)I'am just one of many, many Cold Stone franchisee's that have had this same experience and yes I thought of suicide thinking at least my kids would have my life insurance money ~ glad I did not follow through.

13. harmonizefive
12/28/2010 11:53 AM

A former Coldstone owner, who after months of asking Coldstone to negotiate with the mall that I was in-rent went from 11K to 15K A MONTH in 2yrs,rent was causing me to borrow what I did not have.I decided to sell. I found a buyer, and he went through the vetting process by Coldstone.The buyer stopped conversation with me 2 weeks before the sale after signing a letter of intent, I thought he moved on and finally I could no longer pay rent,I had used up EVERY cent available( the store sold 600k a year consistantly ) Coldstone demanded the keys to my store,paying me 1200 for supplies.To my shock and surprise(sarcasm intended) I see they sold it to MY buyer. I wonder, did Coldstone seeing that I had a buyer decide that they would sit by and watch me financially collapse and somehow take my store for free and turn around and sell the store themselves to my buyer?instead of the franchise fee of 40K why not sell the store and make 150K, Can I prove anything, of course not, but seems the circumstances are peculiar.Coldstone/Kahala cares NOTHING for the owners.In time I am confident they will reap what they sow. They care absolutely nothing for the owner, they like many other coorps worship the dollar and only the dollar.

14. sk
12/28/2010 11:10 AM

I totally agree with the CNBC documentary. It was all the truth. I am a franchisee owner whom luckily is approaching the end of his agreement and will not renew. For the last 5 years, I did not make any kept hoping for things to turn around, because I was always promised for new and exiting programs in the pipe line that would help sales. One may ask any franchisee who was forced to buy two $1,200 milk shake maker if they every broke even and the answer will be NO.
Basically, the large investment that I made did not even buy a minimum wage job after all expenses were paid. There has not been one incident that Cold Stone helped me not even one. I remember when the new Cold Stone President, Dan Beem was traveling around the country and he met with I and another franchisee at my store. When I showed him a spreadsheet that clearly documented cost of goods increased whenever they change suppliers to save franchisee’s money, he agreed. When I told him that I could buy the same items cheaper from the same supplier or our local Sam’s club, he basically shook his head. When I told him about the kick back that cold stone was receiving, he also shook his head.
This franchise is based on lies and I am glad it is now coming to an end for me. I hope this CNBC report will help the new potential franchisee to think twice before they sign the dotted line. The only reason that I kept operating the store is because I broke even for 5 years. It also cost me my marriage.
Thank you Cecil for all your efforts. Cold Stone had an opportunity to be on CNBC but denied. Ifthey were not guilty, they would have not object to an interview with CNBC.

15. MrsSoutherland
12/28/2010 10:20 AM

The segment on Cold Stone was extremely surprising and frankly bitterly disheartening. In the past, it has been a favorite stop for my family after church service. I feel like I have somehow contributed to the suffering of their franchise owners. In good conscience, we know we cannot go back. We’ve already told our kids and although they are young, they completely understand and agree with our decision. BR and TCBY are healthier anyway. We knew something was going on because at least 14 stores have closed in the Houston area even though the stores I personally visited had long lines. I’m disgusted in what I learned about Cold Stone. I just always thought it was a wholesome brand. I now know better. It’s a shame what they are doing to tear families apart. Those five people who wanted to commit suicide were deeply loved by family and friends, yet all Cold Stone could talk about was their legal victories. That could easily have been my family and it’s disappointing to hear that they are so very insensitive. Besides, I’m always suspect when a company won’t show up and answer questions.

http://www.nypost.com/p/news/business/cold_stone_creamery_burning_mad_riulL9wA8tCJv5AcwLnJyM


Risks: 1st generation of investors knowingly sacrificed, Able to finance and sell negative cash flow franchise on crooked appraisals, Abuse inherent in modern franchising, Abuse of business, regulatory & political authority can destroy people, Afraid to talk, Air of desperation, Appraiser and lender has cozy, repeat-business relationship, Assets sold for fraction of cost or value, Assuming a busy store is a profitable store can be very dangerous, Award-winning franchisees, Bankruptcy, Bankruptcy, both franchisee and spouse, Bankruptcy was inevitable the moment the contract was signed, Boycott, Class action lawsuits are an unproven form of remedy, Class action lawsuits benefit lawyers, not franchisees, Basic legal standards inapplicable to franchisees, Beggars can't be choosers: take what you're given and shut up, Beyond the Tipping Point, Bias: Fundamental attribution error (overvalue personality versus situation), Big Franchising, Blocking for the industry, Broken relationships, ruined lives and alienated children, Bullying, Business model had never created adequate investor returns, Can’t sue, Cannon fodder, Can’t afford to sue, Can't buy lower priced products, Can’t collect on court decision, Class-action dead end, Class-action lawsuits: lawyers take majority of risks & spoils, Comments on article are interesting, Conspiracy to market and sell a doomed to failure franchise, Cost of doing business, Crime enabled by solicitor:client privilege, Credence good fraudulent expert, Credence goods: taking advantage of the innocents, Credibility, Cruellest lies are told in silence, Deadbeat systems exported oversees to the unsuspecting, Debt traps, Dehumanization, Delusional or magical thinking, Designed to fail as franchise investment, Difference between appraised and market value equipment and leaseholds funds fraud, Different deals for different dealers, Difficult to trust again, Digital advocacy, Disgraced attorney, Don’t buy any franchise?, Don't use a brand name franchise lawyer, Economics of monopoly (not free market), Emboldens industry bottom-feeders, Emotional collapse, Evil: the exercise of power to intentionally harm people, Evils of the system defined in 1971 (Grange Report), Exponential increase in franchise bar services ($ and influence), Expropriation without compensation, Extreme losses call for extreme remedies, False earnings claims, Family donates labor to keep franchise going, Fear of bankruptcy delays the hard decisions, Fear of poverty, Fell in love with the concept as a consumer, bought the franchise, Follow the money: franchising re-distributes (not creates) wealth, Franchises sold hard directly to those who have just lost their job, Franchisor takes franchisee store, resells to new dealer, Franchisor takes franchisee stores, Fraud, Gouging on supplies, Greed, House negro, Legitimate Businessman's Social Club, Independent franchisee association, Independent franchisee association betrayal, Independent franchisee association funded by franchisor, Lapdog journalism, Lawsuits, class action, Life savings gone, Loan sharking, Lost homes, Must buy entirely useless goods and services, Must buy only through franchisor (tied buying), Must sell business (eventually) through franchisor, No franchisor support, Nothing but cold calculation, Nothing personal, it's just business, Only interested in good news stories, Organized crime, Ponzi (pyramid) scheme, Opportunism: contract creates powers which are used to strip investor value during relationship, Opportunism: self-interest with deceit, Predatory franchising makes more money selling than operating system, Refuses to answer journalist's questions, Secret kickbacks and rebates, Should anyone trust anything associated with franchising anymore?, Sold during time of psychological vulnerability, especially unemployment, Sold only to people with no small business experience (very naïve), Sold useless or inappropriate equipment, Sophism: an argument used to deceive, Suicide, Tip of the iceberg, Unilateral changes in business model drive franchisees' profits down, Unilateral fines, Unproven business model, Unsafe at any Brand?, White-knight lawyer turns black, Will work even when Variable costs > than Selling price, Without conscience, You may not be the 1st but you could be the next, You'll sign anything to get 15% of what you put into it back, United States, 20101228 Cold stone

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