Kauai's Cold Stone Creamery operators file for bankruptcy liquidation

''I too, have been there. I have actually been to both of those stores on Kauai. I owned two stores in Washington state, and even with almost 30 years with McDonalds, could not run anything even close to a profit! I also lost everything…my house, my vehicles, my health (had a heart attack) and every bit of my retirement.

http://www.staradvertiser.com
January 4, 2011

Kauai's Cold Stone Creamery operators file for bankruptcy liquidation
A husband-and-wife team is also mulling the filing of a personal bankruptcy case
Erika Eagle

Coldstone.jpg

Owston and Martinez Inc., operator of the two Cold Stone Creamery stores on Kauai, has filed for Chapter 7 bankruptcy liquidation.

Named for Richard Owston and his wife Maria Jose Martinez Palazuelos, the company estimated its assets at no more than $50,000 and its liabilities at $100,001 to $500,000, and projects that funds will not likely be available to unsecured creditors, according to the bankruptcy filing.

The company's sole officer is Owston, according to the filing and state business registration records, which show the company was incorporated in Hawaii in 2006.

Repeated calls to the Lihue and Kapaa stores went unanswered yesterday afternoon.

The initial filing names creditors including Cold Stone Creamery, Scottsdale, Ariz.; franchiser Kahala Corp., also headquartered in Scottsdale; the Loan Recovery Unit at First Hawaiian Bank; the state of Hawaii Department of Taxation; the IRS; and Kauai Island Utility Cooperative, the island's electric utility. The filing did not list amounts due each creditor.

Cold Stone's website lists the cost of opening a franchise and operating it for the first three months at between $294,250 and $438,850, including equipment that costs between $91,300 and $111,300.

Owston and Martinez Inc. is represented by Honolulu-based attorney Harrison P. Chung, who indicated in the filing that he also represents Owston and his wife "in certain legal matters" and that they are also contemplating the filing of a personal bankruptcy case.

Comments

1. STOPEXPLOITINGKAUAI
I know the Owston family in Kauai from Church and community and they are the nicest, most gracious people. They were bagged by not only Kahala/Cold Stone but by the property management company CBRE!!! They forced them to sign a lease after REMOVING an exclusivity clause from their lease with a promise that "CBRE would never do anything to hurt their business" and then directly after placed a competitive OrangeTree yogurt store right next door. These guys are SLIME! No wonder both locations are practically EMPTY of businesses…because CBRE corporate weasles pinch every ounce of possible profit from ALL tennants. There is NO ALOHA with either Kahala/Cold Stone nor CBRE. The island is dominated by national corporations of greed and have taken all possible livelihood from the people that live here. BOYCOTT COLD STONE, all KAHALA FRANCHISES AND ANY PROPERTY MANGED BY CBRE!!!!

2. bactor
Sorry to hear the news about the owner and his wife. It is really sad and disturbing to read all of these people suffering the same end result. It is a shame that Cold Stone/Kahala does nothing to help out the franchisees. We learned at ice cream university, profit by making people happy. I guess Kahala makes the money, they are happy, and they could care less about franchisees not having profitable stores.

3. CrookedColdstone
Cold Stone, Kahala and their attorney staff are all bunch of crooks. I too have lost my stores and a TON of money. My whole family lost money to these scumbags who lied to us from the beginning. We're still paying for the biggest mistake we ever made. We've run and sold another successful franchise (Wetzel's Pretzels) so we weren't new to the franchise world. The Cold Stone dirtbags are no better than Bernie Madoff. I hope they get theirs someday for ruining so many good people's lives. Good luck to you Richard and Maria, it gets better once you're away from them.

4. restom
I feel so sorry for Richard Owston and his wife Maria. I know what they are going through. I had two stores, now we have nothing. MY 401k and my house is gone because of Cold Stone.

5. restom
I had a multi-unit franchisee for Cold Stone Creamery. The bad decision I ever made was to buy this stores .After two years they took it back, and sold it to some one. It was one of the hardest time I had.. Like many other franchisees, lost every thing, the stores were unprofitable and things would never get better. working 80+ hours a week in the stores and still not turning a profit that I realized the fact it was a bad situation that would only keeps getting worse. I lost my house and all what I had, This busness it will never work most are closing the stores and dealing with the outstanding financial problem . This business model failing every were. Cold stone are taking advanages of good people. No one have the money to go aginst them, and they know that, that is why they keep doing it.

6. guest_user1
The concept of selling ice cream where it's warm 365 days a year has failed. This speaks volumes about the business model. Mr. and Mrs. Owston, things may not be too clear right now, but your life will improve now that you're out of this nightmare called Kahala/Cold Stone.

7. ebernst617
franchisee54
To the Owston family myself, my exwife, my partner's ex husband, we feel your pain and you guys must hang in there! The day we closed the last of three stores was an amazing RELIEF! My partner and I have always been very successful in all our business's, investments until we were introduce to the Kahala/Coldstone franchise. We opened three stores in a matter of 7 months, and we imeadiatly wanted to sell, and get the hell out as we were smart enough to know we had been taken. We had a lawsuit against landlord who breached contract, and Kahala was no where to back us, help us in any way. After $30k in leagal fees to fight that battle,and flying out to arizona with a plan, those bastards after 2 months sent to us a letter claiming we did not get permission to close our very, very unfrofitable store while fighting the landlord which they were acually the tenaunts since we were subleting the space from Kahala, and then haviing to battle"new fight with Kahala"1 they said they were cross terminating our third store, "only because it was turning a very small profit" for us closing the unprofitable store, and the one we were battling with the LL. These are very evil people, and today I remember Doug Duci the president at the time speaking of how we were all family, and how safe I felt being in the Kahala franchise community. My partner and I put our whole life savings in, a total of $1,600,000.00, and they are still harrashing us today for more money. Their head attorney in NY, Joel Stridel said, don't worry, coldstone creamery leasing is a shell company that has no money, and if we get suid, there's no money to be had. Story's are so similar as we had buyers not only for the franchise, but for our space, and yes CSC wanted half after we had spent $460k on our buildout, and equipment. My exwife had 2 heart attacks, and with the divorce which was TOTALY caused from this horrible nightmare, Kahala/Coldstone Creamery. Also I must mention the continuios intimdating letters from CSC leagal who would scare the hell out of us as we ran out of money just to fight thoses bastards. Folks, thank God for Cecil Rolle who had it not been for his help in direction, God knows where we would be today. A very scary though. To other franchisee's my only advice to you is to call Cecil Rolle for direction, and get out while you still have a shirt. Kahala/Coldstone's business model is set up for failer only oppertunity for Kahala/Coldstone. We hung in there way to long thinking just maybe we could get a quarter of our loss's. We were dreaming. Get out!!! When you do, there is light at the end of the tunnel.today I'm using my enturpenur experience, and MOVING forward, and am so, so much happier today just being away from this very evil company.
God bless to all ex, and exsiting franchisee's. you will prevail as I am. Cut the posion now!

unprofitable, and that we had spent $30k for leagal, and $460k for buildout, equipment, ect. folks this is just the tip of the iceburg of what these Kahala/people did to us. We lost absolutly everything, and eventualy ran out of $$ to fight Kahala/Coldstone. We invested a total of $1,600,000.00 for the whole deal which was our life savings, and yet after we where lying there bleeding to death, they continue to kick us to this day! they are absolutly relentless, and for Godsakes must be stopped! I must mention that if it had not been fore Cecil Rolle, God knows where we would be today. YES, I had thoughts of suicide as in the begining ColdStone/Kahala was my family as Doug Duci said on stage at the Balagio hotel. Everyday was a nightmare to where I had to see my Dr for anti depressant medicince, etc. bottom line I am free from those evil people, and have moved forward, and will prvail as I alwe

8. wasdat
bummer, over priced ice cream does not sound like a good business to get into. I never liked stone cold and its seems a lot of other people feel the same way.

9. franchisee77
Mr. and Mrs. Owston, husband and I wondered if we messed up by taking this chance, and we were told by many “No.” They said we would kick ourselves if we hadn’t’ taken the chance. This is not your mistake but Kahala’s greed for money at the franchisees expense. You had no way of knowing, as we didn’t. We paid our due diligence and never learned about any problems with Kahala until after our first co-op meeting. Advertising budget was not spent for the summer months in CA as planned. Cecil’s name came up as a disgruntled franchisee and we disregarded it. However, when we lost our store 6 months later, Cecil was the one who helped bring some sanity to our nightmare. I am happy to report that we survived this ordeal you are facing now. You will make it through. We took good inventory of our own priorities: our faith in God, our marriage commitment and our family being together in peace. We were told we were not failures, and you are not either. Kahala and Cold Stone will pay for their greed. We filed a personal bankruptcy but kept our home. Things are fine now and we even bought our first time share and are reestablishing credit. Hang in there…seek God’s direction and peace.

10. franchisee77
Mr. and Mrs. Owston, husband and I wondered if we messed up by taking this chance, and we were told by many “No.” They said we would kick ourselves if we hadn’t’ taken the chance. This is not your mistake but Kahala’s greed for money at the franchisees expense. You had no way of knowing, as we didn’t. We paid our due diligence and never learned about any problems with Kahala until after our first co-op meeting. Advertising budget was not spent for the summer months in CA as planned. Cecil’s name came up as a disgruntled franchisee and we disregarded it. However, when we lost our store 6 months later, Cecil was the one who helped bring some sanity to our nightmare. I am happy to report that we survived this ordeal you are facing now. You will make it through. We took good inventory of our own priorities: our faith in God, our marriage commitment and our family being together in peace. We were told we were not failures, and you are not either. Kahala and Cold Stone will pay for their greed. We filed a personal bankruptcy but kept our home. Things are fine now and we even bought our first time share and are reestablishing credit. Hang in there…seek God’s direction and peace.

11. edforyou77
I feel so sorry for Richard Owston and his wife Maria. I know very well what they are going through…I too, have been there. I have actually been to both of those stores on Kauai. I owned two stores in Washington state, and even with almost 30 years with McDonalds, could not run anything even close to a profit! I also lost everything…my house, my vehicles, my health (had a heart attack) and every bit of my retirement. Just remember two things Richard: First, you are not alone. There are hundreds of us in the same position as you (do not be afraid to reach out to us), and the second thing is, you will not only survive this challenge, but you will regain your life! Talk to Cecil Rolle, call me (559)999-2599. We can help you work through this. Everyone else, please continue to reach out to people like Richard and his wife. Let everyone you know the truth about Cold Stone. If nothing else, have them read my blog "Behind the Stone" (google it), to discover the scope of Cold Stones abuse of their moral obligation to potential, current and former franchisees. We must speak with one voice, if we are to make a difference.

12. Manoa_Fisherman
Franchising is not for the inexperienced business person, though most folks think that all they have to do is pay money and the money just rolls in. Whether it is fried chicken, hawaiian barbeque, hot dogs or doggie day care, it takes long hours and a lot of business experience to run a successful business, franchise or not. Just look at the trouble Pets Discount is doing in this economy. Sometimes you have to know when to hold them and when to fold them.

13. WestKauai
With the comments from a few failed Cold Stone stores here, it seems to me a class-action lawsuit might be in order.

14. evilstone
Aloha, I am also a former franchisee of coldstone. My story is the same miserable disaster as all the rest. My support goes out to the Owston family. I know they must have been suffering a long time and struggled with their decision of what to do next to try to salvage their lives. They will soon discover they made the right decision to close the stores and rebuild. As upsetting as it is to rebuild, My only regret is that I hung in there as long as I did. Just know the failure of these stores is of no reflection of you as a person. You and your family would have been more sucessful selling ice cubes to a polar bear in Alaska. I wish you and your family peace, better health, joy and last but not least -A stress free life-Enjoy you did the right thing!

15. Smooth Ellis
Another one bites the dust. Somebody in the government needs to get involved. Laws need to be changed. The true failure rate of Coldstone needs to be revealed. The folks going bankrupt in Hawaii are indicative of the fact that these things fail in every market. It even happened in Times Square. Please FTC open an investigation!!!!!!!!!!!!!!!!!!!!!!!!

16. CSvictim
By the way, When is anyone going to speak on the distributors and their part in all of this with regards to overpricing and kickbacks !!!

17. jokestone
Mr. & Mrs. Owston, you have come to the best realization by closing up shop. I understood the fear of staying, hoping one day that the sales would increase, that Dan Beem and his team would guide your store to success, that your operating costs would decrease, being embarrassed that others will think of you as a failure. Your future was bleak staying in the Cold Stone game and even though you may feel defeated, you are the winner.

You are taking your life back, and it starts now. You can rebuild your family and learn from this very expensive lesson. You are no longer the Kahala slave, their employee they keep on the books to scrape monthly royalties, marketing fees and collecting interest of your rent that they take out a week before it's due to your landlord (being an employee has more rights than being a franchisee).

I hope that other media outlets dig into the Cold Stone fraud ponzi scheme - Kahala calls franchising. There are hundreds of us that share the same story, robbed by a corporation that keeps its' doors open and fools unsuspecting investors.

Your life begins today! Congrats!!!!!!!!!

18. bobhitachi
I feel really bad for Mr. and Mrs. Owston for being in this situation. This is another example of Cold Stone Creamery lack of leadership and their personal greed that has caused so many investors and entrepreneurs to file bankruptcy.

This in not a reflection on the Owstons. No franchisee can be profitable under Cold Stone brand except for Cold Stone and Kahala. All the individuals that I have meet during the past few years, were educated, successful business people who believed in Cold Stone and the promises that was made to them. They are hard workers, dedicated individuals that did not matter how hard they work, they never succeeded because of all the kick backs that Cold Stone receives. If every franchisee that has been in the system is failing, then there is something wrong. I hope everyone keeps the pressure on Cold Stone creamery so they can not do this to anyone else. If it was not for Cecil, this movement never would have received the publicity that it has since it was aired on CNBC.
I wish that 2011 bring health, wealth and many blessing for the Owston family.

19. CSvictim
As a former Cold Stone Owner, I feel their pain. I liken Kahala to a sheep slaughter factory, nothing less. False promises and fudged P&L reports to lure incoming Franchisees. We were told during training class in Scottsdale that more than 50% of the owners in attendance would fold over the next 4 years and they were right. For my class it was more than 70%. The fact that Kahala never gives current owners an opportunity to recoup anything off of the sale of their own store makes a bold statement that they not only want us to fail but, be left in ruins. This tactic is only used to lessen the chances of former owners having the financial means to file suit. Enough is Enough. In the words of Kanye West, ColdStone Creamery does care about Franchisees !!!!

20. VentureCap
Very common story. The Wall Street Journal speaks to this ongoing problem with Kahala / Cold Stone. So bad, the article mentions a potential class-action suit at one point. Here's the link: http://on.wsj.com/epRSVA

21. VentureCap
Very common story. The Wall Street Journal speaks to this ongoing problem with Kahala / Cold Stone. The situation has been so bad, the article mentions a potential class-action suit at one point. Very telling that the article is from 2008 and the behavior of Kahala seems to remain unchanged. Here's the link: http://on.wsj.com/epRSVA

22. DumpRumple
I wish Mr. Owston and his wife the very best. This is similar to what I went through as the owner of three Cold Stone stores. This is not their fault it’s Kahala’s and Cold Stones. This is due to the fact that Cold Stone charges kickbacks for the products they it sell to its franchise owners. CNBC recently revealed in a documentary that Kahala Corp, which owns Cold Stone, charged its franchisees more than $13 million in kickbacks in 2009 and had a 31% SBA failure rate. That is way to high because it only includes SBA loan failures, not conventional loans or stores purchased with cash. It also revealed how they closed more than 200 stores between 2008 and 2009.

I wish I had never gotten involved with Kahala and Cold Stone. We lost our house, all of our savings including our kids college fund and all Cold Stone did was lie to us and other franchise owners about how they were going to fix their broken business model. They never did. We waited year after year until we had no more money to dump into the stores. We closed all three stores and much to our surprise, Cold Stone came in, reopened the stores and then sold the same unprofitable stores to another unsuspecting new franchise owner. I can only imagine they lied to them too by telling them the stores were profitable when they were not. Now I’m sure they are losing all of their savings and the cycle continues. They are the ultimate in corporate greed.

I hope this couple has success in putting their lives back together.

23. kamaainaintx
One has to wonder about the veracity of Kahala Corp's founder who says in his brochure that he named the company after 'a beautiful beach in Hawaii that is one of his favorite places to surf'. Oh, really? Odd - our original family home is a block off the beach in Kahala - we don't recall a whole lot of great surfing there…

We also wish all parties well in reconstituting their lives after this disaster.

24. CSTitanic
We closed our Cold Stone Creamery on Aug 27 - CS Corporate flipped it and sold it to a new franchisee and they had the doors back opened by Sept 14 …. and that was after Cold Stone Corporate rejected three buyers that we had brought to the table. We too, lost our investments, house and kids education funds.

Cold Stone franchise business model is not viable no matter how long the lines at the door or how high the revenue. Labor costs, product costs and corporate costs, kickbacks, operating expenses, taxes - suck the life out of every franchisee and eventually left with no choice but to "cut losses" and get out.

Good luck to the Owstons, the road to recovery starts today.

http://www.staradvertiser.com/business/20110104_Kauais_Cold_Stone_Creamery_operators_file_for_bankruptcy_liquidation.html


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