1. Ma hui xin MA2N0245 黃琤琁 MA260207 陳怡琇 MA290206 Group 3

2. Introduction  Not only is its budget stressed but the people who own and operate the business are often stressed as well.  A business practice prudent financial management.  Improve their lives and to achieve financial security.  Work hard to launch a business and invest a lot of money

3. Cold Stone Creamery  Cold Stone Creamery was founded in 1988.  Neither hard-packed nor soft – serve, and opened the first store in Temple, Arizona.  Name comes from the frozen granite stone used to mix “mix-ins” like candy.

4.  In 1995, opened its first franchise and grew quickly through the late 1990s and early to mid – 2000s.  At its peak it had around 1,400 franchise stores.

5.  Had closed or been put up for sale by their owners and suffered severe financial losses and emotional distress.  Including the claims made by disgruntled Cold Stone franchisees and the company’s counterclaims.  The costs are too high relative to their revenues and/or they’re trying to sell a premium-priced product in a tough economy.  The business founders should be mindful of when setting up a new business.

6. Challenges Facing Cold Stone Creamery Franchisees  High prices in a tough economy.  Saturated market.  Believing the hype.  Franchisor control In regard to specific financial issues

7.  It’s extremely difficult to make money owning and operating a Cold Stone Creamery franchise.  Some go so far as to say that the company’s business model is “broken.”  100 Cold Stone Creamery stores closed in 2007 (up from 60 in 2006), and one Cold Stone Web site recently had 303 stores up for sale.  “ Inventory of stores for sale now is higher than it has been.”  The for –sale number as “at par with industry expectations.”

8. Emotional and Financial Toll  Produce many articles and blog posts from who talk about both the financial toll the emotional toll that losing their Cold Stone franchise has imposed on their lives.  The company argues that the ultimate success of an individual store depends on how well it’s operated.

9. 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?

10.  Cost –> rent + franchise fees + other expenses  Investment requirements  Revenues – consumer survey  Value in past years  Market share  Potential market growth  Costs and revenues of franchisees  Forecasted costs and revenues of the franchisee I would open (based on the information of other franchisees with similar features to the one that I would open)  Potential market threats  Consumers and suppliers bargaining power

11. Question 2  After reading the case, do you sympathize with the disgruntled Cold Stone franchisees, or do you believe the company’s explanations?

12.  High prices in tough economy: rent issue  Saturated market: shops too close, competitor  Believing the hype  Franchisor control: Pepsi bottles issue, 2-for-1 coupon $40,000  The ultimate success of an individual store depends on how well it’s operated  For-sale number of franchise as “at par with industry expectations.”

13.  We do not believe the company ' s explanations. Despite of the company ' s obvious decline in market share and threat of bankrupt, the company spokeswoman characterized the for-sale number as “ at par with industry expectations ”  Why?  If a company would confess their decline, they would have to decrease a price for the potential buyers (because the firm face a bankrupt).

14. 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 Stone Creamery) do ahead of time to make sure the business is financially feasible? Use the concepts conveyed in this chapter and Chapter 3 to formulate the answer.

15.  There is a chance for firm with a financial trouble to get investment. However no investor wants to invest to the company that does not appear to have a potential growth and / or has a poor management.  According the feasibility analysis theory if the company is not financially feasible, the main idea of the business should be recreated.  The business owner (or franchisee) should make a feasibility analysis to make sure that the business idea is (financially) feasible.  Buying intention survey should be administered in order to predict revenue of the business and subsequently analyze costs and assess a financial feasibility It is especially important for franchisees who plan to open a franchisee because every location of the business has different factors influencing the feasibility

16. Question 4  At some point in your career, could you see yourself buying a franchise? If so, what type of franchise do you think you’d enjoy owning?

17.  In order to make a right decision whether and what type of franchisee to buy, there should be done a detailed research about markets’ and franchisers’ potential growth as well as a feasibility analysis of a franchisee in the proposed environment and factors influencing business.