Cold Stone Franchise Cost Worth Owner Salary? (2022)
Cold Stone Creamery Franchise is an ice cream parlor chain and has its headquarters in Scottsdale, Arizona. It primarily sells premium ice cream made on location and customized for customers at the time of order. In addition, its menu offers other combinations of ice creams like cream-related products, including ice cream cakes, pies, cookie sandwiches, smoothies, shakes, and iced or blended coffee drinks.
Kahala owns and operates the company with 1300+ locations in 20 countries around the world. The company has been co-branding its locations with other chains this gives it an added leverage of presence and reduced competition. The company was co-founded in 1988 by Donald and Susan Sutherland with their first store in Tempe, Arizona. The store stands till today.
Over the last three years, the company has kept a steady number with 893 stores at the start of 2019 and 889 stores at the end of 2021. There is a marginal change in the total number of stores.
How is Cold Stone Creamery Franchise Positioned in the Food and Beverage Industry?
The food industry has a significant share of the U.S. economy. It employs human resources prominently and is a stable industry providing significant employment and labor income with around 13% of all U.S. service employment. The industry responds fast to the needs of the customers and has made significant innovations to satisfy the taste buds of the customers. The American consumer market figures over 320 million American consumers and has 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumers’ disposable personal income (DPI).
The sales of this market clock at around $1.4 trillion and around 10% of this figure is generated by the food and beverage industry alone. Standard food and beverage industry franchise investment stand at around $466,000 With the fast delivery systems in place and drone technology being initiated to deliver food the food and beverage industry shows signs of expansion.
How Much is a Cold Stone Creamery Franchise?
The initial Cold Stone Creamery Franchise Fee is $310,375 – $476,975. You have to pay this upfront fee when opening a Cold Stone Creamery franchise.
Cold Stone Creamery Franchise Cost
The estimated total investment necessary to begin the operation of a Cold Stone Creamery Franchise ranges from $310K to $580K. The following costs are part of the upfront costs included in the initial investment for a Cold Stone Creamery. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Cold Stone Creamery franchise in 2022.
| Type of expediture | Amount | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Low | High | ||
| Initial franchise fee | $12,000 | $27,000 | Us |
| Rent/Security Deposit | $9,750 | $19,500 | Landlord |
| Travel and Living Expenses while training, not including salaries if any for you and your employees | $3,000 | $7,500 | Airlines, hotels, car rental agency & restaurants |
| Real estate | $30,000 | $30,000 | Us |
| Lease review fee | $0 | $2,500 | Us |
| Architectural Fees | $7,000 | $20,000 | Licensed and approved architect |
| Leasehold improvements | $97,500 | $250,000 | Approved contractors and vendors |
| Exterior signage | $9,700 | $15,000 | Approved sign company |
| Equipment | $123,000 | $185,375 | Approved vendors and suppliers |
| PCI Compliance Costs | $150 | $1,300 | Approved vendor |
| Opening Inventory | $8,000 | $8,000 | Vendors & suppliers |
| Employee Uniforms | $500 | $800 | Vendors |
| Grand Opening Marketing Advertising | $10,000 | $10,000 | US |
| Insurance Premiums | $500 | $2,500 | Insurance carrier |
| Permits and Licenses | $2,000 | $3,000 | Governmental entities |
| Telephone and utility deposits and hookups | $250 | $1,000 | Utility companies |
| Computer training and food safety certification course | $100 | $250 | Vendors, suppliers |
| Miscellaneous | $3,925 | $3,925 | Vendors, etc |
| Depository account | $3,000 | $3,000 | Your bank (we have the right to withdraw from this account) |
| Additional funds- first 3 months of operations | $20,000 | $20,000 | Us, employees, various third parties |
| TOTAL | $310,375 | $580,650 | (Does not include real estate costs, construction of the building or rent for the business location except for the initial security deposit) |
Cold Stone Creamery Franchise Requirements
To franchise with Cold Stone Creamery, a candidate needs a minimum of $250,000. Cold Stone Creamery requires candidates to have minimum liquid capital of $120,000.
Ongoing Fees
Royalty: 6% of gross sales
Marketing Fee: 3% of gross sales
The industry royalty is around 5.3%, marketing expenses are around 2.25%, and the stability of units is expected to be over 75%, the growth rate of the industry is more than 15% and the average investment to establish a new unit is $466K. Cold Stone Creamery charges higher royalty in terms of industry comparisons (6%) but that also exhibits its strength in comparison to the industry averages. The marketing expenses, too, are 0.75% higher with just 3.00% of gross sales.
How much do Cold Stone Creamery franchise owners make?
| Average Gross Sales | Median Gross Sales | Number of Stores Measured | Number of stores that met or exceeded the Average Gross Sales | Percentage of stores that met or exceeded the Average Gross Sales | Number of stores that met or exceeded the Median Gross Sales | Percentage of stores that met or exceeded the Median Gross Sales | |
|---|---|---|---|---|---|---|---|
| All franchised outlets | $593,868 | $570,001 | 864 | 392 | 45% | 432 | 50% |
| Top 20& of franchised outlets | $939,264 | $884,736 | 173 | 55 | 32% | 87 | 54% |
| Bottom 20% of franchised outlets | $321,509 | $339,821 | 173 | 99 | 57% | 87 | 50% |
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $445,325 | 15% | $85,500 | 7.75 years |
| 20% | $114,000 | 6.5 years | |
| 25% | $142,500 | 5.75 years |
Based on the median sales provided by Cold Stone Creamery’s franchise locations, at an average of a 15% profit margin it will take around 6.5 years to recoup the investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Food and Beverage stores; the extent of market penetration and brand awareness that Cold Stone Creamery stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Cold Stone Creamery franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Estimated Selling Price = Net Sales * 0.54
When you go to sell a Cold Stone Creamery franchise based on the median multiple of 0.54 and net sales in 2021 of $570,001, it would sell for $307,800. This is lower than the midpoint investment of $445,325.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
(Franchisor) Income Statement Key Insights:
| 2021 | 2020 | |
|---|---|---|
| Revenues | 216,655 | 192,657 |
| Costs and expenses | ||
| Operating expenses | 142,077 | 141,443 |
| Depreciation – property, plant and equipment | 1,057 | 1,415 |
| Amortization – intangible assets | 13,888 | 14,174 |
| Impairment charge – property, plant and equipment | 27 | 579 |
| Impairment charge – intangible assets and goodwill | 2,862 | 62,143 |
| Interest expense | 16,264 | 16,764 |
| Management fees charged by parent company | 1,733 | 1,830 |
| 177,908 | 238,348 | |
| Other income (expenses) | ||
| Interest income | 1,536 | 683 |
| Gain (loss) on disposal of property, plant and equipment and assets held for sale | 1,986 | (276) |
| Gain on extinguishment of holdback | 27 | |
| 3,549 | 407 | |
| Income (loss) before income taxes | 42,296 | (45,284) |
Cold Stone Creamery is a profitable business for the franchisor with retained earnings of $216,655 in 2021 and $192,657 in 2020. They saw an increase of 12.25% from 2020 to 2021. This is a good indication of high growth as a company overall.
How many Cold Stone Creamery units have opened and closed?
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year |
|---|---|---|---|
| Franchised | 2019 | 893 | 895 |
| 2020 | 895 | 879 | |
| 2021 | 879 | 889 | |
| Company-Owned | 2019 | 3 | 3 |
| 2020 | 3 | 3 | |
| 2021 | 3 | 5 | |
| Total Outlets | 2019 | 896 | 898 |
| 2020 | 898 | 882 | |
| 2021 | 882 | 894 |
The chain had 893 outlets at the start of 2019 which reduced marginally to 889 by the end of 2021 and three company-owned outlets which increased to 5 by end of 2021. Total outlets at the start of 2019 were 896 which reduced to 894 by 2021.
Conclusion
Cold Stone Creamery is an exciting offering on the market that has not seen much growth recently. However, the payback period is pretty good even if slightly higher than the industry average of around 4-5 years. We recommend you talk to at least 2-5 existing Cold Stone Franchisees before investing in the business.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Food and Beverage Industry.
