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Shopping Centers Today -> January 2003
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SCOOPING UP CUSTOMERS
Cold Stone Creamery helps revive the local ice-cream store
By Lee Kessler
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Is the traditional neighborhood ice cream store an endangered species? Not if some people in Arizona have anything to do with it. The Scottsdale-based Cold Stone Creamery, on a mission to deliver the ultimate ice cream experience, is expanding a concept that has people across the country literally singing, dancing and doing back-flips.
In 1988 Donald and Susan Sutherland opened the first Cold Stone Creamery in Tempe, Ariz., claiming they just couldn’t find a store that offered the varieties and quality of ice cream that fanatics like them demand. In a quest to go well beyond the vanilla ice-cream cone, they made their ice cream fresh every day and encouraged their patrons to custom-blend their own creations on a slab of granite chilled to 15 degrees — hence the “Cold Stone.”
In 1995 Cold Stone Creamery opened its first franchise store in Tempe, and today there are 311 stores in 31 states, all but three of them franchises. But these numbers represent only the tip of the ice-cream-berg when it comes to the concept’s potential, said James Flaum, vice president of real estate at Cold Stone Creamery.
“I see Cold Stone today where McDonald’s was in the early ’70s,” he said. Flaum, a veteran of 30 years at McDonald’s Corp., says he is bombarded with prospective franchisees. “We’ve got potential franchisees coming to us from every corner; we’re receiving something like 800 applications a month. In the second quarter [2002] we got 2,700 applications.”
Flaum is driven by the urgency of a clear and present business opportunity. For now the company is focusing on domestic expansion before turning to international development. At press time it had 343 franchises assigned. “Our vision is to have 1,000 profitable, operating stores by the end of 2004,” said Flaum. By contrast, Randolph, Mass.-based Baskin-Robbins, which is owned by Allied Domecq, had 2,385 franchises as of 2001. The TCBY chain, meanwhile, based in Salt Lake City, had 1,776 franchises.
Cold Stone’s average annual sales are $322,000 per store. With the average store measuring 1,200 square feet, that works out to sales of about $268 per square foot. Franchisewide, volume for 2001 was $47 million. That compares with 2001 sales of $508 million for Baskin-Robbins, and $235 million for TCBY. Cold Stone’s 2002 projection is $90 million. The ice cream and yogurt industry overall posted $5.5 billion in sales in 2001, according to Technomic Information Services, a Chicago-based food-service industry research group.
Though the company’s strongest region of growth is California, it is also paying particular attention to New York City and Chicago, two places with ready supplies of retail space and potential franchisees.
As Cold Stone expands its roster of stores, Flaum said, it is focusing on open-air centers rather than malls, although it does have about 10 mall stores.
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“We do our business from 6 o’clock at night through closing, so we want to be in areas where there’s a lot of traffic in the evening,” he said. “In the interior malls traffic slows down dramatically as the night goes on, so we want to be located near things that bring traffic all night long — things like video stores, high-end shopping, high-end restaurants and movie theaters.”
The company, which likes to be in the endcap and to be able to display its trademark signage as it builds brand awareness, is busy signing up space in centers that are opening in the next three years or so.
“We’re tying up a lot of real estate well in advance,” Flaum said. “That gives us the opportunity to get the rock-bottom rent.” Leases are held by Cold Stone, which then sublets to the franchisees, who guarantee the leases. “We like to get a five-year lease with three five-year options.”
Andy Crimmins, who handles leasing at RED Development, a Scottsdale, Ariz.-based developer of shopping centers, has installed Cold Stone at several of its projects.
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“Cold Stone brings a lot of value to the center,” said Andy Crimmins, a leasing executive at the firm. “I think other tenants tend to stay longer if a Cold Stone Creamery is in the center because of the activity they generate.”
Entertainment plays a big part in the concept. Borrowing a page from Disney, employees are called cast members and audition for jobs by singing and joke-telling.
“We will do anything to entertain,” said franchisee James Culver, who owns a top-selling store, in Grand Rapids, Mich. “Constantly singing, constantly telling jokes, interacting with the customers. One of our kids was a pre-Olympic gymnast. He does back-flips, doing the pied piper routine to bring people into the store.”
And it’s working, according to Culver.
“We’re a huge-volume store,” he said, explaining that he makes between 120 gallons and 150 gallons a day. “Our ice cream doesn’t even stay in the store for 24 hours.”
Though the ice cream takes only about a half-hour to make, it needs 10 hours to cure. “So you’re constantly producing for the next day’s consumption. We have two cold stones and four kids working each stone constantly,” Culver added. At all Cold Stone stores, the cast members sing in appreciation when they are given a tip. Perhaps as important as entertaining is communicating with the customers, especially the new ones who need help understanding the process.
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“I would say about 80 percent of the people who come in are new customers,” Culver said. “They have unlimited options. They can have any kind of ice cream they want with any kind of candy, fruit or nut blended in. So for that not to become overwhelming, you need to talk them through the process.”
Clearly, being a Cold Stone cast member is not suited to the majority of job seekers. Chris Anatro, owner of the Cold Stone Creamery franchise in Clinton, Conn., said that most of his cast members are drama students or cheerleaders from the local high school. “I’ve got a waiting list of kids wanting to work here,” he said. “It’s a fun place.”
Another part of the fun is the “Wall of Fame” at each franchise, where customer creations bearing such names as “Lynn’s Lipsmacker,” “Big Al’s Chicago Special,” and “Kim’s Concoction” are posted.
Recently, the chain changed its design for new stores. The original ones have white ceramic tile with red accents, a look that is bright and clean like an old-time ice-cream parlor. The new design takes its cues from Starbucks, using natural wood in an upscale treatment.
This has caused something of a headache for some early franchisees, such as Culver and Anatro, because they now have to buy two different styles of napkins and cups, eroding their economies of scale.
“The new store I open in the spring will look entirely different than the store I have now,” Culver said. “But Cold Stone is growing so fast, and they are learning — and things evolve.”
Entrepreneur magazine listed Cold Stone as a top 100 franchise and the fastest-growing creamery concept in the United States.
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