Cold Stone Store Franchise Ice Cream Headache Case Study

Take a look at the case entitled “Ice Cream Headache” ( ATTACHED A PDF)! This case provides information on what it takes to purchase and operate a Cold Stone Creamery ice cream store franchise. I’ve summarized the financial data below, and also provided similar data about purchasing a McDonald’s restaurant franchise; McDonald’s restaurants earn a lot more revenue but require a much larger financial investment to start up.

You have the opportunity to purchase one of these franchises. Considering these two possible business opportunities, respond to the following questions, reflecting:

Questions

1. What do the laws of supply and demand and the concepts of market competition suggest about running a Cold Stone Creamery franchise vs. a McDonald’s franchise? Which franchise would seem more attractive to you as a business, and why?
2. Considering the concepts of Corporate Social Responsibility and the various approaches to CSR that an organization can take, how do you feel ethically about the opportunity to own and run a McDonald’s franchise? What CSR approach would you take, and what are some practical ways you would demonstrate your CSR approach?
3. Cold Stone Creamery allows individuals, partnerships, corporations or limited Liability companies to purchase a franchise. McDonald’s only allows individuals (sole proprietorships) – no corporations and no partnerships (not even family members, apparently!). Considering the advantages and disadvantages of each form of business ownership, discuss how these requirements might make one of these franchises more or less attractive to you.
4. If you had the financial resources to purchase either one of these opportunities, which would you choose, and why? If you would choose not to pursue either, what would you prefer to do with the financial resources at your disposal?

Cold Stone Creamery

Franchise Fees: $12,000 to $27,000. Also, you pay 6% of gross sales (royalties) and 3% of gross sales (advertising fees)

Financial requirements: $100,000 liquid assets, and at least $250,000 net worth

Startup costs: $310,375 to $476,975

Training: 11 days

Average annual revenue: $350,000 to $400,000

McDonald’s

Franchise Fee: $45,000, and 4% of gross sales (franchise), and 10.7% of sales (rent)

Financial requirements: at least $500,000 liquid assets

Startup costs: Between $1M and $2.2 Million (40% must be paid by franchisee in cash)

Training: 12-18 months

Average annual revenue: $2.7 Million