Cold Stone Franchise Cost Worth Owner Salary? (2023)

Written by: Parth Parth
Last Updated: January 31, 2023
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cold stone franchise

This article is based on its 2022 FDD.

Cold Stone Creamery is an ice cream parlor chain headquartered in Scottsdale, Arizona. It primarily sells premium ice cream that is made on location and customized for customers at the time of order. In addition, its menu offers other combinations of ice creams and related products, including ice cream cakes, pies, cookie sandwiches, smoothies, shakes, and iced or blended coffee drinks. Kahala owns and operates the company with 1,300+ 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 still stands today.

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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 and Beverage 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 330 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 in at around $1.4 trillion, and around 10% of this figure is generated by the Food and Beverage industry alone. The standard Food and Beverage industry franchise investment stands 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.

cold stone franchise

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.

Your Estimated Initial Investment

Type of ExpenditureTraditional Low AmountTraditional High AmountTo Whom Payment Is to Be Made
Initial Franchise Fee$12,000$27,000Us
Rent/Security Deposit$9,750$19,500Landlord(s)
Travel and Living Expenses (2 persons) while training, not including salaries, if any, for you and your employees$3,000$7,500Airlines, hotels, car rental agency & restaurants
Real Estate
Lease Review Fee$0$2,500Us
Architectural Fees$7,000$20,000Licensed and Approved Architect
Leasehold Improvements$97,500$250,000Approved Contractors and Vendors
Exterior Signage$9,700$15,000Approved Sign Company
Equipment$123,000$185,375Approved Vendors and Suppliers
PCI Compliance Costs$150$1,300Approved Vendor
Opening Inventory$8,000$8,000Vendors & suppliers
Employee Uniforms$500$800Vendors
Grand Opening Marketing Advertising$10,000$10,000US
Insurance Premiums$500$2,500Insurance carrier
Permits and Licenses$2,000$3,000Governmental entities
Telephone and Utility Deposits and Hookups$250$1,000Utility companies
Computer Training and Food Safety Certification Course$100$250Vendors, Suppliers
Miscellaneous$3,925$3,925Vendors, etc.
Depository Account$3,000$3,000Your bank (we have the right to withdraw from this account)
Additional Funds – 3 month initial period$20,000$20,000Us, 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.

Owning a Cold Stone Creamery Franchise Requires 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 a 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.

cold stone franchise

How Much Do Cold Stone Creamery Franchise Owners Make?

 Average Gross SalesMedian Gross SalesNumber of Stores MeasuredNumber of Stores That Met or Exceeded the Average Gross SalesPercentage of Stores That Met or Exceeded the Average Gross SalesNumber of Stores That Met or Exceeded the Median Gross SalesPercentage of Stores That Met or Exceeded the Median Gross Sales
All franchised outlets$593,868$570,00186439245%43250%
Top 20% of franchised outlets$939,264$884,7361735532%8754%
Bottom 20% of franchised outlets$321,509$339,8211739957%8750%

(2021) Cold Stone Creamery Median Franchise Sales: $570,001

Initial Investment (midpoint) %Profit margin of average franchise sales Estimated profits Time to recoup investment
$445,325 10% $85,500 7.75 years
15% $114,000 6.5 years
20% $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 7.75 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; and 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 Cold Stone Creamery 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.

cold stone franchise

Cold Stone Creamery (Franchisor) Income Statement Key Insights

Consolidated statements of operations and comprehensive income (loss)

For the Year Ended December 31,
2021 2020
Revenue 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 extinguisment 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?

Systemwide Outlet Summary for years 2019 to 2021 (United States)

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the Year
Franchised2019893895
2020895879
2021879889
Company-Owned201933
202033
202135
Total Outlets2019896898
2020898882
2021882894

The chain had 893 outlets at the start of 2019, which dropped slightly to 889 by the end of 2021, and three company-owned outlets, which increased to 5 by the end of 2021. Total outlets at the start of 2019 were 896, which reduced to 894 by 2021.

Conclusion

Cold Stone Creamery is a new offering on the market and it remains to be seen where it goes.

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.