Cold Stone Creamery Business Information, Profile, and History

Company Perspectives:

With every creation and every customer, the Cold Stone Creamery community is committed to delivering more than ice cream to the legions of ice cream lovers worldwide. They will deliver their passion for quality, their passion for variety, and their passion for choice. That passion is delivering the ultimate indulgence in ice cream.

History of Cold Stone Creamery

Cold Stone Creamery operates on an independently owned franchise system of ice creameries headquartered in Scottsdale, Arizona. There are more than 900 Cold Stone Creamery stores in 47 states, including Alaska and Hawaii, and in the Caribbean and Guam. At each location, Cold Stone Creamery "crew" members handcraft ice cream fresh daily. Customers choose their "creations" from an assortment of flavors and mix-ins, which the crew blends to order on a granite stone chilled to 16 degrees Fahrenheit. Serving sizes range from the size of a tennis ball to the size of a softball and are called "Like It," "Love It," and "Gotta Have It."

1988-95: Creating the Perfect Ice Cream Experience

In the 1980s, Donald and Susan Sutherland, ice cream lovers, searched everywhere for ice cream that was smooth and creamy, rather than hard-packed or soft-serve. After years of finding nothing that met their standards of quality, flavor, consistency, and variety, they opened the first Cold Stone Creamery in Tempe, Arizona, in 1988. Cold Stone Creamery's ice cream was premium quality, containing 14 percent milk fat or butterfat--2 to 3 percent above the industry average--and had low "overrun," the amount of air pumped into the product during manufacture.

Cold Stone Creamery sold not just ice cream, but a concept: Customers designed their own personalized "dessert creations," choosing from basic ice cream, yogurt, and sorbet flavors and adding in fruit, candy, nuts, syrups, and other ingredients. Cold Stone Creamery staff, called crew members, mixed these ingredients together using spatula-like utensils on a frozen granite slab. The idea of add-ins was not new, having been first introduced in 1973 by Steve Herrell of Steve's Ice Cream of Somerville, Massachusetts, but Cold Stone Creamery took the add-in concept one-step further. The company aimed to deliver the "Ultimate Ice Cream Experience" by selling entertainment along with its super-premium ice cream. According to the company's web site, a visit to a Cold Stone Creamery store should be "a community event" as in the "good old days" of ice cream parlors. Aided by the aroma of fresh baked waffle cones and brownies and the warm reception of crew members, it would "transform the simple pleasure of eating ice cream into a memorable, one-of-a-kind experience ... where people could create their own happiness."

Cold Stone Creamery was a hit, and, in 1990, the Sutherlands opened a second store in the Phoenix metropolitan area. Third and fourth stores followed during the next five years, during which time the company added partners as well: Ken Burk as chief executive officer in charge of establishing the foundation of the fast-growing company in 1994, and Doug Ducey as president responsible for business development and direction in 1995. Ducey was an Ohio native and a graduate of Arizona State University with a history in executive sales; he had held marketing positions with Procter & Gamble and Anheuser Busch before arriving at Cold Stone Creamery.

1995-2000: A Regional Success Goes National

Ducey began to build Cold Stone Creamery from a regional ice cream company into a national brand through adding franchises. The company's initial franchise fee of $42,000 was relatively low, and the typical store's footprint of about 1,100 square feet was small. These factors, combined with start-up costs of only about $300,000 per operation, opened many site opportunities for new creameries and helped generate a large number of prospective franchisees. In 1995, the first Cold Stone Creamery franchise opened in Tucson, Arizona, across the street from the University of Arizona. Between 1995 and 1999, the number of franchises increased dramatically and, by August 2000, the year in which Ducey became chief executive officer as well as president, the company had 100 stores in 16 states and placed 94th on Entrepreneur magazine's list entitled the "101 Fastest-Growing Franchises in America." In addition, Cold Stone Creamery doubled the size of its headquarters and moved to Scottsdale in 1997.

Cold Stone Creamery also began in-store promotions to raise interest in its products. Adopting the motto "Create Your Own Happiness," and claiming the title of "the nation's fastest-growing franchiser of gourmet ice cream and frozen yogurt stores," the company held a contest in 2000 in which customers submitted their own recipes for ice cream creations to compete for the chance to become an honorary partner of the company. One participant from each of the company's stores won an ice cream party for 25, $1,100 per month, and free ice cream every day for a year for family and friends.

Cold Stone Creamery also began to actively seek promotional partners in the sports and food industries. In January 2001, it became the official ice cream of the Phoenix Open golf tournament and joined with other businesses throughout the Phoenix community to contribute support to local charities. In February, it joined with the Colorado Avalanche hockey team to raise money for a community fund by sponsoring a contest in which participants competed to create a new "Hockey Road" flavor. Cold Stone Creamery had earlier enjoyed a partnership with the Phoenix Coyotes.

By 2001, Cold Stone Creamery, with some 225 stores in 25 states and the Virgin Islands, had expanded upon the entertainment aspect of its business, auditioning and hiring crew members based on their performance skills and personalities. Crew members began to sing and dance while serving customers and to enlist customer participation in games. In addition to creating a show-biz atmosphere, the singing and dancing distracted patrons from the fact that obtaining a Cold Stone Creamery cone could require a longer wait than at a less popular ice cream store. Some objected to Cold Stone Creamery's attempt to grab media attention when it added chocolate-covered crickets as a mix-in as part of a promotion linking it to the Survivor reality show in 2001; however, the crickets disappeared in record time.

2001-04: Steady and Widespread Expansion Through Franchising

In 2001, Cold Stone Creamery, then 90th on Entrepreneur magazine's list of the Fastest Growing Franchises in the nation,

Domestic sales of ice cream amounted to $20.5 billion in 2002, of which $12.5 billion was spent on frozen confections consumed away-from-home. With the popularity of ice cream and frozen desserts increasing throughout the United States, Cold Stone Creamery began what would become an ongoing collaboration with Make-A-Wish Foundation, holding its first World's Largest Ice Cream Social in 2002. Guests at the event were treated to a free cone of ice cream and encouraged to make a donation to the foundation that fulfilled the wishes of children with life-threatening medical conditions. By 2004, the company's annual socials had raised $1.1 million combined for Make-A-Wish.

In mid-2003, there were Cold Stone Creamery stores in 32 states, and the company was opening about six new creameries per week, including one in New York City's Times Square, which a company news release described as "an important phase in the development of Cold Stone Creamery's aggressive growth strategy." In deference to the nation's skyrocketing obesity crisis and awareness, the company added its fat-free, sugar-free "Sinless Ice Cream." Even with the nation's increased health-consciousness, revenues continued to increase, and Cold Stone Creamery ranked 35th on Entrepreneur magazine's fastest growing list in 2003.

While Dairy Queen and Baskin-Robbins saw sales and units stagnate, Cold Stone Creamery's outlets rose by about 60 percent to 541. Boasting about $380,000 in annual revenue per store, Cold Stone Creamery's 2003 revenues exceeded $156 million, up 77 percent from $88 million in 2002 and more than triple 2001 sales. By mid-year 2004, the company had more than 700 units in 44 states and 250 more stores slated to open. Cold Stone Creamery had reached 25th on Entrepreneur magazine's "101 Fastest-Growing Franchises" list and came in fourth in Restaurant Business magazine's "Top 50 Growth Chains." Increased milk prices coupled with vanilla shortages bumped up the company's costs by double digits in the first half of the year; still the company went ahead with plans to add 12 ice cream cakes to its menu.

The manufacture and sale of ice cream appeared to remain big business despite the nation's obsession with low-carb diets. The company entered 2005 with more than 900 stores in 47 states, another 1,000 units in some stage of development, and ranked 12th on Entrepreneur magazine's "101 Fastest-Growing Franchises" list. Shortly after the start of the year, it launched its new vision statement: "The world will know us as the ultimate ice cream experience by making us the #1 best-selling ice cream brand in America by December 31, 2009."

Principal Competitors: Ben & Jerry's Homemade Inc.; Bruster's Real Ice Cream, Inc.; Carvel Corporation; CoolBrands International, Inc.; Dippin' Dots, Incorporated; Friendly Ice Cream Corp.; International Dairy Queen, Inc.; Marble Slab Creamery, Inc.; YoCream International, Inc.

Chronology

• Key Dates:
• 1988: The first Cold Stone Creamery store opens in Tempe, Arizona.
• 1990: The company opens a second store in the Phoenix metro area.
• 1995: Doug Ducey becomes a partner and president of the company; the company's first franchise store opens in Tucson, Arizona.
• 1997: Cold Stone Creamery's headquarters double in size and move to Scottsdale, Arizona.
• 2000: Doug Ducey becomes chief executive officer.