This Cold Stone Creamery franchisee finishes what he starts

The recent merger of Cold Stone Creamery and Kahala Corp. (which operates a dozen other franchise concepts including Blimpie, Taco Time, and Surf City Squeeze), see executives taking it all in stride.

"I think this new merger may actually give us access to a larger pool of potential multi-unit franchise operators," says Rob Street, vice president of franchise development for Cold Stone Creamery.

But Street describes a "growing from within" expansion philosophy at Cold Stone that grants existing franchisees only one additional franchise at a time. "When an operator proves to us that they can be successful, we'll sell them another one," says Street. "It's one unit at a time." It's a strategy that helps eliminate risk for everybody.

Cold Stone has about 1,400 locations throughout the U.S. Each year, about 40 to 50 percent add another one, says Street, with about half operating two or more units and a few exceeding10.

This one-at-a-time strategy also works best in heavily populated metropolitan areas, according to Street. He says their multi-unit operator stores are most successful when geographically concentrated, so operators can access and manage all their locations more easily.

"Our strategy allows us to benefit because as the operators rise to the top we see who is successful, passionate, and excited about running a store," says Street. Those are the prime candidates for adding stores. "If there's a consistent execution at the first store, then they most likely have the skills, knowledge, experience, and established relationships to expand."

Cold Stone franchisees can take on other brands and concepts (so long as they're not competitive) - and some very well may, since they now have access to the other 12 brands in the Kahala-Cold Stone arsenal. But Street cautions that they prefer to have the full focus of the franchisees on their Cold Stone stores.

He says the company's most successful franchisees (or "partners" as he calls them) are those who run tight operations, are active in their community, and are leaders within the Cold Stone franchise community.

"We have a national advisory board and a multi-unit training program that has benefited tremendously from the input of our multi-unit operators," says Street. The training program helps expanding operators learn more about dealing with growing staff and employee-related issues, managing multiple locations, improving hiring processes, and delegation issues.

But ultimately, Street says, all operators get the same corporate support whether they have a single unit or a half dozen: "Our field team is going to be in every store."

California Creamin'

How did a registered nurse and an engineer running a data entry company wind up in franchising?

"We just loved the ice cream," says Frank Caperino, a multi-unit operator of eight Cold Stone Creamery shops in the San Diego area. "My wife loved it so much she just said, ‘I think I can run one of these.' And she gave up her nursing career to give it a try." That was 10 years ago. Since then, Caperino and his wife, Cindy, have steadily added more units, about one every 18 months.

"When I saw how successful that first location was, I just decided to change careers and get into the ice cream business," says Caperino. It was a move that has paid off handsomely so far. Their eight locations do about $3.2 million in business annually.

Caperino says he's comfortable running his group of stores right now, but does say he's considered buying a couple more locations. For now, he's concentrating all his efforts on running the eight stores. But since the merger announcement (May 11, 2007), he says he's at least thinking about some of the complementary brands and concepts under the Kahala-Cold Stone umbrella. The new company has 13 franchise brands under its belt and is ready to expand.

Like many other multi-unit operators his size, Caperino runs a lean operation and finds his hands full most of the time. He says high employee turnover requires spending a great deal of time and resources on training. "Summer is obviously a busy time for us, and we typically double our system-wide staff to around 180 or so," he says.

His store managers are a key part of his success. "These folks are extremely important. We like to bring them up through the ranks, promote from within," he says. And he offers them bonuses and incentives for keeping their cost of goods and labor in line. He also has created a mid-level point of management oversight by employing two regional managers (responsible for four stores each), who are in and out of the stores regularly.

Caperino takes a hands-on approach to management and says he's in his stores at least one a day, and all eight by week's end. "That's just my style, I like to be involved," he says. "I set the goals, and I like to sit down with my managers and discuss where we are on all the marketing and sales issues." He believes it's his responsibility to communicate with his managers and get them pointed in the right direction - and to help them continue heading that way.

Economies of scale typically appears in any discussion of multi-unit operations. "It just makes sense," says Caperino. "When you have multiple franchises, all of the issues like finance, supply, and labor can be leveraged and blended to minimize expenses and maximize earnings."

Caperino puts that theory into practice by sharing employees and supplies among his stores. One of his mottoes is, "Nobody should ever run out of anything."

There have been challenges for Caperino. He says California has to be one of the most difficult states for franchising. "The government is just unfriendly to us, whether it's sales tax audits, or changing the rules on how things are taxed," he says. Renting commercial property in the state continues to be an expensive prospect.

As for the recent merger, Caperino says, "I'm hoping they can help increase the asset value of Cold Stone Creamery." After all, he doesn't want to be the ice cream man for the rest of his life: He's positioning himself to sell and retire in about nine years, so he wants the business to be as healthy as possible.

Profile:

Memorable first job: I spent 14 years as a field engineer for Sperry-Univac repairing computers aboard ships. I got to travel the world and lived in places like Japan and Italy, flying back and forth to ships to fix their computers. People think that IBM invented computers but really it was Univac.

Professional tip: From the time you take your very first job, do everything you can for your manager and your company to get noticed. Go beyond what's expected.

Key education: I'd say my bachelor's degree in engineering and my MBA in finance. For me, knowing more about those two areas helped me be more successful.

Role model(s): My father. I grew up in a big extended family with cousins all around. We all saw firsthand the determined, hard-working ethic of my father and uncle. It made an impact.

Currently reading: Just finished The Blind Side: Evolution of a Game by Michael Lewis. I love his humorous approach.

Others say you are: Driven, goal-oriented, and committed to finishing what I start.

Business news sources: I've been a daily Wall Street Journal subscriber and reader for over 30 years.

Favorite web sites (besides your own): I love investment sites like Jim Cramer's www.thestreet.com, and the Motley Fool's www.fool.com.

Franchise systems (besides your own) that are creative: I really like what I see with Jamba Juice. They're kind of the Starbucks of the smoothies.

Favorite quote: "Figures don't lie, liars figure." Numbers can be twisted and manipulated and looked at a hundred different ways - that's important to consider.

Best advice anyone ever gave you: My mother told me when I was in college and threatening to give up, "You can't quit, you told the family." It was another lesson in the "finish what you started" philosophy.

Best advice you ever gave anyone: "Work hard while you're young, put away some money, and one day you'll be in a position to start your own business."

Biggest project for the year: There are some management issues in some of my stores that I'm going to need to spend some time correcting in order to achieve my goals.

What you do to unwind: I love to golf, watch movies, and read. People ask me how I can operate eight stores and find time to golf. I say, "You just schedule it and do it."