Question: What are you doing here in Hawaii?

Answer: We are here to basically conduct what we are calling a town-hall meeting with our franchisees. Typically, in a year what we do is we have an annual franchise meeting in Las Vegas. It's usually in January, so because of where the economy is at, we decided to do things a little bit differently this year. So instead of bringing everybody - 1,300 people - to Las Vegas for a four-day period, my team and I, we basically hit the road in a rock-style band tour bus and we blanketed 16 cities in just about two and a half months.

Q: Who did you bring with you?

A: We brought my executive team - Brad Nielsen, VP of ops and Brian Kiel, he is my director of developer support, and Suzanne Schutz, vice president of marketing, to all the meetings.

Q: Do you think you will do it again next year?

A: We've gotten tremendous feedback from this setting. I think it is an incredible opportunity for us to get in front of our franchisees in a smaller group and really have some open and honest dialogue. Here's the strategy, what do you think, and they will provide us feedback. They will explain to us what issues they are having in the market, and we can talk about the best solution to deal with those issues. So you don't necessarily get that when you have a room full of 1,300 or 1,400 people, versus a room full of - gosh, in this market it was 25 - the average has been 75 to 80. There's a lot to be said about the national convention, too.

If I had to guess, I think that we would probably go back to our large meeting next year and maybe every other year rotate between the town hall and the annual franchise meeting.

Q: What did you hear from your franchisees here that may have been different from what you heard around the country?

A: I think what's probably the most unique about this market are the cost of goods and the utility and rent expense. Those three things working in concert makes doing business on the island challenging. I think it helps that our average unit volume here is a little bit higher than in most places, but still you have tremendous expense that has to be analyzed.

Q: Does that mean that an ice cream in Honolulu costs more?

A: I would say that the average ticket in Honolulu is a little more. I think you guys pay $9 for milk, don't you a lot of times? It's expensive.

Q: What are the franchisees seeing now that the economy is going down?

A: Tourism is absolutely down, and that is going to impact our top-line sales. So when you couple the fact of tourism down, declining sales, the cost of real estate for rent, the cost of utilities, and overall crude cost, it's tough. I think what they really want to see is two things: No. 1 that there is a leadership team in place that absolutely cares about their well-being, and No. 2 that that leadership team has a plan. When we were here we basically laid out the six-point vision to raise the sales by $140,000.

Q: When do you hope to do that by?

A: I don't have a crystal ball, and I can't tell what the economy is going to do, but I'm pretty sure I can raise it by $50,000 within eight months.

Q: Are you able to quickly outline that?

A: The first point is incremental sales. There is a couple different bullet points in incre- mental sales, but it starts with core product innovation. So that's why when you go into a Cold Stone starting in February we are rolling out our novelty line. So we are going to have stuff like ice cream cupcakes.

We are going to have an ice and blended coffee drink program starting April 1. We are going to have our own private line of cheesecakes coming in September. We are doing partnerships with Country Time Lemonade for sorbet, Jell-O and Kraft for pudding ice cream. So I think by evolving that core, we are fortunate because we believe we are the most beloved ice cream concept in the country right now. And we can't forget what got us to that, so that is why we really need to focus on the core.

I'd say the other big rock in that would be strategic alliances. Because raising sales by $140,000 on ice cream alone - it's tough. So what we did was we went out and did two strategic partnership tests. One with Rocky Mountain Chocolate Factory and two, with Tim Hortons of Canada (coffee and doughnut shop). So if you walk into a Rocky Mountain, they are the ultimate in chocolate indulgence - and we are the ultimate in ice cream indulgence.

We think that by bringing basically their stores - meaning making it available to the franchisees if they wanted to bring a Rocky Mountain Chocolate into their existing footprint, that that's going to be fantastic because we are leveraging the economies of scale. They've already got all the fixed expenses happening - rent, utilities, etc. - so if you can bring another revenue stream in that is going to optimize those, most of the money flows to the bottom. You are talking about 50 percent out of every dollar flows to the bottom line then.

Q: And the people who own the stores - do they feel that this new batch of initiatives is going to help them?

A: I think there is no doubt, especially given the tourism and the disposable dollars here now that they are not as good off as they were two years ago. Because the traffic's down, but they are absolutely, positively excited about the direction that we are going. Because it's not initiatives that are nominal. We are not talking about stuff that if it happens well, it will only bring a 10 percent sales increase to their store. We are talking about stuff that is going to bring $100,000 to $150,000 in - I think if executed well, I think it is going to be received pretty darn good by the customer as well.

Q: Countrywide, where are your strongest markets?

A: Hawaii is strong, California is strong, California, Puerto Rico. The Northeast Atlantic market is strong for us.

Q: How many stores are there?

A: We've got about 1,350 in the 50 U.S. states. We've got another 100 internationally.

Q: And 14 here. So how many employees do you have in Hawaii?

A: Employees you are probably looking at 280.

Q: Is there some kind of average turnover with the ownership of the different stores?

A: I know we are in line with the typical franchise system. I believe the owners here in Hawaii have had their stores for a tremendous period of time.

Q: Looking down the road, do you see the Hawaii market as somewhere you'd like to open more stores, and if so, where?

A: When I took over the brand a little over a year ago, we made the conscious decision that expansion was not going to be anywhere in what our strategy was. Our focus went from growing a brand to driving sales to the existing store owners. With that said, we will experience some organic growth in the system, so I think there are plans to open a couple more units in Hawaii, and I think that we will probably do a couple non-traditional venues here as well.

Q: What's a non-traditional venue?

A: A non-traditional venue would be a unit that doesn't have an address on its own - so a ballpark, an arena - that kind of deal. You know the airport is another good example. We have opened two locations there recently in the airports, and they are doing fantastic.

  Q: How about nationally, are you in a contracting period?

A: I think we will probably stay right around the same number of stores that we have now over the next couple of years.

Q: Are there any other observations that you have made about your Hawaii operations?

A: These are some of the best-ran stores that we have in the country. Bar-none. The owners are engaged. The owners are passionate. 

Franchisee hopes new initiative will help counter rising expenses

After 17 years in the auto industry, Donald Quinn left his job in search of running his own business.

He now spends his time in Pearlridge Mall, surrounded by fresh ice cream and cakes. In 2007, Quinn took over ownership of Kailua and Pearlridge Cold Stone Creamery locations with his wife, Julie. Now they do just more than $1 million in sales between the two stores each year, and soon may be part of the company's new initiative to help franchisees partner with other big-brand names.

“;We have some things to look forward to, where we have some relationships with some companies that tie into Cold Stone,”; said Quinn, who attended a Tuesday meeting for franchise owners with company President Dan Beem. “;Now how well they work has yet to be seen.”;

Quinn, like other Cold Stone store owners, has seen an increase in costs of just about everything. His monthly electric bill jumped from $3,000 to $4,000 when gas prices went up earlier this year, while food and shipping costs rose several thousand dollars as well.

“;It's a huge concern,”; he said. “;As the economy has worsened, we haven't seen much relief.”;

About 20 people work at Quinn's two stores, and he also sells ice cream at Aloha Stadium events as well as at the swap meet there. He expects to sell about 1,500 units during the Pro Bowl game next month.

His most recent efforts have been focused on promoting the Cold Stone ice cream concept - where different treats are rolled into the ice cream at a customer's request - and lesser-known offerings, such as cakes, which start around $29.99.

Quinn's best-selling base flavor is chocolate, although his personal favorite is vanilla bean.

“;Generally speaking, I think there's a lot of people out there that still don't know everything that Cold Stone does and what Cold Stone is about,”; he said. “;The Cold Stone brand is still very strong, and we certainly still have the best ice cream in the world.”;