BEHIND THE STONE

coldstonecreamer y.com

BEHIND THE STONETH E C R E A M E RY N E W S M A G A Z I N E

Volume 3 • Issue 3 • June/July 2004

2005 Annual Franchisee Meeting Special Insert

Making Wishes Come True

The Power of One The Power of One Victory is Ours for the TakingVictory is Ours for the Taking

Dear Partners & Customers: With any luck the subject of this letter – the record-breaking cream prices – will be

a non-issue by the time you read this. With any luck. But if you know Cold Stone Creamery at all, then you know that we don’t rely on chance. Success has found us through our Pyramid which is a written record of rational thinking, decisive action and expected results. That’s lucky for you! The cream prices we are enduring right now are the brutal facts of our business. There is no denying that this temporary market condition is impact-ing all of our bottom lines. You’re probably not alone if you are asking, “Is it really a great day for ice cream?” Here’s my answer. Yes it is, for one simple reason. Because Cold Stone Creamery is strong. Now before you think, “Doug, that’s a nice compliment, but that doesn’t buy us much ice cream mix,” allow me to explain. Challenging times are when the strong make their moves, if only by standing still. When fuel prices began to skyrocket, we all felt the pinch at the pump, and we still do. Well so do the airlines. So much so that USA Today says that the airlines’ hopes for profits are going straight into their fuel tanks. That is unless you’re Southwest Airlines. During these difficult times Southwest keeps doing what they do best – taking care of people – and they’re holding their ground, even making a profit. Southwest keeps getting stronger as competitors such as Delta and American Airlines cut their earnings outlooks and struggle just to survive. We are part of an industry whose “fuel” is a bit high right now and we have weak competitors. Competitors who likely will decide to do the wrong things: cut back on portions to

improve profits, cut back on staff to reduce costs, pass along price increases, even wear their hearts on their sleeves and forget that they, and we, are all in the ice cream business. People come to us to get happy.

Would I choose the market condi-tion we are facing right now? No, but since it is here, I am committed to rational thinking and maximizing the opportunity. This is our chance to do what we do best and make our move. Here’s how we do it, the Creamery and you. The Creamery is holding your prices artificially low by subsi-dizing the cost of our ice cream mix. The price you are paying right now is, believe it or not, less than what it could be because of the contributions we are making financially to ease the burden. Your competitors, who are not getting this relief, are paying more and that gives you the competitive advantage.

That’s where you come in. In this issue, you’ll read about the plans for Make-A-Wish in July and the 2005 Annual Franchisee Meeting in January. Commit to these business building events now. It’s your job to seize our competitive advantage and make the most of it by doing what we do best: serving customers and making people happy. This is a team effort within your store, within your market, within our entire system. It is our chance to not just win as a team, but dominate as a team. This temporary crisis – or is it opportunity – won’t last forever. We have to make the most of it today, tomorrow and the next day. Who needs luck? We’ve got the Power of One.

It’s a great day for ice cream!

Doug DuceyCEO and Chairman

It Takes the Power of One to Rise Above

BEHIND THE STONEJ U N E / J U LY 2 0 0 4

Features

8 Making Wishes Come True!

12 Victory is Ours for the Taking

Departments3 People Are Talking

• Find out what the press and our customers are saying about Cold Stone Creamery

4 Store Front • News You Can Use – Best Practices • Creamery Card Update • Cake Success Stories

14 Milestones • 100% Mystery Shop Stars • Now Open! New Store Photos and Best Practices • Ice Cream University Graduates

20 Creamery of the Crop • New Top 10 Rankings • Tips From The “King” of Cakes • Editor’s Note

Store #975 – Dublin, OH

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People Are TalkingRead these fantastic excerpts from media and customers. Buzz-building sure is fun!

National Television!Teen idol Melissa Joan

Hart was a recent guest on Ryan Seacrest’s afternoon talk show. Turns out, Melissa LOVES Cold Stone Creamery. So what hap-pened next? The crew from the Hollywood and Highland store in Los Angeles brought an entire

pan of Cold Stone ice cream to her – live – on national TV. The pan was complete with a giant spoon, and judging by this shot, she really enjoyed it!

Media Mixer Praises Cold Stone in Print! A few weeks ago, I received a really fun invitation – to scoop ice cream for a couple of hours during the grand opening of Cold Stone Creamery Store #859, located near Loop 494 in Kingwood, TX. At first I thought, umm, another intrusion on a Saturday afternoon. But when I visited www.coldstonecreamery.com and found out more, you wouldn’t believe how excited I was!Cynthia Calvert Editor, Greater Houston Weekly

Great Service Wins Over Another Customer I was always a fan of mint choc-olate chip and nothing ever com-pared to Baskin Robbins, but after the great service that I received, Cold Stone definitely takes the cake now. I’ve been in the restaurant industry for over six years and managed for two of those years. THANK YOU FOR A GREAT VISIT!Penny – Elk Grove Village, IL

More Happy Customers It’s wonderful to find a company that caters so extraordi-narily well to its customers, and I’m extremely happy to find that the Cold Stone nearest to me has improved so drastically. I will certainly continue to visit this Cold Stone location in the future, and will tell everyone I know who enjoys ice cream to do so as well.Sarah – Grand Prairie, TX

Grocery Store Ice Cream? No Thanks. After having the Cheese Cake Fantasy, Birthday Cake ice cream, Apple Pie á la Cold Stone and others, I will never go back to buying ice cream in a grocery store again as I’m sure it will taste watered down and boring compared to Cold Stone’s! I love Cold Stone! Christel – Greenville, NC

One for the History Books Cold Stone is making history in the world of business educa-tion. A professor at Arizona State University, Dr. Robert Cardy, is the author of Management: People, Performance, Change and chose to feature Cold Stone as an example of a successful franchise.

Celebrity Sightings One of the ways Cold Stone will become a Breakthrough Brand is to get our ice cream in front of celebrity influencers. If a celebrity visits your store, snap a photo and send it to: bts@coldstonecreamery.com Take a look at who’s visiting us and talking about their favorite ice cream!

READY, SET, COLD STONE! Keyshawn Johnson of the Dallas Cowboys, stopped by Store #683, Plano, TX on April 15 to enjoy some great ice cream! Johnson is pictured with store owner Vivien Rosal. He probably needed a tax break!

Doggy and Baby Shower Leave it to the Beverly Hills elite to plan a star-studded “Doggy and Baby Shower.” While the stars “goo-gooed” over sugar sweet puppy and baby gifts, they sampled Cold Stone Cakes. They were also sent home with Cold Stone gift certificates to share with family and friends. Here’s what some had to say.

“I’ll have to pass. Well, never mind – who can pass up Cold Stone Creamery?”– Rachel Hunter (model)

“Wow, thank you. I love Cold Stone.”– Kirsten Dunst (actress) “That ice cream is pure evil. I love it.”– Kathy Griffen (comedian)

Jane magazine recently featured the eating habits of Lara Flynn Boyle.

Cold Stone becomes a page in the history books.

Let Them Eat Cake!Franchisees give testimonials about how cakes are changing their businesses.

Hot Cakes in Coral Springs “Wow! On the slowest busi-ness day of the week (Wednesday) we sold $188 in cakes. Our cake display is beautiful! We hired a ‘cake’ person who gives us 20 hours a week, building and decorating cakes so that we have backup in our walk-in freezer. We can’t sell what we don’t have.”

• Cake tastings in the store every Sunday between 4 – 6.• Direct mail to Chamber of Com-merce (480 members) to remind the business community that April 21 was Administrative Assistant’s Day. • Serving cake to attendees at The Coral Springs Museum of Art fundraiser. Every attendee received a welcome bag which includes a $3 off cake coupon and a cake menu (all from the intranet).• Last week we enjoyed over $700in cake sales. We look forward to continuous growth.– Ruth and Fred Spiegel, owners

in Coral Springs, FL , and Fred is an NAB Member

I’ll Have A Midnight Delight, Please “The cake ad in the newspaper is wonderful. People are actually calling the store and asking for Midnight Delight by name. How fantastic is that? Just the mention of the new cakes seems to be doing the job that was intended.” – Ron and Cindy White, owners in

Anchorage, AK

Ringing Off The Hook “I got in the store at 9 a.m. and the phone has been ringing off the hook for cake orders.”– Stephanie Newberry is a manager

PAPER BEFORE PRODUCTWhile training franchisees and crew members on how

to make waffle cones, try letting them practice the folding

technique on a piece of paper before making the actual

cones. It saves time and money.

– Jared Price, Manager of store #1010, Scottsdale, AZ

CLUTTER-FREE KITCHENNeat and organized while allowing for proper drying,

vs. sitting in a container that may not be sparkling clean.

(Wood strip is actually not wood, it’s plastic, thereby being

okay for moisture areas.)

– John Volmert from store #284 in Colorado

News You Can Use CREW RECOGNITION PROGRAMBe the Best...Be #1!” That’s the core value that inspired Jeff Judas

and Steve Meyer, multi-unit owners in the Washington state area, to

institute a monthly “Above and Beyond Award” for their crew members.

What could be more motivating than being recognized by your peers for

doing a great job!

If you are considering estab-

lishing a recognition program for

your crew, you might be interest-

ed in the accompanied form that

Jeff and Steve use to nominate

crew members for their Above and

Beyond Award. Thank you, Jeff and

Steve, for going Above and Beyond

in motivating your crew members

AND for sharing a great idea! The

Above and Beyond Form is posted

on the Intranet in the Franchisee

Relations section.

You can really learn some wonderful tips from your peers. Here are some best practices we’ve picked up while visiting stores and meeting with franchisees. If you have a “News You Can Use” tip, send it to Cliff Hart at chart@coldstonecreamery.com

It All Adds Up to Higher Asset Values

Q: How do you know if your store is worth more today than when you first joined the community?

A: When the franchise fee increases, your asset value follows suit.

It’s a simple cause and effect equation. Our branding efforts lead to more awareness among potential business owners. Awareness leads to demand. The demand to own a Cold Stone increases, and more Cold Stone Creameries open across the country. The franchise fee

increases and Cold Stone becomes a more lucrative business proposition. What does this mean to you?Your asset value climbs higher, and higher and higher. Our franchise fees will be $42,000 for initial units and $32,000 for sub-sequent units starting July 1, 2004. And you thought Ice Cream University ended on graduation day. If you have any questions, please contact your Area Developer.

Real Estate Round-Up Here’s a new plan to open faster and get better leasing terms. The Real Estate team has recently announced a new program that accomplishes better lease terms and expedites the store opening process. This is GREAT news for

those of you who plan to open a new store. The new program took effect for those impacted by the April 2004 UFOC. More details on this program are available through your Area Developer.

Benefits Survey Reveals Your Healthy Choices We are currently tabulating your responses to our Health Benefits Survey. More than 200 franchisees responded! Your input will help us develop a plan that works hard for you, your crew members and your families. Stay tuned to future editions of Creamery News and Behind the Stone for the latest.

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Store FrontStore Front features program announcements as well as tips and information to help you run a better business. The advice and news updates come from members of the Creamery Team and from Franchisees around the country. If you have a “News You Can Use” tip, please e-mail it to bts@coldstonecreamery.com

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Who do you call? Not Ghostbusters – Carpigiani at 1-866-328-6392. They’re ready to

help. To serve you, they will need some specific information that will expedite service

to get you up and running again.

When using the toll free number to call in a service repair, please provide your

serial number – it is engraved just under the door hinge on the front of the machine.

Batch Freezer on The Fritz?

in Wasilla, AK “Now that the PR and Ads hit, I have to carry my phone in my back pocket just to keep up with the orders – I sold 13 cakes on a Sunday!”– Stan Pittman is an owner in

Colorado Springs and Pueblo, CO

Sweet Secret To Success “We try to remind every customer that comes in about the cake program, and have aggressively pursued corporate accounts. Last month, an orthodontics office con-tributed $430.00 to our cake sales. During the day, crew members usually have more time to spend with customers. Train your crew to ask where they work, tell them about your cake program, and get a contact name and number to follow up about corporate parties, birthdays, etc. We also NEVER turn down a cake order! We will work with customers to accommodate same day orders if necessary.”– Craig Cowell, Denver CO

Creamery Card Update Have you been around long enough to remember when we served Add-ins and Mix-ins? How about Captain Cold Stone? Were you here when waffle cones were

free of charge? These are the things that at one time were hot HOT topics at every Creamery and market meeting. What did they all have in common?They were all programs that have

their places in our company history. But our brand evolved and outgrew these ideas, and that six-letter word, C-H-A-N-G-E, kicked in. The result? Back then, it was hours and hours of spirited and colorful debate – from Tucson to Torrance. And eventually – better, more impactful ideas took shape and helped build the brand that we have today. So what’s the history lesson all about? Creamery Cards are going into retirement. The National Advisory Board has endorsed the decision based on some very com-pelling rationale. True, they have been credited for increasing frequency in yourstores. They’re also guilty of spawn-ing widespread fraud. Stamps vs.signatures cause mixed signals between owners. Customers are

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Store Front

confused and are being turned away, spiking our Service Check reports to undesirable levels. And yes, our well intended Crew Members are winning popularity contests from coast to coast, stamp-stamp-stamp-ing their way to the prom.

What’s Next? (1) First, shred your current

cards. Don’t toss them in the trash – destroy them.

(2) Next, accept all Creamery Cards that are presented to you. Don’t turn anyone away – it hurts the brand and remember, they will be gone very soon.

(3) No new cards will be issued, and no negative signage will be posted.

(4) Please instruct your crew to handle questions from card-bearing customers

with the following talking points:

“Just to let you know, we are unfortunately discontinuing thisprogram. We’re happy to honor your card until it is filled, but we won’t be able to issue you a new one.” This message can be handled so much more tactfully when it comesfrom a compassionate person, rather than a sign.

on our cakes. Too cool, and too much ganache

will remain on the cake during the coating

process, thereby raising food cost and slowing

down the ganache process.

THE GRANNY RULE: HOW YOUR GRANDMA CAN HELP YOU SELL!

Consider the phrases you most com-

monly use with customers. Run through

them in your head. Now run through

them again, only this time, put the word

“Grandma” at the end. Does it sound like

something you’d want to say to your grand-

mother, or something she’d want to hear? Here

are some examples:

• Look, I’ll be right with you, Grandma.

• That’s not my section, Grandma.

• What’s this in reference to, Grandma?

• It’s not our policy, Grandma.

• Let me refer you to the people who handle that,

Grandma.

Suggestion: If you wouldn’t say it to your

grandmother, or any other person you care about,

why would you say it to your customers? Use the

Grandma test to help you eliminate the words and

phrases you use to unknowingly alienate customers

and prospects.

– From Customer Satisfaction is Worthless, Customer Loyalty is

Priceless, by Jeffrey Gitomer

News You Can Use

A thermometer like this one is available from Sysco. Using it properly cuts food costs and ensures quality.

Five Minutes With... The Operations TeamAs we enter into new markets and bring on more

great franchisees, The Creamery Team must evolve to meet the

needs that come with expansion. This month, we’ve added several

new members to the Operations Team. So, we thought you might

like to see a snapshot of the team to see who does what!

Vice President of Operations: Dan Anderson

Director of Operational Excellence: Randy Yamamoto – directs the

QSCE program

Operational Excellence Consultants – perform QSCE evaluations

Director of Operations (position open) – directs Creamery

Operations Teams

Creamery Consultant – serve as business advisors to ADs,

communicate new programs, share insights and best practices

If you have any questions, contact your Area Developer or Creamery Consultant if you do not have an AD.

DECREASE FOOD COSTS BY USING THERMOMETERS

Here’s the 411 on thermometers, a mandatory piece

of equipment to help you serve up the Ultimate Ice Cream

Experience:

Ice Cream – too soft, the quality is poor. Too hard, and

crew members will struggle! Measure ice cream tempera-

ture before each shift. Should be 4 – 6 degrees F.

Meter your mix – the best way to prevent contaminated

product from walking in your back door. Should be below

40 degrees F.

Hot fudge and dipping chocolate – too hot, and cocoa

in chocolate bubbles -- affecting product quality. Too cool,

and excess product remains on waffle products increasing

food cost, while also increasing the chance of bacteria

growth. Should be 120° Fahrenheit. HOT DISCOVERY!

Store visits reveal many

franchisees are “cook-

ing” dipping chocolate

at 135 degrees and

higher!

For great ganache,

it should be poured

at approximately 75°. Too

hot, and the ganache

will melt the ice cream

cake and not provide

thick enough coating

Creamery TalkCreamery Talk is your forum for open dialog and

two-way communication. What’s hot on Creamery

Talk these days? Here are the most “active” topics.

• What New Creative Templates Would You Like to See? (Poll)

• Advice for Build-out

• Ask the Tastemaster

• Health Benefits to Franchisees and Crew

To access Creamery Talk, log on to the Intranet and click on

“Creamery Talk.” First time users will need to register, and once

you’re in, you’ll be hooked!

Event Night PreparationTeams of Five The “Team of Five” is a task force created in each market to help prepare Franchisees for event night. The Team of Five will be led by a volunteer Franchisee Market Leader, so look for a phone call or e-mail from them in early June. The Team

of Five will work from a set plan and a timeline to keep all stores on track as event night approaches. It’s important to note that each Franchisee is part of a Team of Five, as each owner is ultimately responsible for hosting a successful and enjoyable event for our customers. The Team of Five consists of:

• Store Owner • Area Developer • Local Make-A-Wish

Chapter Representative • PR Agency representative • Franchisee Market Leader

Promoting Make-A-Wish To Media Influencers• A video package will be produced with

footage of the Make-A-Wish Cake and the Make-A-Wish family and will be distributed to local TV stations by the PR Team.

• A feature article regarding the Make-A-Wish event will be placed in more than 100 daily and weekly newspapers across the country.

• Beginning June 28, templates, including a media alert and celebrity mixer letter, will be posted on the Intranet for use on a local store level.

• Franchisees are on call for product drops from July 19 – 28. To increase media coverage, market-wide product drop blitzes are highly recommended. Inviting the local Make-A-Wish Representative along will enhance the partnership visibility and increase the likelihood of media coverage.

Tracking Your Donations The Accounting Team is preparing specific guidelines to follow with regard to tracking donations. Be sure to review your Training Guide thoroughly to ensure you receive proper credit for every dollar you raise.

New This Year: Local Check Presentations! You will now have the opportunity to share your market’s success story by host-ing a local check presentation ceremony! The appointed Franchisee Market Leader will coordinate a local check presen-tation and photo-opportunity with the Make-A-Wish chapter and Franchisees at the conclusion of the month-long promotion. For local strores, a post-event press release template will be posted on the Intranet. Make-A-Wish volunteers and Wish families will be encouraged to participate in the events, but cannot be guaranteed, nor expected at every store. Some Wish families may have to cancel at the last minute due to health concerns of the child.

The 3rd Annual World’s Largest Ice Cream Cake Social is slated for Thursday, July 29 from 5:00 p.m – 8:00 p.m.

Making Wishes Come True!

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Doing the Right Thing For Kristen and Brian Meet Kristen and Brian, our “Wish Kids” for 2004. They are brother and sister from Chicago, and both are afflicted with Cystic Fibrosis. Kristen is 11 and Brian is 9 years old. What are they wishing for? Kristen wants to go to Greece to see the Olympics –

particularly to the gym-nastics events. Brian wants to wait until he’s a little older and more mature to make his wish decision.

Why Make-A-Wish? Make-A-Wish touches us for many reasons, but one stands out above them all. When Wish children experience the power of a wish, they see life in a new light. Being poked and prodded at endless doctor visits is enough to bring even the most positive person down – imagine how an innocent child feels. And then, Wish Day arrives. Time to go to Disneyland. Time to meet Sammy Sosa. Time to pretend to be Spider-Man and capture the Green Goblin. Life is worth living! Life is a gift. Make-A-Wish brings hope to these children and inspires them to fight.

That’s why we support Make-A-Wish. That’s why we turn our stores into fundraising centers during National Ice Cream Month. Kids with life-threatening illnesses deserve the chance to fight.

Our partnership with the Make-A-

Wish Foundation has flourished into a national phenomenon. It’s brought us closer together as a franchisee community, and has created stronger ties within our local communities. We’ve raised hundreds of thousands of dollars for America’s Wish kids and that number climbs every day with each Grand Opening fund raising event that supports this worthy cause.

3rd Annual Ice Cream Cake Social Make-A-Wish is far more than an in-store event and a collection of promo-tional window clings. It’s using the Power of One to show we care. The 3rd Annual World’s Largest Ice Cream Cake Social is slated for Thursday, July 29 from 5:00 p.m. – 8:00 p.m. Here are the components you need to know to prepare for this year’s event.

Product Make-A-Wish® Cake Layers of moist devil’s food cake and Sweet Cream ice cream with Oreos®

and chocolate shavings, covered in rich, fudge ganache.

Fundraising Elements This year, we will continue to see $1 wall stars, dedicate two tip jars for MAW and encourage donations throughout the month of July. We are researching selling “Corporate Stars” as an added element to build community awareness and ultimately, raise more money for Make-A-Wish.

Point of PurchaseFloor stand banner – (2) per store • Banner #1 – Ice Cream Cake Social event • Banner #2 – Month-long MAW

Promotion/$2 of all cake sales during the month of July goes to MAW

Cake Freezer Cling – (1) per store • Cling to inform consumers that $2 of

all cake sales go to MAW during the month of July

MAW Window Cling – (1) per store • $2 of all cake sales during the month

of July go to MAWMAW Social Cling Strips – (2) per store • Strips promoting the Ice Cream Cake

Social event night • Donation Jar Labels – (4) per store • Donation Wall Stars – (400) per store • Oversized Check for stores – (2) per

market leader • To be used for local MAW chapters at

end of promotion

Save the Date!

What’s equally as exciting as Cream-ery News, but completely dedicated to helping you deliver the ultimate ice cream cake experience? CAKE NEWS! Consider it your weekly “cake only” update on hot topics and helpful hints, important dates and sales rankings. You’ll receive a Cake News update every Friday, right along side Creamery News weekly e-mail. Here are some of the items you’ll find in Cake News:

How Are We Doing? A Sales Update Average Cake Sales for the system is $496, which is +53.1% over last year! The chart below represents the total number of stores selling more than $1,000, $1,250 and $1,500 in cakes each week.

Hot Topics AndHelpful Hints The Biggest Cake Day Of The Year!

While you are all trying to catch your breath after the Mother’s Day rush, we felt it was important to tell you that according to national research, Father’s Day has consistently outsold Mother’s Day in cake sales. This means it’s time to stock-up on all cake products and begin planning for production. The cake featured on the insert will be Snicker’s Surprise, so be sure to have plenty on-hand for the holiday rush.

Helpful Hints To Meet Demand and Maximize Sales• Dedicate crew time on

your schedule every day for cake building and decorating. Schedule the cake time for early morning so that cakes can be built before the store opens.

• Additional crew time for holidays: When gearing up for a big cake holiday (like Fathers Day), schedule extra cake time the week before. You’ll need to ensure there are enough crew members to build and decorate, as well as take custom cake orders.

• You may be able to adjust and add additional shelves to your blast and your walk-in freezers to maximize space.

• Adjust ice cream production: Con-sider lowering your build to levels for ice cream production, if possible. For example, rather than producing 20 pans of sweet cream each day, you may find 12 pans is enough. Also, try producing ice cream earlier in the day (start at 8 am rather than 10 am) or twice a day – less pans of ice cream in the blast will give you more room for cakes!

Another Layer Of Cake Public Relations Support The Creamery Public Relations team will be distributing a press release to your local community newspapers the week June 1. The press release will highlight Cold Stone Creamery’s new cakes as the perfect treat for Father’s Day and will be sent on behalf of all stores that feature cakes. This release will also be posted on the Intranet and we encourage you to drop cakes and the press release to your local television, radio and print media outlets.

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Your Area Developers: Coaches and Mentors Have you taken a look at our Customer Pyramid

lately? It’s a simplified version of our com-pany organizational chart – and it shows how we support one another. It’s easy to overlook what the Customer Pyramid represents when we’re busy with our day-to-day tasks, but it truly guides the direction of our company. Our Customer Pyramid has driven several recent decisions regarding how we do business. One big decision relates to the evolution of the SCOOP program,

which we now refer to as QSCE or Q’s for short. This change will have a definite impact on your relationship with your Area Developer. It became evident to us that our Area Developers were spending a lot of time SCOOPING franchisees, leaving less time for mentoring and most importantly, coaching how to build sales and profits. Now that the Q visits are being conducted by a team of Operational Excellence Consultants, Area Developers are in a better position to help you build your business. Now your Area Developers will be able to spend more time teaching profitability tools like LMS 1-2 and the

Inventory Scheduler. They’ll also be able to teach you how to grow your sales by maximizing efficiency when you are busy, checking your tracking average and will explain how being “shift-ready” can increase your sales. You should expect to see your ADs once a month, and should block off 2-4 hours to make the most of this important meeting. They will use the OEI Partnership Plan as a game plan, with the focus on increasing your execution and helping you be more a more successful business owner. The Creamery Consultants will transition their roles to serve as business advisors to Area Developers, providing new insights, collaborating with them on ideas to improve sales and profits, and sharing best practices. That’s the spirit of the Customer Pyramid in action. When we work together, we bring out the very best in all of us.

Get Your Finger on THE PULSE: There is a place where you can share your ideas and issues openly and honestly. A place where suggestions bloom into tangible tools and programs to improve your business. A place where problems are identified and earmarked to protect us from repeat occurrences. That place is the Franchisee Relations Department and the Creamery Ombudsman Program. The first quarter of the year is behind us and we’ve gathered incredible insights from Franchisees and Area Developers… resulting in business decisions that make us a stronger Franchisee Community. The improvements we make are not the result

of any one individual or any single department effort, but the result of our Cold Stone Creamery com-munity working in partnership to address the root cause of issues, to prevent the issues, from reoccurring. What a great testimonial to our core value of “Winning As A Team!”

The Pulse If you want to get your finger on “the pulse” of our communities – visit our Intranet page. You can link right to it under “contact us.” A few things might occur to you when you visit:

“Reading this reminds me of an idea that could improve _______.” “Wow – I was wondering if others had that same concern. Looks like something’s in the hopper to address that issue.” The Franchisee Relations/Creamery Ombudsman Program Intranet page is the place where the most talked about issues and ideas meet with tangible decisions and results. You’ll find our new Q1 report – a recap of issues, trends, key learnings, out-comes and good practices received in the past quarter. Also, access the Franchisee/AD Feedback “Results Log,” a living

report of specific issues received through market visits, phone calls, surveys, etc. Both are worth the read. Innovative approaches to issues, teamwork and goodwill are a by-product of open communication and healthy issue resolution. As you review our department’s first quarter activity reports, please keep in mind that any issue raised is an opportu-nity for learning, which will help us work better, work happier and maintain our focus on the business and the brand. Please visit the Intranet under “Contact Us” – “Franchisee Relations/Ombudsman” to get to “the pulse of the community.” If you have questions, comments, or suggestions on how the Franchisee Relations Department can better support you, please contact Jim Valentino at jvalentino@coldstonecreamery.com or Carolyn Stock at cstock@coldstonecreamery.com Thanks to all of you for your contin-ued support to “Be The Best….Be #1!” In accordance with our mandate to provide a confidential avenue to raise issues and concerns, our Creamery Ombudsman Program reports are depersonalized so that the identity of those using the pro-gram is not disclosed.

AD LeadershipLee KnowltonVice President of Area Developers

Jim Valentino

Carolyn Stock

Franchisee Relations and Creamery Ombudsman ProgramBuilding bridges and building relationships through open communication and teamwork!

Cake News

Insert Message Date Cake Featured

Launch April 16th Midnight Delight

Mother’s Day May 2nd Strawberry Passion

Win Cake for Life May 16th Coffee House Crunch

Father’s Day June 13th Snickers Supreme

>$1,000 Sales

>$1,500 Sales

>$2,000 Sales

>$3,000 Sales

>$4,000 Sales

Cake Sales Over $1,0004/6

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2

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18

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52

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5/11

225

86

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5/18

54

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Cake Calendar

12 BEHIND THE STONE • HTTP://FRANCHISEE.COLDSTONECREAMERY.COM

Butter Fat and The Bank Of Kohler As you well know, butter fat prices are climbing higher and higher – and butter fat drives the price of our ice cream mix. To protect you from taking repeated increases over the years, Kohler, our long-time ice cream mix partner has established a bank of sorts on your behalf. It’s a range they have determined with a ceiling and a floor. If the price rises above the ceiling, we need to take an increase. If the price falls below the floor, Kohler owes us. Anything in between is absorbed by

Kohler to avoid the yo-yo effect the market has on all of us. Today, we’ve overdrawn the Kohler bank by about $600,000, which is far more than they can handle. If we were to pay back the bank in full, we would have to increase the price of our mix by approximately $10 more per case.

Making Ice Cream History At the Annual Franchisee Meeting in January, I spoke of a Chinese war general by the name of Sun Tzu who is considered to be one of the greatest war

strategists of all time. His historic teachings often shed light on ways we can win in the competitive marketplace today.

Today, another Sun Tzu idea sets us up for a win that’s bigger than we ever imagined – and it relates to the butter fat price increases we are currently facing.

“Nothing is more difficult than the art of maneuver…to turn misfortune to advan-tage.” – Sun Tzu

Fact: Our new cake

program is rock solid, and without a doubt, we will take customers from Baskin Robbins and other competitors as a result. But can we

hit them again? How can we gain an even greater competitive advantage?

Cause and Effect The entire dairy industry is feeling the pain of rising butter fat prices. Our competitors are scrambling for solu-tions. We know Baskin Robbins passes on ALL increases to their franchisees. The store owners are constantly taking hits. Two things will happen as a result. Their stores will either hold menu prices and continue to lose money, or, they’ll pass increases on to their customers. That’s really the only two options they have. But we have a plan…a plan that will enable us to hold mix prices, thereby enabling you to hold menu prices. It’s the ultimate marketing initiative, and it uses the Flexible Marketing Program to gain competitive advantage in the marketplace! The result? We close the price gap and win on value.

What Is The Flexible Marketing Program? The Flexible Marketing Program was established years ago here at Cold Stone to help build the brand. It’s a partnership with vendors such as Nabisco, Smucker’s, and Hershey’s. We are essentially marketing their products by using and displaying their products in our stores. In exchange, we ask these companies to contribute money from their marketing budgets back to Cold Stone, which are then used for marketing purposes. As new opportunities are presented to us, we must constantly evaluate our use of the FMP to make sure we are getting

“Nothing is more difficult than the art of maneuver…to turn misfortune to advantage.”

– Sun Tzu

the most for our marketing dollars, and to position Cold Stone as the definitive leader in the ice cream world.

The Battle Plan The National Advisory Board has endorsed a plan to apply the 2005 FMP dollars (dollars accrued in 2004) against the Kohler “bank account,” to enable our stores to hold prices firm. This will allow us to postpone mix price increases, but it’s important to note that our FMP dollars can only carry us so far. Depending on market fluctuations, this may postpone the next increase for the next several weeks, and hopefully even longer. We’ll ride it for as long as we possibly can before taking any more increases. While there is no guarantee how high prices will rise, this will hold us in the short term. If we can collectively commit to holding our menu prices firm, we will win more customers

over with a promise of VALUE. We already dominate the industry with the quality of our ice cream. But by sticking together and holding prices, we lead the

pack in quality and value, giving customers only one true choice when it comes to ice cream. Our deliberate and unified commitment starts the domino effect that in the end drives more customers to your stores. This battle will be

won in the field. When the dust settles, and the

butter fat prices decline again, this effort will truly reflect the power of one… tough, closely knit franchi-see community. Making ice cream history is no easy feat, but this is the plan to help take us to the top. Thank you for your support and unwavering commitment to win as a team.

Victory is OursJoe KendraChief Brand Officer

Dear Fellow Franchisees,

As you’ve read in Joe’s column,

we have a tremendous opportunity

to come out of this butter fat chal-

lenge with a big win. He explained

how we’ll be able to delay future

increases by using FMP dollars.

But what he didn’t clarify is – how

the whole thing could fail!

If we pass price increases

along to our customers, the plan

fails. That’s what Baskin Robbins

will do, and the whole idea is to

stand tall above all our competi-

tors, especially Baskin Robbins.

Customers need to see that we’re

on their side. That we’re there for

them. That we won’t buckle to

industry pressure. That we won’t

do what our competitors will.

It is essential that we lock

arms to defy these increases

by holding price. Is it about

winning as a team? Absolutely.

It’s also about winning over more

customers. More customers

means more profit.

If you have any questions

about the plan, please contact

your National Advisory Board

Representative.

Frank Caperino

NAB Member at Large

Frank Caperino

HTTP://FRANCHISEE.COLDSTONECREAMERY.COM • BEHIND THE STONE 13

for the TakingWinning as a Team by Holding Price

HTTP://FRANCHISEE.COLDSTONECREAMERY.COM • BEHIND THE STONE 15

Milestones

14 BEHIND THE STONE • HTTP://FRANCHISEE.COLDSTONECREAMERY.COM

Nancy and Sal Rizzo of Store #48 in Henderson, Nevada hit a home run with this sponsorship! The local little league team sports the Cold Stone name and shows Rizzo’s commitment to the Henderson community.

Cold Stone Creamery is making it happen every day. We’re breaking new ground and achieving incredible results. From franchise awards and new store openings to outstanding achievements and Operational Excellence, it’s clear that our vision is being realized. Take a look at how far we’ve come.

Winning as a Team!

Partners for Life

As most people graduate from Ice Cream University, they find new skills, knowledge and inspiration. Just over a year ago, that was the case for Jennifer Cushing and Kevin King.

But Jennifer and Kevin also found each other.

Kevin, an investment banker turned Franchisee and Jennifer, a Real Estate Manager both saw a

future with Cold Stone Creamery – and they certainly found it. The two fell in love a year ago and are planning a fall wedding in Illinois.

Jennifer will continue to work as a Creamery employee, and also joins the family business, playing the role of Franchisee. The business is expanding, as Jennifer’s father has also partnered with the couple. The trio plans to open 2–4 stores in Illinois.

Congratulations to Kevin and Jennifer, and best wishes for a long and happy life together.

What Are They Doing In Kentucky?

Kentucky may be the home of the Derby and Colonel Sanders, but it’s also home to a great comeback story for Cold Stone Creamery owners and managers.

Jason Bloom is the general manager for stores 315, 334, 335 and 463 in the Lexington and Louisville areas, and has implemented a business plan that’s well worth sharing. Jason partnered with Randy Yamamoto, who at the time served as the Regional Director of Operations and AD for Jason’s region. With Randy’s guidance and Jason’s determination, average same store sales continue to climb higher and higher. He attributes his success to focus, discipline and teamwork. Congrats to Jason and his team! Here’s what he did:

A Man with a Plan“I set out with a business

plan that had a week-by-week ‘to do agenda’ with promotions being planned, promotions in effect, advertising planning, product drop areas and operational goals. This was done two quarters in advance.

Once our local trade map was filled in and our in-store events were scheduled, I began a routine where I would call the contact person two weeks before the event and send them flyers and ideas I think would help the fundraiser. At the fundraiser, an entertainment director is normally present. This entertain-ment director is responsible for everyone having a great time.”

Targets: Churches, Schools and Local MediaFundraisers and Product Drops

“Mention the church or school and we donate .50 per person. At the churches, I received permission to speak at the end of the service and provide everyone there with free ice cream. At the schools, I set up Cold Stone Class of the Month where we bring in ice cream to a class with great attendance.

Many of these churches and schools have ordered ice cream in bulk from us now that we are friends.” And at Media Outlets”Free ice cream translates to free air time!”

Tracking Our Success“We began tracking our weekly

same store sales trends, which helps me prepare accordingly with labor and in-store events. We also track weekly labor and food costs, which helps us find problems before they happen and hold the managers accountable.”

Awards74 awards in April!

Total Stores Awarded1,446 as of April 19, 2004

LeasesReal Estate received 43 fully executed leases – a Cold Stone record!

Store Openings 27 during the month of April!

Franchisees with Three or More Open Stores40 as of April 19, 2004

Cold Stone by the Numbers

This graph illustrates Jason’s business goals and tracks the successes he’s experiencing in one of the stores.

Last year’s sales Current sales Projected sales

APRIL TOTALS

Milestones

16 BEHIND THE STONE • HTTP://FRANCHISEE.COLDSTONECREAMERY.COM HTTP://FRANCHISEE.COLDSTONECREAMERY.COM • BEHIND THE STONE 17

New Store Openings!Store #717 – La Mirada, CAStore #616 Grand Opening – Destin, FL Store #1041 – Salinas, CA

Store #657 – Brandon, FL

Store #979 – Greenville, NC

Store #1060 – Savannah, GA

Store #1090 – Savage, MN

Grand Opening Success StoriesHOW DID THEY DO THAT? Opening Day Sales have increased by approximately 88 percent since the new Grand Opening Partnership Plan was unveiled earlier this year. Here are two great success stories of franchisees who followed the plan with guidance of the PR Team.

G. Loy Ehlers of store #979 in Greenville, NC Opening Day Sales = $3,442.60• Partnered with Make-A-Wish Foundation for

Grand Opening Event Day and donated 50 percent of the day’s sales

• Product drops to trade area neighbors• Hosted two pre-opening parties with trade

area influencers that spread word-of-mouth like wildfire

• Received free announcements on a local radio station leading up to the event because of the affiliation with Make-A-Wish and through doing product drops

• Received press coverage in a local newspaper on the front page of the food section

• TV mentions on the local cable access channel in conjunction with chamber of commerce membership

Patrick Barcus of store #616 in Destin, FL Opening Day Sales = $3,974.06• A TON of ice cream was given away at the pre-

opening party. Destin is a mall location and over 90 people waited in line for a taste of Cold Stone Creamery. No one was turned away.

• Partnered with the Make-A-Wish Foundation for Grand Opening Event Day and donated 50 percent of the day’s sales

• Built relationships with retail partners and raffled off items during the Grand Opening event to benefit the Make-A-Wish Foundation

• Partnered with radio station to give away four ice cream cakes per week to callers on their birthdays

Store #891 – Hollywood, FL

Store #1205 – Rochester, MNStore #1205 – Rochester, MNStore #1205 – Rochester, MN

Store #1090 – Savage, MNStore #1090 – Savage, MN

Store #835 – Staten Island, NYStore #835 – Staten Island, NYStore #835 – Staten Island, NY

Store #1196 – Las Vegas, NVStore #1196 – Las Vegas, NVStore #1196 – Las Vegas, NVStore #846 – San Marcos, CA

Store #975 – Dublin, OH

Milestones

March 22, 2004Franco Proto (653 – Stamford, CN) Sarah Clark (826 – Pickerington, OH) Dean Schnell (870 – Bemidji, MN) Pat Schnell (870 – Bemidji, MN) Gary Hilliard (927 & 1235 – Augusta & Brunswick, ME) Julie Hilliard (927 & 1235 – Augusta & Brunswick, ME) Marc Wallace (1051 – St Charles, IL) Joel Orth (1054 – Frankfort, IL) Daniel Starr (1072 – Glen Cove, NY) Ann Debus (1094 – Shelby Township, MI) Maureen Gudenau (1094 – Shelby Township, MI) Vernon Prince (1164 – Indialantic, FL) Gladys Gunia (1164 – Indialantic, FL) Kim Grubbs (1223 – Amelia Island, FL) Teneilia Anderson (1223 – Amelia Island, FL) Rex Carlson (1255 – Crystal, MN) John Olson (1259 – Onalaska, WI) Craig Skrede (1259 – Onalaska, WI) Kris Luetgens Creamery / AD Support Heather Behnke Creamery / Marketing Michael Shubic Creamery / Marketing

HTTP://FRANCHISEE.COLDSTONECREAMERY.COM • BEHIND THE STONE 19

Congratulations Ice Cream University Graduates!

April 5, 2004

Congratulations Ice Cream University Graduates!Congratulations Ice Cream University Graduates!

Arie StroupOperational Excellence Manager

Melanie HansenGeneral Counsel

Desiree FaucetteField Marketing Manager

Sue WilliamsExecutive Assistant to Joe Kendra

Rosemary TaylorTraining Store Manager

Yolanda ValadezReal Estate Manager

Welcome to the Creamery Team!WE’RE ADDING NEW FACES TO SUPPORT OUR GROWING FRANCHISE COMMUNITY.

John LeeAssistant Manager, Times Square

Patricia JohnsonIce Cream University Professor

Cyra DombkowskiTraining Store Manager

Carolyn BacaDirector of Creative Services

Michael SchubicField Marketing Manager

Lewis LeiferPurchasing Assistant, – Equipment

Sandra LynnFranchisee Development Coordinator

Yolanda ValadezReal Estate Manager

National Press!If you’ve spent any amount of

time at Cold Stone, you’d see that it’s definitely one fast company! The editors of the magazine Fast Company, thought so too – and recently interviewed Doug Ducey about Cold Stone’s vision and the secrets behind the success of our concept. Doug was profiled in the May issue with a handfull of other executives from companies like IBM and Mandarin Oriental Hotel Group, an international chain.

Cold Stone Cakes Make National TV Debut!

Can you think of a better way to let America know that Cold Stone is in the cake business? Millions of TV viewers watched as Cold Stone Cakes were served up on Good Morning America in late April. On the heels of the nation-wide launch of Cold Stone Cakes, Good Morning America invited Cold Stone to help them celebrate the 100th anniversary of Times Square. We celebrated alright…with 100 Cold Stone Cakes for the live TV audience, talent and show guests!

Making it happen took an entire team effort including New York area Franchisees, Creamery Team Members and our PR partners. Way to take the cake to TV audiences coast to coast!

18 BEHIND THE STONE • HTTP://FRANCHISEE.COLDSTONECREAMERY.COM

Janese Ritter (7 – Mesa, AZ) John Romant (35 – Mesa, AZ) Miae Chung (179 – Valencia, CA) Dana Park (179 – Valencia, CA) Richard Chang (202 – Santa Clarita, CA) Kristin Clogston (427 – Charlestown, MA) Ernesto Espaldon (868 – Tamuning, GU) Sumiko Espaldon (868 – Tamuning, GU) Mark Lord (877 – Los Lunas, NM) Ellen Brown (919 – Appleton, WI) Mike Belvedere (932 – Forest Hills, NY) Michelle Levine (932 – Forest Hills, NY) Lori Cummings (955, 1133 & 1233 – Tulsa, OK) Jess Stennett (1097 – Klamath Falls, OR)

Amy Stennett (1097 – Klamath Falls, OR) Harry Firth (1108 – Howell, NJ) Tim Johnson (1125 – Little Rock, AR) Corey Bacon (1125 – Little Rock, AR) Stacy Henderson (1183 – Baldwin Heights, CA) John Paoli (1314 – Cary, IL) Clark Forsyth (1425 – Ontario, OR) Dan Orr (1425 – Ontario, OR) Sue Williams Creamery / Administration Andrew Gerhard Creamery / Operations (SE Region) Patricia(PJ) Johnson Creamery / Training Stan Hauseman Creamery / Operations (SE Region) Lewis Leifer Creamery / Purchasing Katherine Lynch Creamery / Operations Quality Assurance

20 BEHIND THE STONE • HTTP://FRANCHISEE.COLDSTONECREAMERY.COM

Top 10 Sales Rank Store City

1 619 Times Square 2 1020 Manhattan, NY3 653 Stamford, CT 4 639 Westbury, NY5 215 Antioch, CA6 388 Oahu – Honolulu, HI7 979 Greenville, NC8 1008 Marlboro, NJ 9 807 Lynbrook, NY10 322 Oahu – Honolulu, HI

WOW! If you took full

advantage of this Behind the

Stone, you’ve picked up some

tips from your peers, you’ll be

fired up and ready to rock with

the Make-A-Wish Promotion and

you’ll be up to speed on the

butter fat situation and our plan

to rise above it all.

The next issue comes out

in early August. We continue to

receive great letters and photos

from you, and I encourage you

to keep ‘em coming! Thanks for

your helpful input and have a

great summer!

Kim Atkinsonkatkinson@coldstonecreamery.com

The Creamery of the Crop takes on a new form, with Top Tens in various categories. Watch Cake News for current Top Ten rankings in the Cake category, and visit the Accounting section of the Intranet for the current list of sales rankings.

Creamery of the Crop April

Editor’s Note

Top 10 Sales Increases Rank Store City

1 240 Hollywood, CA 2 538 Houston, TX 3 420 Sacramento, CA 4 181 Scottsdale, AZ 5 380 Pleasanton, CA 6 253 Temecula, CA7 80 Provo, UT8 439 South Lake Tahoe, CA 9 487 Rock Hill, SC 10 74 El Cajon, CA

Top 10 Cake Sales Rank Store City

1 619 Times Square, NY2 630 Grand Junction, CO 3 88 Eagle River, AK4 434 Greenley, CO5 123 Parker, CO6 49 Goleta, CA7 271 Fort Collins, CO8 506 Eden Prarie, MN9 636 Levittown, NY10 601 Kauai – Lihue, HI

Top 10 OEI ScoreRank Store City

1 198 Norwalk, CA 2 506 Eden Prairie, MN 3 111 Huntington Beach, CA 4 515 Santa Cruz, CA 5 799 Delafield, WI 6 74 El Cajon, CA7 323 Carson, CA8 375 Livermore, CA 9 534 Lincoln, NE 10 899 Corpus Christi, TX

Kevin King, the current “King” of cakes, is from store #630 in Grand Junction, Colorado. Here are just some of his secrets for success. “Treat your cake business like it’s a separate business, with it’s own food costs analyses and labor needs. Don’t be afraid to spend money to promote your business and get the labor you need. The return is well worth it.” “Hire a cake decorator – a culinary school student or someone from a craft store who hosts cake decorating classes. Pay them well - $10 an hour. Your cakes become works of art and your customers will take notice. Positive word-of-mouth accentuates the effect, bringing even more people in.”

“Enthusiasm. Show your passion – it’s the best and most credible marketing tool you have! Tell them how AWESOME your cakes are – people respond to that and want to feel as good as you do about your cakes!”

How Does He Do It?