Cold Rock franchisees say stores at the ice-cream chain are closing because high product costs and marketing charges are making it hard to stay afloat.
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Franchisees from Cold Rock were one of the main sources of confidential submissions to the parliamentary inquiry into franchising, according to the inquiry's report published last week. Franchisees say the company has "flown under the radar" until now.
Cold Rock is part of the Franchised Food Company (FFCo) which includes ice-cream stores Mr Whippy and Trampoline, and cafe chain Healthy Habits.
The chain sells ice-cream mixed with lollies and chocolate and Cold Rock's website lists 77 stores across Australia.
Franchisees say store numbers have fallen sharply recently from a peak of 108, however, a spokesperson for FFCo denied there were any problems with the franchise and said he was surprised it had been mentioned so often at the recent parliamentary inquiry.
"If a franchisee has a problem let them air their grievances and work together with us. I have a brand and other franchisees to protect and I will do that," the spokesperson said.
One franchisee, who made an anonymous submission to the inquiry, told The Age and Sydney Morning Herald, most closures had been in the last few years when franchise agreements have ended and franchisees have chosen not to renew.
The franchisee, who wants to remain anonymous, said about 15 Cold Rock franchisees made submissions to the inquiry and were afraid to speak out because of "fear of repercussions and being targeted".
"Morale was good and the profitability of stores was high until the FFCo took over Cold Rock in 2009," the franchisee said.
The franchisee said under FFCo, store owners had been required to buy certain products at inflated prices and to pay into a marketing fund for which they saw little return.
Examples of inflated prices included paying $4 a litre for ice-cream when it could be manufactured for $2 a litre and being required to buy two litre bottles of 'loaded shake mix' for the chain's new loaded shake product.
"If you look at it, it's not much different to milk and we have to buy it at $6.90 a bottle instead of $2.50 a litre for milk," the franchisee said. "We are not making money out of this product."
The franchisee was also concerned at high charges for marketing with little to account for the royalties paid. He said there was no television, radio or newspaper advertising only a few store posters and social media.
"I am just sick and tired of giving them all this extra money," the franchisee said. "There are people in the group who just want to get out but they can't afford to get out.
"That's what upsets me is stores going backwards and [FFCo] still get paid royalties. If it goes pear- shaped they don't lose anything."
The FFCo spokesperson denied there were any problems with rebates on products at Cold Rock and said ice-cream reflected the price of manufacturing while the loaded shake mixture was "completely different" to milk.
The spokesperson said "the world has changed in the last 10 years" when it came to marketing and social media was now becoming the main avenue.
As for store closures, the spokesperson said" "I place the blame entirely on landlords."
The spokesperson said franchisees should not be scared to make complaints.
"I think if anything we are absolutely fair, if a franchisee has an issue it is addressed," he said. "At the end of the day they are small businesses, they are 'mom and pop' businesses, we want them to succeed and the better they do, the better we do."
The spokesperson said he welcomed parliament's report into franchising and "I concur with every single one of [the recommendations made] and we probably already comply with every single one of them".
smh.com.au
