Cold Stone Franchisees Sue Parent Company

A group of Cold Stone Creamery franchisees is suing parent company Cold Stone Creamery Inc., asking the franchisor to disclose information about a shared, vendor-contributed marketing fund and data on unredeemed gift cards.

The National Independent Association of Cold Stone Creamery Franchisees, or NIACCF, filed suit this week against Scottsdale, Ariz.-based Cold Stone Creamery in the 11th Judicial Circuit Court for Miami-Dade County, Fla.

A spokesperson for Cold Stone Creamery Inc., a division of Kahala Corp., said, "As a matter of company policy, we do not comment on pending legal matters."

The NIACCF's lawyer, Robert Zarco of the Miami firm Zarco Einhorn Salkowski & Brito, has filed papers asking that Cold Stone disclose the amount of money in the company's flexible marketing program, as well as the amount of breakage, or unspent amounts, in the chain's gift-card program.

A spokesman for Zarco said the NIACCF, which was formed in October 2010, represents more than 120 individual franchisees and about 200 Cold Stone locations. The Cold Stone system totals more than 1,500 locations in 19 countries.

Specifically, Zarco has asked the court to require Cold Stone to disclose the percentage or amount of vendor rebates earmarked for and used by the flexible marketing program, the percentage of those funds used for marketing purposes, and whether prices of products bought from approved vendors are increased to accommodate rebate payments.

In addition, the lawsuit asks the court to require Cold Stone to provide a detailed account of gift-card breakage and any interest accrued.

The franchisee–franchisor dispute over these issues has been going on for a year.

Outgoing NIACCF president Rudy Puig in a Nov. 25 email told members: "During the past seven months we have pushed hard for Kahala to be more transparent. ... To date, our letters and request to Kahala have pretty much fallen on deaf ears, but that is not going to deter us from our mission."

Editor's Note: A previous version of this story has been updtated to include the correct number of franchisees represented by the NIACCF.

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