Can Kahala Cold Stone Put Some Reality in Cereality?

by sean on July 17th, 2007

(FranchisePick.com) In a recent post (Reality, Surreality & Cereality) on the all-cereal cafe franchise Cereality, we stated that the concept seems to have been developed more as a PR story than a viable foodservice operation.

Eventually, even the most masterful spin succumbs to reality. Despite Cereality’s COO’s contention to the Chicago Sun-Times that they’ve never encountered price resistance selling mass-produced cereal at 4 bucks per bowl, people must not have been lining up at their two recently closed Chicago locations. The official story that they shifted focus and no longer needed their expensively built-out Evanston training store rings a bit hollow (they didn’t sign a lease?). They cancelled plans to open at O’Hare Airport. In May, the two founders left the management team to pursue “other interests” and the company quietly closed its new 15-person headquarters. Discussions of unit sales or profitability has been avoided in interviews.

Earlier this month it was announced that the newly formed Kahala Cold Stone development group was acquiring the Cereality concept, and there has been discussion of possibly co-branding the cereal cafe concept with other Kahala Cold Stone foodservice franchise brands. The 13 brands under Kahala Cold Stone include Blimpie, The Great Steak & Potato Co., Ranch 1, Taco Time, and flagship brand Cold Stone Creamery. The new holding company now has 4,600 stores, 3,000 franchisees, and is in 15 countries.

It could be a mutually beneficial move for all involved. If the concept is indeed not working at the unit level, the founders and investors can still skate with their success story pretty much intact. Kahala Cold Stone obviously has the resources and foodservice expertise to evaluate and run Cereality as a viable niche concept, or wed it with their other concepts to boost their breakfast daypart. At the very least, Cereality will bring some freshness and creativity to a portfolio that includes some dowdy concepts like The Great Steak & Potato Co. and Taco Time. That’s helpful when positioning to go public, as Kahala Cold Stone certainly seems to be doing.

If nothing else, the Cereality Cereal Cafe acquisition was a smart franchise marketing and PR move for Kahala Cold Stone. The trendy concept generates a good deal of press and, reportedly, thousands of inquiries from prospective franchise owners. That alone is valuable, even if they eventually turn the prospective franchisees attention toward on of their concepts that actually works.

THAT’S MY TAKE. WHAT DO YOU THINK? COMMENTS WELCOME.

Trendy Franchise Concept Gets Cereality Check, Closes Store(s)

Graphic elements: Cereality.Com

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