MTY BEGAN 2020 WITH 6,989 FRANCHISES. IT CLOSED 1,324 (18.3%) LOCATIONS IN 2020 AND A TOTAL OF 1,769 IN THE FOUR YEARS BEFORE THE PANDEMIC (AVERAGE 442 OR 9.3% PER YEAR). THAT’S A TOTAL OF 3,093 LOCATIONS CLOSED IN THE LAST FIVE YEARS. IF YOU ARE CONSIDERING BUYING ANY MTY OR KAHALA FRANCHISE LISTED BELOW, WE STRONGLY SUGGEST YOU LEARN ABOUT SOME OF THE RISKS OF OWNING AN MTY FRANCHISE. YOU SHOULD ALSO KNOW THAT MTY RECEIVED $64 MILLION IN KICKBACKS IN 2019—AN INCREASE OF MORE THAN $8 MILLION FROM THE PRIOR YEAR.
KICKBACKS CAUSE FRANCHISES TO FAIL!
MTY/Cold Stone Grossly Overstated Growth & Location Data to Land a Top 400 Ranking on the Franchise 500
Updated on June 20, 2021
Entrepreneur.com is widely regarded as the premiere resource for potential franchise investors. The website also publishes the Franchise 500—a ranking of franchises based on various data inputs provided by the franchise company. The ranking is influential in many potential franchise investors’ decision-making; therefore, franchisors covet the honor of being listed.
According to an overview of the Franchise 500 methodology, size and growth are top priorities in selecting and ranking the companies. In its 2020 reporting to Entrepreneur.com, MTY/Cold Stone overstated the size of its global franchise network by at least 253 locations. It also overstated the growth of its global franchise network by 56 locations.
According to rankingthebrand.com, MTY/Cold Stone hasn’t been ranked in the Franchise 500 since 2016. In 2020 alone, in addition to declining 12 locations, MTY/Cold Stone had 104 franchisees leave the system (at least 10.4% its network; PDF pgs. 100-105), admitted it has fewer than 1,000 global locations and has therefore been overstating its total stores by as much as more than 500 locations for years (see Item 4).
This is particularly noteworthy when one considers that the company ranked at 390—one spot ahead of MTY/Cold Stone—gained one location during 2020 after gaining 42 locations in the preceding eight years. The company ranked just behind MTY/Cold Stone at 392 lost five locations during 2020 after gaining 48 stores in the preceding two years. In stark contrast, however, based on the information published to Entrepreneur.com and its federal disclosures, MTY/Cold Stone lost 56 locations during 2020 after losing 208 locations in the preceding eight years.
MTY/Cold Stone was not worthy of a 2020 Franchise 500 ranking in our view—let alone a top 400 ranking.
Entrepreneur.com would have known this had MTY/Cold Stone submitted accurate data. If Entrepreneur.com had full knowledge of how poorly the company had performed in 2020, they would have likely come to the same decision they reached since 2016; a company other than MTY/Cold Stone was more deserving of place on the Franchise 500. As it stands, whichever company placed 501 in the ranking was likely cheated of an honor they worked hard for and deserved. That company’s omission was likely because of MTY/Cold Stone’s continued pattern of false statements.
As if MTY/Cold Stone’s cheating weren’t enough, the company then published an article to its franchisee recruitment website to boast that it had a “banner” year. The company also bragged that its ranking proved the company “can measure up”. Curiously, the article states that MTY/Cold Stone “experienced growth in terms of new locations”. This is the company’s attempt to create a new definition for growth that excludes closures—similar to a measurement of population growth that excludes those who move out of town. The article further takes the Franchise 500 ranking out of context referring to it as a “list of the top investment opportunities for 2021”, which is entirely inconsistent with the methodology overview which states the list is not intended to “endorse, advertise, or recommend any particular franchise.”
Shamelessly, the company was looking to lure more franchise investors using the trappings of its sleight of hand move after reporting false data to Entrepreneur.com.