I was a Dippin' Dots Franchisee

Someone emailed us the other day asking about our “experiences” being a Dippin Dots franchisee. We asked them to call us as the experience was way too long to put in an email. Additionally, we somewhat suspected who they were and their motives’. Well that mysterious emailing person never called . Makes us wonder if our suspicions were correct? Their email did however, get us to thinking perhaps a brief, condensed version of why we are so sour with the whole experience might be in order.

The Dippin’ Dots mismanaged franchise system is the main problem. It is understood and a known fact the corporate structure of Dippin’ Dots is run by people without any real business experience. Most of the key corporate positions are filled with Curt Jones, the founder’s, relatives. While relatives may be loyal, they are not always the best choice. The entire corporation seems to fly by the seat of their pants. Hiring, terminating, changing policy and franchise agreements at a whim in a simplistic good 'ol boy fashion. They are, after all headquartered in Paducah. When the end of our relationship came, it came via email. No legalese, no corporate attorney letter, just a simple "we are done" email. We expected more for the money we spent.

Avoiding any discussion about severing relationships, seems to be a pattern with Curt Jones and the Dippin' Dots staff. Long term employees who worked with Jones from the very beginning of his business (1988) were let go back in 2008-2009 (called the Great Purge by those fired), with little reason as to why their loyalty was being repaid with such hostility. We remember attending a regional meeting in Las Vegas where one of the Dippin’ Dots Regional Directors drove 5 hours to the meeting only to arrive and then be terminated on the spot. Such spur of the moment actions by corporate leaders do nothing to give franchisees whom invested life savings into their stores confidence.

Favoritism: Favoritism within the corporate structure is rampant. If you as a franchisee has a problem with one of the corporate workers, you CANNOT complain for if you do, you will be labeled as a "problem"; and no one will do anything for you at the corporate level--- even if it’s their job. A cousin of Curt Jones was in charge of Public Relations & Marketing. We paid a monthly royalty for marketing. The "marketing" person blew off our press release of our store's opening which set off a barrage of emails between us, our Regional Manger and Curt's cousin. She never apologized and basically blamed us for the mistake. Ms. Marketing sent us a list of questions a month prior to our opening, we answered the questions, returned the form and told her the date of our opening.Her excuse "Oh but I did not know for sure what date you were opening". When we pointed out that the date we gave her, a month before, was the correct date of our opening, she merely shrugged and stated "well it wasn't confirmed". Well whose job is it to confirm? Would it be the responsibility of the person placing the press release....um maybe YOU not us we asked.

Over the years as a franchisee, many times we tried to reach this "marketing" person, leaving her phone messages or sending emails, it is not an exaggeration to say she NEVER responded unless we went over her head. Complain? We did, we got labeled. Never mind that she was suppose to work for us. Never mind that we invested our life savings into her employer's business. She's a relative and thus, we are the outsiders. It seemed to us every dealing we had with this relative/corporate employee of Dippin' Dots always ended up with mistakes, whether it was ordering business cards we never received, asking for use of the corporate mascot uniform which was shipped to a wrong address or help getting our webpage on the company website working we were met with incompetence. But, she still has a lifetime job with Dippin' Dots or until the company is liquidated by their bank--whichever comes first.

Partial to certain Franchisees: This is another problem. Certain franchisees who kiss corporate butts are the “favored ones” and with such status are allowed to break rules; go outside the confines of their franchise agreements or claim territories in other franchisee's areas even though corporate states there is a "no territory" policy. The "no territory" policy at Dippin' Dots basically means no franchisee can lay claim to any territory outside their store. If a franchisee spends the money to open a store in one area, another franchisee can do an event or have a cart right next door. This has caused some embarrassing situations especially when two different franchisees show up at the same event. Pitting franchisee against franchisee is the norm. We have seen two franchisees go at it in a regional meeting and feared it would come to blows! What kind of franchise system promotes and approves of such ill feelings amongst owners? Sad, tragic and especially contrary to the image of such a "happy, fun" product as Dippin' Dots. Those two franchisees within a year both closed their stores and went out of business.

Not a product people will seek out: When we became franchisees, we did not want to invest in a brick and mortar-type store. We wanted to get our feet wet by selling this dotty product at fairs, festivals or private events before spending the family nest egg on a product we were not certain was anything more than a passing fad. Dippin’ Dots would not allow anyone to sell their product without owning a retail store. They convinced us they were no longer going to have the image of being a "ballpark treat" or an "amusement park" fancy. No, they wanted to go "big time" compete with Baskin Robins and Coldstones. Be a destination!

Mislead us about the retail stores:To our horror, we discovered at our very first National meeting, that DD corporate was aware the retail stores were big losers. DD corporate was fully aware their product was not the kind of ice cream people would actively seek out when at home. DD knew full well their product is the kind of item that may be a big hit with a captive audience--like at a ball game or an amusement park but is not so much a hit when these same people are in their neighborhoods.

People do not think of Dippin Dots as a destination, they think of Dippin’ Dots as a novelty as said, like when you are away from normal routine, on vacation, away from home ready for trying something new or where "regular" ice cream is not an option. But when those same customers return to their homes, 95% of the time when ice cream enters their thoughts, "regular" ice cream or frozen yogurt is what they choose. So...why was Dippin' Dots corporate pushing so hard for us to open a retail store rather then become dealers who could sell their product along with other ice cream or desserts? Why do we need to be specifically a Dippin' Dots store?

They failed to disclose average sales for retail stores: At the time we signed on to be franchisees, Dippin' Dots claimed they did not have any ROI (return on investment) figures for the retail stores nor were they able to give us a general idea of what a store could do in monthly sales. We believed the knew full well the retail stores would not provide enough profit for franchisees to keep their doors open. The huge cost of overhead and the outrageous costs of $22.00 per gallon of ice cream would seal the deal that most stores would struggle to stay open and almost all would never see any profit or return on their investment.

Dippin' Dots corporate mislead us about the "privilege" of doing outside events: We were told at our first meeting with the Dippin' Dots folks that their product was the best for making sales outside our retail store because it could easily be transported on dry ice. We were led to believe by the DD staff that doing outside events was a privilege of store ownership and it was like "the icing on the cake" having an additional income stream from outside events. What Dippin' Dots did not disclose to us was the NEED to do outside events in order to keep the retail stores afloat. Again, Dippin' Dots is best sold when it's sold to a captive audience with few or no other ice cream choices. Dippin' Dots knows store owners cannot live by sales inside their stores and it is a must to do outside carnivals, fairs, school fundraisers, catered parties or resale the ice cream to party planners. However, Dippin' Dots, at the time we signed up to be franchisees, would not allow any franchisee to do an outside event without having a physical location. We've since heard the rules have changed.

Why did Dippin' Dots corporate push us to have a retail store: We soon learned the reason. We were pushed into having a retail store and into opening multiple units for one reason: DD needed money, why? Because the founder, Curt Jones’ incurred monsterious legal bills. He sued Frosty Bites who makes a similar product for patent violations and lost:

https://ecf.txnd.uscourts.gov/cgi-bin/show_public_doc?1996cv1959-967

And, Mr. Jones leveraged the money he took from franchisees for frivolous business speculating such as bio-fuel:

(http://blog.al.com/live/2011/02/undaunted_by_lawsuits_bankrupt.html)

Or running a music publishing business or being the wallet for failing country music wanna bees.

http://www.msnbc.msn.com/id/14001806/ns/business-small_business/

How did Jones finance these other than ice cream ventures, well besides somehow talking his bank Regents Bank into loaning him more and more money, he started an all out campaign with his existing franchisees calling it "take it to the next level" which to translate from corporate-speak to average Joe-speak, means we are going to raise the cost of ice cream and push everyone into owning more store units even tho' we are well aware of what a losing business it is to have a retail Dippin' Dots store.

http://dockets.justia.com/docket/kentucky/kywdce/5:2010cv00114/74209/

It upsets us we lost over $250,000 (some of it ours from 401ks and other from loans), to open retail stores Dippin' Dots knew were losers but to add salt to our wounds, the dippindots.com site now states they offer "Dippin' Dots Franchising, Inc. offers two types of franchise opportunities: a single-unit franchise for Dippin' Dots® retail ice cream stores and an event-based franchise for the sale of Dippin’ Dots® at fairs, festivals, or similar events. An offer is only made after the potential franchisee has reviewed our Franchise Disclosure Document.For a Dippin’ Dots store-based franchise, the initial franchise fee is $12,500. The estimated initial investment ranges from $80,428 to $235,250.For a Dippin’ Dots event-based franchise, the initial fee is $2500. The estimated initial investment ranges from $27,723 to $160,100" (from the Dippindots website, under "Business Opportunities)." The latter "event-based" franchise is what we asked Dippin' Dots to allow us to do but the answer was "no, you must have a retail store". Once again, changing the rules in midstream. Let that be a red flag to anyone who is considering a franchise. If the franchiser constantly changes rules, agreements, procedures, it is the mark of a company with no direction, no leadership and most obviously a loser.

Dippin' Dots certainly looks like a company with no clear vision or plan in place. As the lawyers say “caveat emptor” if you are even thinking about owning a Dippin' Dots franchise. And, before you write or post about our responsibility to research an investment : We did our due diligence, the problem was (and still is) Dippin’ Dots is an unknown in most venues, therefore; we did not have much of anything to go on before we invested. And, we really did not know all the right questions to ask. If you are thinking of opening any franchise, you may want to consider these questions:

• How financially stable is the franchiser? Make them disclose the information in writing and have a CPA review the numbers.
• What is the personal financial history for the founder of the franchise? (Curt Jones went bankrupt a few times unknown to us prior to signing our agreement).
• How close will other franchisee's stores be to mine? (Dippin' Dots allowed another franchisee to put a store within 5 miles of an existing store that was already struggling for customers). In some cases, like Starbucks's that may work but no so for Dippin' Dots Stores.
• Advertising and Marketing: How much of a vote or say in when, where and how the franchiser markets the product? Dippin' Dots corporate had all the power. They frequently "sponsored" rather than outright pay for advertising to have their ice cream in a scene known as "product placement" however, their sponsorship frequently ended up meaning nothing as the one scene their product was in usually was cut. Additionally they paid big bucks to market movies that turned out to be box office losers. Many franchisees asked corporate to do commercials, corporate refused to do any commercials, local or national, as a result, millions of people have no idea what Dippin' Dots are. As a franchisee, you pay an advertising fee weekly, you should have some vote as to how that money is spent.
• Will I have assistance with site selection? (Dippin' Dots gave us no assistance. Sure they had a "Property Allocation" person but she never physically came out to help with selection. Had we had a trained person familiar with demographics of the area we might have made a better site selection. We paid for a site selection person but never really got one.
• How often do you change logos or store designs? (Dippin' Dots changed theirs 4 times in 2 years, franchisees are suppose to upgrade to the new design, thus spend more money)
• Do I have to purchase everything for the store from you i.e equipment, floor tiles, paint, tables chairs--even if I can get it cheaper locally? (Dippin' Dots made us buy cheap floor tiles through their manufacture and have it shipped. Shipping cost more than the tiles. We could have bought the tiles locally at the Home Depot. Ditto with a lighting package that was so dangerous our electrical contractor refused to install it. We could not get our money back from Dippin' Dots corporate even with a written statement from our contractor pointing out the defective electrical wiring within the lights).
• Do you enforce your franchisee agreement for everyone? (We found Dippin' Dots stores selling other products that conflicted with the franchisee agreement. We found other Dippin' Dots stores having their own websites, store designs, selling to restaurants--all things banned by the agreement but enforcement of the rules by the Dippin' Dots staff was on a selective basis--again a distinct partiality to "favored" franchisees).
• What is the educational and employment background of your key corporate people? What is their success in leading franchisees, goals and record for growing business? And, once you place key people in a position of authority will you allow them to lead or will you over rule them at your whim?
• New products: Is there a plan for rolling out new products? Will the products be mandatory for sale in every store or will the store owners have some discretion on which products they will or will not sell in their stores? (This is important because sometimes your lease may not allow certain products to be sold inside your location because of another tenant selling those same products. Also, a certain item like coffee may not be a big seller in your store but if the franchiser comes out with a coffee line and makes it mandatory for you to sell in your store, you will have incurred the cost of the product knowing it will not sell well).

One of our small business mentors told us in the beginning of our experience that we were sold a dream, that's what franchisers do, they sell dreams not real business ownership. I guess in a way he was right, but we gladly bought into that dream, for a while at least. We are not sorry for the experience but equally we are great-full we closed our store when we did and we are gainfully employed. We are certain the financial problems Dippin' Dots corporate is now having will most assuredly impact the current franchisees-those few stores who are left anyway. Ya live, ya learn. We're so much smarter now.

UPDATE: My own personal Dippin Dots deep throat advises Curt Jones will soon be closing one of his corporate stores in Franklin, TN and the Chapter 11 bankruptcy filing is not just "a reorg" as some corporate talking heads would lead us to believe. Latest news is the bankruptcy judge is allowing Curt Jones to use some of the money obtained from sale of assets but that an auction of the company must be completed by May of this year. See related news story http://www.thedeal.com/content/restructuring/dippin-dots-keeps-interim-cash-use.php

********************************************************************************************************************

Recent news about Dippin' Dots bankruptcy: Dippin' Dots corporate tried to explain their filing of Chapter 11 as a basic "re-organization" to give them breathing room. "No big deal"
the corporate talking heads stated and posted on the dippindots.com site. "We're still here" blah, blah, blah. Fact is when you owe over $12 million in loans, the bank is going to call it and will make you sell off all assets. So, in May of this year (2012) we will see the end-times for Dippin' Dots. When you auction off all your equipment, buildings and other essentials for manufacturing your product, you are pretty much DONE. Does Dippin' Dots disclose this? NOPE, they keep selling franchises and giving lip service to their few remaining franchisees.

As a matter of truth, Dippin' Dots should revise their "History" of Dippin' Dots on their website......ah what the hell, I already did that for them. Here it is:

2012

· Company is auctioned off by bank to pay $12 million in debts leaving franchisees in limbo!

2011

· Dippin’ Dots files bankruptcy but tries to play it off as a “reorganization” which they already tried to do back in 2008.

2010

· Dippin' Dots has 3 million Facebook Fans!

2008

Dippin' Dots Franchising, Inc. ranks 112th on the Entrepreneur "Franchise 500"

2007

· www.dippindots.com V.5 is launched

· Dippin' Dots available in Colombia

2006

· Dippin' Dots available in The Netherlands

· Dots 'n Cream, conventional ice cream enhanced by beads of Dippin' Dots, is introduced for test marketing in Kroger stores in the midwest

· Company leadership restructured. Curt Jones becomes Founder/Chairman of the Board. Tom Leonard becomes President, Dippin' Dots, Inc.

2005

· International Dairy Foods Association names Dippin' Dots Best In Show for Dot Delicacies. Dippin' Dots also wins three awards for package design

· Dippin' Dots Franchising, Inc. ranks No. 1 on Franchise Times Magazine's Fast 55 list of the fastest growing young franchises in the nation

· Ice cream cake and ice cream sandwiches (Dotwiches) introduced to launch the "Dot Delicacies" program

· Six Flags Theme Parks (again) select Dippin' Dots as "Vendor of the Year"

· Dippin' Dots first produced in Canada

· Dippin' Dots available in Panama

· Dippin' Dots Franchising, Inc. ranks 93rd on the Entrepreneur "Franchise 500"

2004

· Dippin' Dots Franchising, Inc. Achieves 112th spot on the Entrepreneur "Franchise 500," and No. 4 (again) on its Top 50 New Franchise Companies list

· Dippin' Dots Global, Inc., formed to coordinate international business activities

· Dippin' Dots Founder Curt Jones is a guest on the Oprah Winfrey television program

· Six Flags Theme Parks select Dippin' Dots as "Vendor of the Year"

2003

· Manufacturing plant opens in South Korea, operated by a licensee, to serve markets in Asia

· Company constructs largest -50°F commercial walk-in freezer in North America at its Kentucky facility

· Dippin' Dots Franchising, Inc. Achieves 144th spot on the Entrepreneur "Franchise 500," and No. 4 on its Top 50 New Franchise Companies list

2002

· Online sales begin of ice cream and Dippin' Dots merchandise

· Dippin' Dots became a regular menu offering for McDonald's restaurants in San Francisco Bay area in California. Grew to several hundred McDonald's restaurants

· Triple honors from Entrepreneur magazine: 112th spot on the "Franchise 500" list, 69th "Fastest Growing" franchise company and No. 1 "New Franchise Company