UFOC

Sample UFOC

Oept. of Corporations-PSS UNIT-San Francisco Office

JUN 2 9 2006

DISCLOSURE DOCUMENT

Required by the

FEDERAL TRADE COMMISSION

for COLD STONE CREAMERY, INC

June 15,2006

INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIREDBYTHE FEDERAL TRADE COMMISSION

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There may also be laws on franchising in your state. Ask your state agencies about them.

FEDERAL TRADE COMMISSION Washington, D.C. 20580

061506

Non-traditional FOC.2006

Oept. of Corporations-PSS UNIT-San Francisco Office

JUN 2 9 2006

DISCLOSURE DOCUMENT

Required by the

FEDERAL TRADE COMMISSION

for

COLD STONE CREAMERY, INC.

June 15,2006

INFORMATION FOR PROSPECTIVE FRANCHISEES SMD BY THE FEDERAL TRADE COMMISSION

a-*****************************

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contract. Read all of your cont^c c*refuy. ^^"^ information to an advisor, Take your time to decide. ^ P^^/ ^g you think may be wrong or anything

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There may also be laws on franchising in your state. Ask your state agencies about them.

FEDERAL TRADE COMMISSION Washington, D.C. 20580

061506

Non-traditional FOC.2006

i^Mj>                                                                              FRANCHISE OFFERING CIRCULAR

#1AT II OVAIfflwl?*                                                                                   COLD STONE CREAMERY, INC.

I .UliD o 1UJN Wk W^                                                                                         a"iVi?°"a cporati«»n

V -rsrX mXjCI ■ **^                                                                                             9311 E- Via De Ventura

Scottsdale, AZ 85258

(480) 362-4800

www.coldstonecreamery.com

The Ucense is a non-traditional Cold Stone Creamery® restaurant featuring super-premium fresh made ice cream, frozen yogurt, cakes, pies, smoothies, shakes, specialty beverages and other frozen dessert products (prepared using proprietary recipes) and an assortment of complementary toppings and mix-ins on a take-out or eat-in basis.

The initial Ucense fee will vary between $9,000 and $21,000, depending upon the type of non-traditional Cold Stone Creamery® restaurant you wiU operate and the term of your License Agreement. You must also pay an appUcation fee of up to $75. Also, you must use us as the broker for the purchase of your equipment and signage for your non-traditional Cold Stone Creamery® restaurant. You wul deposit with us the cost of that equipment and signage (estimated to be between $68,000 and $130,000) and pay us an Equipment and Signage Fee in the amount of 4% of the cost of that equipment and signage (estimated to be between $2,750 and $5,200). See ITEM 5 (Initial Franchise Fee).

In addition, if your Cold Stone Creamery® restaurant wiU be operated pursuant to a concession agreement that requires a security deposit, you will pay us a security deposit in the amount required under that agreement. If your Cold Stone Creamery® restaurant will be leased, you must pay us a lease administration fee of between 2% and 5% of the base rent under the Master Lease, an amount of between $2,000 and $6,000 to pay for our attorney's review of the Master Lease on our behalf and an amount equal to the initial monthly rent, estimated monthly operating expenses and security deposit under the Master Lease.

Your estimated Initial Investment, including the above amounts, wiU be between $132,250 and $417,850, depending upon the type of non-traditional Cold Stone Creamery® restaurant you will operate and the term of your License Agreement (except for hcenses in Alaska, Hawau and the Caribbean, where most costs wiU be up to 50% higher and for Ucenses in the New York metropoUtan area, where most costs wiU be up to 300% higher). These figures are estimates only and it is possible to significantly exceed costs in any of the areas listed. Your costs wiU depend upon several factors. See ITEM 7 (Initial Investment).

If your non-traditional Cold Stone Creamery restaurant® is a Proactive Unit, upon signing the License Agreement you will be required to pay us for the costs and expenses incurred by us in connection with buUding out your non-traditional Cold Stone Creamery® restaurant (in Ueu of paying those amounts directly to the appUcable vendors and other parties) plus a Development Fee in an amount up to 25% of our cost of leasing, building out, developing, equipping and stocking your Proactive Unit. See ITEM 5 (Initial Franchise Fee).

Risk Factors:

THE LICENSE AGREEMENT AND THE OTHER DOCUMENTS TO BE SIGNED BY THE LICENSEE PERMIT THE LICENSEE TO LITIGATE WITH THE LICENSOR ONLY IN THE STATE OF ARIZONA. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO LITIGATE WITH THE LICENSOR IN THE STATE OF ARIZONA THAN IN YOUR HOME STATE.

THE LICENSE AGREEMENT AND THE OTHER DOCUMENTS TO BE SIGNED BY THE LICENSEE STATE THAT ARIZONA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

THE LICENSOR WILL NOT GRANT AN EXCLUSIVE TERRITORY TO THE LICENSEE.

EACH PRINCIPAL OF THE FRANCHISEE AND HIS SPOUSE MUST JOINTLY AND SEVERALLY GUARANTEE THE FRANCHISEE'S OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. THAT GUARANTEE PLACES THE PRINCIPALS' AND HIS SPOUSE'S PERSONAL ASSETS AT RISK.

THERE MAY BE OTHER RISKS CONCERNING THIS LICENSE.

Information comparing franchisors is available. Call the state administrators listed in Exhibit L or your pubUc Ubrary for sources of information.

Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this Franchise Offering Circular. If you learn that anything in this Franchise Offering Circular is untrue, contact the Federal Trade Commission, Washington, D.C 20580 and the appropriate state administrator listed in Exhibit L.

Issuance Date: June 15,2006 (For state-specific effective dates, see Exhibit L of this Franchise Offering Circular.) 061506                                                                                                                                                         Non-traditional FOC.2006

TABLE OF CONTENTS

ITEM                                                                                                                                          PAGE

1.  The Franchisor, its Predecessors and Affiliates..........................'......................................................1

2.  Business Experience..............................................................................................................................3

3.  Litigation................................................................................................................................................9

4.  Bankruptcy...........................................................................................................................................11

5.  Initial Franchise Fee............................................................................................................................11

6.  Other Fees............................................................................................................................................14

7.  Initial Investment................................................................................................................................21

8.  Restrictions on Sources of Products and Services..........................................................................27

9.  Franchisee's Obligations....................................................................................................................32

10. Financing.............................................................................................................................................34

11. Franchisor's Obligations...................................................................................................................37

12. Territory...............................................................................................................................................48

13. Trademarks.........................................................................................................................................49

14. Patents, Copyrights and Proprietary Information........................................................................52

15. Obligation to Participate in the Actual Operation of the Franchise Business...........................53

16. Restrictions on What the Franchisee May Sell...............................................................................55

17. Renewal, Termination, Transfer and Dispute Resolution............................................................56

18. Public Figures.....................................................................................................................................64

19. Earnings Claims.................................................................................................................................64

20. List of Outlets.....................................................................................................................................64

21. Financial Statements..........................................................................................................................73

22. Contracts.............................................................................................................................................73

23. Receipt.................................................................................................................................................73

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EXHIBITS

A         Audited Financial Statements as of December 31, 2005, 2004 and 2003                   A-l

Al       Unaudited Financial Statements as of March 31, 2006                                           Al-1

B         Application for License                                                                                       B-l

C         Form of License Agreement                                                                                C-l

D         Form of Agreement to be Bound and to Guarantee                                               D-l

E         Form of Preauthorization to Permit Cold Stone Creamery, Inc. to

Draw Drafts on the Licensee's Account                                                               E-l

F         Form of Restrictive Covenant                                                                              F-l

Gl       Form of Agreement of intent to Sublet                                                                 Gl-1

G2       Form of Sublease                                                       '                                         G2-1

G3       Form of Master Lease                                                                                         G3-1

G4       Form of Lease Addendum                                                                                  G4-1

H        Form of Assignment of Concession Agreement                                                    H-l

I          Form of Equipment and Signage Agreement                                                       1-1

J          Specimen of General Release                                                                               J-l

K         Table of Contents of Operating Manual                                                               K-l

L         List of Agents for Service of Process/State Administrators and

State-specific Effective Dates                                                                               L-l

M        List of Franchisees, Licensees and Area Developers                                              M-l

N        Item 2 Disclosure for Area Developers                                                                 N-l

0          List of Former Franchisees and Licensees                                                             O-l P         Specimen Preferred Lender Loan Documents                                                      P-l

ATTACHMENTS

1           Additional Disclosures Required by Certain State Laws                                       1-1

California

Hawaii

Illinois

Indiana

Maryland

Michigan

Minnesota

New York

North Dakota

Rhode Island

Washington

2           Notices of Negotiated Sale (if any)                                                                       2-1

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ITEM1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

Cold Stone Creamery and its Affiliates

The Licensor is Cold Stone Creamery, Inc., which is referred to in this Offering Circular as "Cold Stone Creamery," "we," "us" and "our." A person or entity that buys a franchise from us is referred to in this Offering Circular as "you," "your," or "Licensee." If you are a corporation, limited liability company, partnership or other entity, certain provisions of Cold Stone Creamery's License Agreement will also apply to your shareholders, partners, members and owners that directly or indirectly own 5% or greater equity interest in Licensee ("Principals").

Cold Stone Creamery is an Arizona corporation incorporated on March 3,1992. The only name under which we do business is Cold Stone Creamery, Inc. Our principal business address is 9311 E. Via De Ventura, Scottsdale, Arizona 85258. Our agents for service of process are identified in Exhibit L.

We are in the business of selling franchises and licenses to operate Cold Stone Creamery® restaurants. We began offering franchises to operate traditional Cold Stone Creamery restaurants® in April 1994 and licenses to operate non-traditional Cold Stone Creamery® restaurants in November 2002. (Franchises for traditional Cold Stone Creamery® restaurants are offered by a separate franchise offering circular.) We presently own one traditional Cold Stone Creamery® restaurant and one non-traditional Cold Stone Creamery® restaurant.

Our affiliate, SDS Enterprises, Inc., an Arizona corporation, operated traditional Cold Stone Creamery® restaurants between 1988 and 2004. Cold Stone Creamery Restaurants, L.L.C., an Arizona limited liability company ("CSC Restaurants"), presently operates 32 traditional Cold Stone Creamery® restaurants. See ITEM 20 (List of Outlets). Neither SDS Enterprises, Inc. nor CSC Restaurants offers or sells franchises or licenses of Cold Stone Creamery® restaurants.

Another affiliate of ours, Cold Stone Creamery Leasing Company, Inc., an Arizona corporation ("Cold Stone Leasing"), was incorporated for the purpose of leasing sites for Cold Stone Creamery® restaurants and subleasing them to franchisees and licensees. CSC Equipment Company, LLC, an Arizona limited liability company ("CSC Equipment"), was organized for the purpose of assisting franchisees and licensees with the purchase of equipment and signage required for their Cold Stone Creamery® restaurants. Neither Cold Stone Leasing nor CSC Equipment operates businesses of the type being franchised or licensed or offers or sells franchises or licenses of Cold Stone Creamery® restaurants.

Another affiliate of ours is Cold Stone Creamery International, LLC ("International"), an Arizona limited liability company organized on April 14, 2004, which was organized for our international expansion and franchises outside of the United States. Cold Stone Creamery Asia, LLC ("CSC Asia"), an Arizona limited liability company organized on April 14, 2004, is International's subsidiary. CSC Asia licenses the right to use the Cold Stone Creamery® concept for the operation of restaurants in Japan and Korea. Neither International nor CSC Asia

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operates businesses of the type being franchised or offers or sells franchises or licenses of Cold Stone Creamery® restaurants in the United States.

Neither we nor any of our affiliates has offered, or currently offers, any franchise or license in any other line of business. We do not have any predecessors and do not conduct any other business activities, other than offering area developer rights to develop Cold Stone Creamery® restaurants in certain geographical areas and supervising the franchisees and licensees within those areas. The principal business address of all of our affiliates is 9311 E. Via De Ventura, Scottsdale, Arizona 85258.

The License

Under the License Agreement, you will have the right, subject to certain conditions, to open and operate one non-traditional Cold Stone Creamery® restaurant (the "Licensed Business"). Cold Stone Creamery® restaurants feature super-premium fresh made ice cream, frozen yogurt, cakes, pies, smoothies, shakes, specialty beverages and other frozen dessert products (prepared using proprietary recipes) and an assortment of complementary toppings and mix-ins on a takeout basis. (As stated below, non-traditional Cold Stone Creamery® restaurants may not offer all of the above products.) The ice cream and frozen yogurt are made daily and hardened overnight to be served in the following one to three days. The ice cream and frozen yogurt are used to prepare cakes, pies, smoothies, shakes, specialty beverages and other frozen dessert products.

There are three types of non-traditional Cold Stone Creamery® restaurants:

           "Gotta Have It" Cold Stone Creamery® restaurant (full menu licensed store) - has permanent fixtures within a venue and may be similar to a traditional Cold Stone Creamery® restaurant, except that it typically has between 700 and 1,200 square feet (excluding up to 200 square feet of secured commissary space, some of which may be shared) and is located in a non-traditional location, such as an airport, shopping mall, stadium, entertainment pavilion, amusement park, sports or entertainment venue, train station, travel plaza, toll roads, cafeteria, retail store, military base, prison, hospital, hotel, casino or high school or college campus. Alternatively, it may differ from a traditional Cold Stone Creamery® restaurant in that production and storage facilities may be located in a remote location within the venue. Menu offerings typically include 32 Cold Stone Originals® (Creations®), waffle cones and bowls, Signature CakesSM, shakes, smoothies and specialty beverages.

           "Love It" Cold Stone Creamery® restaurant (limited menu licensed store) - has permanent fixtures within a venue, typically has between 300 and 700 square feet (excluding up to 200 square feet of secured commissary space, some of which may be share) and is located in a non-traditional location, such as an airport, shopping mall, stadium, entertainment pavilion, amusement park, sports or entertainment venue, train station, travel plaza, toll roads, cafeteria, retail store, military base, prison, hospital, hotel, casino, high school or college campus or convenience store. Production and storage facilities may be located in a remote location within the venue. Menu offerings

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typically include a minimum of six Ready-To-Love Originals®, French vanilla, chocolate and strawberry ice cream, waffle cones and bowls and specialty beverages.

          "Like It" Cold Stone Creamery® restaurant (licensed kiosk) - the kiosk typically has a

12' x 12' footprint, with a minimum of 6' queuing space from the front counter outside of the footprint and a minimum of 200-350 square feet of remote production and storage space. The kiosks are located in a non-traditional location, such as an airport, shopping mall, stadium, entertainment pavilion, amusement park, sports or entertainment venue, train station, travel plaza, toll roads, cafeteria, retail store, military base, prison, hospital, hotel, casino, high school or college campus or convenience store. There are typically multiple point of sale (POS) stations. Menu offerings typically include Ready-To-Love Originals®, French vanilla, chocolate and strawberry ice cream, waffle cones and bowls and specialty beverages.

The right to open and operate a traditional Cold Stone Creamery restaurant and area developer rights are not offered by this Franchise Offering Circular, but are offered by separate franchise offering circulars.

People of all ages consume the products offered by Cold Stone Creamery® restaurants. The restaurant market for the products offered by Cold Stone Creamery® restaurants is seasonal, as consumption of ice cream, frozen yogurt, cakes, pies, smoothies, shakes, specialty beverages and other frozen dessert products is higher in the summer and lower in the winter.

You will have to compete with other restaurants, fast food outlets, supermarkets and other food retailers located in your venue or other market area. Some of your competitors may include Cold Stone Creamery® restaurants operated by other franchisees or licensees or by us or our affiliates. See ITEM 12 (Territory).

There are no regulations specific to the fast food industry in which Cold Stone Creamery® restaurants operate, although you will be required to comply with all local, state and federal laws and regulations that apply to restaurant operations, including health, sanitation, food safety, non-smoking, EEOC, OSHA, discrimination, employment and wage and hour statutes, Family Medical Leave Act, and the federal Americans with Disability Act of 1990. You will need to understand and comply with those and other laws in operating your non-traditional Cold Stone Creamery® restaurant. You should consult with your attorney to determine what federal, state and local laws may affect your non-traditional Cold Stone Creamery® restaurant operations. We also require your compliance with all provisions of the USA Patriot Act and Executive Order 13224. You should talk to an advisor or your attorney regarding compliance with these laws.

ITEM 2 BUSINESS EXPERIENCE

Douglas A. Ducey, Chairman, Chief Executive Officer, Treasurer and Director

Douglas A. Ducey has been the Chairman, CEO and Treasurer of Cold Stone Creamery since April 2004, January 2001 and September 1997, respectively. He has also been a director of Cold

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Stone Creamery since September 1997. Between September 1997 and April 2004, he was the President of Cold Stone Creamery. He joined Cold Stone Creamery in February 1996 as a Vice President. He has also been the President, the Treasurer and a Director of Cold Stone Leasing since January 1998; on January 2002, he also became the Chief Executive Officer. In addition, he has been a member of CSC Restaurants since its organization in August 1997; he has been the Managing Member since April 2004. He has been a member of CSC Equipment since its organization in September 2003. He has been a member of International since its organization in April 2004.

Sheldon Harris, President

Sheldon Harris has been the President of Cold Stone Creamery since June 2004. He was the Chief Operating Officer of Cold Stone Creamery between September 2001 and May 2004. He joined Cold Stone Creamery in January 1999 as the Vice President of Development. Since January 2002, he has been the Chief Operating Officer of Cold Stone Leasing; between January 1999 and January 2002, he was a Vice President of Cold Stone Leasing. He has been the President of CSC Restaurants since July 2004.

Donald W. Sutherland, Founder and Director

Through SDS Enterprises, Inc., an Arizona corporation, Mr. Sutherland opened the original Cold Stone Creamery restaurant in 1988 and operated it until February 2004, at which time he sold it to CSC Restaurants. He has been the President, the Treasurer and a Director of SDS Enterprises, Inc. since its incorporation in 1988. He has been a Director of Cold Stone Creamery since its incorporation in March 1992 and Founder since January 2001. He was the Chairman of the Board of Cold Stone Creamery between September 1997 and January 2001. He has been a Director of Cold Stone Leasing since its incorporation in December 1994, and has been the Founder since January 2002. He was the Chairman of the Board of Cold Stone Leasing between January 1998 and January 2002. He has been a member of CSC Restaurants since its organization in August 1997. He has been a member of CSC Equipment since its organization in September 2003. He has been a member of International since its organization in April 2004.

Lee E. Knowlton, Senior Vice President

Lee E. Knowlton has been the Senior Vice President of Cold Stone Creamery since February 2005. He was Vice President of Area Developer Support between January 2002 and February 2005. Between May 1997 and December 2001, he was Vice President of Operations for Perfect Line LLC (dba NASCAR Silicon Motor Speedway) in San Jose, California. He has been the Senior Vice President of International since August 2005.

Melanie K. Hansen, General Counsel

Melanie K. Hansen has been the General Counsel of Cold Stone Creamery since January 2004. She has also been General Counsel of Cold Stone Leasing and Cold Stone Creamery Restaurants since April 2004. Between November 2003 and January 2004, Ms. Hansen was an attorney in the Phoenix, Arizona office of the Washington, D.C.- based law firm of Steptoe and Johnson. From July 1999 to November 2003, Ms. Hansen was an attorney with Gallagher & Kennedy, in

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Phoenix, Arizona. She has been the General Counsel of International and CSC Asia since their respective organizations in April 2004 and she has been a director of CSC Japan KK.

Donald "D.T." Cole, Vice President of Finance

Donald "D.J." Cole has been the Vice President of Finance of Cold Stone Creamery since June 2005. From February 2005 through May 2005 he was the Director of Finance of Cold Stone Creamery. Between October 2003 and April 2004 he was the Senior Vice President and Controller of Vital Processing Services in Tempe, Arizona. From December 1983 and April 2003 he was the Chef Financial Office and Vice President-Administration of AG Communications Systems Corporation, located in Northlake, Illinois and Phoenix, Arizona.

Kevin M. Myers, Vice President of Marketing

Kevin M. Myers became the Vice President of Marketing of Cold Stone Creamery in October 2005. Between September 2004 and September 2005, he was the Managing Partner and a Principal of TopLine Strategies in Scottsdale, Arizona. Between December 2003 and September 2004, he was a Partner with SpinSix, a creative design firm in Scottsdale, Arizona. Between May 2001 and December 2003, he was the Vice President of Marketing for Sage Software in Scottsdale, Arizona.

David P. Daniels, Vice President-Human Resources, Training and Diversity

David P. Daniels has been the Vice President-Human Resources, Training and Diversity of Cold Stone Creamery since August 2005. Between January 2004 and December 2005 he was the Owner/Operator of Sona MedSpa in Grand Rapids, Michigan and Indianapolis, Indiana. From January 2001 to February 2004 he was the Vice President of Field HR, Training and Operations of Boston Market Corporation in Golden, Colorado. From May 1999 to January 2001 he was the Senior Regional Manager-Nashville area for McDonald's Corporation in Brentwood, Tennessee.

Sally Bell, Vice President of Store Transfers and Renewals

Sally Bell has been Vice President of Store Transfers and Renewals of Cold Stone Creamery since January 2006. Between October 2004 and January 2006, she was the Vice President of Special Projects of Cold Stone Creamery. Between August 2002 and October 2004, Ms. Bell was Chief of Staff-Legal for BellSouth Corporation located in Atlanta, Georgia. From December 1987 until August 2002, she held various positions, including Senior Manager-Corporate Relations/Legal, at McDonald's Corporation located in Oak Brook, Illinois.

Tuliet R. Peters, Assistant General Counsel

Juliet R. Peters has been the Assistant General Counsel of Cold Stone Creamery and Cold Stone Leasing since October 2005. She was the Associate Counsel of Cold Stone Creamery and Cold Stone Leasing from October 2004 until October 2005. From February 2004 through October 2004, she was Special Counsel for Strategic Communications with the Arizona Attorney General's Office, based in Phoenix. From September 1998 through February 2004 she was an attorney with Gallagher & Kennedy.

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Tohn M. Wuycheck, Vice President of Franchise Development

John Wuycheck became the Vice President of Franchise Development for Cold Stone Creamery in September 2003. He joined Cold Stone Creamery in March 2001 as a Development Manager and was promoted to Director of Development in June 2002. From September 1996 until March 2001, he was Vice President and Operations Manager for Pegasus Window Corporation, of Phoenix, Arizona.

Brett K. Sheets, Vice President of Real Estate

From October 1999 to October 2002, Mr. Sheets was Director of Leasing for The Rubin Companies, Inc., in Phoenix, Arizona. He joined Cold Stone Creamery in January 2003 as Director of Real Estate and became Vice President of Real Estate in January 2005. He has been the Director of Real Estate of Cold Stone Leasing since April 2004.

Bruce O. Burnham, Vice President, Supply Chain Management New Store Construction and Logistics

Bruce O. Burnham has been the Vice President, Supply Chain Management, New Store Construction and Logistics of Cold Stone Creamery since June 2004. In addition, since September 2003 he has been the President of Burnham & Tillinghast, LLC, in Key Largo, Florida. Between April 2000 and September 2003, he was the Vice President, North American Supply Chain Management in Miami, Florida for Burger King Corporation.

lenny L. King, Regional Director of Real Estate

Jenny King joined Cold Stone Creamery in May of 2003 as a Real Estate Manager and was promoted to Regional Director of Real Estate in March 2005. From July 2001 through January 2003, she worked as an Associate Broker with CB Richard Ellis in the Downtown Boston Brokerage Group. Ms. King's responsibilities included all aspects of landlord and tenant representation. She conducted all facets of the due diligence process, including site surveys, property tours, financial pro formas and lease negotiations. From January 1988 through May 2000 she worked for Vistoso Partners in Tempe, Arizona specializing in office leasing with an emphasis on the entitlement, preliminary and final plat processing.

Shelby Yastrow, Director

Shelby Yastrow became a Director of Cold Stone Creamery in December 2004. He is also currently a director of Spirit Finance, Inc. (since August 2003), Great Clips, Inc. (since May 1996), Sonoran Desert Council for the Arts (since November 2002) and The Greater Phoenix Jewish Federation (since May 2004). In addition, within the past five years he was a Director of Martin Engineering Company (since October 1985), Of Counsel to the Chicago Law firm Sonnenschein, Nath & Rosenthal (from January 1998 to January 2001) and Of Counsel to the Phoenix law firm of Gallagher & Kennedy (from June 2001 to June 2004).

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Renee McWenie, Director of Training

Renee McWenie became the Director of Training in January 2004. She joined Cold Stone Creamery in December 2002 as a Training Store Manager and was promoted to Curriculum Design Manager in June 2003. From June 1980 to December 1987, Ms. McWenie was a Training Store Manager and Director of Training for Swensen's Ice Cream Restaurants, Inc. From June 1988 to June 1989, she was a Regional Supervisor for Eegee's Restaurants.

Susan H. Boresow, Senior Director of Field Marketing

Susan H. Boresow has been the Senior Director of Field Marketing of Cold Stone Creamery since August 2005. From February 2004 to July 2005 she was the Chief Marketing Officer of Daddio's in Omaha, Nebraska. From June 2002 to February 2004 she was the Vice President of Marketing of Godfather's Pizza in Omaha, Nebraska. From November 2001 to June 2002, she was the Vice President of Marketing of Mr. Goodcents Pastas and Subs in Desoto, Kansas. From 1985 to November 2001 she held various positions with McDonald's Corporation in St. Louis, Missouri, Portland, Oregon, Seattle, Washington and Kansas City, Missouri.

Bradley A. Nielsen, Director of Creamery Operations-Utah

Bradley A. Nielsen became the Director of Creamery Operations-Utah of Cold Stone Creamery in July 2005. Between September 2004 and July 2005 he was a Field Consultant for Utah. Between May 2003 and September 2004 he was a partner of Lone Peak Marketing in Salt Lake City, Utah. Between May 2001 and May 2003, he was an Area Manager with Jack in the Box Corporation in Sacramento, California. He was the Director of Outsourced Call Centers for RightNow Technology from July 2000 to May 2001.

Tohn D. Tones, Tr., Real Estate Manager-Southeast Region

John D. Jones, Jr. became the Real Estate Manager-Southeast Region of Cold Stone Creamery in August 2005. Between January 2000 and August 2005 he was the Director of Development (Real Estate and Construction) with Barwie's Coffee and Tea Company, Inc. in Orlando, Florida.

Daniel Beem, Vice President of Store Profitability and Franchise Financing

Daniel Beem became the Vice President of Store Profitability and Franchise Financing of Cold Stone Creamery in October 2003. Between January 2001 and October 2003 he was the Director of Business Development of Interactive Motorsports and Entertainment in Indianapolis, Indiana.

Sean Bock, Co-counsel

Sean Bock has been a Co-counsel of Cold Stone Creamery since April 2005. From July 2004 until April 2005 he was a Senior Associate with PricewaterhouseCoopers in Phoenix, Arizona. Between May 2002 and October 2003 he was a Senior Associate with Deloitte & Touche in Chicago, Illinois. From September 2000 until May 2002 he was an Associate with Arthur Andersen in Chicago, Illinois.

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Toshua Becker, Co-counsel

Joshua Becker has been a Co-counsel of Cold Stone Creamery since April 2005. From April 2004 through April 2005 he was an associate attorney with Fennemore Craig, in Phoenix, Arizona. From June 2001 until April 2004 he as an associate attorney with Kutak Rock LLP in Scottsdale, Arizona.

Tay D. Goldstein, Franchise Development Manager

Jay D. Goldstein has been the Franchise Development Manager of Cold Stone Creamery since October 2005. Between April 2004 and October 2005 he was a Franchise Consultant for Cold Stone Creamery. In those positions, he has been based in Syracuse, New York. Between October 2002 and April 2004 he was a General Manager for Chucky Cheese in Albany and Middletown, New York. Between December 1999 and October 2002 he held various positions, including Regional General Manager, with NASCAR Silicon Motor Speedway in Albany, New York.

Michael T. McGill, Director of Southeast Creamery Operations

Michael J. McGill has been the Director of Southeast Creamery Operations since February 2004. He joined Cold Stone Creamery in November 2003 as the Regional Director of Operations. In those positions, he was located in Rock Hill, South Carolina and Scottsdale, Arizona. Between October 1998 and November 2003, Mr. McGill was the Director of Operations for Silicon Entertainment and NASCAR Silicon Motor Speedway, in Charlotte, North Carolina.

Frank Spano, Lease Administration Manager

Frank Spano joined Cold Stone Creamery in October 2003 as a Lease Administrator and was promoted to Lease Administration Manager in September 2005. From June 2002 to October 2003, Mr. Spano was an insurance adjuster with DM & A in Phoenix, Arizona. In addition, from September 2002 through October 2003 he was employed by MAS Real Estate Services, a consultant to Cold Stone Creamery based in Scottsdale, Arizona; in that capacity, Mr. Spano reviewed Cold Stone Creamery leases. From August 2000 through April 2002, he worked at Allied Packaging, in Los Angeles, California, as a software developer. From September 1999 through June 2000, he worked at General Network Corporation, in Glendale, Arizona as a software consultant. Mr. Spano also worked at Software Works, in Glendale, Arizona, as a software developer from April 1994 through September 1999. Mr. Spano attended Grumman Data Systems Institute in Bethpage, New York, where we earned a certificate in programming in 1979. He also attended Nassau Community College in Westbury, New York, where he received an AA degree in Accounting in 1977.

Rob Streett, Senior Director of Strategic Development

Rob Streett has been the Senior Director of Strategic Development of Cold Stone Creamery since April 2006. Between June 2005 and April 2006 he was Director of Non-traditional Development. Between April 2003 and May 2005 he was the Director, North America-Strategic Sales and

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Development with R. Torre & Co/Torani Brands, located in South San Francisco, California. Between December 1997 and September 2002, he was Director of Strategic Sales and Development with Starbucks Coffee Company/Seattle's Best Coffee located iii Seattle, Washington.

Pierro Hazrati, Director of Business Development-Southeast Region

Pierro Hazrati became the Director of Business Development-Southeast Region for Cold Stone Creamery in April 2004. Between January 1, 2001 and February 2004, he was a Principal and Vice President of Development, based in Lake Worth, Florida, for Nuts on Top, Inc., then an Area Developer for Cold Stone Creamery. From August 1993 through January 2001, he managed Barcelino, a men's clothing store located in San Francisco, California.

Michael Patch, Construction Manager - SE

Michael Patch has been the Construction Manager - SE for Cold Stone Creamery since August 1, 2004. In that capacity, he has been based in Jupiter, Florida. From April 1993 through December 2003, he was the Business Manager of FPL Energy, Inc. in Juno Beach, Florida.

Kenneth R. Burk, Director

Kenneth R. Burk has been a director of Cold Stone Creamery since November 1994. He was the Chairman of the Board of Cold Stone Creamery between January 2001 and January 2002, the Chief Executive Officer between September 1997 and January 2001. Since July 2001, he has been the owner of KB&M LLC, in Las Vegas, Nevada. He was the Chief Executive Officer and a Director of Cold Stone Leasing between January 1998 and January 2002 and was a member of CSC Restaurants between August 1997 and January 2002.

For information with respect to our area developers, see Exhibit N.

ITEM 3 LITIGATION

Other than the following four actions, no litigation is required to be disclosed in this Franchise Offering Circular.

Cold Stone Creamery, Inc. v. Lone Cone Creamery, LLC, (American Arbitration Association Case No. 76 114 Y 00008 05 MAGE). On January 7, 2005, we filed a Demand for Arbitration seeking to confirm the expiration of the Franchise Agreement associated with one of Lone Cone's stores (store 10), and seeking an Award ordering Lone Cone to cease its operation of that store. We contended that Lone Cone had been in breach of that Franchise Agreement by repeatedly failing inspections. In March 2005, Lone Cone counterclaimed, alleging that we had wrongfully terminated both the store 10 Franchise Agreement and another Franchise Agreement associated with a store that Lone Cone had closed some months earlier (store 6). Lone Cone claimed breach of contract and bad faith termination for our allegedly wrongful termination of the franchise agreements for Stores #6, #10 and #127, and for tortious interference with prospective business advantage. During the pendency of the arbitration, we terminated Lone Cone's final

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remaining Franchise Agreement (store 127) for, among other things, breach of the store 10 Franchise Agreement by continuing to operate store 10 after the agreement expired. We added a claim for confirmation of that termination in the arbitration. The Arbitrator found that we acted in good faith and in fair dealing with Lone Cone. The Arbitrator found that Lone Cone, on the other hand, repeatedly failed to adhere to franchisee standards and those continual failures were appropriate grounds for not renewing Lone Cone's two stores. The Arbitrator ordered Lone Cone to turn over store 10, and gave Lone Cone approximately six months to sell store 127, or that store would also be forfeited. The Arbitrator also ordered Lone Cone to pay all arbitration expenses and most of our attorneys' fees.

Cold Stone Creamery, Inc. and Cold Stone Creamery Leasing Company v. Culbreath, (American Arbitration Association Case No. 76 114 00935 05). In August 2005, we filed a Demand for Arbitration seeking to terminate Culbreath's three Franchise Agreements. We alleged that Culbreath had failed to comply with the required operating standards and had failed to meet certain financial obligations. Culbreath filed a counterclaim alleging that we failed to provide promised assistance and consulting, failed to provide tenant improvement monies and interfered with Culbreath's attempt to open his third store. Culbreath is seeking unspecified damages. We intend to vigorously contest Culbreath's claims.

The Hickman Group v. Cold Stone Creamery, Inc. (Maricopa County (Arizona) Superior Court, Case No. CV2001-018257). On October 18, 2001, the Hickman Group, a franchisee, filed suit against us for intentional interference with contract, seeking damages in excess of $500,000. The Hickman Group alleged that the Balelos (one of our area developers) persuaded a prospective purchaser not to purchase one of the Hickman Group's Cold Stone Creamery restaurants and, as the Balelos' principal, we are liable for that conduct. We answered that Balelos did not interfere with that transaction and, therefore, that we are not liable for any damages. We asserted that the sale did not proceed due to the unit's poor performance and/or the alleged prospective purchaser's inability to finance the transaction. (We learned that the alleged prospective purchaser filed a petition in bankruptcy shortly after deciding not to purchase the Hickman Group's Cold Stone Creamery restaurant.) On November 15, 2002, we and the Hickman Group entered into a Mutual Release and Settlement Agreement, in which the parties agreed to dismiss the litigation, the Hickman Group was given the right to sell their Cold Stone Creamery restaurant for a limited period of time, the franchise agreement would be terminated and we would pay the Hickman Group $35,000. Balelos indemnified us in the litigation and the settlement and reimbursed us in that amount. The lawsuit was dismissed on November 26, 2002.

Todd A. Ferrante vs. Gregory V. Ferrante, Kathleen O. Ferrante and Patrick O'Malley (Case No. MJG-97-2143), U.S. District Court for the District of Maryland. The Plaintiff brought an action against Mr. Gregory V. Ferrante (one of the principals of Phoenix Partners Development, Ltd., one of our area developers). The amended complaint, filed December 9,1997, alleged violations of the antitrust and RICO laws in connection with alleged breaches of photography franchises and sought compensatory and punitive damages. The action was discharged in connection with Mr. Ferrante's bankruptcy proceeding. See Item 4 (Bankruptcy).

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ITEM 4 BANKRUPTCY

Except for the three persons identified below, no person previously identified in Item 1 or 2 of this Franchise Offering Circular or identified in Exhibit N to this Franchise Offering Circular has been involved as a debtor in proceedings under the United States Bankruptcy Code required to be disclosed in this Item.

Lee E. Knowlton, Senior Vice President of Cold Stone Creamery, filed as debtor a petition to start an action under Chapter 7 of the United States Bankruptcy Code on December 11, 2003 in the United States Bankruptcy Court for the District of Arizona (In re Lee Edward Knowlton, debtor, Case No. 2:03-bk-2166) and obtained a discharge of his debts under the United States Bankruptcy Code as of April 6,2004.

Gregory V. Ferrante, one of the principals of Phoenix Partners Development, Ltd., one of our area developers, filed as debtor a petition under Chapter 7 of the United States Bankruptcy Code on September 15,1999 in the United States Bankruptcy Court for the District of Maryland (Baltimore) (In re Gregory V. and Kathleen O. Ferrante, debtors, Case No. 99-6-2058) and obtained a discharge of his debts under the United States Bankruptcy Code as of December 27,1999.

Dean A. Johnson, who is in charge of Area Developer Support for All Mixed Up, Inc. one of our area developers, filed as debtor a petition under Chapter 7 of the United States Bankruptcy Code on November 30, 2000 in the United States Bankruptcy Court for the District of Arizona (In re Dean A. Johnson and Delia P. Johnson, debtors, Case No. 00-13059-ECF-EWH) and obtained a discharge of his debts under the United States Bankruptcy Code as of March 21, 2001.

ITEM 5 INITIAL FRANCHISE FEE

Initial License Fee.

The initial license fee (the "Initial License Fee") for your non-traditional Cold Stone Creamery restaurant is as follows:

Type of Cold Stone Creamery Restaurant

License Fee Per Year

Minimum

License Fee

(3 years)

Maximum

License Fee

(5 years)

"Gotta Have It"

$4,200

$12,600

$21,000

."Love It"

$3,600

$10,800

$18,000

"Like It"

$3,000

$9,000

$15,000

The Initial License Fee is payable by certified or cashiers' check, and is due in full upon your signing the license agreement (the "License Agreement"). The Initial License Fee is not a deposit and is not refundable under any circumstances, except in connection with the expiration of the License Agreement at the end of the Probationary Period (as defined below), in which case the Initial License Fee (less our expenses) will be refunded to you, provided that you satisfy

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certain requirements. The initial franchise fee for traditional Cold Stone Creamery restaurants is presently $42,000 ($32,000 for second or subsequent units). The Initial License Fee will be used for our general purposes. The term "Probationary Period" means the period beginning on the effective date of the License Agreement and ending on the date on which we notify you that the License Agreement will expire as of the end of the Probationary Period because we believe in good faith that you may not be a good fit within the Cold Stone Creamery system or may adversely affect the goodwill or reputation of us, our products or the Service Marks (as defined below), but not later than the date on which your Licensed Business opens to the public for business.

If we permit you to open and operate additional non-traditional Cold Stone Creamery restaurant locations, the Initial License Fee for each additional non-traditional Cold Stone Creamery restaurant will be the initial license fee in effect at the time you sign the subsequent license agreements. Note that we may increase the initial license fee at any time and the initial license fee that you will pay for additional licenses will be the fee contained in the Franchise Offering Circular in effect at the time you deliver your signed license agreement (in the then-current form) for additional licenses to us. If the License Agreement is signed in connection with a renewal or relocation, you will not pay the Initial License Fee. See ITEM 12 (Territory) and ITEM 17 (Renewal, Termination, Transfer and Dispute Resolution).

Application Fee.

All prospective licensees (other than licensees that have previously executed license agreements with us) will be required to pay us a non-refundable application fee of up to $75 to cover the costs of the English proficiency and personality tests required in connection with their applications.

Master Concession Agreement.

If your Cold Stone Creamery® restaurant will be operated pursuant to a Master Concession Agreement (as defined below) that requires a security deposit, you will pay to us a security deposit in the amount required under the Master Concession Agreement.

Master Lease.

If your Cold Stone Creamery® restaurant will be leased, you must pay to us (1) a lease administration fee ("Lease Administration Fee") in an amount equal to between 2% and 5% of the base rent under the Master Lease, as determined by us, to compensate us for serving as the tenant under the Master Lease (and the related risk of loss) and administering the Master Lease and the Sublease (as defined below) (including, without limitation, collecting and paying rent) and (2) an amount between $2,000 and $6,000, as determined by us, to pay for our attorney's review of the Master Lease on our behalf. (If you submit more than one Master Lease for our review, the fee for our attorney's review of the Master Lease will be charged for each Master Lease submitted.) Our attorney may be our employee or an independent contractor. If you engage an attorney to review the Master Lease and/or Sublease on your behalf, those fees will be payable directly by you to that attorney. The Lease Administration Fee will not eliminate any of your obligations to us under the Sublease. In addition, when you sign the Sublease, you

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must pay to us an amount equal to the first month's base rent and estimated operating expenses under the Master Lease, plus a security deposit in an amount equal to the security deposit required under the Master Lease. (We reserve the right, however, to require a greater security deposit, based upon your creditworthiness.) We will pay to the Master Landlord the first month's base rent, the first monthly installment of estimated operating expenses and the security deposit under the Master Lease (if any) and will retain the Lease Administration Fee and the fee for our attorney's review of the Master Lease. The amount of the total initial payment (including the Lease Administration Fee and the fee for our attorney's review of the Master Lease) will vary, depending upon the rent anticipated to be paid under the Master Lease for your site, but is expected to range between $6,500 and $36,000. However, the amount will be up to 50% higher in Alaska, Hawaii and the Caribbean and will be up to 300% higher in the New York metropolitan area.

You are also required to engage a real estate broker on our approved list to assist you in selecting a site and negotiating the letter of intent for the Master Lease. The cost is estimated to be between $2,000 and $10,000, but all or part of the real estate broker's fee may be paid by the Master Landlord. However, the amount will be up to 50% higher in Alaska, Hawaii and the Caribbean and will be up to 300% higher in the New York metropolitan area. If you use a real estate broker not on our approved list, you must pay us a fee in an amount up to $5,000 in connection with training your real estate broker regarding our requirements and reviewing the letter of intent.

Equipment and Signage Fee.

You must use us as a broker for the purchase of,your equipment and signage for your non-traditional Cold Stone Creamery restaurant. At the time you sign the License Agreement, you must sign and deliver to us an Equipment and Signage Agreement, in substantially the form attached to this Franchise Offering Circular as Exhibit I. You will be required to deposit with us the cost of that equipment, signage shipping and sales tax (if charged by the vendor) by certified or cashiers' check before we place your order with those vendors. That deposit is not refundable and will be placed in an equipment brokerage account. We will act as your equipment broker and coordinate the ordering and delivery of your equipment and signage. We have established this policy due to previous difficulties franchisees and licenses have experienced in receiving their equipment and signage. In addition, you will pay to us an equipment and signage fee (the "Equipment and Signage Fee") in the amount of 4% of the cost of that equipment and signage (including shipping, but excluding taxes). The estimated deposit for the equipment and signage is between $68,000-$130,000 (including shipping and sales taxes). We will pass on your payment of any sales tax charge by any individual vendor, but you are responsible for any use tax associated with the use of your equipment. The amount of use tax you must pay will vary from state to state, but it is estimated to be between $1,500 and $9,000. The estimated Equipment and Signage Fee is between $2,750 and $5,200. See ITEM 8 (Restrictions on Sources of Products and Services).

Equipment.

We may acquire certain used equipment and offer it for sale to prospective or existing licensees at a price that we believe to be equal to or less than the fair market value of that equipment. If

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we make that offer to you, you have the option of purchasing that equipment from us. In addition, we may offer to sell to prospective or existing licensees an existing operational non-traditional Cold Stone Creamery restaurant (including the equipment, fixtures, inventory and other items necessary to operate the restaurant) at a price that we believe to be equal to or less than the fair market value of the restaurant. If we make that offer to you, you have the option of purchasing the existing operational non-traditional Cold Stone Creamery restaurant or starting your own non-traditional Cold Stone Creamery restaurant.

Development Fee.

We may lease, build out, acquire permits and/or purchase signage, equipment and/ or inventory for one or more non-traditional Cold Stone Creamery restaurants ("Proactive Units") and, at some point during the build-out period, sign a License Agreement with a particular licensee to own and operate one of those non-traditional Cold Stone Creamery restaurants. If you are one of those licensees, upon signing the License Agreement, you will be required to pay us for the costs and expenses incurred by us in connection with building out your non-traditional Cold Stone Creamery restaurant (in lieu of paying such amounts directly to the applicable vendors and other parties) plus a development fee (the "Development Fee") in an amount up to 25% of our cost of leasing, building out, developing, equipping and stocking your Proactive Unit. The amount will vary, based upon the extent of the build-out that has been completed before you acquire your Proactive Unit, the amount expended by us in connection with the build-out and other factors that we may determine. The Development Fee is not refundable.

Except as stated above, the Initial License Fee presently is the same for all new licensees of non-traditional Cold Stone Creamery restaurants.

See also ITEM 10 (Financing).

ITEM 6 OTHER FEES

Fee1

Amount

Due Date

Royalties2

6% of Gross Sales3

Weekly*

Brand Building & Support

3% of Gross Sales3

Weekly*

Sublease Rent

See ITEM 5 (Initial Franchise Fee) and ITEM 8 (Restrictions on Sources of Products and Services)

Weekly*

Charitable Contribution5

To be determined by us

As determined by us

Renewal

Then-current renewal fee for licensees of the type of Licensed Business that you operate

Upon request for renewal (See ITEM 17 (Renewal, Termination, Transfer and Dispute Resolution))

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Fee1

Amount

Due Date

Relocation

$5,000

Upon approval of relocation of business premises

Lease Administration Fee in an amount equal to between 2% and 5% of the base rent under the Master Lease

Upon signing Sublease (See ITEM 5 (Initial Franchise Fee) and ITEM 8 (Restrictions on Sources of Products and Services))

An amount between $2,000 and $6,000, as determined by us, to pay for our attorney's review of the Master Lease on our behalf

Upon request for our review of Master Lease (See ITEM 5 (Initial Franchise Fee) and ITEM 8 (Restrictions on Sources of Products and Services))

Additional Training6

$1,500 per additional training program per person

Prior to attendance

No-show Fee

$500, if you fail to cancel any portion of the teaming program on less than 14 days' notice

Upon failure to cancel

Hours Violation Fee

$100 per occurrence, if you fail to keep your non-traditional Cold Stone Creamery restaurant open during the Required Hours or the Posted Hours

Upon failing to comply with Required Hours or Posted Hours (See ITEM 15 (Obligation to Participate in the Actual Operation of the Franchise Business))

Non-participation Fee

$100 per day if you fail or refuse to participate in any required local, regional, seasonal, promotional or other program, initiative and campaign or in any new or modified product or service test or offering

Upon failing or refusing to participate

Continuing Training, Annual & Other Meetings7

To be determined by us

Prior to attendance

On-site Consultation8

$45 per hour (including consultation & travel time) plus travel, lodging & meals

As incurred

Interest

18% per annum on royalties, Brand Building & Support fees, Development Fees, rent and other amounts unpaid within 10 days; on amounts paid by us on your behalf

As incurred

Document Late Charge9

$100 per week or part of a week

As incurred

Draft Draw Charge10

$100 per day

As incurred

Late Charge

5% of the unpaid amount or $100, whichever is greater, on royalties and Brand Building & Support fees, Development Fees, and other amounts unpaid within 10 days

As incurred

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Fee1

Amount

Due Date

Sublease Late Charge

5% of the late or unpaid amount plus any late charges and interest incurred under the Master Lease as a result of the late payment (See ITEM 5 (Initial Franchise Fee) and ITEM 8 (Restrictions on Sources of Products and Services))

As incurred

Audit

Costs & expenses of the audit plus 18% per annum interest on the underpayment

Promptly after the audit if the audit reveals an underpayment, from the due date

Interim Operating Fee plus Reimbursement of any Operating Loss

To be determined by us; payable if you abandon or fail to operate your non-traditional Cold Stone Creamery restaurant and we (or our designee) operate your non-traditional Cold Stone Creamery restaurant

As incurred

Premiums and Other Amounts paid by us if you Fail to Purchase Required Insurance

Premium and other amounts paid by us, plus interest (see above)

As incurred

Liquidated Damages upon Breach of Restrictive Covenant

An amount equal to the Initial License Fee for each site operated in breach plus 10% of Gross Sales

As incurred

Attorneys' Fees and Costs

Will vary under the circumstances

As incurred

Indemnification of us for damages suffered or incurred for your actions or omissions, including amounts paid on your behalf to cure your breaches under the License Agreement

Will vary under the circumstances

As incurred

Currency11

Costs of conversion to U.S. dollars

As incurred

Taxes

Sales, use, gross receipts & similar taxes payable by us with respect to the Initial License Fee, royalties, Brand Building & Support fees, Lease Administration Fee, Development Fee, Equipment and Signage Fee, equipment and signage purchases, rent & other amounts paid by you to us

Within 10 days of invoice

Footnotes

1 All fees payable to us or our affiliates may be modified by us from time to time without your approval. Such fees will be no greater than the fees then being charged to new licensees.

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All fees in the above table are payable to us or our affiliates, other than the Muzak® Fee (which is payable to the Muzak® service provider), the Equipment Maintenance Fee (which is payable to the approved vendor that will provide maintenance) and insurance premiums, which are payable to your insurance carrier, agent or broker). All fees in the above table are not refundable.

We require you to sign a pre-authorization form to enable us to draw against your bank account for the full amount of the royalties, advertising payments, Development Fees, equipment fees, payments due under the Sublease and for any other amounts that you owe to us or our affiliates or your cooperative advertising association (for example, for promotional materials). The form of that authorization is contained in Exhibit E to this Franchise Offering Circular.

If you are a married individual, your spouse must sign the Spousal Consent to the License Agreement. Each person (and his/her spouse), corporation, partnership, limited liability company or other entity that owns, directly or indirectly, a five percent or greater equity interest in the licensed entity (a "Principal") must sign an agreement, in the form of Exhibit D, in which he agrees to perform, and guarantees, all of the licensee's obligations to us and our affiliates (including the obligations under the License Agreement and the Sublease) and agrees to be bound by the restrictive covenants, the confidentiality provisions and certain other provisions contained in the License Agreement.

2  Royalties will be increased to up to 18% of Gross Sales with respect to any period during which you are in breach of your obligations under the License Agreement. (The royalties paid or owing to us with respect to the period during which you are in breach are referred to as "Breaching Royalties"). Breaching Royalties will be charged for a minimum 14-day period, regardless of the length of the actual breach.

If you do not open your Licensed Business to the public within one year after the date of the License Agreement, 150 days after the Master Landlord makes the site for your non-traditional Cold Stone Creamery restaurant available to you (as determined by us) or the deadline in the Master Concession Agreement, whichever occurs first, in addition to our other rights, you will pay royalties ("Late Opening Royalties"), from that date until the date that your non-traditional Cold Stone Creamery restaurant is open to the public for business or your Franchise Agreement has been terminated, at the rate of 6%, calculated based upon the average unit volume for all Cold Stone Creamery restaurants open for business, as calculated by us from time to time. This deadline will apply even if we have not approved the site that you have chosen for your non-traditional Cold Stone Creamery restaurant and even if we have delayed the opening of your non-traditional Cold Stone Creamery restaurant because you have not satisfied the Continuing Working Capital Requirement.

3  The term "Gross Sales" means sales from all products and services sold at your non-traditional Cold Stone Creamery restaurant, whether for on-site or off-site consumption, including, without limitation, sales from products and services delivered to customers and/or sold from off-site locations. The term "Gross Sales" also includes the proceeds received or realized by you in connection with any business interruption insurance maintained by you, or for your benefit.

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You must participate in all programs of a charitable nature designated by us from time-to-time, including the obligation to contribute a designated percentage of opening day sales (or sales for other periods) to a charity designated by you or us, as we may elect.

4   The weekly period runs from each Wednesday to the following Tuesday (the "Business Week"). Royalties and advertising payments based on Gross Sales during each Business Week are due by the Friday after the end of the Business Week. However, rent due under the Sublease will be due on the day of the Business Week selected by us.

5  You must participate in all programs of a charitable nature designated by us from time-to-time, including the obligation to contribute a designated percentage of opening day sales (or sales for other periods) to a charity designated by you or us, as we may elect.

6 See ITEM 11 (Franchisor's Obligations) with respect to the training program.

The fee payable to us for more than two people to attend the training program is $1,500 per additional person. Training of the additional people may or may not be held at the same time as training of the initial two people, at our election.

All training program attendees bear their own travel, lodging and meal expenditures in connection with attending the training program.

If you fail to satisfactorily complete our training program, in our sole discretion, we may require or permit you to attend the training program again, at your expense ($1,500 per additional training program per person, plus travel, lodging and meal expenditures in connection with attending the training program).

7  Additional training programs and refresher courses may be required upon renewal and from time to time. Although we do not presently intend to charge licensees for attendance, we may elect to do so in the future. In any event, you will be required to bear your own travel, lodging and meal expenditures in connection with attendance. In addition, you must attend, at your expense, all annual and other meetings and conference calls of franchisees that we determine are mandatory for all licensees, or groups of licensees (as designated by us), such as franchisees within a particular geographic region. We may impose a charge for your failure to attend those programs, courses, meetings and conference calls.

8   This rate is subject to change from time to time, depending upon our cost of providing consulting services.

9  If you fail to deliver or provide to us or your area developer any statement, report or other document or information required to be delivered (for example, sales reports, certificates of insurance and financial statements), by the applicable deadline, you will be assessed a late charge per week, or part thereof (until that statement, document or other information has been delivered or provided), which amount may be increased by us from time to time.

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10 If you fail to provide us with any necessary information or documentation with respect to our practice of drawing drafts against your bank accounts, you will be assessed a fee in the amount of $100 per day.

11  Computation of any amounts to be paid that require conversion between currencies will be made at the selling rate for United States Dollars quoted by our primary bank on the date on which payment is made.

In addition, the License Agreement requires you to:

1.          Deposit with us, within 90 days after the end of each calendar year, $600 per year towards your minor remodel/update or "spruce up" of your non-traditional Cold Stone Creamery restaurant. As and when you perform a minor remodel/update or "spruce up," we will return those funds to you in the amount expended by you.

2.          Subscribe to our approved vendor of Muzak® (or other provider of musical programming designated by us) and play our custom programming (or other musical programming designated by us) at your non-traditional Cold Stone Creamery restaurant, unless we waive that requirement.

3.          Purchase approved accounting software from our approved vendor and subscribe to its update, upgrade and support program. See ITEM 11 (Franchisor's Obligations).

4.          Obtain credit card and gift card processing services from our approved vendors. See ITEM 11 (Franchisor's Obligations).

5.          Contract with an approved Internet service provider and establish an e-mail account with our designated provider. See ITEM 11 (Franchisor's Obligations).

6.          Obtain annual computer support contracts with our approved vendor for telephone support to you concerning the hardware and software used at your non-traditional Cold Stone Creamery restaurant. See ITEM 11 (Franchisor's Obligations).

7.          Contract with our approved vendor to provide maintenance for equipment (other than computers) in your non-traditional Cold Stone Creamery restaurant.

8.          Carry insurance of the types and in the amounts contained in our Operating Manual. In addition, you must comply with the insurance requirements of the Master Concession Agreement or Master Lease and applicable worker's compensation laws. These insurance policies must name us (and any of our affiliates that we reasonably require), your area developer (if any) and the site owner or Master Landlord as additional insureds. See ITEM 7 (Initial Investment).

9.          Provide all notices, reports and other communications with us and our area developers in the English language. In addition, you must ensure that all employees whose duties include customer service have sufficient literacy and fluency in the English language (or such other

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Non-traditional FOC.2006

language that is the primary language in your market) to adequately serve the public at your non-traditional Cold Stone Creamery restaurant.

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Non-traditional FOC.2006

ITEM 7 INITIAL INVESTMENT

"Gotta Have It" Cold Stone Creamery Restaurant

Payment

Amount

Method of Payment

When Due

To Whom

Payment is to be

Made

Initial License Fee

$12,600-$21,000 ($4,200 per year of term-minimum is 3 years; maximum is 5 years)

Lump sum, certified or cashiers' check

Upon signing

License

Agreement

Us

Travel & Living Expenses While Training

$500-$5,000

As incurred

As incurred

Airlines, hotels & restaurants (see Item 11 (Franchisor's Obligations))

Real Estate-related Expenses1

$0-$26,000

Lump sum; then drawn from your bank account

Daily or weekly or upon signing Sublease then weekly

Owner of Concession Site or Us

Architectural Fees

$4,000-$10,000

As incurred

As incurred

Architect

Leasehold Improvements2

$90,000-$170,000

As incurred

As incurred

Site owner, Master Landlord or contractor

Exterior & Interior Signage

$9,700-$15,200

Certified or cashiers' check

Before being ordered

Us

Equipment

$91,300-$111,300

Certified or cashiers' check

Before being ordered

Us

Initial Inventory

$8,000

Lump sum

Before opening

Vendors & suppliers

Employee Uniforms

$500-$800

Lump sum

Before opening

Vendors

Grand Opening Advertising3

$100-$5,000

Lump sum

Within one month of grand opening

Media, printing vendors, event planners, celebrities, customers

Insurance Premiums4

$500-$2,500

Lump sum

Before opening

Insurance carrier

Permits & Licenses

$2,000-$3,000

Lump sum

Before opening

Governmental entities

Telephone & Utility Deposits & Hookups

$250-$l,000

Lump sum

Before opening

Utility companies

Computer Training and Food Safety Certification Course5

$100-$250

As needed

As incurred

Vendors, Suppliers

Miscellaneous6

$3,800

As incurred

As incurred

Vendors, etc.

Additional Funds/ Working Capital-3 months7

$35,000

As incurred

As incurred

Employees, vendors,

suppliers, utilities, etc.

TotaF

$258,350-$417,850

061506                                                                            21                                               Non-traditional FOC.2Q06

"Love It" Cold Stone Creamery Restaurant

Payment

Amount

Method of Payment

When Due

To Whom

Payment is to be

Made

Initial License Fee

$10,800-$18,000 ($3,600 per year of term-minimum is 3 years; maximum is 5 years)

Lump sum, certified or cashiers' check

Upon signing

License

Agreement

Us

Travel & Living Expenses While Training

$500-$5,000

As incurred

As incurred

Airlines, hotels & restaurants (see Item 11 (Franchisor's Obligations))

Real Estate-related Expenses1

$0-$26,000

Lump sum; then drawn from your bank account

Daily or weekly or upon signing Sublease then weekly

Us

Architectural Fees

$1,000-$10,000

As incurred

As incurred

Architect

Leasehold Improvements2

$1,000-$100,000

As incurred

As incurred

Site owner, Master Landlord or contractor

Exterior & Interior Signage

$3,000-$10,000

Certified or cashiers' check

Before being ordered

Us

Equipment

$70,000-$125,000

Certified or cashiers' check

Before being ordered

Us

Initial Inventory

$8,000

Lump sum

Before opening

Vendors & suppliers

Employee Uniforms

$500-$800

Lump sum

Before opening

Vendors

Grand Opening Advertising3

$100-$5,000

Lump sum

Within one month of grand opening

Media, printing vendors, event planners, celebrities, customers

Insurance Premiums4

$500-$2,500

Lump sum

Before opening

Insurance carrier

Permits & Licenses

$2,000-$3,000

Lump sum

Before opening

Governmental entities

Telephone & Utility Deposits & Hookups

$250-$l,000

Lump sum

Before opening

Utility companies

Computer Training and Food Safety Certification Course5

$100-$250

As needed

As incurred

Vendors, Suppliers

Miscellaneous6

$3,800

As incurred

As incurred

Vendors, etc.

Additional Funds/ Working Capital-3 months7

$35,000

As incurred

As incurred

Employees, vendors,

suppliers, utilities, etc.

Total8

$136,550-$353,350

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"Like It" Cold Stone Creamery Restaurant

Payment

Amount

Method of Payment

When Due

To Whom

Payment is to be

Made

Initial License Fee

$9,000-$15,000 ($3,000 per year of term-minimum is 3 years; maximum is 5 years)

Lump sum, certified or cashiers' check

Upon signing

License

Agreement

Us

Travel & Living Expenses While Training

$500-$5,000

As incurred

As incurred

Airlines, hotels & restaurants (see Item 11 (Franchisor's Obligations))

Real Estate-related Expenses1

$0-$26,000

Lump sum; then drawn from your bank account

Daily or weekly or upon signing Sublease then weekly

Us

Architectural Fees

$1,000-$10,000

As incurred

As incurred

Architect

Leasehold Improvements2

$1,000-$10,000

As incurred

As incurred

Site owner, Master Landlord or contractor

Exterior & Interior Signage

$500-$l,500

Certified or cashiers' check

Before being ordered

Us