Robert Parker MGT 4800

Introduction

In 1987 Curt Jones had a great idea to flash freeze ice cream in liquid nitrogen, the result is Dippin Dots. It took Jones a while to get a patent and get the startup capital to support Dippin Dots, but once they got the first store off the ground they knew the market had potential. Known as the future of Ice Cream, Jones moved his business to theme parks, sports venues, and vending machines. In 1991 a dealership network was developed to sell ice cream to authorized vendors and provide support with equipment and marketing. Dippin Dots saw high returns with these little kiosk locations. In 2001 Jones felt he has to keep pushing advancement in the company and Dippin Dots began require dealers to sign a franchise agreement and pay the associated franchise fees for any location they operated or planned to operate. The franchise location could be any mall, fair, amusement park, or entertainment center. The initial franchise fee was $12,500 with an estimated initial investment range from 80,428 to 235,250 depending on location. Although Dippin Dots has seen sustained growth they have had some problem with keeping the dots at subzero temperatures. The problem is that Dippin Dots needs its own refrigerant system to keep the Dippin Dots in its rocky but edible form. Jones meanwhile was working on his own refrigerant system that would keep the Dippin Dots frozen and edible for up to 12 days; this helped with shipping cost and provided a longer shelf life for Dippin Dots. Dippin Dots has tried to diversify into the regular soft ice cream market as well as the ice cream sandwich market. They developed a soft ice cream called dots in cream that could be sold in regular refrigerants. Although this seemed like a good idea the ice cream was getting away from what Dippin Dots stood for and was discontinues short after. Despite the development in new products Dippin Dots experience and resource base are still subzero ice cream from scoop shops. The idea to have vending machines that served 5 oz. and 8 oz. servings of the ice cream increased market share in 2007. Dippin Dots needed its own vending machine with special

refrigerant to keep the Dots subzero, but would reduce costs such as labor costs and other overhead costs.

Business Issue

How can we stabilize rising operating costs, transition from franchises to vending machines, and continue to be viewed as the ice cream of the future, to continue growth? This business issue is critical because sales have plummeted and operating costs have soared. Our refrigerant technology is very important because the subzero temperature ice cream is what makes us unique. We must continue to improve the R & D of the company to allow our shelf life for Dippin Dots to be longer. This will lower operating costs and allow products to stay in the refrigerant unit longer. Franchises have been steadily closing with over 200 shutting down in the last two years due to increased number of viable substitutes. In my mind and through my research we can see that the franchise stores need much more direction from corporate with advertising and creation of new products. This is still an upward battle with so many other creameries and frozen dessert shops opening that provide a unique experience just as we do, such as Cold Stone Creamerys. Over 50 percent of our sales come from amusement parks, fairs, and entertainment centers. We must continue to grow in this area, and can do so by adding vending machines which have a lower operating cost then self-scoop location. We must centralize our focus on the vending machine market and concentrate on location and affordability. We must focus our vending machine locations around our target market 8-18 year olds. So this means vending machines near beaches, near playground and play areas, trying to get elementary thru College contracts to put our vending machines in schools with smaller serving sizes. We must make it easy for companies to get a Dippin Dots vending machine and need to develop contracts with certain distributers to ensure effective and time efficient delivery. We can still fill the gap as the unique ice cream of the future but we must make it more affordable and more convenient to get in our customers hands. With less franchise stores

and more vending machines we will lower our operating cost while transitioning and continuing to grow our brand.

Analysis
SWOT Strengths o Novelty and uniqueness of our product o Our technology with the ice cream and the refrigeration system o Richer and more favorable ice cream o Marketing and advertising through celebrities such as Shaquille ONeal and NSync stars o Our dealer network which includes fairs, stadiums, amusement parks o Product identity and brand awareness because we have been serving for over 20 years Weaknesses o Product quality and shelf life is short o Refrigerant system needs to be improved to hold product longer and more efficiently o Transportation in those unique refrigerants is hard for drivers and more costly because of the equipment o No patent to protect any of our technology which was denied in 2007 Opportunities o Opportunities to maybe move into the fast food industry and team up with a company like McDonalds o Our innovative technological advancement in ice cream is a considerable opportunity as we market to our younger demographic who look for new different ways to eat ice cream

o Our experience is an opportunity because with over 20 years under our belts our brand is well known and very recognizable o International expansion to stadiums and amusement parks which our on an up rise abroad Threats o The increased number of related substitutes to Dippin Dots, such as creameries o The chance for a very similar product with lower price such as Mini melts o Bigger corporate companies could start selling a product that is very similar and probably easier and cheaper for them to produce

Goal- Vision
The continued effort to advance through the vending machine market, allowing us to lower operating cost and provide more locations for our product To advance the development of our refrigerant system so our product can be stored longer and more efficiently to guarantee quality To continue to be ice cream of the future as well as that little snack that can brighten your day

Improvements/Changes
Improve supplier relationships which will give us an competitive advantage With higher supplier relationships it will be harder for substitutes to enter the market We must continue the perception of ice cream of the future and continue to be a novelty in the market

With bigger corporate companies having the chance to copy our product we much continue to hold a strong brand image so we can dominate the subzero frozen ice cream category

We must transition to less franchise stores and more vending machines to lower operating cost while increasing the locations you can get our product, this will also discourage possible entrants into our industry because of the availability and convenience of acquiring our product

Cost Leadership VS Differentiation

Involved Parties
Company- As a company we need to continue to improve our refrigerant system and the delivery of our product to our vending machines and kiosks as we transition from stores to vending machines and smaller kiosk locations. We must also continue to give support and direction to the operating franchise stores from our investors to try and guarantee a successful business which all private investors thought when they opened franchises Franchises Must slowly start cutting back on inventory and labor costs to decrease operational costs. By improving our refrigerant system we can ensure our franchises

that our product will have a longer shelf life which will also decrease costs. These franchises must continue to engage in are marketing and advertising plan Customers Need to continue to grow the perception of uniqueness and novelty of our product. We need to increase the locations where our customers can receive our product and make it easier and more affordable. With over 20 years of subzero Dippin Dots being sold we have a more recognizable brand image and can market to a larger demographic

Risk Assessment
We have a high risk of substitutes in our industry because of the loss of our patent for the type of ice cream we make as well as the opportunities for larger multi-national corporations to make a similar product for cheaper. We also have a risk with our refrigerant system as it is more expensive to produce and maintain because it has to stay at colder temperatures. This could increase our wasted product cost if our machines are not running correctly. This could also raise our maintenance cost if we have to fix machines that are more delicate and expensive Because of the novelty of our item we could receive lower brand recognition if a larger company comes out with a viable substitute to our product Our brand image could be diminished as the number of franchise locations we have decreases