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 Creamery’s. 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 O’Neal and

N’Sync 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

Dippin’ Dots has effectively used differentiation to stand out in the frozen ice cream

market

By offering a product that is unique and futuristic we reach a bigger demographic as the

sociocultural phenomenon of innovation and technology continue to grow

Differentiation in the way we serve our ice cream, moving away from franchise stores

and transitioning to a vending machine and kiosk delivered product

Must continue to market and advertise with celebrities which could make our ice cream

seem like even more of a novelty

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