Kahala Cold Stone purchases Cereality

by Eric Schroeder
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SCOTTSDALE, ARIZ. — Kahala•Cold Stone, a holding company formed in May as a result of the merger between Kahala Corp. and Cold Stone Creamery, said it has bought Cereality Cereal Bar & Café. The move marks the company’s first acquisition since the merger and raises the number of brands operated by the company to 14. Specific terms of the transaction were not disclosed.

"When we formed Kahala•Cold Stone, we promised to aggressively seek out acquisitions of leading brands in the Q.S.R. space to grow the portfolio of franchise brands for partners, and this is the first of many to come," said Kevin Blackwell, chairman and chief strategist of Kahala•Cold Stone. "Cereality is one of the most exciting, distinctive concepts to be launched in the past decade, attracting a great deal of interest from franchisees and cereal-craving customers alike."

Cereality was launched in the fall of 2003 in Arizona as a concept store at Arizona State University’s Memorial Union. The branded restaurant format for eating ready-to-eat cereal focuses on the custom-blending and serving of both familiar and proprietary cereals, as well as a variety of original recipe cereal-based snack foods such as snack bars and mixes and smoothies. According to the company, the concept builds upon a kitchen setting with cabinets stocked with familiar cereals, modeled after the set design featured in the kitchen apartment of Jerry Seinfeld on the popular "Seinfeld" television show.

Cereality has seven cafes in operation, with an eighth location scheduled to open at JFK International Airport later this month. The company currently holds franchise commitments for the opening of an additional 24 cafes over the next six years. Prior to 2007, Cereality had wholly owned and operated all of its cafes, but there are now two franchise locations open and the company has received thousands of inquiries from entrepreneurs interested in opening Cerealities across the country, according to the company.

"We believe Kahala•Cold Stone is well-placed to scale the Cereality concept and create new opportunities for our more than 3,000 franchisees who are very taken with the concept and eager to explore multi-branding within our portfolio," said Doug Ducey, chief executive officer of Kahala•Cold Stone. "We plan to grow the Cereality brand by doing what we do best — providing exciting opportunities for entrepreneurs, successful concepts for our franchisees and innovative, fun experiences for our loyal customers."

Cereality co-founders David Roth and Rick Bacher said they believe the acquisition will help Cereality realize its full potential "by leveraging its operational and brand-building expertise."

"Shared between us is a sharp focus on creating a unique customer experience and we very much look forward to opportunities to come as we ramp up our visibility in the marketplace," Mr. Roth and Mr. Bacher said. "As entrepreneurs ourselves, we fully appreciate the value Kahala•Cold Stone is delivering to fellow entrepreneurs."

In addition to Cereality, the other brands Kahala•Cold Stone operates includes: Blimpie, Cold Stone Creamery, Frullati Café & Bakery, Great Steak & Potato Co., Johnnie’s New York Pizzeria, NRgize Lifestyle Café, Ranch1, Rollerz, Samurai Sam’s Teriyaki Grill, Surf City Squeeze, TacoTime, V’s Barbershop and WafflO.

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