Sweet Success

Few startups in the past 20 years could even dream of achieving the dizzying success of Scottsdale, Ariz.-based Cold Stone Creamery. It started out as a gourmet ice cream shop in Tempe in 1988. Today it has 1,375 stores and another 1,000 in development. It also has expanded beyond the U.S., opening shops in Guam, Puerto Rico, Japan and South Korea. From 2004 to 2005, sales doubled from $288 million to $408 million. Its five stores in Japan are currently raking in an astounding $35,000 a week in sales.

What Cold Stone sells is an experience. After entering a store and picking your favorite ice cream, you then get to unleash your creativity by adding an assortment of goodies such as gummy bears, Oreos, pineapples, raspberries and apple pie filling. A store clerk then scoops, grinds and chops the ingredients into your ice cream on a cold slab of marble. A Harvard doctoral student recently calculated that it's possible for Cold Stone to serve up to

11.5 million different possible combinations. It's the variety that turns ice cream lovers into loyal Cold Stone customers.

Making sure everything runs smoothly from a legal standpoint is

35-year-old Melanie Hansen.

Born in a small town in Kansas, Hansen started out her legal career as a tax associate at a number of firms, including Steptoe & Johnson and Gallagher & Kennedy, after graduating from Washburn University School of Law. While at Gallagher & Kennedy, Shelby Yastrow, of counsel at the firm, encouraged her to apply for the GC opening at Cold Stone. Yastrow is a former general counsel of McDonald's and a Cold Stone board member. Hansen got the job and, with Yastrow's help, quickly learned not only how to help her client stay out of trouble, but also how to grow the business.

Q. How did Shelby help you in the transition from law firm life to the GC role?

A. He was a great help. When I first started, I probably called him on a weekly basis about various things. No question was too stupid for him. He was available to me whenever I needed him.

Q. What was the most significant lesson he taught you?

A. You never say, "no." You say, "here's how." That's always in the back of my mind when I'm advising the client. He also taught me to give the businesspeople practical advice that helps them meet their business objectives.

Q. What was the transition like going from a law firm to a legal department?

A. It wasn't tough at all. It was like I had stumbled into a dream. I immediately liked coming to work every day. It was this really charged up, incredibly dynamic environment, and the people here are just outstanding.

Q. Did you like practicing tax law at a law firm?

A. Not really. I really did enjoy some aspects of practicing law but the tax side of it for me was not so much fun. There was a lack of variety in what I did. The monotony of that was not my style. I am not sure why I decided to practice tax law. It's one of the decisions I wish I had thought about more carefully. But it was easy for me, which was strange because it's a complicated area of the law.

Q. What was it about Cold Stone that appealed to you?

A. In the back of my mind I always thought I would end up in-house. I just thought I would be better at living on and guiding one ship than I would be at radioing out to various ships. It became immediately apparent to me that I had made the right decision after about

90 days on the job.

Q. On what legal issues do you spend most of your time?

A. It has really changed over the years. My responsibilities have expanded beyond legal, so I don't get to spend nearly as much time on the day-to-day legal stuff. I now oversee four departments and have four VPs reporting to me.

Q. What are the four departments?

A. Legal, real estate and store construction, store transfers and renewals, and franchise development.

Q. So how did you transition from a purely legal role to a business role?

A. Shelby had some input into that. He always had a lot of different roles at McDonald's and told me that the business side was more fun than the legal side. In addition our CEO, Doug Ducey, is incredibly supportive of the legal department. He doesn't look at it as the cost center as many CEOs do. He thinks we actually save him money and prevent many problems for him. He sees it more as a business department.

Q. How do you have time to run the legal department?

A. I've got good people. My assistant general counsel runs what I would call the day-to-day operations of the legal department, and she supervises two other lawyers as well as the paralegals.

Q. That's not a small legal department--especially for a private company.

A. No, not at all. One of the things I learned quickly about franchising was it's a very legally intensive business. Every single store you open has a little contract that has to be constantly monitored and maintained. And you don't want to have to send your franchise agreement out to outside counsel every time there's a problem. You want somebody who's fluent in your franchise agreement that can solve the problem in 10 minutes.

Q. Do you see yourself giving up the ?? 1/2 legal side of it completely?

A. I really hope not. Every now and then I go poke my head in a meeting because I really do miss it sometimes. I really do enjoy thinking and talking about the law.

Q. How does Cold Stone name the ice cream flavors?

A. The marketing department does it, but they work very closely with us. It can be very difficult to find names that aren't already trademarked. For instance, we are rolling out a new ice cream flavor as part of our grab-and-go line. We went through no less than 30 names. It cost us about $25,000 in trademark searches, clearances and legal fees to find the name. The name is Shock-A-Cone. It's a vanilla custard ice cream with chocolate, little bits of sugar cone and caramel. It is the most phenomenal flavor you really have ever tasted in your life.

Q. Do you use outside counsel to conduct the searches?

A. We recently started doing the searches internally. Now we have a paralegal who has been trained to do all our searches. Hopefully that will save us a great deal of money.

Q. Are there any patent issues that you have to deal with in your job?

A. There are from time to time. It's not always top of mind to run out and get a patent in our business. That's a mistake. You have to keep that option in the back of your mind as a possibility. We are working on some healthy products that I think are definitely patentable. We also have design patterns for ice cream cakes as well that might be patentable.

Q. How much of the department's time is spent dealing with franchise ?? 1/2 issues?

A. A lot--in part because we are incredibly protective of our brand. We visit stores on a quarterly basis and follow up with anything that is not in compliance with the franchise agreement.

Q. What are some of those things?

A. It is typically things like a dirty store or perhaps doing something outside the realm of what state employment laws might allow. You don't typically think of poor service as a legal issue, but we do. We track customer complaints because our concept is known for the experience and the high level of customer service. If we see excessive customer complaints than that could become a compliance issue, with which the legal department would then have to deal.

Q. What is the strangest legal issue you have had to deal with?

A. I got a call from a parent in Illinois one time--in the winter--telling me that his son was a teenager working in one of our stores in Chicago, and they weren't turning the heater on so the kids were having to warm their hands on the waffle iron so they could serve the ice cream.

Q. Has Cold Stone been impacted by the so-called obesity suits?

A. Not really--we definitely look at ourselves as an indulgent product, but we aren't marketing our products as a meal or a meal replacement. I think if we're going to do that we need to do it responsibly, and that's what we would do. But consumers have choices, and I don't think the food industry should be held responsible for the eating choices of consumers. On the other hand, I do have a child, and I think companies do have an obligation to market responsibly, especially to children.

Q. I understand you were an athlete in high school.

A. I ran track. I hesitate to tell you this, but I also was a cheerleader. I went to the national championships for that, but it isn't something I usually put on my r?? 1/2 sum?? 1/2 because it doesn't invoke a lot of credibility.

Q. Did you win?

A. No, we didn't. I think we came in 16th place.

Q. Any other sports?

A. I played softball in college. I almost went to the University of Nebraska to play softball and changed my mind at the last minute and decided I wanted to keep it as a recreation and not a job. I decided I wanted a normal college

experience.

Q. What is your favorite Cold Stone product?

A. I have so many. But I will tell you at my last dinner party I served sweet cream ice cream with black cherries, almond and caramel. It's really perfect for a dinner party--a very rich tasting dessert. And we put a tiny bit of Amaretto in the bottom of the bowl and it was fantastic.

Q. Is this your dream job?

A. If it involved purses and shoes it might be my dream job, but it's pretty darn close to my dream job.

staff Writer

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