ASSE 4311 - Learning Outcome Assessment III

College of Business Administration ASSE 4311 - Learning Outcome Assessment III Instructor: Dr. Emmanuel Ntui Section202 Group Case Analysis Project .Rocky Mountain Chocolate Factory, Inc Summer 2012 Submission Date: August 3rd, 2012

Table of Contents Introduction The present case study is to analyze Rocky Mountain Chocolate Factory,

Inc. (RMCFI). It will be divided into four parts: Current Situation and Corporate

Governance, External Environment (Opportunities and Threats) and Internal

Environment (Strengths and Weaknesses), Analysis of Strategic Factors (SWOT) &

Strategic Alternatives & Choice, and Strategy Implementation and Evaluation &

Control. To accomplish each of these four parts, the Rocky Mountain Chocolate

Factory, Inc. (RMCFI) should be scrutinized regarding its financial information and data that made the company to its present situation it has now. The case study report will also identify from the information whether the company will continue to strategically grow and what made it so. The close analysis of these data and

.information will be the basis of the conclusion

Company Background The present case is about the Rocky Mountain Chocolate Factory, Inc.

(RMCFI) which is an international franchiser of gourmet chocolate, confection and self-serve frozen yogurt stores and a manufacturer of an extensive line of premium chocolates and other confectionery products with headquarters in Durango,

Colorado. As of the present, RMCFI together with its franchisees have 371 stores that are located in 40 different states of the USA, besides Canada, and the United

Arab Emirates. Also, it is listed as common stock on NASDAQ Global Market

”.under “RMCF

The Rocky Mountain Chocolate Factory, Inc. was founded by Frank Crail in

1981 and went to the public in 1986. Its main competitors are Godiva Chocolatier,

.(Fannie Mae, See’s Candies, Lindt, and Ethel M’s (www.rmcf.com, 2012 The company business line assures freshness of products sold as 50% of

them are done in the stores as the Company believes that this “in-store preparation

creates a special store ambiance and the aroma and sight of products being made

attracts foot traffic and assures customers that products are fresh” (www.rmcf.com,

.(2012

Presently, the Rocky Mountain Chocolate Factory, Inc. shareholders of

record at the close of business May 24, 2012, were given cash dividend of $0.11 per

common share outstanding last June 8, 2012. The dividend represents a 10%

increase in the cash dividend payout when compared with the previous quarterly

.(dividend (Merryman, 2012

The Corporate Governance The success of a company lies on the leadership of its governing body. The

leaders encourage productivity through the development and encouragement of

creativity and innovation as well as efficiency in the company’s employees. The

corporate governance is the combination of the rules, procedures, and

administration of the company’s contracts with its shareholders, creditors,

employees, suppliers, customers, and sovereign governments

(http://ivoireconsultancy. hubpages.com/, 2012). This governance is officially

placed on the responsibility of the board of directors whose duties have been

entrusted by the shareholders to serve the interests of the corporation. The Rocky

Mountain Chocolate Factory, Inc. has the following officers and directors taken

:(from the company’s website (www. rmcf.com, 2012

Since Title OFFICERS 1981 Chairman of the Board, President, Chief Executive Officer Franklin E. Crail 1997 Chief Financial Officer, Chief Operating Officer, Treasurer, Director Bryan J. Merryman 1997 Senior Vice President - Sales and Marketing Edward L. Dudley 2001 Senior Vice President – Development Gregory L. Pope 2008 Vice President - Franchise Support and Training Donna L. Coupe 2008 Vice President – Finance Jeremy M. Kinney 1991 Vice President – Creative Jay B. Haws 2001 Chief Information Officer William K. Jobson 2011 Corporate Secretary Tracy D. Wojcik

Since Title DIRECTORS 1982 Chairman of the Board, President, Chief Executive Officer Franklin E. Crail 1999 Chief Financial Officer, Chief Operating Officer, Treasurer, Director Bryan J. Merryman 2000 Director Clyde W. Engle 1995 Director .Gerald A. Kien, Ph.D 1987 Director Lee N. Mortenson 1982 Director Scott G. Capdevielle

The corporate governance is composed of the By-laws of the company, audit

committee of the Board of Directors, Code of Conduct, Code of Ethics for Senior

Financial Officers, Nominating Committee Charter, Policy on Shareholder

Communications with Board of Directors, and Whistleblower/Complaint

.Procedures for Accounting and Auditing matters

Company’s Vision

The vision of Rocky Mountain Chocolate Factory, Inc. is to become a top

.international manufacturer of chocolate candies and sweets

Company’s Mission

The mission of Rocky Mountain Chocolate Factory, Inc. is to produce a

fantastic variety of yummy handmade chocolates and confections that are made from only the finest ingredients, the best cocoa blends, and rated as the top

.chocolate for its rich, intense flavor

Industry Analysis Data

A short industry analysis of the chocolate identifies the following

:((http://chocolate-news.com/chocolate-makers-3/, 2012

Rise 2% on average in the duration of the next five years, because of the 

.growth of emerging markets is expected in global demand for chocolate

Global chocolate market is estimated to reach $98.3 billion in 2016 from 

$83.2 billion in 2010, at a CAGR of 2.7% from 2011 to 2016. The market in

Asia is driving the sales and is expected to hold 20% of the global market

share in 2016. The Asian market is expected to have high growth of CAGR

4.7% due to lower penetration and sales of Asian region are expected to

.boost their share from $15 billion in 2010 to $19.7 billion in 2016

Expands at a 45% in the Russian chocolate market and 60% in North Africa 

.by 2016

Consumers purchased tablets of chocolate for lower cost because they 

speculated with the recession, and chocolate makers reduced the size of the

Western Europe represents 32% of the demand for global chocolate and 

.follows that of the United States, with 20% This year the consumption in the United States will fall by 4.8% and reach 

1.32 million metric tons, and that Western Europe will expand by 0.6% to

.reach the 2.46 million tons

In the quarter of 2012, the demand will be 43,000 tons greater than the 

.supply

Growth of cocoa consumption will decrease to 1.8% against more than 5% 

.that occurred in the period 2010-2011

The U.S. leads the chocolate market in North America with around 86.3% 

market share while Japan leads the Asian market with 39.7% of market share. Within Europe, UK draws the largest demand with 16.4%; followed

.by Germany with 15.9 % market share

In March of last year, cocoa climbed to its peak in 32 years because of civil  war in Ivory Coast, from us $3.775 per ton but declined this year at $2.171

.(per ton and widespread disease in cocoa trees in Brazil (Bright, Chris

Supermarkets and hypermarkets distribute a further 28.5% of the market’s  revenues. Chocolate candy boxes or bags greater or equal to 3.5oz account

.for 36.7% of the US Chocolate Confectionary Segment

The value of gourmet chocolate products that Americans bought increased 

.by 28% from 2002 to the present

External Environment (Opportunities & Threats) and Internal (Environment (Strengths & Weaknesses

:External Environment 

Economic Forces Environment 

Growth of emerging markets like China, India, Indonesia, Vietnam, o

.and Malaysia .Steady economic growth in Western Europe o

.Continued slow growth of US economy o

.Decreasing growth of the global economy o

.(Increasing raw material prices (sugar, cacao, milk o

Dependence of the industry over unstable economies for cocoa o

.supply

Social and Demographic Forces 

.Increase in world population o

.Chocolate is seen as good for the health o

.Seasonal and festive sales o

.The demand of gourmet and healthier types of chocolates o

Political, Legal, and Governmental Forces 

Civil war in Ivory Coast last year that politically became stable thi8s o

.Increased in production and sales tax in the US o

Environmental Forces 

The existence of widespread cacao tree diseases in cacao plantations o

in Brazil call for planting change and to use cacao to reforest some

.portions of the Amazon forest

Technological Forces 

Emergence of counterfeiting processes that produce alternative o

.chocolates

.Improved preparation and discovery of other products from cacao o :(Internal Environment (VRIO Analysis 

To find the internal environment, we used the analysis of Valuable, Rare,

.Inimitable and Organized resources of the company which called VRIO Analysis

?Valuable - How valuable are the company’s resources 

Using the common foundations that include efficiency, quality, customer responsiveness, and innovation, the company can be assessed of how valuable it is. As the increase of dividends of 10% increase in the cash dividend payout when compared with the previous quarterly dividend has shown of its increasing income as the amount of output is much higher than its input (revenue vs. cost is 9,658 vs. 5,567, respectively). Please see

Appendix financial statements. The quality of its chocolates is the pride of the company. It has over 300 varieties of handmade chocolates and confections that are made from the best cocoa blends and other ingredients that make their top chocolate products. The way the company prepares its chocolates and confectionaries are valuable because it is the only company with this way of preparing its products and servicing its customers. The special individualized way of serving its customers is valuable because this

.distinguishes the company from its competitors

Chocolate is made in front of your eyes when you order any of its chocolate products. Its continual way of creating new products tells of how innovative company RMCF is. RMCF’s valuable resources give it a

competitive advantage over its competitors

. ?Rare – How rare are the company’s resources 

The brand name of RMCF has already achieved successful branding and it is known in the USA as a fun way to buy chocolates. Rocky

Mountain has strong brand awareness and marketing techniques that, in the

.past, have proved to be successful in its franchises

RMCF’s competitors include Hershey Foods Corporation, and Mars,

Inc. Hershey Foods Corporation is the leading company, with a 24.3% share, in the US confectionary market. Mars, Inc. holds 18.7% of the market’s value. Between the two of them, a 43% of the entire market is held. Hershey

Foods, the 112-year-old will expand to the premium chocolate market by buying Scharffen Berger Chocolate Maker. Mars will launch Ethel’s, a gourmet chocolate line that ranges from traditional truffles to trendy treats inspired by cocktails such as cosmopolitans. These products have the potential to be marketed in the grocery store environment just as their counterparts are now being marketed (Baldonado, Hardwick, Houang,

Moreno, Norashkarian, and Trinh, 2012). To have stronger share of the

.market, RMCF should also grow towards organic chocolate line

?Inimitable – Can these products imitated easily 

Although particular chocolate confections are easily imitated and replaced by other chocolate confections, buying and consuming RMCF products is a luxury experience. Rocky Mountain Chocolate Factory embodies the idea that luxury, gourmet indulgence can be consumed on a relative budget. As long as tourists with higher levels of disposable income continue to be its core target market, the trend towards better chocolates should not decline within the franchise. Consumers will not move backward in terms of preference and taste, especially if what they desire remains attainable (Baldonado, Hardwick, Houang, Moreno, Norashkarian, and

Trinh, 2012). RMCF is believed to have unique products that are sought after by its consumers and clients and are not easily substituted by other

.chocolates

?Organized - How usable is the resource to the company 

To be organized, a resource must be usable to the company.

RMCF’s marketing and sales outlets are well organized. As of May 3, 2012 the Company and its franchisees operated 371 stores in 40 states, Canada,

Japan and the United Arab Emirates (finance.yahoo.com, 2012). It is committed to its expansion of its franchise system as well as providing dedication and product excellence. From 2003 through 2007, it has been rated in the “Franchise 500.” It provides excellent support services for those who

.are interested in getting a franchise

As a summary, the VRIO analysis indicates that RMCF has internal

resources that make the company to have internal strengths. These strengths

.help the company grow

Summary of External and Internal Analysis

Some of the major drivers of the industry are health benefits, large variety of applications, and seasonal and festive sales. The major threats identified in this report are raw material prices and the dependence of the industry over unstable economies for cocoa supply, decrease of consumer buying due to continued financial crisis in North America and the Euro zone, rising counterfeit market and changing consumer preferences. There are some opportunities that include lower penetration in developing economies, increasing consumption in emerging

.economies, organic and fair trade chocolate, and use of chocolate as functional food

The market has been witnessing a trend of shifting consumer preferences

towards the dark and premium chocolate segments. The trend towards affordable- luxuries, such as those available at Rocky Mountain Chocolate Factory, is a cause of this increase in the value of gourmet products. The better-chocolates trend comes as

consumer palates shift to higher-end foods. The health benefits of cocoa act as a

major driver for the market. The dependence of the chocolate industry on unstable economies for the supply of cocoa along with rising raw material prices act as major

restraints for the market. Under the raw materials section, an in-depth analysis of

cocoa, sugar, emulsifiers, and flavors has been done with respect to their

.contribution to the chocolate industry

Analysis of Strategic Factors (SWOT) & Strategic Alternatives & Choice

The SWOT Analysis .A

After the analysis of internal and external factors, the analysis of

.strategic factors known as SWOT analysis follows Strengths 

.Quality products of top chocolate confections o

.Over 300 varieties of handmade chocolates and confections o

Efficiency of production and management processes (Revenue vs. o

.Costs of production) results to increasing quarterly dividends

.Unique preparation of their products o

.Special individualized way of serving its customers o

.Improving financial status o

Strong brand awareness and marketing techniques that, in the past, o

.have proved to be successful in its franchises

Weaknesses 

Hersey and Mars have cornered 43% of the US chocolate market for o

many years already and RMCF has not even come close to a small

.part of it

Small marketing reach as its products are sold in specialty stores o

because of the nature of its business line and specialized preparation

.of its products

Dependence to tourists as market segment which is a small segment o

.of the market

Opportunities 

The global demand for chocolate rise 2% on average in the course of o the next five years, because of the growth of emerging markets, as

.reported by KPMG LLP The Russian chocolate market will expand at a 45% by 2016, while o

,in middle and North Africa it will be approximately 60% more

Because of recession, chocolate makers reduced the size of the bars o

This year consumption in Western Europe will expand by 0.6% to o

reach the 2.46 million tons and represents 32% of global chocolates

On March this year the demand is predicted to 43,000 tons greater o

than the supply

In March of last year, cocoa climbed to its peak in 32 years, from us o

$3.775 per ton, in the New York ICE Futures U.S. market and

decreased to US$ 2.171 per ton this year

The global chocolate market is estimated to reach $98.3 billion in o

2016 from $83.2 billion in 2010, at a CAGR of 2.7% from 2011 to

Threats 

Shrink in demand in developed markets o

This year US consumption is predicted to fall by 4.8% and reach o

1.32 million metric tons which is 20% of global consumption

The consumption growth will decrease to 1.8% as it reaches o

September this year as against more than 5% that occurred in the period 2010-2011 because of economic crisis in Europe and the USA

.and the post tsunami rebuilding costs in Japan

Unsteady price of cocoa and other ingredients like sugar and milk o Unsteady supply of cocoa because of political events such as was o

like what happened in Ivory Coast last year and because of cacao

disease such as what happened in Brazil last year

B. Strategic Alternatives & Choice

Porter’s generic competitive strategy indicates three competitive strategies to cope up with Porter’s five competitive forces and to outperform the companies in the industry. In this report, I recommend to strengthen the use of differentiation in Rocky Mountain Chocolate Factory products. RMCF focuses

.its efforts in differentiating their products from those of the competitors

A visit to its store and a client discovers why Rocky Mountain Chocolate

Factory is the number one destination of chocolate lovers everywhere.

Throughout its store, different yummy chocolates and confections to satisfy cravings of even those who like chocolates so much. RMCF workers dip fresh apples in thick, bubbling caramel from a traditional copper kettle rolled in a rainbow of tasty toppings to complete this old fashioned treat. Fudge is made as

RMCF workers fashion a creamy loaf on a traditional marble slab, the old fashioned way, and right before the clients’ eyes. Orders of gift of fine chocolate are elegantly crafted and beautifully packaged in boxes, tins and baskets and are prepared according to clients’ specifications. All of its products are shown in its website. Everyone does not leave any of the RMCF stores

.without eating a free sample

This different way of serving and producing chocolates for their clients increases customer loyalty that protects RMCF from other competitors and also from the new entrants. Clients cannot compare RMCF products from other chocolate confections because they lack alternative for comparison. I recommend strengthening extensive R&D, product design, high quality products, and intensive customer support to differentiate either their products or their service for more differentiation. These can be done to find ways in making

.the products cheaper and at the same time very much unique

Strategy Implementation, Evaluation, and Control

At this last phase of the strategic management process, Rocky Mountain

Chocolate Factory needs to assess the success of its processes and strategies such as choice of products and production, organizational marketing strategy, organizational competitive strategy, and daily operations, and financial management strategies. In order to assess the appropriateness and success of these processes and strategies,

RMCF must put control process and identify a set of parameters for evaluating and measuring the performance at the headquarters’ level and the store level. Corrective actions will be done if the evaluation reveals difference between the actual performances with the projected one within the period of time. This is done to find out the effectiveness of strategy implementation. The parameters of the assessment include the nature of objectives, environmental assumptions, internal organization, resources, risk adverse, timing of decisions and actions, feasibility, and organizational management (Wheelen and Hunger, 2012).. RMCF’s evaluation system provides a feedback to the entire strategic management process.

Implementing a strategy well needs efficient employees, who have shared vision, developed work culture, and value system. RMCF should ensure an encouraging

.environment that develops the effective implementation of strategies

For example in 2009, decline in the same – store pounds purchased from the

factory by franchise stores was seen, thus an assessment was done to reverse what

was happening. It was found out that decline in same store pounds purchased was due to a product mix shift from factory-made products to products made in the store,

such as caramel apples and fudge. In that year, a study conducted to find out the

factors that affect total sales in order to craft strategy to increase total factory sales

and it was found that new store openings, competition, and the receptivity of the

company’s franchise system to new product introductions and promotional

programs are such factors. Corrections and effort were made to increase the

purchases by franchisees of company manufactured products, and to increase

profitability of its store system through increasing overall sales at existing store

locations by placing changes in system-wide domestic same-store sales. The

decline the sales in 2008 was blamed on the financial crisis and the decline in the

.(overall retail environment (Wheelen and Hunger, 2012

RMCF’s Financial Ratios

73.93M :Market Cap (intraday)5 70.73M :Enterprise Value (Jul 9, 2012)3 19.34 :(Trailing P/E (ttm, intraday 13.94 :Forward P/E (fye 2014-02-29)1 N/A :PEG Ratio (5 yr expected)1 2.16 :(Price/Sales (ttm 3.99 :(Price/Book (mrq 2.04 :Enterprise Value/Revenue (ttm)3 10.71 :Enterprise Value/EBITDA (ttm)6 Profitability 11.19% :(Profit Margin (ttm 16.90% :(Operating Margin (ttm

Management Effectiveness 16.04% :(Return on Assets (ttm 21.91% :(Return on Equity (ttm

Income Statement 34.63M :(Revenue (ttm 5.67 :(Revenue Per Share (ttm 13.00% :(Qtrly Revenue Growth (yoy 14.52M :(Gross Profit (ttm 6.60M :EBITDA (ttm)6 3.88M :(Net Income Avl to Common (ttm 0.62 :(Diluted EPS (ttm 13.60% :(Qtrly Earnings Growth (yoy

Balance Sheet 4.13M :(Total Cash (mrq 0.67 :(Total Cash Per Share (mrq 0.00 :(Total Debt (mrq N/A :(Total Debt/Equity (mrq 3.98 :(Current Ratio (mrq 3.04 :(Book Value Per Share (mrq

Dividends & Splits 0.44 :Forward Annual Dividend Rate4 3.60% :Forward Annual Dividend Yield4 0.41 :Trailing Annual Dividend Yield3 3.40% :Trailing Annual Dividend Yield3 4.60% :Year Average Dividend Yield4 5 65.00% :Payout Ratio4 Jun 7, 2012 :Dividend Date3 May 22, 2012 :Ex-Dividend Date4 105:100 :Last Split Factor (new per old)2 Jul 18, 2007 :Last Split Date3

RMCF’s Commons

.Please, see Appendix for Commons

RMCF’s Income Statement

Period Aug 31, 2011 Nov 30, 2011 Feb 29, 2012 May 31, 2012 Ending Total 7,576 8,280 10,133 9,658 Revenue Cost of 4,092 3,760 7,213 5,567 Revenue

Gross Profit 3,483 4,520 2,920 4,092

Operating Expenses Research - - - - Development Selling General and 1,889 3,225 772 2,232 Administrati ve Non - - - - Recurring 190 194 198 237 Others Total - - - - Operating Expenses

1,404 1,101 1,950 1,622 Operating Income or Loss

Income from Continuing Operations 14 15 13 11 Total Other Income/Expenses Net 1,418 1,116 1,963 1,633 Earnings Before Interest And Taxes - - - - Interest Expense 1,418 1,116 1,963 1,633 Income Before Tax 506 391 643 571 Income Tax Expense - - - - Minority Interest

912 725 1,320 1,062 Net Income From Continuing Ops

Non-recurring Events - - - - Discontinued Operations - - - - Extraordinary Items - - - - Effect Of Accounting Changes - - - - Other Items

912 725 1,320 1,062 Net Income - - - - Preferred Stock And Other Adjustments

912 725 1,320 1,062 Net Income Applicable To Common Shares

Conclusion

The Rocky Mountain Chocolate Factory, Inc. is an American company

which is an international franchiser of gourmet chocolate, confection and self-serve

frozen yogurt stores and a manufacturer of an extensive line of premium chocolates

and other confectionery products with headquarters in Durango, Colorado. As of the present, RMCFI together with its franchisees have 371 stores located in 40 states of the USA, Canada, and the United Arab Emirates. It is listed as common stock on

Nasdaq Global Market under “RMCF.” It was founded by Frank Crail in 1981 and

went public in 1986. Its main competitors are Mars, Hersey, Godiva Chocolatier,

Fannie Mae, See’s Candies, Lindt, and Ethel M’s. Although the financial crisis has

hit the USA, RMCF has continued to be profitable although there is a declining

profit margin for some years now. Its financial statements, commons and financial

ratios still reflect that it is still profitable. Quarterly dividends still increase although the rate of increase is still declining. However with businesses looking for

solutions to their financial problems, Rocky Mountain Chocolate Factory, Inc. is

still solid. I recommend that RMCF should introduce and market its products in other places like in the GCC especially in Saudi Arabia whose population is looking

.for high end confections and chocolate products to satisfy their sweet tooth

:References

Bright C. (2011). Chocolate Could Bring the Forest Back. Retrieved on July 20, 2012 from website: http://www.worldwatch.org/node/510

Chocolate News (2012). Retrieved on July 20, 2012 from website: http://chocolate- /news.com/ chocolate-makers-3 ivoireconsultancy.hubpages.com. (2012). The Importance of Corporate Governance. Retrieved on June 10, 2012 from website: http://ivoireconsultancy.hubpages.com/hub/ The-Importance-Of-Corporate- Governance

Merryman B. (2012). Rocky Mountain Chocolate Factory, Inc. Announces 10% Increase in Quarterly Cash Dividend to $0.11 per Share. Retrieved on June 10, 2012 from website: http://www.reuters.com/article/2012/05/03/idUS123279+03-May- 2012+MW20120503

www.rmcf.com. (2012). Rocky Mountain Chocolate Company Factory, Inc. Retrieved on June 10, 2012 from website: https://rockymountainchocolatefactory.com/rmcf/ Documents/ WebHelpingFiles/aboutUs.html

Wheelen T.L. and Hunger J.D. (2012). Strategic Management and Business Policy. 13th edition. Retrieved on July 20, 2012 from website: http://www.scribd.com/doc/90690636/Strategic-Management-and-Business- Policy-13th-Edition-2012-Thomas-l-wheelen-j-David-Hunger

Wood A. (2011). Research and Markets: State of the Industry: Chocolate Candy in the U.S. Fifth Edition Report. Retrieved on July 20, 2012 from website: http://search.proquest.com/ docview/885430845/1383D0158B263BB626A/2? accountid=51112

Yahoo. (2012). Income statement. Retrieved on July 20, 2012 from website: http://finance.yahoo.com/q/is?s=rmcf

Appendix (Rocky Mountain Chocolate Factory Inc. (RMCF

NasdaqGM-

3:50PM EDT (3.06%)0.38 12.03

Add to Portfolio

Income Statement All numbers in thousands View: Annual Data | Quarterly Data

Aug 31, 2011 Nov 30, 2011 Feb 29, 2012 May 31, 2012 Period Ending

7,576 8,280 10,133 9,658 Total Revenue

4,092 3,760 7,213 5,567 Cost of Revenue

3,483 4,520 2,920 4,092 Gross Profit

Operating Expenses

Research - - - - Development

Selling General and 1,889 3,225 772 2,232 Administrative

- - - - Non Recurring

190 194 198 237 Others

- - - - Total Operating Expenses

Income from Continuing Operations

14 15 13 11 Total Other Income/Expenses Net

1,418 1,116 1,963 1,633 Earnings Before Interest And Taxes

- - - - Interest Expense

1,418 1,116 1,963 1,633 Income Before Tax

506 391 643 571 Income Tax Expense

- - - - Minority Interest

Non-recurring Events

- - - - Discontinued Operations

- - - - Extraordinary Items

- - - - Effect Of Accounting Changes

- - - - Other Items

912 725 1,320 1,062 Net Income

- - - - Preferred Stock And Other Adjustments 912 725 1,320 1,062 Net Income Applicable To Common Shares

.Currency in USD Rocky Mountain Chocolate Factory, Inc. Announces 10% Increase in Quarterly Cash Dividend to $0.11 per Share

Press Release: Rocky Mountain Chocolate Factory, Inc. – Thu, May 3, 2012 7:30 AM EDT http://finance.yahoo.com/news/rocky-mountain-chocolate-factory-inc- 113000214.html

:Companies .Rocky Mountain Chocolate Factory Inc  RELATED QUOTES Change Price Symbol 0.13- 12.01 RMCF

DURANGO, CO--(Marketwire -05/03/12)- Rocky Mountain Chocolate Factory, Inc. (RMCF - News), (the "Company"), which franchises/operates gourmet chocolate and self-serve frozen yogurt stores and manufactures an extensive line of premium chocolates and other confectionery products, today announced that its Board of Directors has declared a first quarter cash dividend of $0.11 per common share outstanding. This represents a 10% increase in the cash dividend payout when compared with the previous quarterly dividend. The cash dividend will be payable .June 8, 2012 to shareholders of record at the close of business May 24, 2012 Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, Colorado, is an international franchiser of gourmet chocolate, confection and self-serve frozen yogurt stores and a manufacturer of an extensive line of premium chocolates and other confectionery products. As of May 3, 2012 the Company and its franchisees operated 371 stores in 40 states, Canada, Japan and the United Arab Emirates. The Company's common stock is listed on The Nasdaq Global Market under the symbol "."RMCF :Contact For Further Information Contact Bryan J. Merryman COO/CFO 259-0554 (970)

As of As of As of As of As of 2011-05- 2011-08- 2011-11- 2012-02- 2012-05- (In Millions of USD (except for per share items 31 31 30 29 31

4.57 4.07 3.15 4.13 5.05 Cash & Equivalents

- - - - - Short Term Investments

4.57 4.07 3.15 4.13 5.05 Cash and Short Term Investments

3.43 3.65 4.56 4.08 3.49 Accounts Receivable - Trade, Net

- - - - - Receivables - Other

3.81 4.10 4.92 5.09 3.91 Total Receivables, Net

3.87 4.59 4.32 4.12 3.74 Total Inventory

- - - - - Prepaid Expenses

0.92 0.82 0.88 0.77 1.00 Other Current Assets, Total

13.17 13.58 13.26 14.10 13.70 Total Current Assets

15.94 15.66 16.48 17.83 18.00 Property/Plant/Equipment, Total - Gross

9.12- 8.95- 9.13- 9.32- 9.55- Accumulated Depreciation, Total

1.05 1.05 1.05 1.05 1.05 Goodwill, Net

0.05 0.04 0.03 0.02 0.02 Intangibles, Net

- - - - - Long Term Investments As of As of As of As of As of 2011-05- 2011-08- 2011-11- 2012-02- 2012-05- (In Millions of USD (except for per share items 31 31 30 29 31

4.57 4.07 3.15 4.13 5.05 Cash & Equivalents

- - - - - Short Term Investments

4.57 4.07 3.15 4.13 5.05 Cash and Short Term Investments

3.43 3.65 4.56 4.08 3.49 Accounts Receivable - Trade, Net

- - - - - Receivables - Other

3.81 4.10 4.92 5.09 3.91 Total Receivables, Net

3.87 4.59 4.32 4.12 3.74 Total Inventory

- - - - - Prepaid Expenses

0.92 0.82 0.88 0.77 1.00 Other Current Assets, Total

13.17 13.58 13.26 14.10 13.70 Total Current Assets

15.94 15.66 16.48 17.83 18.00 Property/Plant/Equipment, Total - Gross

9.12- 8.95- 9.13- 9.32- 9.55- Accumulated Depreciation, Total

1.05 1.05 1.05 1.05 1.05 Goodwill, Net

0.05 0.04 0.03 0.02 0.02 Intangibles, Net

- - - - - Long Term Investments

0.10 0.10 0.13 0.13 0.14 Other Long Term Assets, Total

21.61 21.92 22.17 24.16 23.68 Total Assets

0.90 1.22 1.35 1.36 0.92 Accounts Payable

1.58 1.27 1.25 1.41 1.17 Accrued Expenses

0.00 0.00 0.00 0.00 0.00 Notes Payable/Short Term Debt

- - - - - Current Port. of LT Debt/Capital Leases

0.91 0.83 0.80 0.77 0.82 Other Current liabilities, Total

3.38 3.31 3.39 3.54 2.91 Total Current Liabilities

- - - - - Long Term Debt

- - - - - Capital Lease Obligations

0.00 0.00 0.00 0.00 0.00 Total Long Term Debt As of As of As of As of As of 2011-05- 2011-08- 2011-11- 2012-02- 2012-05- (In Millions of USD (except for per share items 31 31 30 29 31

0.00 0.00 0.00 0.00 0.00 Total Debt

1.08 1.04 1.00 1.88 1.86 Deferred Income Tax

- - - - - Minority Interest

- - - - - Other Liabilities, Total

4.46 4.36 4.39 5.43 4.78 Total Liabilities

- - - - - Redeemable Preferred Stock, Total

- - - - - Preferred Stock - Non Redeemable, Net

0.18 0.18 0.18 0.18 0.18 Common Stock, Total

8.24 8.36 8.46 8.71 8.49 Additional Paid-In Capital

8.72 9.02 9.13 9.84 10.22 (Retained Earnings (Accumulated Deficit

- - - - - Treasury Stock - Common

- - - - - Other Equity, Total

17.14 17.56 17.78 18.74 18.90 Total Equity

21.61 21.92 22.17 24.16 23.68 Total Liabilities & Shareholders' Equity

- - - - - Shares Outs - Common Stock Primary Issue

6.09 6.13 6.13 6.16 6.14 Total Common Shares Outstanding

.Google Finance Beta available in: Hong Kong - Canada - U.S. - China - U.K

Cash Flow

3 mo nths 6 9 12 months 3 endi months months months ending ng ending ending ending (In Millions of USD (except for per share items 2012-05- 201 2011-2011-11-2012-02- 31 1- 08-31 30 29 05- 31 0.92 1.83 2.56 3.88 1.06 Net Income/Starting Line 3 mo nths 6 9 12 months 3 endi months months months ending ng ending ending ending (In Millions of USD (except for per share items 2012-05- 201 2011-2011-11-2012-02- 31 1- 08-31 30 29 05- 31 0.17 0.36 0.55 0.75 0.24 Depreciation/Depletion - - - - - Amortization - 0.03- 0.17- 0.73 0.07- Deferred Taxes 0.09 0.23 0.41 0.67 0.92 0.24 Non-Cash Items 1.60 0.45 0.24- 0.14- 0.66 Changes in Working Capital 2.84 3.02 3.37 6.15 2.13 Cash from Operating Activities - 1.19- 1.86- 3.26- 0.25- Capital Expenditures 1.04 0.02 0.06 0.08 0.14 0.02 Other Investing Cash Flow Items, Total - 1.13- 1.78- 3.12- 0.23- Cash from Investing Activities 1.02 0.00 0.01 0.01 0.02 0.01 Financing Cash Flow Items - 1.22- 1.83- 2.44- 0.62- Total Cash Dividends Paid 0.61 0.02 0.04 0.04 0.17 0.36- Issuance (Retirement) of Stock, Net - - - - - Issuance (Retirement) of Debt, Net - 1.17- 1.78- 2.24- 0.97- Cash from Financing Activities 0.58 - - - - - Foreign Exchange Effects 1.23 0.72 0.19- 0.78 0.93 Net Change in Cash - - - - - Cash Interest Paid, Supplemental 0.11 0.98 1.43 1.88 0.05 Cash Taxes Paid, Supplemental Financial Ratios (Rocky Mountain Chocolate Factory Inc. (RMCF NasdaqGM-

3:09PM EDT - Nasdaq Real Time Price (1.06%)0.13 12.01 Add to Portfolio

:Get Key Statistics for Key Statistics

.Data provided by Capital IQ, except where noted Trading Information Valuation Measures

5 Stock Price History 73.93M :Market Cap (intraday)

3 0.25 :Beta 70.73M :Enterprise Value (Jul 9, 2012)

3 25.67% :Week Change -52 19.34 :(Trailing P/E (ttm, intraday

3 1 2.67% :S&P500 52-Week Change 13.94 :Forward P/E (fye 2014-02-29)

3 1 12.88 :Week High (Jul 2, 2012) -52 N/A :PEG Ratio (5 yr expected)

3 7.14 :Week Low (Oct 4, 2011) -52 2.16 :(Price/Sales (ttm

3 10.74 :Day Moving Average -50 3.99 :(Price/Book (mrq

3 3 9.59 :Day Moving Average -200 2.04 :Enterprise Value/Revenue (ttm)

6 10.71 :Enterprise Value/EBITDA (ttm) Share Statistics

3 Financial Highlights 12,644 :Avg Vol (3 month)

3 15,929 :Avg Vol (10 day) Fiscal Year

5 6.17M :Shares Outstanding Feb 29 :Fiscal Year Ends 5.13M :Float Feb 29, :(Most Recent Quarter (mrq 1 15.72% :Held by Insiders % 2012

1 36.60% :Held by Institutions %

3 Profitability 6.80K :Shares Short (as of Jun 15, 2012)

3 11.19% :(Profit Margin (ttm 0.60 :Short Ratio (as of Jun 15, 2012) 16.90% :(Operating Margin (ttm Short % of Float (as of Jun 15, N/A :2012)3

3 Management Effectiveness 5.32K :Shares Short (prior month) 16.04% :(Return on Assets (ttm

Dividends & Splits 21.91% :(Return on Equity (ttm

4 0.44 :Forward Annual Dividend Rate

4 Income Statement 3.60% :Forward Annual Dividend Yield

3 34.63M :(Revenue (ttm 0.41 :Trailing Annual Dividend Yield

3 5.67 :(Revenue Per Share (ttm 3.40% :Trailing Annual Dividend Yield

4 13.00% :(Qtrly Revenue Growth (yoy 4.60% :Year Average Dividend Yield 5

4 14.52M :(Gross Profit (ttm 65.00% :Payout Ratio 6 3 6.60M :EBITDA (ttm) Jun 7, 2012 :Dividend Date 3.88M :(Net Income Avl to Common (ttm May 22, :Ex-Dividend Date4 2012 0.62 :(Diluted EPS (ttm

2 105:100 :Last Split Factor (new per old) 13.60% :(Qtrly Earnings Growth (yoy

3 Jul 18, 2007 :Last Split Date Balance Sheet

4.13M :(Total Cash (mrq

0.67 :(Total Cash Per Share (mrq

0.00 :(Total Debt (mrq

N/A :(Total Debt/Equity (mrq

3.98 :(Current Ratio (mrq

3.04 :(Book Value Per Share (mrq

Cash Flow Statement

6.15M :(Operating Cash Flow (ttm

1.66M :(Levered Free Cash Flow (ttm RMCF’s Income Statement