DUCEY DISASTER
Stephen Lemons
Francisco Banuelos' El Mas Rudo: Unfair? Yes. But maybe more to Adolf.
Doug Ducey is not the über-businessman he claims, say former Cold Stone franchisees.
Related Content
More About
You've got to wonder what was going through editorial board noggins at the Arizona Republic when they decided to give their endorsement in the Republican primary for state treasurer to Doug Ducey.
The former CEO of pricey ice cream peddler Cold Stone Creamery is the favorite to take the Republican nod in the race and has raised hundreds of thousands of dollars more than that of his next-closest GOP rival, state Senator Barbara Leff.
Local TV stations have been flooded with Ducey ads that tout him as one of "Arizona's most honored businessmen, with a record of creating jobs."
The Republic seemed to swallow this load whole cone, stating in its endorsement that "the best fit" for the treasurer's job "comes from the business world."
This, even though Ducey's under withering fire from the Democratic Party over the allegation that he has yet to fully disclose his assets.
Ducey, for instance, lists in his financial disclosure form a trust in the name of him and his wife as his primary investment but not what's in the trust itself.
(Matt Benson, a spokesman for the Secretary of State's Office, tells me that at least the trust part of Ducey's filing — spare though it may be — is lawful.)
Follow that up with what must be an embarrassment for the editorial board: the revelation, after its endorsement, by one of the Rep's own reporters that Ducey was late paying 2006, 2008, and 2009 taxes on his million-dollar-plus Paradise Valley abode.
The stalled payments for '08 and '09 earned him a lien on his home, and he finally paid up — in May of this year.
Okay, maybe the Rep's satraps didn't know about Ducey's tax problems — I'll give them that. But if they'd bothered to stick Ducey's name into Google, they would have been inundated with testimonies betraying Ducey's representation of himself as a hotshot jobs creator and über-businessman.
Blogs about Ducey and Cold Stone, acquired in a 2007 merger by the Scottsdale-based Kahala Corporation, abound.
One of them, titled "Doug Ducey Is Sleazy," blasts Ducey as a "sleaze bag and con artist." A GOP blog called "Grow Our Party" alleges that Ducey "left a trail of devastation and bankruptcies for those who invested in his business escapades."
Scratch the surface and you find there's more to these allegations than just the usual blogosphere rants.
Indeed, many former franchisees who got into Cold Stone during the Ducey years — from 1995 to 2007 — have similar complaints about Cold Stone and what they refer to, over and over again, as a failed business model.
They say this business model encouraged expansion at all costs and hobbled them with high-priced goods they were obligated to purchase from Cold Stone-approved vendors. And they complain about Cold Stone's erstwhile two-for-one coupons, with the franchisee picking up the tab on the freebie, and the fact that stores were located too close together, thus diluting sales.
This year, in a review of the 10 most-popular franchises, CNNMoney.com noted that Cold Stone franchisees have a 31 percent failure rate.
"The product is sweet, but the financials can be bitter," notes the article. "In the last 10 years, almost one in three [Small Business Administration]-backed franchisees defaulted on [its] loan. It's an expensive shop to start, too: The initial franchise fee is $42,000."
Far more devastating was a June 2008 piece by Richard Gibson in the Wall Street Journal that detailed the plights of ex-franchisees, some of whom had gone bankrupt, losing homes and life savings in the process.
Cold Stone boasts "more than 1,400 stores in the U.S. and worldwide," says Kahala's Web site. Cold Stone began as one store in Tempe in 1988 and opened its first franchise in '95, in Tucson.
Cold Stone's rapid expansion occurred during Ducey's reign, and Ducey is not shy about taking credit for that expansion on his campaign Web site. Indeed, that growth was one of the reasons cited by the Republic in its endorsement of the businessman.
But the Journal took that ice-cream bubble to task, noting that as of the date of the article, 20 percent of Cold Stone's franchises were up for sale. Ducey once called the ice cream biz "recession proof," but critics in the Journal article called the ice cream — up to $4 a scoop — "a pricey indulgence" in a down economy.
As for the over-expansion, the Journal quotes Michael Goldman, then a franchisee with seven stores and a member of Cold Stone's National Advisory Board, as stating that Cold Stone "did overbuild across the country, no question about it."
Goldman argued that store sales were decimated in the process.
"I'm sure there are sites that should never have been picked and franchisees that should never have been picked," Goldman told the Journal.
After Kahala took over Cold Stone, it eventually cut Ducey loose. In the Journal piece, a Kahala exec claims that the company ended at least one of the business practices that were the ire of franchisees under the Ducey regime: the 2-for-1 coupons.
Kahala declined to comment for this column. And Ducey did not return my call to his office, asking for answers to franchisee claims.
