COLD STONE CREAMERY: Failed Franchisees Attack Doug Ducey Campaign
Doug Ducey, the former Chairman and CEO of Cold Stone Creamery and CEO of Kahala-Coldstone, is campaigning for the position of Arizona State Treasurer.
Angry former Cold Stone Creamery franchise owners, who claim Ducey knowingly sold a flawed franchise opportunity that cost them their financial well-being and the government millions, have joined forces with Ducey’s opponent, Democratic nominee Andrei Cherny, to try to melt his hopes of ever reaching office.
Doug Ducey calls Cold Stone Creamery “a true Arizona business success story”
Doug Ducey’s campaign strategy is to cast himself as a proven, successful business person who built a successful 1400+ unit franchise chain endowed with a “culture of accountability.”
According to his campaign website:
Over the last 20 years, Doug Ducey has been a business leader and a business builder. Through his innovation, team-building skills, and results-based managerial style, he has created thousands of jobs in America and worldwide, helped hundreds to realize their dreams of business ownership, and created a culture of accountability and a mission that has become a model of business best practices.
…As the former CEO and Chairman of Cold Stone Creamery, a true Arizona business success story, Doug discovered that the key to achieving seemingly impossible goals is to set a vision, ignite people to it, provide tools and support, and manage for results. It’s Doug’s proven method, and it’s what he’ll do as Arizona State Treasurer.
Failed Franchisees Want to Melt Ducey’s Political Hopes
According to an article (“Former Cold Stone Franchisees, Cherny Campaign Slam Ducey”) in the Arizona Capitol Times:
A group of former Cold Stone Creamery franchise owners accused Republican state treasurer candidate Doug Ducey, the company’s former CEO, of using a raft of dishonest business practices to perpetuate a revolving-door system that lured in franchisees, bankrupted them and then pushed them aside to make way for new ones.
At an Oct. 7 press conference, hosted by Andrei Cherny, Ducey’s Democratic opponent, four former Cold Stone franchise owners blasted the former CEO. They accused him of attracting franchisees with inflated profit projections, intentionally undermining owners and using Cold Stone’s store evaluation system to bully franchisees who challenged the company’s actions…
“They know they were selling a failed business model to franchisees, yet they continued to do it year after year to the profit of the creamery. Most of us, a number of us here, were just ruined financially,”Ken Gornall said at the press conference, which was held at Arizona Democratic Party headquarters. “He was the CEO. He was responsible for whatever actions took place.”
The Success Story with a 31% Failure Rate
Ducey’s run for Arizona State Treasurer has prompted an aggressive alliance between unhappy ex-franchisees eager to share their feelings about Ducey’s allegedly sleazy business practices, and Andrei Cherny, who is more than happy to give them a megaphone to do so. Cherny videotaped failed franchisees bashing Doug Ducey and Cold Stone Creamery, and posted the video series both on his website and on YouTube.
See: Videos for Press Conference about Doug Ducey with Former Cold Stone Creamery Franchisees
According to a Phoenix News Times (Doug Ducey’s Record at Cold Stone Could End Up His Albatross) story:
The ex-Cold Stone hawkers ran through a litany of common complaints regarding Cold Stone’s alleged business practices: promises of profits that rarely materialized; "cannibalizing" sales by placing franchises too close together; forcing franchisees to purchase high-priced goods from favored vendors who provided "remunerations" to Cold Stone; two-for-one coupons that the franchisees had to eat the cost of; and on and on.
One allegation in particular was an eyebrow-raiser. Redd, who operated four stores in Arizona, said on camera that the franchisees were supposed to pay sales tax on the freebie ice cream offered by the infamous two-for-one coupons. He said he was forced to pay this when he was audited by the state. Moreover, Redd claimed he informed Ducey and Cold Stone about the situation.
"We told Cold Stone about it," Redd explained at the press conference. "They told us to just not pay the sales tax, to just, you know, throw the coupons away."
Redd suggested that Cold Stone may not have paid state sales tax on "hundreds of millions of dollars of ice cream" distributed through the promotion.
Also read:
Failure Rates of the 10 Most Popular Franchises
COLD STONE CREAMERY: Bitter Franchisee Alleges Encroachment
COLD STONE CREAMERY: Franchisee Alleges FR “Churning”
Cold Stone Creamery Gets Served by Franchisees
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Contact the author or site admin at UnhappyFranchisee[at]gmail.com
I was supposed to be interviewed on this topic because of earlier critical writings warnings the gang had over at franchise-chat, when its forum was still running.
The one issue not raised in the above story has to do with Cold Stone’s treatment of giftcards which were not used – technically, those funds belong to the State after a certain period of time. Technically, this is called “escheating”. Nice sounding word.
Cold Stone however simply kept the breakage and reported it as revenue. Nice, eh.
I am republishing the posts I wrote about the Cereality concept on the Franchise Pick blog.
I wrote about a very revealing article published in Restaurants & Institutions magazine when Kahala bought Cereality. Cereality had a track record of failure, with company and franchise units failing within 6 and even 3 months. In the article, Doug Ducey stated that it took 50-60 units before a company could know what worked, what didn’t, etc. In the same article he announced that the 5-unit chain’s expansion would now be all through the sale of franchises. It was so blatant that he was going to sell this “proven” concept (proven to be unsuccessful) and all the risk that went with it to franchisees without the slightest hesitation.
Ironically, the Cereality website still quotes some moron as saying the concept is too good to fail. Today there are NO full Cereality Cafes in existence, just a few co-brands and an airport kiosk.