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Although Unable to Pay Bills, Cold Stone Owner Said on CNBC He was Profitable

L-R: Franchisee Rudy Puig and franchisor president Dan Beem
Franchisee Puig (left) and Cold Stone's president Dan Beem speaking on CNBC

MIAMI – Cold Stone Creamery franchisee Rudy Puig was spotlighted on national television in 2011 exclaiming to viewers, “All my stores have been profitable,” but court records show otherwise.

The purpose of Puig appearing on CNBC’s documentary, sitting between president Dan Beem and attorney Robert Zarco, was to help defend the franchisor from bad publicity caused by the network’s first airing of Behind the Counter: The Untold Story of Franchising. Puig, approved by Cold Stone, was supposed to be indicative of the hundreds of franchise owners in the system—happy and profitable. Puig’s testament was to counter the negative stories presented on CNBC’s original program by former franchisees who failed in their businesses.

Blue MauMau has now discovered court records in Florida that shine a different light on the multi-unit store owner and his business Nutty Buddies Creamery. Records show a history of sales tax liens, judgment liens and litigation from creditors before, during and after the CNBC program. Miami-Dade County civil court records lists at least seven judgment liens totaling approximately $35,000 against Nutty Buddies, filed by Florida Department of Revenue. Some records show Puig was struggling to pay various bills to vendors, even for small amounts. 

April 2011 Fla Dep't of Revenue lien against Puig

One dispute revealed is a lawsuit filed by South Kendall Investors LLC, Puig’s landlord, seeking back lease payments. Miami-Dade County reveals a stipulation for settlement and dismissal on March 2011, naming Cold Stone Creamery Leasing Co. as defendant with Nutty Buddies Creamery. Puig and two other individuals are named as guarantors. Two months later Cold Stone Leasing, listed as “tenant” paid $31,798 on Puig’s outstanding lease. “Subtenant” Nutty Buddies paid $4,772. After paying off the balance ten months later, Cold Stone received a voluntary dismissal of the lawsuit in early 2012.

Bank of America has also filed suit against Puig. In Miami-Dade County circuit court, the bank notified Puig and other individuals and entities that the legal action is to foreclose on the mortgage of his property. The document is dated August 29, 2011.

Pressures on a franchisee

One attorney, who does not want to be identified, observes that it is human nature for franchisors to seek out vulnerable franchisees to tow the company line and publicly support the brand. “They give them the ‘we’re in this together bit, you scratch my back and I’ll scratch yours’ and sometimes franchisees fall for that.” He said in the Cold Stone case, in the end, the franchisee was used like a Kleenex. “The franchisor used it and then threw it in the trash. It’s very unfortunate.”

"Miami-Dade County reveals a stipulation for settlement and dismissal on March 2011, naming Cold Stone Creamery Leasing Co. as defendant with Nutty Buddies Creamery... Two months later Cold Stone Leasing, listed as “tenant” paid $31,798 on Puig’s outstanding lease."

Jim Coen, president of the Dunkin’ Donuts Independent Franchise Owners Association understands the pressure that franchisees can be under in supporting what the franchisor wants. “While franchisors point to the franchise agreement to protect the brand, franchisees must think of their families first and brand second,” says Coen in regard to Puig saying on television that he was profitable while actually not being able to pay his accumulating debts. “Nobody can fault them for that, particularly when the franchisor has an onerous franchise agreement to back them up.” Coen is referring to the ease, provided by franchise agreement, in which a franchisor can terminate a franchise business.

Today Rudy Puig finds himself in a darker place, fighting financial turmoil and litigation, far from the limelight of appearing on national television with President Beem and attorney Zarco. After the CNBC interview, National Independent Association of Cold Stone Creamery Franchisees president Puig and other group leaders pleaded with management to work with Cold Stone to improve store profitability, especially since U.S. franchisees were failing at an alarming rate.

When collaboration failed, the association’s attorney Robert Zarco of Zarco Einhorn Salkowski & Brito filed a lawsuit against Cold Stone in Florida on January 23, 2012. Franchisees hoped the court would force Cold Stone to be more transparent. The group asked for an accounting of franchisees’ advertising contributions and an accounting of the amount the franchisor had collected on unredeemed gift cards and vendor rebates. The group also asked for lower pricing on the products that franchisees are required to purchase through Cold Stone. 

Fla department of revenue lien against Nutty Buddy
Fla. Dep't of Revenue lien against Nutty Buddy

Unfortunately for the franchisees, the judge ruled last May to put the group’s lawsuit on hold, granting Cold Stone’s motion to arbitrate the disputes in Arizona, as their franchise agreements dictate.

Now, Cold Stone stands ready to fight against the franchisee association leaders in arbitration. First on their list is NIACCF president Rudy Puig, represented by his attorney, Robert Zarco.

In an attempt to find out what Dan Beem knew about Rudy Puig's store profitability at the time of the CNBC interview, Blue MauMau contacted Cold Stone Creamery headquarters. The company did not respond. A phone call to Robert Zarco revealed that he was not aware of Puig’s financial situation, but said he would check with his law partners. A second phone call and email were not returned.


Editor's note: Corrections to this article by Cold Stone franchisee Rudy Puig and attorney Robert Zarco appear in a new article Puig: My Cold Stone Stores Are Profitable. Please read that updated article for the full details to this story.

 

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.