Ice Cream Anyone?

Posted on August 01, 2005
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Like millions of Americans, Donald and Susan Sutherland love ice cream. In fact, they like ice cream so much they decided to open their own ice cream store in Tempe. What started out as a single Cold Stone Creamery 18 years ago is today a growing company with outlets in 47 states and even the Caribbean.

Everyone can probably agree that the world is a better place with more ice cream in it.

But if you were to listen to Arizona Chain Reaction, we'd all be better off without "chains" like Cold Stone Creamery.

ACR says chains hurt the local economy because they export profits, whereas independent businesses spend profits locally. "When you shop locally owned businesses," ACR says, "your money is recirculated over and over and creates up to 75 percent more tax revenue to our community."

As it turns out, the 75 percent claim appears to be based on a single report on three bookstores in Austin, an underwhelming sample to say the least. What's more, the authors withheld from the report "the underlying data, assumptions and methodology," making the calculations impossible to verify.

On the meta level, if we bought this muddled reasoning, every city and state should pursue economic autarchy. Let's call it a North Korean economic growth strategy. You could say goodbye to companies like Cold Stone Creamery and to the improved products, services and lower costs that accompany competition.

The "shop locally" idea also raises some thorny questions. When does a business become a chain? After it opens a second store, a third store, a 10th? And what about a store founded in Arizona like Cold Stone Creamery? By ACR reasoning, those profits will return to Arizona. Should consumers in Florida have to forgo Arizona ice cream for that reason?

At its core, the assumption that local businesses spend profits in-state while chains export them just doesn't square. Local entrepreneurs can spend profits on Wall Street, just as chains can spend locally. Wal-Mart, for instance, spent $1.5 billion for merchandise and services with 939 suppliers in the state last year.

ACR may not like the "homogeneity" of places like Wal-Mart, but consumers apparently do. Wal-Mart has 70-plus stores in Arizona that handed over $248 million in sales taxes to the state last year. And more than 28,000 Arizonans are employed in local stores. Would these Arizonans be better off without Wal-Mart?

Fuzzy economics aside, there is something to like in the group's appreciation for businesses that "create a unique atmosphere that set Arizona apart." There is something fun in discovering out-of-the-way venues with the character that local entrepreneurs put into their businesses.

But you can take a good point too far. ACR says independent businesses appeal to customers "who value choice, individuality and quality service more than the occasional discount." That's a fine sentiment for those who can afford it.

But there are plenty of consumers who rely on that "occasional discount" to make ends meet. When you have a family to feed and clothe, Target isn't an option, it's salvation.

ACR has backed bills to end what it calls "big-box subsidies," and on that point we agree. Skewing the playing field by subsidizing particular companies is unfair.

On the other hand, backlash against chain stores is so intense in some states that legislators have proposed additional taxes, called the "Big Box Tax," on large stores. That's not right, either.

Fair competition requires a level playing field with all players operating by the same rules. Government should enforce the rules and let the players play.

Perhaps the New Times said it best when it included ACR on a "Best of" list, saying, "We know the nice folks from Arizona Chain Reaction are flipping through 'Best of' right at this very moment, clutching their heads . . . whenever they see mention of a chain store or restaurant. Sorry, guys . . . but sometimes bigger is better. Not always, though. . . . We're still giddy over the impending arrival of Ikea, but we're thankful for you, too, Arizona Chain Reaction."

As one of the fastest-growing states, Arizona has plenty of room for all kinds of businesses. So enjoy your Lux or your Starbucks. I'm going out for some ice cream.

First published in the Arizona Republic, July 31, 2005.

Key Links:
Arizona Chain Reaction
-Austin Impact Analysis
-Wal-Mart Facts
- Arizona Republic: "Arizona has room for all-even ice cream"

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