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Kahala to merge with Cold Stone

Mix Cold Stone Creamery with Kahala Corp., and you get a $1.1 billion company with 13 fast-food brands and 4,600 locations.

The two companies will announce this morning that they are merging, and the creation is a Scottsdale-based casual dining conglomerate called Kahala Cold Stone.

The two companies, which are privately-held, did not disclose terms of the deal.

Kahala brings a cornucopia of brands to the table, including Blimpie, Samurai Sam’s Teriyaki Grill, Taco Time and Surf City Squeeze. Cold Stone brings its fast-growing ice cream concept and branding know-how.

“It was a perfect opportunity,” Cold Stone CEO Doug Ducey said Thursday. He will retain his role in the new company, and Kahala founder Kevin Blackwell will become chairman and chief strategist.

Ducey said the two companies are an ideal match because Cold Stone has been on the hunt for new brands to build.

Its first store opened in Tempe, and 19 years later, the company is mixing ice cream on frozen granite slabs in seven countries.

Kahala, meanwhile, wanted to grow.

Some of its brands are high performers, while others are virtual unknowns. Blackwell started with a smoothie stand that catered to California surfers; today his biggest franchise is Blimpie.

The company will now look at each of its brands individually before making any decisions about its stores.

Together, Ducey and Blackwell hope to leverage their buying power and real estate.

The goal is to fill strip malls with not one of their brands but a handful.

They say that with that strategy, they can capture fickle consumers, who may feel like pizza one night and Mexican food another. Dessert is covered, too.

Martha Mariscal, 42, runs four Phoenix Cold Stone franchises.

She said franchise old-timers may struggle to accept that a company so passionate about ice cream is also passionate about fried rice and turkey wraps now.

But she thinks it’s a smart business move that ultimately will boost her profits.

“It will help us buy down costs. That’s what I’m looking forward to,” she said.

“They’re both Arizona companies, which is really good for our economy.”

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