The true nature of the surf emporium's customer base isn't lost on its CEO, Edward Moriarty, a former Walt Disney executive who has big plans for Ron Jon. "Only 2.5-million people surf in this country," he says. "It's the wannabes who drive the business."
Since being named big kahuna three years ago, Moriarty, 58, has been leading Ron Jon in an expansion based on the premise that the surf wannabes are everywhere -- and surf retailers are not. Ron Jon opened a shop in California's The Block at Orange just over a year ago, followed by a Sawgrass Mills store in Fort Lauderdale last May. Next year, the company, which took in $40 million in sales in fiscal 1999, plans to open a 25,000-sq.-ft. store at Festival Bay in Orlando. A Florida distribution center is on the horizon, as are Ron Jon shops overseas.
Moriarty's goal over the next four to six years: Open 12 to 16 stores, grow sales to close to $100 million and take Ron Jon public. To pull it off, he says, "We must be hardcore, authentic, believable and credible. We need to put our businesses in the right spots and run them well, and that's how we plan to leverage this brand."
Ah, the brand. Ron Jon-emblazoned merchandise, most of it imported, accounts for 46% of the company's sales. Ron Jon's badge-like, Asian-lettered logo was the brainchild of the company's founder, an eccentric surfer named Ron DiMenna. (There is no "Jon" -- DiMenna just thought the name sounded good with his own.) He opened the first Ron Jon on the Jersey Shore in 1961, and the Cocoa Beach store two years later.
But as Cocoa's tiny strip-mall shop began to prosper, DiMenna foundered. He battled drugs and alcohol, was arrested for several drug offenses and served 16 months in a New Jersey prison. After his release, he eventually moved to Australia to avoid what he has called "persecution."
Fortunately for DiMenna, a young man named Bob Baugher was showing considerable business savvy as he worked his way up from janitor at the Cocoa Beach store -- enough so that in 1975, DiMenna tapped Baugher president. It was a smart move. Baugher kept the company running while DiMenna was in Australia. It was Baugher who helped create the Ron Jon mystique by pounding DiMenna's logo into the consumer psyche with millions of stickers and T-shirts and hundreds of highway billboards letting tourists know how many more miles to Cocoa Beach.
As Baugher flourished and Ron Jon grew, DiMenna consulted and applauded from his refuge Down Under, sending hand-written missives to Baugher signed, "Love Ya, Ron." But the two men's partnership also played out in passionate arguments over the future of the business. As DiMenna put it in one note: "I feel you have outgrown Ron Jon and you want to build your own empire."
In early 1997, DiMenna, who still owns 100% of the company, pushed Baugher out -- the company says he resigned, Baugher claims he was fired. Baugher filed a civil suit against Ron Jon that claimed he'd been forced out of a lifetime contract. Last April, after two years, four judges and 13 court files thick with depositions, the suit was settled with undisclosed terms.
Neither Baugher nor DiMenna agreed to be interviewed for this article, but Baugher appears to hold a grudge. After DiMenna would not take his advice to buy up properties surrounding Ron Jon, Baugher bought the properties himself during his last years as president. The owner of Ron Jon's south parking lot, Baugher last year declined to renew the lease. Baugher, who also owns the huge Radisson Resort & Conference Center in nearby Cape Canaveral, plans to build a 75-unit hotel on the former parking lot. Another possible plan for the site: a competing surf shop.
Moriarty, who was hired just days before Baugher filed his lawsuit, soon found out he'd inherited an even more serious problem. U.S. Customs agents raided Ron Jon's corporate offices in Cocoa Beach in early 1998, just after company executives had boxed up documents in preparation for the civil suit. The feds seized 150 cartons of evidence, from computer files to a box of Ron Jon labels marked "Made in the USA." Since then, a federal grand jury has been looking into possible Customs violations that include illegal importing, smuggling and money laundering.
The U.S. Attorney's Office won't comment. Moriarty says he knows only that Customs is investigating the company's import practices for a period from 1993 to 1996 -- before he joined. He says today's practices are pretty much the same as before he came, and that Ron Jon "follows all the rules."
As the Customs investigation has proceeded, Moriarty has taken care of business. He pushed to settle Baugher's civil suit. And -- as the depositions reveal -- he also pushed to limit DiMenna's involvement. During interviews, Moriarty is complimentary about his reclusive boss. But Moriarty's deposition in the civil suit makes clear that in the wake of the lawsuit and federal investigation, he would have quit had DiMenna not agreed to stay out of the company's day-to-day management. Today, Moriarty says that DiMenna "has specific feelings and concerns about the logo and is very interested in the marketing, but his input comes to us from his place on the board of directors."
DiMenna, 62, now lives with his third wife on a Merritt Island reserve that he calls the Rubber Ranch. He likes to pop by the surf shop, admiring the life-size sporting statues out front and bringing employees bags of grapefruit from his citrus groves. He's over his drug habit, and six years ago, he got something he had been seeking for many years: In one of his last acts as governor, New Jersey's Jim Florio signed a pardon that wipes clean DiMenna's criminal record. Still, the ongoing U.S. Customs investigation means DiMenna's legal problems may not be behind him.
Moriarty doesn't expect to complete his plans for the company until the criminal investigation is concluded, but he's pressing ahead. And neither the company's curious sole shareholder nor the grand jury probe have deterred investors such as development companies Mills Corp. and Belz, which are helping Ron Jon open new stores. Moriarty and other Ron Jon officials are studying companies from REI to L.L. Bean to figure out just the right retail balance for its new stores: A combination of Ron Jon merchandise and higher-end active lifestyle wear, and a possible expansion into cold-weather sports gear.
Those plans, however, have their skeptics. Erik Gordon, director of the Center for Retailing at the University of Florida, has studied efforts to turn companies that are "One of a Kind" -- that's the Cocoa Beach store's logo -- into chains. Take Hard Rock Cafe: When the only way to get a Hard Rock T-shirt was to trek to London or New York City, the shirts were wildly popular, Gordon says. Now that you can get one in Orlando, they are decidedly uncool. Gordon predicts the same fate for Ron Jon. Stopping by the Festival Bay store on a family trip to Disney won't have the same appeal as making the pilgrimage to the original in Cocoa Beach, he says.
Moriarty, pointing to successful retail chains such as The Gap and Old Navy, says it's not fair to compare Ron Jon to themed restaurants. Rather than dilute the brand, he argues, additional stores can enhance it -- if they stock high-quality merchandise and if there aren't too many outlets. The biggest challenge, he says, is to stay authentic; carrying enough top-line surf gear to balance souvenir merchandise such as Ron Jon's dancing dashboard hula girls and disposable lighters. As long-time Ron Jon retail director Michele Passamonte puts it: "If we went too mainstream, people wouldn't come anymore because you can go to Wal-Mart and get surf clothes nowadays."
Gordon, however, is not convinced. "The Beach Boys didn't sing about catching a wave in Orlando. You can't have an authentic surf shop in Orlando, and very few people are going to want a T-shirt from Ron Jon's Orlando."
Then again, the Beach Boys never sang about catching a wave in Cocoa Beach, either.