DQ Operators' Association Response to Conversion Program

CHANHASSEN, Minn. (Blue MauMau) - At the end of 2007, the Dairy Queen Operators’ Association sent out a DQOA News Alert to members stating it opposes the franchisor's mandatory program designed to force franchisees to convert to new Dairy Queen concepts, Grill & Chill and DQ/Orange Julius. Harris Cooper, head of the DQOA stated, "The bottom line is that DQOA does not think that International Dairy Queen has the contractual right to coerce franchisees into adopting these system changes." The estimated cost by the corporate office for converting a store is between $200,000 to $450,000. The conversion will require remodeling, changing the signage, merging menus, and obtaining new equipment.

According to Cooper, the DQOA also feels that International Dairy Queen has failed to offer credible proof that the franchisees will receive a reasonable return on their costly investments, even though corporate has been "test-driving" these concepts for several years. And he adds, "Moreover, IDQ will be making a tidy profit on equipment and signage, at the franchisees' expense."

The Association's position is that individual operators are in the best position to determine whether such drastic changes make business sense. Cooper said they are the ones who have the most at stake.

Mandatory Name Change and Signage

The franchisee association clearly opposes the mandatory changes required under the company's modernization provision in their franchise agreements, addressing signage. Even if the franchisees did not convert to the new concept, "Grill & Chill," they would have to change current Dairy Queen signs to the "DQ" moniker. The Operators' Association feels that such a request is unreasonable, and that Dairy Queen does not have the legal right to require it.

Supplier Surcharges without Credits

DQOA reminds franchisees that many franchise agreements contain provisions which require them to pay a surcharge to suppliers for each unit of product purchased. But it also states that Dairy Queen is obligated to credit any supplier surcharges against the franchisees' monthly license and sales promotion program fee. The company is also required to submit an accounting of the surcharge credits and to remit excess fees to the franchisee.

Cooper states in the news alert that they feel it would be a breach of contract and franchisees should assert their contractual rights so that they are not getting double-charged for products.

The DQOA, founded in 1971, represents over 1200 Dairy Queen franchisee stores.

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Dairy Queen Franchisees Hope to Halt Mandatory Conversion