Dairy Queen Faces Icy-Cold Franchisee Revolt

Posted Fri, 2008/02/29 - 02:53 by Bob Frankman

DQ Sees Lawsuit Rebellion from Franchisees

Dairy Queen is facing a franchisee lawsuit rebellion for upgrading owner-restaurants from ice cream to a grill concept. Here's a pretend transcript of a conference call based on the original AP article. The Dairy Queen franchisees often are mom & pops found in small towns throughout the U.S. and Canada. (Original text is placed in quotation marks to show that I'm not making much of this conversation up.)

DQ Franchisees: We are going to go broke forking out $275,000 to $450,000 to remodel our ice cream shops to become grills. We're chilled to the bone about the Grill & Chill upgrades!
CEO Mooty: Hog-wash! It will only take "$75,000 in 2008, $85,000 next year and $95,000 in 2010." Did you flunk math? That's only $255k for the next three years, not $275,000 total. “It is not making somebody spend hundreds of thousands."
DQ Franchisees: “No one should have to make this conversion that is quite expensive unless they want to." Times are tough right now. We can't afford this.
CEO Mooty: "No one is being forced to do anything." "The company isn't strong-arming anyone." The only thing is that "Dairy Queen does require about 70 percent of franchises to modernize restaurants periodically," but that isn't strong-arming. I'd call it more like... uh...
DQ Franchisees: Sumo-wrestling?
CEO Mooty: You know what this rebellion is really all about, smart pants? I'll tell you. "Dairy Queen is cutting margins on the supply business, which in turn is hurting the [franchisee] associations." Such franchisee associations are really about gouging their franchisees from revenues through supplier mark-ups.
DQ Franchisees: Earth to Mooty, are we on the same planet? Who said anything about franchisee associations?
CEO Mooty: “They [Franchise-owner Associations] are losing membership, they are losing market share and they are having to take more drastic measures in creating fear and concern.” That's what this is about. Not the upgrade.
DQ Franchisees: Mooty's left the solar system. Look, we just want to keep our money. But since you brought it up, wasn't there some huge independent franchisee association announced just a few weeks ago—Coalition of Franchisee Associations? Then there's Super 8 a few weeks ago. Seems like there is an independent association explosion happening. Hmmm, what could be fueling franchisees to be organizing independently like that?
McDonald's expert Richard Adams: "Such squabbles boil down to the need to please Wall Street." “The franchises become second place, second fiddle, to the investors.” “Very seldom do the franchisees win an outright victory.” “It's usually something that's settled out of court.”
DQ Franchisees: Second fiddle is right. McD "franchise owners balked" at the expense of $100,000 latte coffee upgrades per store. Mickey D's corporate was fair enough to help by paying 40 percent of the upgrade fee. Our costs are much higher. Whether it is an in-court judgment or outside settlement, we just don't want to go broke. I don't think anyone is feeling our pain.
CEO Mooty: What losers. Everyone else, plug your ears. "What you're hearing is the [vocal] minority" as opposed to the silent majority. They just "don't have any desire to evolve and rejuvenate!" Think BIG, not small—you small mom & pops. Now go borrow that money because the future is grill.
DQ Franchisees: You're NOT LISTENing...