Dairy Queen Having Trouble Refranchising

Dairy Queen is having trouble refranchsing a block of 56 company units in Kentucky and Southern Indiana, due to difficult lending conditions.

According to yesterday's Nation's Restaurant News, a DQ spokesperson noted that the franchising firm didn't have a history of selling to large franchisees. Most of its franchisee operators were in the 1 to 4 unit scope. This is no surprise as it is widely known that lenders want large, well capitalized, multi-unit franchisees with lending facilitiies attached, hopefully over $10M EBITDA as a minimum barrier. The units supposedly are at AUV of $1.2M, above the DQ system AUV, but all new units must be the DQ Grill and Chill format. This would take the company unit count down from 72 to 16 out of 5845 units worldwide. 

I'll have relevant articles on franchisee observations from the recent 2010 Restaurant Finance and Development Conference, soon.