GRAND RAPIDS Mich. A group representing 90 Dairy Queen franchisees in Michigan has sued franchisor American Dairy Queen over a requirement that they convert their stores to either a DQ Grill & Chill or a DQ/Orange Julius format as a condition of renewing their franchisee agreements.
The Grill & Chill and DQ/Orange Julius concepts were developed by the franchisor as contemporary reinventions of the traditional Dairy Queen concept, one of the quick-service sector’s oldest entrants. The Orange Julius blended drink brand is owned by ADQ’s parent, International Dairy Queen, which also was named as a defendant in the suit.
The plaintiff, the Michigan Dairy Queen Operators’ Association, contends that the conversions could bust the mom-and-pop operators who constitute its membership by rendering their units unprofitable.
In addition to seeking injunctive relief on that issue, the suit asks the U.S. District Court for the Western District of Michigan here to block ADQ and IDQ from imposing advertising-fund surcharges on products sold to franchisees through approved vendors. The action also seeks to prevent IDQ and ADQ from levying advertising fees on franchisees whose contracts do not require the payments.
IDQ received the complaint on Tuesday and is reviewing it, said company spokesman Dean Peters. “We are not in agreement with the allegations and will respond accordingly,” he said, declining further comment.
Franchisee cooperatives in other regions have filed similar lawsuits and otherwise objected to converting treat shops to the new concepts. The Dairy Queen chain consists of more than 5,600 branches.
Warren Buffet’s Berkshire Hathaway acquired Edina, Minn.-based IDQ in 1998. IDQ also operates and franchises the KarmelKorn Shoppe treat chain.