EDINA Minn. Three Dairy Queen franchisee groups have joined the lawsuit that was filed against franchisor American Dairy Queen by an association of Michigan licensees, echoing the first plaintiff’s allegations that the company is forcing them to convert their units into new concepts at a cost of as much as $450,000 per store.
ADQ denies that it's forcing the franchisees to revamp their conventional DQ outlets into either a DQ Grill & Chill or a DQ/Orange Julius Treat Center. The former is a fast-casual update of the DQ concept, featuring a broader menu and limited table service. The latter is a combination store that requires the retrofit of an Orange Julius drink outlet.
The lawsuit says that about 105 Grill & Chill units have opened to date in the United States and that two have closed.
Chuck Mooty, chief executive of ADQ operating company International Dairy Queen, also refuted the Grill & Chill conversion price of $450,000 that was stated in the lawsuit. He said the changeover cost averages $15,000 to $20,000, and he stressed that the expenditure is voluntary.
According to ADQ, contracts with franchisees do require them to modernize their restaurants periodically but they cap required investments at $75,000 for 2008, $85,000 for 2009 and $95,000 for 2010. The contracts do not require franchisees to change their concepts, Mooty said.
The lawsuit was originally filed by the Michigan Dairy Queen Operators’ Association. The new plaintiffs are the Arizona Dairy Queen Operators’ Association, the Heartland Dairy Queen Operators’ Association and the North Eastern Shore Operators’ Association. The new plaintiffs represent franchisees in Illinois, Pennsylvania, Ohio, Maryland, Arizona, West Virginia, Virginia, Kentucky and Missouri. The four franchisee groups participating in the suit represent a minority of the chain’s franchisees.
The suit was filed in the U.S. District Court in the Western District of Michigan.
Dairy Queen and its corporate parent, Warren Buffett’s Berkshire Hathaway, oversee about 5,700 units worldwide, including some 4,700 in the U.S.