Matt Frauenshuh was fresh out of business school in 2006 when he received his biggest assignment, from his father:
Turn around the family’s seven, money-losing Dairy Queen Grill and Chill restaurants.
“He told me I’d live in his shadow unless I did something different,” Frauenshuh said.
“He said, ‘I’ll give you the restaurant business and either you make something of it or close it.’”
Frauenshuh’s family was in the real estate business in the Minneapolis area, and helped open 10 of Dairy Queen’s first Grill and Chill locations in the early 2000s. But, the locations lost money, and by 2006 were down to seven units.
So Frauenshuh, who had managed some of the locations during college and worked there while getting his MBA, put in new management teams. He also learned the hard way that operating a mid-sized franchise can be difficult.
“I was our everything, from bookkeeper to operations manager to head of marketing and all of the above,” Frauenshuh said.
“But we figured out the nuts and bolts of the restaurant just building it for growth.”
Frauenshuh began buying. His company, Fourteen Foods, bought some restaurants in Clearwater, Minnesota in 2007. It then bought 43 locations in the Upper Midwest, and bought 58 locations in the Southeast from its franchisor, International Dairy Queen.
The company has kept growing since, acquiring smaller franchisees, while building its own locations. The company plans to open 17 new locations in Tennessee and Alabama over the next year, which would get Fourteen Foods to the 200-unit mark.
Today, at 34, Frauenshuh is the 5,000-unit chain’s largest franchisee. It’s safe to say he’s made a name for himself.
“I think you should either be a small franchisee and do that really well, or get pretty big,” he said. “A mid-sized franchisee is the hardest place to be. You can’t afford to hire accounting staff or maintenance because you don’t have enough cash flow. I’ve been there. It’s most challenging.”
Evolving into a quick-service chain
Fourteen Foods’ growth has come largely thanks to the strong performance by Dairy Queen’s Grill and Chill concept, which has helped the brand evolve into a full-fledged quick-service chain, rather than simply a treat concept.
The performance of that concept is a big reason Dairy Queen’s system sales have grown nearly 19 percent the past two years, according to data from Nation’s Restaurant News Top 100. Nearly all of Fourteen Foods’ locations are Grill and Chill concepts.
“It gives us a lot more predictable business,” Frauenshuh said. “In the past, Dairy Queen was known as an ice cream shop. It was highly seasonal. With the Grill and Chill, it acts more like a QSR, with more predictable cash flows over 12 months. It helps us to just run a more efficient business.
“Before Grill and Chill, you’d get 75 percent of your revenue in four months. Now it’s spread out across 12 months.”
He added that the early model was not as strong, because it required large, 5,000-square-foot buildings. Dairy Queen has since cut that in half, which makes the economics work better.
Meanwhile, Frauenshuh said, the company has worked to generate more lunch business. “The $5 lunch has been huge for us,” he said. “We needed that shot in the arm.”
Fourteen Foods has grown in part by purchasing small-scale operators. Many of these restaurants are in small towns where the franchisee has become part of the community and social fabric.
The company works to maintain that connection and “stay true to the community aspect,” he said.
“We’ve got a team of marketing folks, and their entire job is to figure out how to respond to communities,” Frauenshuh said. “They’re working in communities to find partnerships. They find fundraisers, work with baseball teams and schools, hand out frequent reader cards or sponsor a baseball team or a youth mission trip.
“We look at it as, we have a lot of responsibility to give back to the community. Dairy Queen is not just a place to get food. It’s a fun place to be.”
Frauenshuh said he is open to potentially operating another concept. But he also called himself a “strong believer in focus,” and that there’s a lot of opportunity left in Dairy Queen.
“We just love that we get to be different than a McDonald’s or a Burger King or a Wendy’s,” he said.