Dairy Queen is facing a rebellion against the revamping of restaurants by a growing number of mostly mom-and-pop franchise owners.
Claiming that DQ is forcing them to increase the size of restaurants or add table service under the threat of losing their franchises, owner associations with members in 10 states are now suing the chain.
Resistance to the Minneapolis-based corporation began in Michigan last month.
This month, franchisee associations with members in Arizona, West Virginia, Ohio, Virginia, Maryland, Pennsylvania, Kentucky, Missouri and Illinois filed suit to block the corporation’s plans.
The lawsuit pits entrepreneurs who mostly own one or two restaurants against International Dairy Queen and its corporate parent, Berkshire Hathaway Inc., the investment company of billionaire investor Warren Buffett.
“It’s the classic David vs. Goliath balance,” said Carmen Caruso, an attorney for the plaintiffs.
But Dairy Queen Chief Executive Chuck Mooty says the company isn’t strong-arming anyone.
“What you’re hearing is the minority that really are saying, ‘I really don’t have any desire to evolve and rejuvenate,’ ” Mooty said. “We have to be a brand that’s relevant.”
It is the second time in recent months that a major restaurant franchise has faced rebellion in its ranks.
McDonald’s Corp. late last year mixed it up with franchise owners over a requirement to offer lattes and cappuccinos. Franchise owners balked at the expense, which McDonald’s estimated at up to $100,000 per store.
Dairy Queen’s plans center on two relatively new restaurants lines. DQ Grill &Chill establishments would sell meals and desserts, and would expand to include limited table service, among other things. Outlets that sell only Blizzards, Dilly Bars and desserts would combine with the Orange Julius beverage chain to become a DQ-Orange Julius Treat Center.
Traditionally, Dairy Queens have been small restaurants, often with just a few tables or even just window service.
The lawsuit contends Dairy Queen is trying to force franchise owners to spend between $275,000 and $450,000 to remodel stores to adhere to an unproven concept — one that will cost more to operate, double staffing requirements and cut into profits.
“No one should have to make this conversion that is quite expensive unless they want to,” Caruso said. “If the DQ Grill &Chill concept was such a promising new concept, then the free market would solve this problem.”
That hasn’t happened, according to the lawsuit.
As of December 2006, the complaint says, just 105 Grill &Chill restaurants had opened in the United States. Some have performed poorly, and two have closed.
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