Industry News | March 9, 2000

Dairy Queen and Franchisees Settle Dispute

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International Dairy Queen, Inc. (IDQ) and its Dairy Queen franchisees announced March 9 the settlement of a class-action lawsuit filed in April of 1994 by five of its franchisees, who complained that IDQ was unreasonably preventing "Dairy Queen" franchisees from purchasing food products and supplies from alternative sources. In 1996, the case was converted into a class action involving about one-third of the "Dairy Queen" franchisees in the United States.

The proposed settlement, preliminarily approved today in the United States District Court for the Middle District of Georgia-Macon Division, calls for a commitment from International Dairy Queen to contribute an average of nearly $5 million annually during the next six years to the franchise system's national sales promotion programs.

In another major term of the settlement, IDQ will pay a total of more than $6 million to the Dairy Queen Operators' Cooperative to provide for the continued availability of alternative sources of food products and supplies for the "Dairy Queen" system's stores.

Current and former "Dairy Queen" franchisees will be notified of the settlement terms this month. Both IDQ and the participating franchisees will then ask the court to finalize the agreement.

According to Michael P. Sullivan, IDQ president and chief executive officer, "We're pleased to reach a settlement with our franchisees. The terms of the agreement are fair to both parties, and the contributions to the advertising and sales promotion fund should benefit the 'Dairy Queen' name and our franchisees' ability to effectively grow our collective businesses.

"We are blessed with a wonderful group of franchisees, and this settlement will allow us to focus on offering the best food products and service to the millions of 'Dairy Queen' customers worldwide."

Hugh Collins, one of the named plaintiffs in the class-action suit and the owner of "Dairy Queen" stores in Dublin, Ga., added, "It was imperative that we conclude this litigation and resolve our differences. The areas of agreement between the 'Dairy Queen' franchisees and IDQ far outweigh our points of difference. We can now put this dispute behind us and concentrate on the many advantages of being part of the 'Dairy Queen' system."