Industry News | February 20, 2008

Lawsuit Against Dairy Queen Grows

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Three more Dairy Queen franchisee associations joined the Michigan Dairy Queen Operators’ Association (MDQOA) in its lawsuit against International Dairy Queen (IDQ) and American Dairy Queen (ADQ) in the U.S. District Court in the Western District of Michigan. According to court papers filed yesterday by Schwartz Cooper, the Arizona Dairy Queen Operators’ Association (AZDQOA), the Northeastern Store Owners’ Association (NESO), and the Heartland Dairy Queen Operators’ Association (Heartland) are joining MDQOA’s legal fight against IDQ and ADQ seeking declaratory judgment and injunctive relief on a variety of legal issues that threaten to bankrupt or destroy the profitability and value of Dairy Queen mom and pop franchise holders.

According to Carmen Caruso of Schwartz Cooper, “The addition of these regional associations makes clear that the forced conversion by IDQ/ADQ is a national problem, not a problem isolated to one particular region or state. It is affecting all franchisees.” The lawsuit by the four Dairy Queen franchisee associations continues to ask the Court to prevent IDQ and ADQ from:

1. Forcing current members to convert their outlets to the new DQ Grill & Chill or DQ/Orange Julius concepts through modernization/name change programs immediately upon renewal, relocation, transfer, or upgrade of their existing franchise agreements.

2. Placing unreasonable requirements, i.e., a mandatory investment of tens of thousands of dollars, on existing Dairy Queen franchisees to convert their current outlet to an entirely new Dairy Queen concept/brand/system, resulting in the potential loss of their business.

3. Placing surcharges on products sold to the franchisees by endorsed vendors/distributors of IDQ/ADQ for advertising purposes without applying credits for the payment of these surcharges to the franchisees’ advertising commitments per the franchise agreements.

4. Requiring payment of surcharges on certain products sold to Dairy Queen franchisees for advertising purposes and, therefore, breaching franchisee agreements that do not require franchisees to pay advertising fees.

This suit, on behalf of members of four separate regional franchisee associations spanning ten states, seeks to protect the rights of existing and future Dairy Queen franchisees by eliminating the threat of forced conversions by IDQ/ADQ which impact the viability of each and every Dairy Queen franchisee. MDQOA’s members own and operate Dairy Queen franchises in Michigan; AZDQOA’s membership is comprised of Dairy Queen owners and operators situated in Arizona; NESO’s members own and operate Dairy Queen franchised outlets in West Virginia, Ohio, Virginia, Maryland, Pennsylvania, and Kentucky; and Heartland’s members operate franchises in Missouri and Illinois.

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.