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.


Me thinks the lid is about to blow off the Dairy Queen corporate boiling pot of mistrust and lies. This time, suits filed by regional operators organizations will force Warren Buffet and Berkshire Hathaway to look more deeply into the misdeeds that have constructed the house of cards in the franchise system. Yeah, it was all fun and games when they thought new ownership and investment by WB and BH would force transparency in management to support increasing profit margins and revenue growth. This logic is flawed right off the bat as all INDQ management has done is bullied their base of franchisees through illegal changes to legacy contracts and has begun to force many smaller operators out of the system. Since when is it cool for a national brand to step on the throats of the very franchisees who generate their revenue (a scam), promote their brand, and operate profitable businesses. INDQ just wants more to show Warren Buffet that his investment would grow and he could look like the hero in front of his shareholders. Little does he know the magnitude of the clamp he has begun to tighten on the nads of the mom and pop operators. We will see what they have to say on April 30th in Omaha when the clown suits come out and the signs start flashing the incriminating facts against them. While I am not too naive to think that one little Guy can communicate the fullness of inept management and illegal practices, but I damned well know that MSNBC, CBS Business Watch, and all the other business magazine will want to know our collective story. Mine is a single-focused witch hunt based on innuendo and rumor all for the sake of bringing me down. When it gets to the national stage, we'll see who listens then. Continue to turn your back on me and the rest of us because one day you'll be forced to look into the light and come to terms with your poor and unjust business practices.More information on these blogs below - right here on QSR MagazineINDQ Puts Operator on COD - Say What?Dairy Queen Continues to Hammer the Small Guy - How's that Fair?

ng to control freedom of speech and demonize the franchisee. This is the United States I know if Warren Buffet looked at this he would agree its definately giving Dairy Queen a black eye.Read more: Dairy Queen sues Iowa franchisee over alleged $13 million extortion plot | Minneapolis / St. Paul Business Journal

I can not believe this information would actually get to a franchisee. Test answer Questions wow that has to be embarrassing for DQ. I read the lawsuit it sounds like DQ is trying to deflect attention from misdeeds they have committed. It seems the franchisee was trying to communicate with DQ and they clearly ignored him. Whats clearly missing is ACH authorizations nowhere could I see any actual signed ACH authorization form. I just find it hard to believe DQ being owned by the greatest investor of all time could be this disorganized. I also find it very disturbing that Dairy Queen would not provide disclosure... Ryan Palmers comments are correct this should of never escalated to this point. It sounds like Dairy Queen is trying to control freedom of speech and demonize the franchisee. This is the United States I know if Warren Buffet looked at this he would agree its definately giving Dairy Queen a black eye.Read more: Dairy Queen sues Iowa franchisee over alleged $13 million extortion plot | Minneapolis / St. Paul Business Journal

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