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FDD Talk 2016: The DQ (Dairy Queen)/Orange Julius Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on June 15, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Frozen Dessert Franchise, Smoothie Franchise

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DQ Treat

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the DQ/Orange Julius franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a DQ/Orange Julius franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of DQ/Orange Julius’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2014 (the latest year for which data is available) average net sales, cost of goods sold, labor costs, controllable operating expenses, manageable profit, occupancy costs, service fees/royalties, and sales promotions for franchised DQ/Orange Julius stores that were newly-constructed and that are located in shopping malls (enclosed or open air, such as a lifestyle center); were developed and first opened for business between January 1, 2010 and December 31, 2013; and were operated for the full 2014
  • The financial performance representations below are for franchised DQ/Orange Julius stores located in malls with a gross leasable area (“GLA”) of at least 1,000,000 square feet; franchised DQ/Orange Julius stores located in malls that have less than 1,000,000 square feet GLA; and all franchised DQ/Orange Julius stores without regard for GLA.

Section I – Background Information

DQ Treat Locations Focus on Sweetness

While many of the tiny traditional Dairy Queen walk-up stores have given way to DQ Grill & Chill restaurants offering full food menus, you can still find plenty of DQ Treat Centers. Also known as DQ/Orange Julius, DQ Treat restaurants focus on frozen treats and beverages.

Many DQ Treat stores are in shopping malls, on the street, and in airports, where customers can grab a quick DQ soft-serve cone, milkshake or Blizzard Treat between shopping, while walking, or on flight layovers.

It All Started With the Recipe

DQ’s soft-serve ice cream treat predated the actual stores. John Fremont (J.F.) McCullough (known as Grandpa McCullough) and his son, Alex, developed the recipe in 1938 and convinced their friend Sheb Noble to sell the treat at his ice-cream store in Kankakee, Illinois. It was so popular that the three men opened up the first Dairy Queen store in 1940 in Joliet, Illinois.

Grandpa McCullough called the store Dairy Queen because he saw his soft serve as a queen among dairy products, offering an exceptionally fresh, wholesome treat.

75 Years for DQ Chain

DQ, which celebrated its 75th anniversary in 2015, is now based in Edina, Minnesota, a Minneapolis suburb. The chain is owned by International Dairy Queen and franchised in the U.S. by American Dairy Queen and has more than 6,600 DQ locations in the U.S., Canada and 25 other countries.

Dairy Queen is currently seeking development in the following “hot-spot” states: Alabama, Arkansas, California, Florida, Georgia, Louisiana, Massachusetts, Mississippi, North Carolina, New York, Oklahoma, South Carolina and Tennessee. The chain also has franchise opportunities in other locations, both in the United States and other countries.

DQ/Orange Julius restaurants serve the full menu of DQ treats as well as Orange Julius beverages. The restaurants can be free-standing units, mall locations, or housed in end caps of strips centers, dual-use buildings, and other venues, including shopping malls. Mall stores are strong performers in food courts or kiosks.

Sweet Treats Keep DQ Iconic

Dairy Queen is still iconic for its frozen treats, even while burgers, chicken baskets and onion rings have made it possible for people to have a whole meal at DQ. In addition to the soft-serve ice cream treat, sundaes and malts, some of the chilly delicacies at DQ Treat Centers include the Peanut Buster Parfait, Dilly Bar, MooLatte and Blizzard, as well as the Orange Julius line, which adds fruity sweetness and some lower-calorie choices for customers.

Orange Julius Menu Added in 2012

Orange Julius was placed on DQ menus in 2012, but the Orange Julius chain was actually purchased by International Dairy Queen in 1987, so the relationship has existed for some time on the corporate level. In addition to stand-alone locations and inclusion in DQ menus, some Orange Julius locations are paired side by side with Dairy Queens with separate storefronts.

The DQ/Orange Julius menu includes the Julius Original in orange, strawberry, tripleberry, strawberry banana, mango pineapple and piná colada, as well as Premium Fruit Smoothies in those flavors. Newly introduced is a strawberry watermelon flavor at participating locations.

DQ No. 34 on Franchise 500

Dairy Queen was No. 34 on Entrepreneur’s 2016 Franchise 500 list, up from No. 56 the year before. At the end of 2015, the chain had 4,451 locations in the U.S. and 2,218 international locations, with two corporate restaurants. DQ surpassed 2,000 international locations in 2014.

Section II – Estimated Costs

  • Please click here for detailed estimates of DQ/Orange Julius franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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