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FDD Talk 2017: What You Need to Know About the DQ (Dairy Queen) Treat Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on May 10, 2017

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

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In this FDD Talk 2017 post, you’ll learn the following:

  • Section I – Background information on the DQ Treat franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a DQ Treat franchise, based on Item 7 of the company’s 2017 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a DQ Treat franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of DQ Treat’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2015 (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 Treat 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, 2011 and December 31, 2014; and were operated for the full 2015
  • The financial performance representations below are for franchised DQ Treat stores located in malls with a gross leasable area (“GLA”) of at least 1,000,000 square feet; franchised DQ Treat stores located in malls that have less than 1,000,000 square feet GLA; and all franchised DQ Treat stores without regard for GLA.

Section I – Background Information

8 Things You Need to Know About the DQ Treat Franchise

Company History

1.  The first Dairy Queen restaurant was opened in 1940 by John Fremont McCullough and Sherb Noble in Joliet, Illinois. McCullough had developed the first soft-serve formula a few years earlier in 1938 and convinced Noble to sell the new ice cream in his ice cream store. On the first day of sales, Noble sold more than 1,600 servings within two hours. The new soft-serve concept quickly caught on and more locations were opened. Franchising officially began in 1944.

2.  The parent company of Dairy Queen, International Dairy Queen, which has been owned by Berkshire Hathaway since 1998, purchased the Orange Julius chain in 1987. After the acquisition of Orange Julius, Dairy Queen began offering franchisees the opportunity to franchise co-branded DQ/Orange Julius Treat centers.

3.  The treat center concept serves DQ frozen treats and Orange Julius drinks. The co-branded model is the company’s preferred concept for small-scale locations such as in malls and airports. Some treat centers also sell Karmelkorn, which is owned by the same parent company as DQ and Orange Julius. All DQ locations in the U.S. have been selling Orange Julius drinks since 2012.

New Promos and Menu Items

4.  To promote Guardians of the Galaxy Vol. 2, Dairy Queen’s Blizzard of the Month for May is the Guardians Awesome Mix Blizzard. The Blizzard features mini “brookies,” which are brownies and cookies baked together, caramel, and chocolate chunks blended with vanilla soft-serve.

5.  On the Orange Julius side of the treat center concept, DQ is offering a buy one, get one free drink coupon for signing up for the Julius League e-mail list. To use the coupon, customers need to buy one Premium Fruit Smoothie or Julius Original of any size to receive a free drink of equal or lesser value.

6.  In April 2016, Dairy Queen introduced a new type of Blizzard, the Royal Blizzard, which contains a flavored center not found in traditional Blizzards. The Royal Blizzard comes in four flavors:  Royal Oreo with a fudge center, Royal New York Cheesecake with a strawberry center, Royal Reese’s Brownie with a peanut butter topping center, and Royal Choco Brownie with a fudge topping center.

7.  A month after introducing the Royal Blizzards, the company added another new permanent menu item, the Funnel Cake a la Mode. The new item features a crispy funnel cake topped with powdered sugar and drizzled with the customer’s choice of topping (hot fudge, caramel, or strawberry) and a side of vanilla soft serve.

Entrepreneur’s Franchise 500

8.  Dairy Queen, which franchises DQ Grill & Chill restaurants and DQ Treat centers, has appeared on Entrepreneur’s annual Franchise 500 list almost every year in the last decade. The company’s highest rank is this year’s No. 6 spot, while its lowest rank was No. 58 in 2013.

Section II – Estimated Costs

  • Please click here for detailed estimates of DQ Treat franchise costs, based on Item 7 of the company’s 2017 FDD (updated).

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on DQ Treat’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

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