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

• Section I – Estimated initial investment (franchise costs) for a DQ Grill & Chill franchise, based on Item 7 of the company’s 2022 FDD

• Section II – Initial franchise fee, royalty fee, and marketing fee for a DQ Grill & Chill franchise, based on Items 5 and 6 of the company’s 2022 FDD

• Section III – Number of franchised and company-owned DQ Grill & Chill outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD

• Section IV – Background information on the DQ Grill & Chill franchise opportunity, including relevant news updates

• Section V – Presentation and analysis of DQ Grill & Chill’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:

• 2018, 2019, 2020, and 2021 average, median, high, and low gross sales for the DQ Grill & Chill restaurants that were newly constructed freestanding restaurants developed under American Dairy Queen’s (ADQ’s) new or additional restaurant development programs; were developed and first opened for business between January 1, 2017 and December 31, 2020; were operated and reported sales data to ADQ for all 12 months of the noted year; and are franchisee owned and operated

• 2018, 2019, 2020, and 2021 average gross sales, cost of goods, labor, restaurant controllables, and manageable profit for the DQ Grill & Chill restaurants that were newly constructed freestanding restaurants developed under ADQ’s new or additional restaurant development programs; were developed and first opened for business between January 1, 2017 and December 31, 2020; were operated and reported sales data to ADQ for all 12 months of the noted year; are franchisee owned and operated; and submitted usable profit and loss statements to ADQ

• Section VI – Key ratios, comparables, computations, and analyses for the DQ Grill & Chill franchise opportunity (exclusive content for Platinum subscribers)

Section I – DQ Grill & Chill Franchise Costs

• DQ Grill & Chill franchise costs, based on Item 7 of the company’s 2022 FDD:

• Initial Franchise Fee:  $45,000
• ALTA Survey and/or Site Investigation Report (SIR):  $0 to $5,000
• Initial Training Fees and Costs:  $1,200 to $11,990
• Travel and Living Expenses for Training Programs:  $23,000 to $38,500
• Building, Construction, and Leasehold Improvements:  $800,000 to $1,400,000
• Construction Consultation Services:  $0 to $7,500
• Building Plans, Design Intent Plans, and Architectural Seal:  $15,000 to $45,000
• Equipment (includes signs and point-of-sale systems):  $500,000 to $600,000
• Training Inventory:  $6,000 to $16,000
• Opening Inventory:  $15,000 to $35,000
• Utility Deposits, Business Licenses, and Government Charges:  $4,000 to $17,000
• Attorneys’ Fees:  $1,000 to $8,000
• Additional Funds for 3 Months:  $51,000 to $198,000
• Total Estimated DQ Grill & Chill Franchise Costs:  $1,461,200 to $2,426,990

Section II – DQ Grill & Chill’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• DQ Grill & Chill’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:

• Initial Franchise Fee:  $45,000
• Continuing License Fee:  4% of Gross Sales
• Sales Promotion Program Fee:  5% to 6% of Gross Sales

Section III – Number of Franchised and Company-Owned DQ Grill & Chill Outlets

Franchised

2019

• Outlets at the Start of the Year:  1,893
• Outlets at the End of the Year:  1,913
• Net Change:  +20

2020

• Outlets at the Start of the Year:  1,913
• Outlets at the End of the Year:  1,926
• Net Change:  +13

2021

• Outlets at the Start of the Year:  1,926
• Outlets at the End of the Year:  1,952
• Net Change:  +26

Company-Owned

2019

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2020

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2021

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

Section IV – Background Information on the DQ Grill & Chill Franchise

17 Things You Need to Know About the DQ Grill & Chill Franchise

Launches Biggest Menu Rollout in 20 Years with Stackburgers

1.  At the end of March 2022, American Dairy Queen (ADQ) unveiled its new Signature Stackburgers menu. Centered on cheeseburgers that deliver on consumer demand for big flavor and variety, this new menu is the most significant product rollout for ADQ in the past 20 years.

2.  Created as an everyday offering to defeat burger boredom, the Signature Stackburgers menu comes in five flavor varieties in the U.S. Offered as one-third pound doubles and one-half pound triples, each cheeseburger is made with 100-percent seasoned real beef and served on a soft and toasted bun with a wide array of delicious toppings. The Signature Stackburgers menu is available at all DQ Grill & Chill restaurants across the U.S.

3.  Troy Bader, president and CEO of International Dairy Queen, said, “Our hot food menu, served at our DQ Grill & Chill restaurants, is key to our business goal to become a balanced leader in both food and treat items. We know that means innovating and expanding our everyday food offerings, and the new Signature Stackburgers go beyond typical cheeseburgers that you find at quick service restaurants. Offered in five flavor varieties, our new Signature Stackburgers deliver on everything fans want, and we are confident these new cheeseburgers will keep our fans coming back for more.”

4.  The New Signature Stackburgers menu includes:

• FlameThrower with fiery FlameThrower sauce, perfectly melted Pepper Jack, jalapeno bacon, tomato, and lettuce;
• Loaded A.1. with A.1. Thick & Hearty Steak Sauce, creamy peppercorn sauce, thick-cut Applewood smoked bacon, perfectly melted Sharp American, and crunchy onion rings;
• Bacon Two Cheese Deluxe with perfectly melted Sharp American and White Cheddar, thick-cut Applewood smoked bacon, tomato, onion, lettuce, pickles, ketchup, and mayo;
• Two Cheese Deluxe with perfectly melted Sharp American and White Cheddar, tomato, onion, lettuce, pickles, ketchup, and mayo;
• Original Cheeseburger with perfectly melted Sharp American, pickles, ketchup, and mustard.

5.  Kelly Kenny, vice president of brand and product marketing for ADQ, said, “We know our fans are looking for cheeseburgers that offer big flavor and premium ingredients that keep them coming back for more, and the Signature Stackburgers menu was designed to meet that craving. We now are offering five different cheeseburgers that bring flavor variety to our everyday menu, each made with perfectly melted cheese, seasoned beef and a host of creative toppings, all served on a perfectly soft and airy bun.”

Parent Company Announces Plan to Open 600 More Locations in China

6.  In mid-March 2022, International Dairy Queen (IDQ), through its wholly-owned subsidiary American Dairy Queen Corp., and FountainVest Partners (FountainVest), a leading independent private equity firm with offices in Beijing, Shanghai, and Hong Kong, announced plans to open 600 DQ restaurants in China by 2030. The franchise development agreement, spearheaded by the FountainVest-acquired franchise ownership company CFB Group, expands Dairy Queen’s stronghold in China. FountainVest and CFB Group will begin the expansion by opening 100 DQ restaurants in 2022.

7.  Jean Champagne, chief operating officer, international, of IDQ, said, “China remains an important growth market to us, and this expansion with FountainVest provides the opportunity to widen our footprint in one of the fastest-growing countries for [quick-service restaurants]. The continued success of our investment in China, which includes several unique-to-China food and treat offerings, showcases the strength of the DQ brand to fans throughout the country.”

8.  Founded in 2007, FountainVest focuses on long-term investments in industry leaders with track records of delivering high growth in consumer and financial categories across Asia. FountainVest recently acquired CFB Group, a franchise ownership group in mainland China with more than 900 DQ restaurants.

9.  Andrew Huang, managing director at FountainVest Partners, added, “The market for frozen treats is booming in China and we predict the industry will continue a rapid growth trajectory during the next ten years. FountainVest is committed to fully supporting CFB Group’s growth of both its existing DQ restaurants and opening 600 new DQ restaurants by 2030.”

10.  CFB Group has worked with IDQ to develop and launch products unique to the Chinese market, including hard pack ice cream, specialty novelties, light meals, and artfully designed DQ Cakes. Across a more than 20-year relationship, CFB Group has outperformed China’s industrial average for frozen treats, making the DQ brand one of the best performing QSR brands in China.

11.  Alan Hsu, CEO of CFB Group, said, “We’ve seen immense success from DQ restaurants in China, and with our strength in digitalized operations, social media management, and sub-franchisee expansion, we see endless growth opportunities for this well-loved brand. With continued support in innovation and product development from IDQ, we will grow our fan base further and open new DQ restaurants in 2022 and beyond. We have great confidence in the DQ brand.”

12.  China is the fastest growing market for the DQ brand and is among the top three in size, alongside the U.S. and Canada. There are currently more than 1,100 DQ restaurants in China.

Company History

13.  Dairy Queen was founded in 1940 by Sherb Noble, John Fremont McCullough, and Alex McCullough in Joliet, Illinois. A few years earlier, in 1938, the McCulloughs developed the recipe for soft-serve ice cream and convinced Noble to sell the product in his ice cream shop in Kankakee, Illinois. The soft-serve ice cream was an immediate success and Noble sold more than 1,600 servings within two hours.

14.  From the start, Dairy Queen grew through franchising and it was one of the first companies in the world to utilize a franchise system. Dairy Queen grew quickly and by 1955 there were more than 2,600 stores in operation. The company continued to grow both domestically and internationally and became International Dairy Queen, Inc. (IDQ) in 1962.

15.  In 1987, IDQ acquired Orange Julius and both companies often appear in co-branded locations. About a decade later, in 1998, IDQ was acquired by Berkshire Hathaway, which still owns the company today.

16.  Dairy Queen’s stores operate under several different brands and models. In 2001, Dairy Queen launched the DQ Grill & Chill model, which features hot food, treats, table delivery, and self-serve soft drinks. It is Dairy Queen’s most modern store type and currently its preferred model. There are now DQ Grill & Chill locations all around the United States.

Entrepreneur’s Franchise 500

17.  Dairy Queen did not rank on Entrepreneur’s 2022 Franchise 500 list.

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the DQ Grill & Chill Franchise (Item 19, 2022 FDD)

• Schedules A and B disclose information about DQ Grill & Chill restaurants that:

• were newly constructed freestanding restaurants developed under American Dairy Queen’s (ADQ’s) new or additional restaurant development programs;
• were developed and first opened for business between January 1, 2017 and December 31, 2020;
• were operated and reported sales data to ADQ for all 12 months of the noted year; and
• are franchisee owned and operated.

• This financial performance representation does not include information about:

• (1) new DQ restaurants developed in Texas (which have the “Texas County Foods” cooked food menu and are offered under a separate disclosure document);
• (2) existing DQ restaurants that have converted to the DQ Grill & Chill restaurant’s facility design, menu, and trademark by remodeling an existing DQ restaurant or replacing an existing DQ restaurant with a new DQ Grill & Chill restaurant design facility either at the same site or at a new location;
• (3) new DQ Grill & Chill restaurants that were opened in a fuel center or other non-traditional location inside a host building such as a ferry terminal or mall; or
• (4) new DQ Grill & Chill restaurants that were opened under a developmental rights contract or a franchise agreement granted by a territory operator.

• Schedule A presents Gross Sales for all locations that meet the criteria above for inclusion in this financial performance representation.

• Schedule B includes information on certain categories of expenses and manageable profit for a subset of the locations listed in Schedule A, based on the usable profit and loss statements (“P&Ls”) these locations submitted to ADQ for the years 2018 through 2021.

• The data in schedule A is based on sales reports submitted to ADQ by franchisees of the restaurants included in the schedule and the data in schedule B is based on information submitted on P&Ls from franchisees of the restaurants included in the schedule.

• ADQ has not audited or independently verified the results in the P&Ls or sales reports.

Schedule A – Gross Sales for All Locations That Meet the Criteria for Inclusion in the Financial Performance Representation

2018

• Average Annual Gross Sales:  $1,284,579
• Number of Restaurants Meeting or Exceeding the Average:  18
• Percent of Restaurants Meeting or Exceeding the Average:  39%
• High Annual Gross Sales:  $3,725,266
• Median Annual Gross Sales:  $1,263,588
• Low Annual Gross Sales:  $637,260
• Number of Restaurants That Qualified for Inclusion:  46
• Number of Restaurants That Were Excluded Because They Were Not Open or Did Not Report Sales for All 12 Months of the Year:  33

2019

• Average Annual Gross Sales:  $1,221,529
• Number of Restaurants Meeting or Exceeding the Average:  36
• Percent of Restaurants Meeting or Exceeding the Average:  47%
• High Annual Gross Sales:  $2,753,016
• Median Annual Gross Sales:  $1,157,103
• Low Annual Gross Sales:  $549,419
• Number of Restaurants That Qualified for Inclusion:  77
• Number of Restaurants That Were Excluded Because They Were Not Open or Did Not Report Sales for All 12 Months of the Year:  31

2020

• Average Annual Gross Sales:  $1,319,711
• Number of Restaurants Meeting or Exceeding the Average:  45
• Percent of Restaurants Meeting or Exceeding the Average:  43%
• High Annual Gross Sales:  $2,682,054
• Median Annual Gross Sales:  $1,265,540
• Low Annual Gross Sales:  $541,943
• Number of Restaurants That Qualified for Inclusion:  105
• Number of Restaurants That Were Excluded Because They Were Not Open or Did Not Report Sales for All 12 Months of the Year:  28

2021

• Average Annual Gross Sales:  $1,427,766
• Number of Restaurants Meeting or Exceeding the Average:  53
• Percent of Restaurants Meeting or Exceeding the Average:  41%
• High Annual Gross Sales:  $2,886,417
• Median Annual Gross Sales:  $1,386,549
• Low Annual Gross Sales:  $592,454
• Number of Restaurants That Qualified for Inclusion:  129
• Number of Restaurants That Were Excluded Because They Were Not Open or Did Not Report Sales for All 12 Months of the Year:  4

Schedule B – Information on Certain Categories of Expenses and Manageable Profit for a Subset of the Locations Listed in Schedule A

2018

• Store Count:  36
• Average Gross Sales:  $1,214,819
• Average Cost of Goods:  30.83%
• Average Labor:  30.57%
• Average Restaurant Controllables:  10.51%
• Average Manageable Profit:  28.10%

2019

• Store Count:  58
• Average Gross Sales:  $1,236,224
• Average Cost of Goods:  30.80%
• Average Labor:  30.53%
• Average Restaurant Controllables:  10.16%
• Average Manageable Profit:  28.50%

2020

• Store Count:  63
• Average Gross Sales:  $1,304,047
• Average Cost of Goods:  29.60%
• Average Labor:  28.91%
• Average Restaurant Controllables:  9.59%
• Average Manageable Profit:  31.89%

2021

• Store Count:  39
• Average Gross Sales:  $1,607,946
• Average Cost of Goods:  29.88%
• Average Labor:  30.24%
• Average Restaurant Controllables:  9.91%
• Average Manageable Profit:  29.97%

• Gross Sales. Gross sales, as used in Item 19 and in the Operating Agreement, means the total revenues and receipts from the sale of all products sold by the Restaurant, whether paid for by cash, credit (not adjusted for credit card fees) or gift card, barter, or otherwise, including sales of all products under any of the Trademarks as well as sales of other products, services, and merchandise, whether or not identified by other brand names, and excluding sales taxes and revenues and receipts arising directly from Licensee’s sale of gift cards.

• Cost of Goods. The cost of the food products that are sold to consumers and the associated paper purchases (based on beginning inventory, plus purchases, less ending inventory). The food products include ingredients, beverages, and condiments. The associated paper purchases include bags, product wraps and containers, other paper products, cups and lids, straws, and eating utensils.

• Labor. The sum of crew labor wages, manager’s salary and other compensation, and related taxes and benefits. Labor does not include payments that may be made to a franchisee or its owners in the form of a manager’s salary or wages. Labor does not include payments that may be made to a franchisee or its owners in the form of an owner’s draw, a dividend, or similar distributions.

• Restaurant Controllables. The sum of utilities, telephone, local advertising, repairs and maintenance, service contractors, laundry and uniforms, operating supplies (other than inventory), trash and recycling, delivery service provider fees and commissions, and bank charges (other than debt service).

• Miscellaneous Expenses. All miscellaneous expenses are rolled up into the total Restaurant Controllables percentage.

• Manageable Profit. Profit remaining after deduction of sales taxes, discounts, Cost of Goods, Labor Cost, and Restaurant Controllables, but before the deduction of occupancy costs, insurance (non-employment), continuing license fees, sales promotion program fees, legal fees, accounting fees, and other administrative costs.

Section VI – DQ Grill & Chill Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️