December 27, 2005
Something Similar
International Dairy Queen Inc. was in arbitration last week in Denver with leaders of a franchise association representing certain Dairy Queen franchisees. This article from the Minneapolis/St. Paul Business Journal reports that thousands of franchisees believe the company is violating the 2000 settlement of a $50 million class action franchisee lawsuit. In the class action, franchisees alleged that Dairy Queen prevented franchisees from buying products from alternative sources.
The arbitrating franchisees complain that: (i) Dairy Queen is requiring franchisees of its new DQ Grill & Chill concept to buy their supplies from only the company; (ii) Dairy Queen is being too restrictive in determining when and where there are enough franchise stores to permit alternative product buying; and (iii) the franchisees’ purchasing co-op should get the same discounted price on crushed Oreo cookies from Kraft Foods that Dairy Queen receives.
According to the executive director of the co-op and the association, before the class action settlement franchisees paid between 38 to 42 percent of their revenues for supplies. That dropped to 23 to 32 percent, allegedly due to alternative sourcing. A Dairy Queen spokesman declined to comment on the pending arbitration. A ruling is expected in several months.