Dairy Queen operators' suit still at square one

Some Dairy Queen operators say the two concepts are ""unproven"" and not likely to provide a ""reasonable return"" on investment. Ten other operators' associations have since filed similar lawsuits in other states.

The Detroit News
April 16, 2008

Dairy Queen operators' suit still at square one
Court to decide if franchise owners have to file separately in fight over store conversions.
Jennifer Youssef

A lawsuit filed against the Dairy Queen chain by the Michigan Dairy Queen Operators' Association over franchise improvements is still in its preliminary stage in a Grand Rapids court.

In the lawsuit, the association claims that Minneapolis-based International Dairy Queen, Inc. is forcing franchise owners to spend "tens of thousands of dollars" to renovate and convert their stores into either a DQ Grill & Chill or DQ/Orange Julius Treat Center.

Some Dairy Queen operators say the two concepts are "unproven" and not likely to provide a "reasonable return" on investment. Ten other operators' associations have since filed similar lawsuits in other states.

The U.S. District Court in Grand Rapids is examining the case and will decide whether the Michigan Dairy Queen Operators' Association can sue the company or if each franchise owner has to file a separate lawsuit. The plaintiff's attorney, Carmen Caruso, said he expects a ruling the first week in June.

"This is not unexpected," he said. "It's par for the course."

The Michigan Dairy Queen Operators' Association filed its suit Jan. 14 against International Dairy Queen, Inc. and American Dairy Queen Corp. on behalf of franchise owners who don't want to renovate or convert their business into a different brand concept. According to the lawsuit, some owners say they are being coerced into spending $275,000 and $450,000 to renovate and convert their stores. The changes would also require an additional investment of $1.2 million to $2 million to expand the menus, build bigger stores, hire more workers and buy new equipment.

Associations with members in Arizona, West Virginia, Ohio, Virginia, Maryland, Pennsylvania, Kentucky, Missouri and Illinois also have filed suits against the company. Dairy Queen executives say the company isn't forcing anyone to do anything and the cost of renovating is much less than the owners are estimating. The company and the Michigan association declined to comment for this story.

Not all oppose revamps
Not every Dairy Queen operator objects to revamping their store.

Franchise owner Bonnie Manjo remodeled her store on 12 Mile in Berkley three years ago, but she said the company didn't force her to do it. Rather, she voluntarily made the changes because she wants to keep her business updated and attractive.

"A lot of people don't like change (and) they don't want to change," said Manjo of West Bloomfield Township. "If you can afford to, then do it."

"I think it's better for all Dairy Queens. Some you walk into and it looks like it did in the 1960s."

Even though the store is only three years old, she will convert it into an Orange Julius next year because she believes the changes will pay off. Manjo has another store in Madison Heights that she will remodel and convert into an Orange Julius the following year if the one in Berkley is successful.

"In this industry, you should update to stay in business," her husband Wally Manjo said. "If you don't change, you're not going to grow."

You can reach Jennifer Youssef at (313) 222-2319 or moc.swented|fessuoyj#moc.swented|fessuoyj.


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