Dairy Queen Franchise Cost Is $1M+ (2022)
Written by: Patrick Findaro
Last Updated:
November 10, 2022
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This article is based on its most recent FDD.
Dairy Queen is an American quick-service restaurant that is well known for its frozen treats. Founded in 1940 in Minnesota, Dairy Queen has grown into an international brand, with over 7,150 stores around the world today. It’s current CEO is Troy Bader.
Dairy Queen franchises in the United States operate under America Dairy Queen (ADQ), which is a subsidiary of International Dairy Queen (IDQ). In turn, IDQ is a subsidiary of multinational conglomerate Berkshire Hathaway, famously led by Warren Buffett.
Stepping into the food service industry – and more specifically the quick-service restaurant industry and specialty ice cream industry – can be a daunting task, considering the significant start-up costs and the increasingly competitive nature of the industry. This article will break down the Financial Disclosure Document for Dairy Queen and provide all the information that prospective franchisees should know before making an investment decision.
Contents
Dairy Queen Restaurant Formats
Dairy Queen franchises all of its restaurants in the United States. The restaurant offers three types of franchises:
- Dairy Queen Grill and Chill– a standard restaurant with a full menu. This is Dairy Queen’s most popular and common format. It combines a full-service grill and counter service ice cream into one restaurant.
- Dairy Queen Treat– generally smaller in size and offers a limited menu. DQ Treat Center – As the name suggests, this format is focused primarily on frozen treats like ice cream, cakes, and novelties. It does not have a grill, so it is a counter service-only format.
- Texas DQ Restaurant- contains a “Texas Country Food” menu in addition to the standard DQ Grill and Chill menu items, as well as a full-service bar.
As of December 2021, there are 1,952 Grill and Chill locations, 828 Treat locations, and 586 Texas style restaurants in the United States. Internationally, Dairy Queen has around 700 stores in Canada and another 2,157 international locations. This article will focus solely on the American Grill and Chill restaurants.
DQ humanitarian efforts:
In 2004, Dairy Queen launched the DQ Miracle Treat Day campaign to support local children’s hospitals. On the second Thursday of every August, a percentage of sales from every Blizzard sold at participating DQ locations is donated to hospitals in the United States and Canada. To date, the campaign has raised over $145 million for children’s hospitals.
Dairy Queen is also a supporter of the Make-A-Wish Foundation. Since 1984, Dairy Queen has granted over 22,000 wishes to children with life-threatening illnesses.
How is Dairy Queen Positioned in the Quick Service Restaurant Industry?
THE QUICK SERVICE FOOD INDUSTRY AND SPECIALTY ICE CREAM TREAT INDUSTRY ARE TWO WELL-ESTABLISHED AND HIGHLY COMPETITIVE INDUSTRIES IN AMERICA.
Dairy Queen franchises compete with nationally established chain stores, such as Burger King, Baskin Robbins, and McDonald’s, as well as local stores and independent restaurants.
Dairy Queen franchises compete with nationally established chain stores, such as Burger King, Baskin Robbins, and McDonald’s, as well as local stores and independent restaurants.
Dairy Queen Grill and Chill restaurants have a competitive advantage over some of their competitors because they offer a wider array of menu items than other fast food chains that focus primarily on burgers and fries. Dairy Queen’s menu includes burgers, sandwiches, salads, wraps, chicken strip baskets, appetizers, and of course their Blizzards and other ice cream treats.
Dairy Queen is also positioned well to capitalize on the growing trend of consumers wanting healthier options when they eat out. In response to this trend, Dairy Queen added several healthier menu items in 2019, including a grilled chicken wrap and a salad.
How much does a Dairy Queen Franchise Cost?
The estimated initial investment for a Dairy Queen Grill and Chill franchise is from $1,461,200 to $2,426,990.
A full breakdown of the costs is shown below. The estimates do not include the cost of land. Note that an initial, nonrefundable franchise fee of $45,000 is due at signing the Franchise Agreement. Additionally, note that a substantial portion of the investment cost stems from Building, Construction, and Leasehold Improvements and Equipment costs, which together is estimated to cost anywhere from $1,300,000 to $2,000,000. Together, these two costs account for over 80% of the estimated initial investment cost. However, these.
| Type of Expenditure | Amount (In USD) |
|---|---|
| Initial Franchisee Fee | 45,000 |
| ALTA Survey and/or Site Investigation Report | 0 – 5,000 |
| Initiak Training Fees and Costs | 1,200 -11,900 |
| Travel and Living Expenses for Training Programs | 23,000 -38,500 |
| Building, Construction and Leasehold Improvements | 800,000 – 1,400,000 |
| Construction Consultation Services | 0 – 7,500 |
| Building Plans, Design Intent Plans and Architectural Seal | 15,000 – 45,000 |
| Equipment (Includes signs and point-of-sale systems) | 500,000 – 600,000 |
| Training Inventory | 6,000 – 16,000 |
| Opening Inventory | 15,000 – 35,000 |
| Utility Deposits, Business Licenses and Government Charges | 4,000 – 17,000 |
| Attorneys’ Fees | 1,000 – 8,000 |
| Additional Funds – 3 Months | 51,000 – 198,000 |
| TOTAL | 1,461,200 – 2,426,990 |
Franchise Requirements
Certain requirements must be met in order to own a Dairy Queen Franchise.
The Dairy Queen Franchise must be operated in compliance with the Franchise Agreement. Dairy Queen will also set standards that must be followed. These include rules delineating what proprietary items may be sold, restrictions on store build-out, computer software, and supplier and product approval.
Additionally, prospective franchisees must undergo a Dairy Queen training program prior to starting operations. The training program consists of 32 hours of classroom instruction and 245 hours of on the job training. A more detailed breakdown of training is broken down in the following chart.
| Subject | Hours of Clasrrom Training | Hours of On-The-Job-Training | Location |
|---|---|---|---|
| Product and Equipment Training (Phase 1) | |||
| Restaurant Operations (product preparation, equipment, shif positions work experience) | 0 | 116 | At an approved certified DQ location |
| Customer Services | 0 | 3 | |
| Sanitation | 0 | 2 | |
| Safety | 0 | 2 | |
| Service, Management, and Financial Basics Training (Phase 2) | 0 | 0 | |
| Restaurant Operations (shift positions, customer service, manging shifts, management function modules) | 0 | 104 | At an approved certified DQ location |
| Financial Management (recordkeeping, controllables, cash management) | 0 | 8 | |
| Marketing | 0 | 2 | |
| Register/Back Office System | 0 | 8 | |
| People, PRIDE, and Profit Training (Phase 3) | 0 | 0 | |
| Facility Management (service profit chain, DQ Capability Model function) | 3 | 0 | Classroom in Minneapolis, MN, or other location ADQ designates |
| Human Resource Management (training, supervising, retaining, coaching, evaluating) | 7 | 0 | |
| Customer Service, PRIDE, Speed of Service, Local Marketing | 4 | 0 | |
| Situational Leadership | 8 | 0 | |
| Goals, Change Management, Time management | 4 | 0 | |
| Profitability Management cost of goods sold, recordkeeping, labor cash management, controllables) | 6 | 0 | |
| Total | 32 | 245 | |
Ongoing Fees
There are several ongoing fees associated with owning and operating a Dairy Queen Franchise. The most notable are the advertising fund contribution, quarterly service call fee, and ongoing royalty fee.
The main fees associated with owning a DQ franchise are as follows:
- A 4% licensing fee on monthly gross sales, and
- A 5-6% sales promotion program fee on monthly gross sales.
Additional minor fees, such as a Renewal Fee, Operational Program Fee, and Additional Training fees, vary depending on location and circumstances.
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DQ Grill & Chill & Dairy Queen/Brazier Direct-Licensed Outlets Systemwide Outley Summary For Years 2019 to 2021
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 1893 | 1913 | 20 |
| 2020 | 1913 | 1926 | 13 | |
| 2021 | 1926 | 1952 | 26 | |
| Company-Owned | 2019 | 2 | 2 | 0 |
| 2020 | 2 | 2 | 0 | |
| 2021 | 2 | 2 | 0 | |
| Total Outlets | 2019 | 1895 | 1915 | +20 |
| 2020 | 1915 | 1928 | +13 | |
| 2021 | 1928 | 1954 | +26 |
How much do Dairy Queen Franchises Make?
The following table reports the average annual gross sales among Dairy Queen Grill and Chill restaurants that have opened since 2017. In the most recent year of data, 2021, the average Dairy Queen under these conditions reported annual gross sales of $1,427,766. As the table shows, average gross sales for these franchises has increased year over year since 2018, even through the coronavirus pandemic.
| Year | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|
| Average Annual Gross Sales | $1,284,579 | $1,221,529 | $1,319,711 | $1,427,766 |
| Number of Restaurants Meeting or Exceeding the Average | 18 | 36 | 45 | 53 |
| Percent of Restaurants Meeting or Exceeding the Average | 39% | 47% | 43% | 41% |
| High Annual Gross Sales | $3,725,266 | $2,753,016 | $2,682,054 | $2,886,417 |
| Median Annual Gross Sales | $1,263,588 | $1,157,103 | $1,265,540 | $1,386,549 |
| Low Annual Gross Sales | $637,260 | $549,419 | $541,943 | $592,454 |
| Number of Restaurants that Qualified for Inclusion | 46 | 77 | 105 | 129 |
| Number of Restaurants that Were Excluded Because They Were Not Open or Did Not Repor Sales for All 12 Months of the Year | 33 | 31 | 28 | 4 |
However, it should be noted that the sample size that this data is obtained from is quite small relative to the 1,952 stores that are currently open across the country. These sales figures may not be representative of the average Dairy Queen store since newer stores may have amenities that make them more appealing than older stores, or may be located in more desirable locations. However, the information above is useful for prospective franchisees who intend to open a new Dairy Queen store, rather than refurbishing an existing store.
How much does a DQ Grill & Chill franchise owner make?
DQ Grill & Chill franchise earnings and revenue can vary significantly from one franchisee to another. The DQ Grill & Chill franchise owner profits can be influenced by labor costs, lease rates, hours worked as well as other factors. DQ Grill & Chill discloses financials at the unit level. In other words, they show how much DQ Grill & Chill franchisees made in the past. Through analyzing this information available in the metrics tab, it can serve as a good basis to further explore the opportunity or not. At Vetted Biz, we advise you to speak with 5 to 10 franchisees to understand how much money they are making from the DQ Grill & Chill franchise. Roughly 60% of franchises disclose financials and it makes the process easier when filtering potential franchise opportunities like DQ Grill & Chill. Don’t just speak to existing franchisees, call franchisees who have recently left the system and try to find out how much those DQ Grill & Chill owners were making.
What is the DQ Grill & Chill Franchise for Sale Rate?
The DQ Grill & Chill systemwide health and franchisee satisfaction can be measured by the DQ Grill & Chillfranchise for sale rate. The franchise for sale rate is calculated by the percentage of units transferred to new franchisees and reacquired by franchisor. DQ Grill & Chill franchise for sale rate over the past 3 years is 14%. Over the last year we have data for, DQ Grill & Chill had a franchise for sale rate of 5%. Without a comparison, this number doesn’t mean much. Compare how the DQ Grill & Chill franchise for sale rate compares to 2,000+ other franchises and Industry franchises like DQ Grill & Chill.
What is the DQ Grill & Chill Franchise Failure Rate?
DQ Grill & Chill franchise failures comprise franchise terminations, franchise non-renewals, and franchises that ceased operations for other reasons. The failure rate is one of the most important franchise metrics to consider when investing in a franchise! DQ Grill & Chill failure rate over the past 3 years is 3%. Over the last year we have data for, DQ Grill & Chill had a franchise failure rate of 1%. Without a comparison, this number doesn’t mean much. Compare how the DQ Grill & Chill franchise for sale rate compares to 2,000+ other franchises and Industry franchises like DQ Grill & Chill.
Main competitors of the Dairy Queen franchise:
Dairy Queen was founded in 1940 with the goal of providing a fun, friendly place for people to enjoy soft serve ice cream and other frozen treats. Today, there are more than 6,000 Dairy Queen locations around the world. Dairy Queen’s main competitors are other large ice cream franchises such as Baskin-Robbins, Cold Stone Creamery, Ben & Jerry’s, Haagen-Dazs, and Carvel. These companies compete for customers with similar products and strategies.
These brands have followed the Dairy Queen business model to position themselves in the market. However, each company has its own unique history, flavors, and marketing approach that sets it apart from the others.
Below are some of the most renowned in the industry:
1. Baskin-Robbins: Baskin-Robbins was founded in 1945 by two ice cream enthusiasts who shared a dream of creating an innovative ice cream shop that would be a neighborhood gathering place for friends and family. Today, Baskin-Robbins has more than 8,000 locations worldwide.
2. Cold Stone Creamery: Cold Stone Creamery was founded in 1988 with a mission to serve the highest quality ice cream and create a unique experience for its customers. Today, there are more than 1,000 Cold Stone Creamery locations worldwide.
3. Ben & Jerry’s: Ben & Jerry’s is a Vermont-based company that has been making ice cream since 1978. Today, they have more than 500 ice cream shops worldwide.
4. Haagen-Dazs: Haagen-Dazs was founded in 1961 with a mission to create the world’s best ice cream using only the purest ingredients. Today, there are more than 600 Haagen-Dazs locations in 55 countries.
When it comes to choosing an ice cream franchise, potential franchisees should research all of the options to find the best fit for their goals and interests. Dairy Queen is a well-established franchise with a strong brand, but it is important to consider all of the competition before making a final decision.
Conclusion
When searching for a franchise, it is important to consider all aspects of the business in order to make an informed decision. The Dairy Queen Grill and Chill franchise offers a unique opportunity in the fast food industry, with a focus on grilled foods and a more family-friendly atmosphere than many other chains. While the average store gross sales are lower than some of its competitors, the low investment cost and franchisor support may make it a more appealing option for some prospective franchisees. It is important to research the franchise thoroughly before making any decisions, and speaking with existing and former franchisees can give you valuable insights into what it is really like to own and operate a Dairy Queen Grill and Chill franchise.
While Dairy Queen is a well established international brand, the 9-16 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait. Other companies in the food and beverage industry may provide a better investment opportunity. For more examples, check out other businesses offered on Vetted Biz.
