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Dairy Queen is a well-known fast food and ice cream change in the United States, even though it isn’t quite the global juggernaut that McDonald’s has become. Still, word has it that Dairy Queen restaurants turn a profit, which has led many to wonder whether they would be good franchise investment opportunities. If you’ve been wondering How Much Does A Dairy Queen Franchise Cost? or whether it’ll be profitable to own a Dairy Queen franchise, you’ve come to the right place!
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Dairy Queen – A Short History of Its Franchising
Dairy Queen, a fast food and soft-serve ice cream brand, originally began in 1940 and started its business in Illinois. It’s now a chain of over 6600 restaurants in the United States and Canada, as well as another 2200 restaurants in 22 countries. There are two corporate stores compared to the rest being franchisee locations. In other words, franchising is huge with this company!
Dairy Queen was actually one of the first big brands to experiment with franchising. They had only 10 locations in 1941 and grew rapidly to 100 locations by 1947. Then they reached 1500 locations only three years later in 1950, and over 2600 locations in 1955.
But the spread didn’t stop there. 1998 saw Dairy Queen become a subsidiary of a parent company called Berkshire Hathaway, Inc. Now Dairy Queen also owns over 300 other stores from the Orange Julius and Karmelkorn Shoppes brands.
How Much Does a Dairy Queen Franchise Cost?
Anyone interested in purchasing a Dairy Queen franchise license and starting their own store first has to decide which store they want to pursue. There are two choices: Dairy Queen Grill & Chill and Dairy Queen Orange Julius Treat Center.
Either way, a potential franchisee needs $400,000 in liquid assets and $300,000 in cash equity in order to even be considered for approval. There also needs to be a minimum net worth of $750,000. A liquid asset, if you aren’t already aware, is any cash on hand for an asset that can be converted to cash quickly. These are things like stocks, which can be converted to cash almost instantaneously these days.
Once you have the required capital, you can submit a request to become a Dairy Queen franchisee. The above costs are just minimums; it’ll ultimately cost you between $890,000 and $1,200,000 if you want a standard 2048 ft.² building with enough room for 48 customers. You can pay even more, between $1,080,000 and $1,400,000 for a 2709 square-foot building with enough space for 78 customers. These values and prices change relatively frequently with the rest of the market, so you have to visit Dairy Queen’s site to see available locations and building options.
How Much Does a Dairy Queen Franchise Owner Make?
At this time, Dairy Queen franchisees are required to pay an initial franchise fee of $25,000. Then you also must pay 5% royalties on any gross monthly receipts; basically, you pay 5% of what you make every month. Fortunately, this is below the franchisee industry average of around 5.4%.
Let’s break this down into simple math. If your store sells $1 million worth of dairy products in a month, Dairy Queen themselves (technically Warren Buffett, who owns DQ) gets $50,000 that month. It’s extremely unlikely for a single Dairy Queen store to make $1 million, of course; you would need multiple stores under your belt to even think about approaching that number.
So how much can you expect to make as a Dairy Queen franchise owner? The average annual profit for someone who operates their own franchisee location is around $194,000. Subtracting 5%, you get $184,300 that year. Of course, you still then need to pay any maintenance costs, employee salaries, and other fees.
Still, you can expect to make around 33% of your initial annual profits when you subtract all the applicable costs. This means a typical Dairy Queen franchise owner and actually expect to make a very reasonable salary of between $60,000 and $70,000 every year.
Is This Worth It?
That’s the million-dollar question, isn’t it? Looking at that number on its face, it’s clear that such a salary is also attainable by getting a college education and earning a job in a good field, like a STEM field. That being said, college is also quite an investment of time and money.
We think that it’s more likely that owning multiple Dairy Queen restaurants is where real profit comes into play. However, you need to have quite a lot of startup cash to be able to even consider this idea.
Dairy Queen Franchise Owning Compared to Other Franchises
As we mentioned before, the average franchise fees every month is around 5.4% on gross monthly receipts. Dairy Queen has a slightly lower rate, so you pay a little less every month. But they do have relatively high start-up costs compared to other franchise options.
For instance, a 7-Eleven store only has a franchise fee of $10,000 minimum, although some stores have much higher costs. Initial investments can also be quite cheap, averaging around $50,000-$60,000. These convenience stores are growing rapidly across the country.
Still, many other fast food or café options are quite competitive when you look at Dairy Queen’s overall costs and options. McDonald’s, for instance, is one of the costlier franchises to get into, with a $45,000 initial franchise fee and the minimum initial investment of $1 million. The actual initial investment will likely be quite higher, up to well over $2.2 million depending on location.
Even ancillary but related franchises like Dunkin’ Donuts (actually just called Dunkin’, now) require a franchise fee between $40,000 and $90,000 and the initial investment can easily run you well into the millions. Still, the potential profits are quite great given customer loyalty.
All in all, Dairy Queen franchises are a great option if you don’t have lots of franchise startup cash compared to other high-profit options. While the potential for higher profits certainly exists in places like McDonald’s, you need more startup cash in order to break into those industries.
Dairy Queen Franchise Complaints
In the last decade, there have been a number of Dairy Queen franchise complaints on behalf of the franchisees. One of the most notable cases saw near-revolt when Dairy Queen corporate offices determined that all the restaurants should convert in order to add table service, which meant increasing the size of most restaurants. This placed a big financial burden on franchise owners, who banded together to resist these changes.
However, Dairy Queen’s corporate offices eventually won out, and now virtually all Dairy Queen facilities do have seating for customers. Occasionally, franchise owners have new complaints, but by and large, Dairy Queen is one of the better franchises to get into if you have the cash and inclination.
What is a “Franchise”?
A franchise is a kind of a marketing strategy and concept that allows the parent company (often called a franchisor) to license its properties and experience to another person. That person (called the franchisee) then uses those products and the production methods to sell branded products in conjunction with a greater chain.
We know that sounded a little complex. Let’s break it down.
McDonald’s has literally thousands of stores across the world. But not every one of those stores is directly run by McDonald’s corporate managers… or at least not employees who are legally part of the McDonald’s corporate umbrella. Instead, 90% of their stores are owned and operated by independent franchisees.
Those franchisees receive the same materials, procedures, intellectual property and advertising material to build McDonald’s restaurants. They get to keep some of their profit and return the rest to the greater McDonald’s company.
In this way, individuals with little start-up cash can become a franchisee for a restaurant chain like McDonald’s, Dairy Queen, and others and earn a profit. It’s kind of like owning and renting property, but with brands or corporate entities.
Big brands end up franchising their methods and products because it allows them to spread more rapidly and shares the capital risk with other investors. Using the McDonald’s example again, McDonald’s was able to spread so fast because independent investors who could afford a single restaurant started sprouting McDonald’s joints all across the United States. They didn’t have to rely on a single shared pool of income from the initial investors.
Meanwhile, investor owners can become much richer by relying on an existing brand and food that has already been proven to be profitable as opposed to starting their own chain or restaurant.
All in all, becoming a Dairy Queen franchise owner might be a smart way to earn a great salary over time. But looked at another way, you are in about the same amount of money as a franchise owner from a single store as you would from a typical job that requires a college degree. The real money likely lies in owning multiple franchise restaurants at once and cooling all that income together to make a real profit.
Do you have any experience running franchise restaurants? Let us know how it worked out for you and whether you think Dairy Queen would be a good investment!