International Law

DQ Franchise Lawsuits Multiply

From the QSR News, Lawsuit Against Dairy Queen Grows

"According to Carmen Caruso of Schwartz Cooper, "The addition of these regional associations makes clear that the forced conversion by IDQ/ADQ is a national problem, not a problem isolated to one particular region or state. It is affecting all franchisees."

The lawsuit by the four Dairy Queen franchisee associations continues to ask the Court to prevent IDQ and ADQ from:

1. Forcing current members to convert their outlets to the new DQ Grill & Chill or DQ/Orange Julius concepts through modernization/name change programs immediately upon renewal, relocation, transfer, or upgrade of their existing franchise agreements.

2. Placing unreasonable requirements, i.e., a mandatory investment of tens of thousands of dollars, on existing Dairy Queen franchisees to convert their current outlet to an entirely new Dairy Queen concept/brand/system, resulting in the potential loss of their business.

3. Placing surcharges on products sold to the franchisees by endorsed vendors/distributors of IDQ/ADQ for advertising purposes without applying credits for the payment of these surcharges to the franchisees' advertising commitments per the franchise agreements.

4. Requiring payment of surcharges on certain products sold to Dairy Queen franchisees for advertising purposes and, therefore, breaching franchisee agreements that do not require franchisees to pay advertising fees."

The first two elements of this lawsuit are inappropriate for litigation, in my opinion.

It is a systemic change issue which needs to be negotiated or better yet, mediated.

The problem with litigation is that each party's trade-offs will be hidden while economically unhelpful legal arguments about contractual interpretation will be pursued.

Systemic changes are largely about economic change: parties have different views about what will happen in the future. This is exactly the climate for mediation: tradeoffs between different preferences are clearly possible.

Full post as published by Misleading Advertising Law on February 21, 2008 (boomark / email).