If ADQ fails to fulfill its obligations to Dq Treat franchisees, what happens?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
American Dairy Queen Corporation vs. UAM, LLC (United States District Court, Western District of Texas, San Antonio Division, #5:24-cv-1209, filed October 23, 2024). American Dairy Queen Corporation ("ADQ") initiated this litigation seeking an order declaring Defendant, a DQ® franchisee, breached its obligations under the franchise agreement by failing to use soft serve mix, supplies, and fresh milk as approved by ADQ, which is a public health and safety zero-tolerance violation of the franchise agreement. ADQ alleges breach of contract, trademark infringement and unfair competition in violation of the Lanham Act, as well as common law unfair competition. ADQ is seeking temporary and permanent injunctive relief, compensatory damages, attorneys' fees, and costs. On November 15, 2024, the Defendant filed a counterclaim alleging wrongful termination of the franchise agreement and breach of contract. Defendant is seeking a declaratory judgment reinstating Defendant's franchise agreement, compensatory damages, attorneys' fees and costs. The court granted ADQ's request for preliminary injunction at a November 22, 2024 hearing. A jury trial is set for May 19, 2025. ADQ will continue to vigorously pursue its claims and defend itself against the counterclaims.
Project Lonestar, Inc. vs. American Dairy Quen Corporation (United States District Court, Northern District of Texas, Dallas Division, #3:25-cv-00339-L, filed February 11, 2025). Project Lonestar, Inc. initiated a lawsuit against American Dairy Queen Corporation seeking injunctive relief and damages. Plaintiff alleges breach of contract, interference with contract, and interference with prospective business relationship by ADQ related to the transfer process for several of their franchised restaurants. ADQ denies the claims and has asserted counterclaims for unpaid fees and termination fees.
Source: Item 21 — UItem 21U***:** U**Financial Statements (FDD page 67)
What This Means (2025 FDD)
Based on the 2025 Dq Treat Franchise Disclosure Document, there is no specific section that explicitly outlines the consequences if American Dairy Queen Corporation (ADQ) fails to fulfill its obligations to Dq Treat franchisees. However, Item 3 regarding litigation does provide some insight into potential legal actions that franchisees or ADQ may take against each other.
Item 3 includes descriptions of legal cases involving ADQ. These cases involve allegations of breach of contract, trademark infringement, and unfair competition initiated by ADQ against franchisees, as well as counterclaims from franchisees alleging wrongful termination and breach of contract. These examples suggest that disputes between ADQ and its franchisees are typically resolved through litigation.
Since the FDD does not explicitly state the repercussions if ADQ fails to meet its obligations, prospective franchisees should seek clarification from ADQ regarding the specific remedies or processes available to franchisees in such situations. This could include asking about mediation, arbitration, or other dispute resolution mechanisms, as well as the potential for financial compensation or other forms of relief.