What are the potential benefits of being a 'conversion franchisee' for a Dq Treat franchise (Item 5)?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
If you operate an existing Dairy Queen® soft-serve-only or limited non-system food ("NSF") store, and meet all of ADQ's qualifying criteria, ADQ may allow you to convert your store to a DQ® Treat store by signing the franchise agreement and the applicable conversion addendum included in Exhibit C. The conversion addenda allow you to, among other things, carry over from your old agreement to the new agreement the protected territory and the continuing license fee for products made with soft-serve as an ingredient. Franchisees converting an existing Dairy Queen® soft-serve-only store or an NSF store to a DQ® Treat store are referred to as "conversion franchisees" and the locations are referred to as "conversions."
Dairy Queen® soft-serve-only stores are different from the DQ® Treat franchise currently offered by ADQ because they are under franchise agreements entered into over 30 years ago and have no rights to carry DQ® food items.
What This Means (2025 FDD)
According to the 2025 Dq Treat Franchise Disclosure Document, a significant benefit for 'conversion franchisees' is the ability to carry over certain terms from their previous Dairy Queen franchise agreement. Specifically, if you operate an existing Dairy Queen soft-serve-only or limited non-system food store and convert it to a Dq Treat store, you may be able to maintain your existing protected territory and continuing license fee for products made with soft-serve. This can be advantageous, especially if the previous agreement had more favorable terms than what is currently offered to new franchisees.
For franchisees converting from a non-system food store, there's a potential benefit regarding continuing license fees on food menu products. These franchisees do not pay a continuing license fee on food menu products for the first 36 full months after the conversion's effective date. After this initial period, starting with the 37th month, a continuing license fee of 5% of "Food Sales" minus "Base Food Sales" will be applied, as defined in the conversion addendum. This provides a grace period to establish the food sales aspect of the Dq Treat business without incurring additional fees.
These conversion options acknowledge the existing investment and operational history of franchisees within the Dairy Queen system. By allowing them to carry over certain benefits, Dq Treat aims to incentivize upgrades to the Dq Treat model while recognizing the established goodwill and customer base of the existing locations. However, it's crucial for prospective conversion franchisees to carefully review the specific terms and conditions outlined in the conversion addendum to fully understand the financial implications and obligations.