Dairy Queen: Litigation & Risk
Quick-Service Restaurants · FDD Items 3, 4 & 5
Elevated Risk
8 cases disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 8
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 53 / 100
- FranchiseVerdict composite · higher is better
- Rating
- B
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 1,242
- Government-backed loans issued
- Charge-off rate
- 10.6%
- vs 16% franchise average
- 5-yr charge-off rate
- N/A
- Defaults
- 110 loans
- Loans charged off or defaulted
- Total loan volume
- $380.5M
- Avg loan size
- $306K
- Participating lenders
- 272
FDD Items 5, 6 & 17: What You Give Up
Contract Risk Indicators
- Mandatory arbitration
- Required
- Disputes resolved outside court, limits your legal options
- Jury trial waiver
- Not waived
- Non-compete
- 1 yrs
- Post-termination restriction on similar businesses
- Franchisor can compete
- Yes
- Franchisor can open competing locations in or near your territory
- Right of first refusal
- Yes
- Franchisor can match any purchase offer when you try to sell
- Governing law
- State where restaurant is located
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
4 pending: Oshlo-Wilkinson DQ vs ADQ (contract/Iowa Franchise Act - transfer rights); ADQ vs Estate of Ridl (termination/trademark infringement); Rhode Island General Treasurer vs Domino's et al (securities class action naming ADQ officer D'Elia); Project Lonestar vs ADQ (breach of contract/transfer process). 4 concluded settlements. ADQ is plaintiff in Ridl and Project Lonestar counterclaims; defendant in others.
What drove the 53/100 verdict
Risk Score Breakdown
- 01MINORStagnant unit growth of only 1.4% YoY indicates system contraction and poor franchisee recruitment/retention
- 02MINORNo Item 19 (Average Net Income) disclosure prevents validation of $1.62M average revenue translating to actual profitability
- 03HIGHMultiple litigation categories (contract disputes, trademark infringement, encroachment claims) suggest franchisor credibility and operational governance issues
- 04MINORUnprotected territory creates direct competition risk and commoditizes franchisee investments within the same market
- 05MINORHigh investment range ($623K-$2.78M) combined with 4-5% royalties on gross sales offers poor downside protection if revenues underperform
- 06HIGHOfficer litigation history from previous franchise employment raises governance and compliance risk concerns
Severity inferred from FDD text. Not a regulatory or legal classification
Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice. Consult a franchise attorney before signing any franchise agreement.