Dairy Queen Targets South Carolina for Major Expansion

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The state of South Carolina, and the Myrtle Beach area in particular, is about to become Dairy Queen territory, as the quick-service restaurant chain owned by Berkshire Hathaway looks to build some 75 new Dairy Queen Grill & Chill restaurants in South Carolina in 2016.

Dairy Queen opened 84 new outlets in the United States in 2015, and its goal of 85 new stores in 2016 means that the vast majority of them will be in South Carolina.

Eight of the locations are planned for the popular Grand Strand beach area that runs from North Myrtle Beach to Georgetown.

Why South Carolina? The company cites its “state-of-the-art analytics” for its interest in expanding the state, and the new stores will mean Dairy Queen will have over 90 locations including existing stores.

As a corporate strategy, Dairy Queen shuns company owned stores, instead focusing on its franchise business, and it is looking for franchise owners that want to run multiple stores.

In recent years, new franchises have popped all over Florida, and overseas in places such as Bahrain, Brunei, Dubai, Egypt, Oman, Qatar, and Saudi Arabia.

DQ a Winner for Berkshire

With 6,700+ locations worldwide, Dairy Queen is far smaller than McDonald’s or Burger King, but to its advantage it has only three company owned stores. The cost of the bricks and mortar are born by the franchisees, and Dairy Queen makes its money from franchise fees and a percentage of the sales.

Each franchise pays a $35,000 franchise fee, a royalty fee of 4%, and a marketing fee of 5% – 6%.

In the aggregate the franchises net Berkshire Hathaway hundreds of millions a year on its investment of only $585 million. Increasingly Dairy Queen is making that money year-round as its stronger focus on its food business, including its new DQ® Bakes! line-up, has customers seeing it as more than just a summer treats purveyor.

For more information read a Mazor’sEdge special report on Dairy Queen.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.