(BRK.A), (BRK.B)
The cone with the curl on top will become a much more common sight in Massachusetts when Dairy Queen goes forward with a major planned expansion across the Bay State.
Massachusetts does love its ice cream. The Bay State ranks in the top ten of most ice cream consuming states.
Dairy Queen has announced plans to rollout 60 new stores with potential locations including the towns of Taughton, Peabody, Burlington, Plymouth, and the city of Worcester.
While there is already a modest number of locations in Massachusetts, there is currently only one location that sits in the western half of the state. The location is a “Grill & Chill” restaurant in Chicopee, Massachusetts.
In keeping with Dairy Queen’s strategy, the restaurants would all be franchises, and would be built over the next five years.
Dairy Queen has been focusing on state-wide expansion as of late, and is in the midst of building 75 new Dairy Queen Grill & Chill restaurants in South Carolina in 2016.
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.