Dairy Queen Makes Progress on Year-Round Customers

(BRK.A), (BRK.B)

When your softball team wins the July tournament where do you go to celebrate? Everyone knows you get ice cream at Dairy Queen. The problem has been that when your hockey team wins in the middle of February, you don’t go there.

It’s a battle that Dairy Queen has been fighting to prove it’s not just summer treats that are the focus of its business.

For decades, some of the oldest Dairy Queen franchises were seasonal and shuttered for the winter, but the modern DQ Grill & Chill is a full-service restaurant that need year-round business.

Dairy Queen’s corporate strategy in recent years has been to boost the quality and advertising for its food items. It’s not just a soft-serve ice cream stand. Look at the DQ Bakes sandwiches to see its efforts to expand its menu items.

DQ’s Efforts are Paying Off

It looks like Dairy Queen’s efforts are paying off. YouGov.com, an internet-based marketing firm that polls thousands of members on a wide variety of issues, is reporting that its YouGov BrandIndex is showing positive news for Dairy Queen.

The BrandIndex is billed as a key measurement of potential revenue, and it’s showing an uptick in interest in eating at Dairy Queen for the month of December 2015, as compared to December 2014.

According to their polling,  in 2014 “31% of adults 18 and over who were aware of the brand considered Dairy Queen when making their next fast food purchase. The percentage is now up to 33%.”

The 6% increase in shows that the company is making progress, and what’s more, the 33% is a healthy one, with the “average Purchase Consideration score for the fast food dining sector overall is 22%.”

DQ a Winner for Berkshire

Dairy Queen, which has 6,400+ locations worldwide, may be 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, and more and more its making that money year-round.

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

© 2015 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.