DAIRY QUEEN Sues Franchisee for $13M Extortion Scheme

Dairy Queen claims it’s the victim of a $13 million extortion scheme perpetrated by one of its own franchisees.

International Dairy Queen Inc. is soft-serving up a lawsuit against multi-unit franchise owner Guy Blume of Ankeny, Iowa. 

IDQ, Inc. claims Blume is threatening to go public with information he says would cause $100 million in damage to the company. 

Dairy Queen wants a federal judge to sever its ties with Blume, who operates four Iowa stores, and to issue a court order to keep the franchisee from defaming the company.

Blume hasn’t filed a response to the suit yet, but his attorney denied the allegations.

Source:  Minneapolis St. Paul Business Journal


12 thoughts on “DAIRY QUEEN Sues Franchisee for $13M Extortion Scheme

  • February 24, 2011 at 10:52 pm

    So, I continue to see this suite popping up all over the QSR and franchise world blogs and it makes me wonder who’s got the real goods. Having reviewed the suit in full detail, it would appear that Dairy Queen’s lead outside counsel lost his cool with this hapless, frustrated, and befuddled franchisee from Iowa. Further research shows that while Mr. Blum raged a war of words in the on-line press, he clearly could not have come even close to extorting DQ. In fact, I would say the suit is a full-on affront to limit the franchisee’s right of free speech and his desire to simply have his complaints heard first by DQ Corporate, then Berkshire Hathaway, directly. So they think it’s cool to respond to the guy with a frivolous law suit? I think they have more to hide, frankly. What could it be? All I can figure is there must be some merit to the potential of the exposure to which the franchisee refers. Please readers, weigh in on this and let us know what you think the issue may be.

  • February 24, 2011 at 11:10 pm

    Guest 6 hours ago

    Ya I heard Ghadafi and Mubarak are considering seeking employment at DQ because it allows them to still act as a dictator and control free speech… DQ is clearly losing it.. Sounds like class action to me
    Edit ReplyReply
    Guest 13 hours ago

    I wonder if Dairy Queen will put this information into an FDD (Federal Disclosure Document) they even post on there website that this is required by the Federal Trade Commission. It does not matter anyway the obviously don’t disclose as required by law. DQ is trying to control free speech sueing a franchisee because they want him to shut up and not tell the truth. Bring on the clowns. Oh by the way Dairy Queen this is not Egypt or Libya you can’t shut the intenet off and control freedom of speech!!!
    Edit ReplyReply
    Guest 22 hours ago

    Dairy Queen hires lobbyist and High powered attorneys to protect them so they don’t provide disclosure. Franchisees must band together and get the FTC involved


    Mr. Blume needs to stand firm and get other Franchisees involved so the FTC steps in to protect his rights against a BULLY LIKE DAIRY QUEEN

    Closing Comment

    If disclosure under the current scheme of Federal Rule and patchwork quilt of state law was all that was needed to right the informational imbalance between franchisees and their franchisors, then the American Franchisee Association (AFA) would never have come into existence.

    If disclosure of material information to prospective franchisees is based on the theory that an informed consumer will then be equipped to determine whether a franchise deal is in his or her best interest, then the Commission must take all steps necessary to ensure that lay people can understand what they are getting into. This means that franchisors must use plain English (not use their “artful” franchise terms) and come clean with the public that franchisees do not, in fact, own their own businesses. Franchisees are leasing the rights to sell goods or services under the franchisor’s trade name and trademarks.

    If disclosure is ever to be considered adequate to “regulate” franchising, then when called upon to do so by Congress, Commission staff must go on the record in favor of providing a private right of action under the FTC Rule.

    It is the experience of AFA member franchisees after they sign their contracts with franchisors that tells us that the current scheme of pre-sale disclosure is wholly inadequate in protecting their interests. Only with the establishment by law of federal standards of conduct for both franchisors and franchisees to abide by after the sale will there be the necessary balance to ensure that franchising is a safe vehicle for consumer investment.

    Respectfully submitted,

    Susan P. Kezios
    American Franchisee Association (AFA)
    53 W. Jackson Blvd., Ste. 205
    Chicago, IL 60604

    Tel. 312-431-0545
    FAX 312-431-1132
    E-Mail: SKeziosAFA@aol.com

    Edit ReplyReply
    Guest 1 day ago

    DAIRY QUEENS HANDS ARE DIRTY “THEY ARE CREATING A DIVERSION” I AM FORWARDING THIS TO THE Federal Trade Commission. Who are they kidding saying they don’t have to provide disclosure or an FDD the poor franchisee asked for this for months. He converted to a Grill and chill No disclosure. Dairy Queen I can smell something burning its called a bridge between you and your franchisees after reviewing this case I am amazed how bad of an organization this is. I am shocked Warren does not step in and chang the management team. I would tell my clients to run away if they were considering this franchise.

    If I was this Franchisee I would definately protest in clown suit at Berkshire Hathaway The Federal Trade commission needs to react to Non disclosure right away. I agree with Guy Blumes claims they are crooks and to ask for 13million who cares how much damage have they done by not providing Disclosure obviously his Attorney would not of sent a demand letter if DQ did not want one. That organization needs to wake up and watch TV this crap is not flying in the Middle East let alone in the United States!!!

    Under the current Federal Trade Commission (FTC) Rule on franchising and business opportunity ventures, in 38 states, franchisees have no private right of action. In today�s world, franchisees actually have to go to the government for redress if their franchisor violates the FTC Rule. A July 1993 GAO report on the FTC�s enforcement activities in franchising found that the FTC acts on less than 6% of all franchise complaints brought to it, going to federal court in just 2% of those instances. If the prohibition against certain activities is a federal issue, then relief should be in federal court. Therefore, franchisees are asking to de-regulate and seek privatization of the enforcement mechanism.

    Edit ReplyReply
    Guest 2 days ago

    Dairy Queen is essentially saying its okay not to provide Federal Disclosure Documents to franchisees.. I know this is a federal case and the FTC does not act on individual basis but clearly Dairy Queen Franchisees should review there agreements with Dairy Queen and file a complaint with the FTC. I am amazed at these practices this clearly is a disfunctional organization. I know Warren Buffett would not approve of deceptive practices.
    Edit ReplyReply
    Guest 4 days ago

    I can not believe this information would actually get to a franchisee. Test answer Questions wow that has to be embarrassing for DQ. I read the lawsuit it sounds like DQ is trying to deflect attention from misdeeds they have committed. It seems the franchisee was trying to communicate with DQ and they clearly ignored him. Whats clearly missing is ACH authorizations nowhere could I see any actual signed ACH authorization form. I just find it hard to believe DQ being owned by the greatest investor of all time could be this disorganized. I also find it very disturbing that Dairy Queen would not provide disclosure… Ryan Palmers comments are correct this should of never escalated to this point. It sounds like Dairy Queen is trying to control freedom of speech and demonize the franchisee. This is the United States I know if Warren Buffet looked at this he would agree its definately giving Dairy Queen a black eye.
    Edit ReplyReply
    Guest 5 days ago


    Chill Test-Out Answers

    What is the shelf life of the following items: store made DQ Chillabration™ and Blizzard® Cakes and novelties? (1 point)

    10 days
    Circle the appropriate spoon size for each of the following products: (12 points)

    Large MooLatté Long – Short – No Large Sundae Long – Short – No

    Medium Shake Long – Short – No Waffle Cone Long – Short – No

    Peanut Buster Parfait Long – Short – No Small Sundae Long – Short – No

    Medium Blizzard Long – Short – No Brownie Earthquake Long – Short – No

    Medium Sundae Long – Short – No Banana Split Long – Short – No

    Small Blizzard Long – Short – No Small Arctic Rush Long – Short – No

    List the temperatures of the following products. Temperatures listed may be used more than once and some will not be used at all. (13 points)

    DQ Soft Serve Liquid Mix 33-38F
    DQ Frozen Soft Serve 18F
    Fruit toppings 33-38F
    Hot Fudge 140F
    Vanilla Syrup Room Temp
    Caramel Fudge 140F
    Cocoa Fudge™ 100F
    Cone Coating (Novelties) 120F
    Cone Coating (Cones) 100F
    Marshmallow Rm Temp
    Chocolate Topping 33-38F
    Cold Fudge Rm Temp
    Waffle Coating 120F

    What are the sizes (in ounces) of Blizzard Flavor Treats? (3 points)

    12 oz, 16 oz, 21 oz

    What are the sizes (in ounces) of Shakes? (3 points)

    16 oz, 21 oz, 32 oz

    How much topping should be put on standard sundaes? (3 points)

    Small 1 oz.

    Medium 1 ½ oz.

    Large 2 oz.

    How should a Blizzard Flavor Treat always be served to the customer? (1 point)

    Upside down

    Choose the letter of the correct answer to the following questions about overrun. (5 points)

    ___b___ Which of the following is the correct definition of overrun?

    a. The number of times mix can be reused
    b. The amount of air incorporated into the mix during the freezing process c. The amount of air in the mix at the pump
    d. None of the above

    ___c___ What are the steps to measure overrun?

    a. Zero scale, Fill any cup with soft serve, Weigh, Scrape excess
    b. Fill a 16 oz. Pelouze® cup with soft serve, Weigh
    c. Zero scale, Fill 16 oz Pelouze cup with soft serve, Scrape excess, Weigh
    d. Fill a 16 oz cup with soft serve, Zero scale, Scrape excess, Weigh

    ___b___ Which of the following are characteristics of low overrun?

    a. Shiny/wet looking, Grainy, Off- white color, Fluffy
    b. Shiny/wet looking, Chewy texture, Grainy, Off- white color
    c. Grainy, Pockmarks on surface, Chewy texture, Fluffy
    d. Chewy texture, Off -white color, Heavy, Pockmarks on surface

    ___a___ What should be the weight and overrun of DQ soft serve?

    a. 13.2 ounces and 40% overrun
    b. 13.2 ounces and 50% overrun
    c. 12.3 ounces and 40% overrun
    d. 12.3 ounces and 50% overrun

    ___d___ Which of the following are characteristics of high overrun?

    a. Shiny/wet looking, Fluffy, Pockmarks on surface, Light
    b. Shiny/wet looking, Marshmallow texture, Grainy, Off- white color
    c. Grainy, Pockmarks on surface, Low Vanilla flavor, Fluffy
    d. Pockmarks on surface, Fluffy, Low Vanilla flavor, Marshmallow texture

    List 3 ways to correct High Overrun. (3 points)

    Make sure mix bag is not empty
    Make sure all hose clamps between mix bag and pump are tight
    Check for pinholes in the mix bag and hoses
    Make sure bag adapter is firmly in place and check valve is present
    Duke Make sure curved air tub is not cracked and air meter is tight
    Check washer valve for wear (DPR)
    Change to a lower-sized air meter
    Stoelting Make sure the black cap and hat is positioned correctly (219)
    Adjust overrun setting

    List 3 ways to correct Low Overrun. (3 points)

    Make sure all hose connections between pump and faceplate are tight
    Check for leaks at connection to freezer, at the faceplate, or for cracks in the faceplate
    Duke: Make sure air tube and meter are not plugged with dry mix
    Make sure curved air tube is not pinched or kinked, and is pointing upward
    Change to a higher-sized air meter
    Stoelting: Make sure quad ring is positioned correctly (219)
    Make sure air outlet is pumping air (U3)
    Adjust overrun setting

    How long must waffle batter rest before being used? (1 Point)

    10 minutes

    __c___ How long should you blend a Blizzard? (1 Point)

    a. As long as it takes
    b. 10 – 15 seconds
    c. 7 – 10 seconds
    d. 3 – 7 seconds

    What is the current Blizzard of the Month? (1 Point)

    Check current product promotion for answer

    What is the weight of the following: (9 points)

    a. Small sundae (form) 5 oz.
    b. Peanut Buster® Parfait (finished) 11 ½ oz.
    c. Medium cone 7 oz.
    d. Dipped Waffle Sundae (form) 7 ¾ oz.
    e. Large sundae (form) 10 oz.
    f. Small cone 5 oz.
    g. Banana Split (form – no banana or toppings) 6 ¾ oz.
    h. Banana Split (finished) 13 ½ oz.
    i. Brownie Earthquake™ (form) 6 ¼ oz.

    How often should the following pieces of equipment be completely disassembled, washed, rinsed, and sanitized? (3 points)

    a. Fudge Pumps Weekly
    b. Soft Serve Freezer, Pump, and Faceplate Daily
    c. Arctic Rush Machine Weekly

    What type of lid goes on the following to-go products? (5 points)

    a. Brownie Earthquake Treat dish
    b. Peanut Buster Parfait Dome lid
    c. Blizzard Flat drink lid
    d. Banana Split Banana split dish
    e. MooLatté Wide mouthed dome lid

    Which Blizzard Cake uses chocolate soft serve instead of vanilla? (1 point)

    Chocolate Xtreme

    What is the shelf life of waffle cones and waffle bowls? (1 Point)

    24 hours

    Name the 3 standard Waffle Bowl Sundaes and list the toppings (including amounts) for each. (12 Points)

    1. Chocolate Covered Strawberry
    2 Ladles Strawberry
    1 Ladle Chocolate Cone Coating
    4 Whipped Topping Stars

    2. Fab Fudge
    2 Pumps Hot Fudge
    1 Black Spoon Rainbow Decorettes
    4 Whipped Topping Stars

    3. Turtle
    2 Pumps Caramel
    1 White Spoon Pecans
    4 Whipped Topping Stars

    Total Points: ___________/ 81

    (Passing = 72)

    1 person liked this. Edit ReplyReply
    Guest 5 days ago

    I looked into this and read through the information and if Mr. Blumes allegations are found to have merit which by the sounds of his attorney they do!!! Dairy Queen is in big trouble I would not reccomend this Franchise.

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  • February 28, 2011 at 10:11 am

    So, if you look at the fine details of the correspondence in the suit documents, you’ll make note of one particular detail of extreme interest. While it appears DQ wanted this operator out of its system, they failed to enforce their rights to due process leading to the potential cancellation of the franchise agreements. This process allows for a period to cure which, had DQ exercised this provision, they would have potentially prevented the massive embarrassment to themselves. Most professional organizations represented by reasonable counsel would have pursued this path versus using the extreme measures employed thus far. They look like bullies on the playground!

    I, like many other posters here, want to know what DQ is thinking. They cannot believe they come out of this looking any better for the ware. Come on DQ, get a grip! Right now you look like you’re hiding a very smelly dead body in your closet! Some here would suggest the FTC already knows where it’s buried. If these details come to be truths then the claims by posters on QSR Magazine of a potential $100M problem may not be too far-fetched.

  • February 28, 2011 at 12:27 pm

    If anyone is willing to share copies of the complaint or the correspondence referred to, please email the in confidence to unhappyfranchisee[at]gmail.com

  • March 1, 2011 at 12:26 am

    I know Guy Blume and he is the problem in this dispute. At one of his stores he got into a disagreement with the territory operator so he changed the ownership of the store to his sister’s name and then changed the store from a Dairy Queen to a Dairy Mart. Sales dropped more than 20% after the change so he changed it back. He also went from no quick service restaurant experience to owning 7 DQ stores in a little over a year. He proved to be a horrible operations person and those stores had lots of employee theft and poor management. Then he ran into cash problems due to a divorce so he wanted out of the business but since he was such a lousy operator, no one wanted his stores except one which he sold to Fourteen Foods, a large DQ multi-unit multi-state franchisee.

    Is DQ a perfect franchisor? Is there such a thing as a perfect franchisor? I don’t think so that exists especially once you get past 10 units in the system. But I can tell you from experience that DQ is one of the better franchisors I’ve had experience with.

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  • March 31, 2011 at 1:54 pm

    I wooked for guy blum for about a year or so thay had me to come in and clean and help out it was the nastiest place i have ever woorked at i have photos of befor and after it was so bad the bugs of all kind was in there i will never work for him or DQ ever he did not pay me or the outher kids that worked there it is a shame that hecould get get baywith all of this……..

  • April 18, 2011 at 12:47 pm

    Today reporting the filing of the law suit by American Dairy Queen against an Iowa franchisee who has not only answered the claims in the Minneapolis case but has also today filed his own suit against American Dairy Queen and its territory operator, Edward Sorrenson. You’ll find it interesting that the suit discusses Sorrenson’s threats of physical violence against the franchisee and his employees. One of the most compelling items in this suit is the franchisee’s claim against American Dairy Queen under the Consumer Fraud Act of Iowa. He references the collusion of ADQ and Mr. Sorrenson under tenants of anti-trust. Additionally, his suit invokes codes under the Iowa Franchise Act which, if true, could be the key to his previous statements regarding disclosure rules.

    You’ll reference this new case at: https://ecf.iasd.uscourts.gov/cgi-bin/rss_outside.pl

  • July 17, 2011 at 12:47 am


    Guy A. Blume, Pro-Se )
    ) Case No.: cv-00178
    Plaintiff, ) Honorable Robert W. Pratt
    Chief, U.S. District Judge, Southern District of Iowa
    Vs. )
    ) Amended Complaint
    American Dairy Queen ,Cindy Lakatos, )
    Oshlo Wilkinson LLC, EE Sorenson LLC, )
    Defendants )

    Plaintiff, Guy A. Blume, Pro-Se, Demands trial by Jury, for its complaint against American Dairy Queen (“ADQ”), Cindy Lakatos, Oshlo Wilkinson, EE Sorenson LLC, Ed Sorenson, known as (Defendants)
    1. American Dairy Queen is covering up Racketeering and mob actions in hopes to get away with committing crimes with impunity and continue their illegal enterprise. Territory agreements for selling ice cream only but fraudulently signing franchise agreements with the unknowing franchisee as a Dairy Queen sub-franchisor for food also. The Territory Agreements will show that a conspiracy exists to unlawfully collect debt. It will show the criminal act of fraud and Racketeering. American Dairy Queen is operating an illegal crime operation. Like the Grinnell contract these Territory operators are posing as American Dairy Queen sub-franchisor’s with the ability to sell food as a Dairy Queen and collecting fees on Non-Dairy Queen foods without being registered with the Secretary of State. This Scheme is extorting millions illegally by racketeering. The contracts will tie the missapropriators together. This unlawful debt collection is in over 1/3 of the franchises in Iowa. Mr. Buffet I am sure is not aware of this racketeering scam.
    2. Racketeering states it is unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18 Us code.
    3. The crucial factual issue in this case is whether defendant’s challenged conduct involves concerted action with its Territory operators. The Complaint alleges that, Defendant and its co-conspirators have engaged in a combination and conspiracy. . . Consisting of an understanding and concert of action among Defendant and its co-conspirators the “territory operators” to unlawfully collect fees for the sale of non-system foods. This was done to make money illegally off the franchisees, for the purpose of collusively allowing American Dairy Queen to make money off of food sales of Non-System Foods. Dairy Queen turns a blind eye to the Racketeering by Territory Operators, because they make it on the other side (Food Sales). It is a complicated network developed by American Dairy Queens senior management over a period of years in the 1960’s through 1997.
    4. American Dairy Queen is still allowing Mr. Sorenson(Ames and Huxley dairy Queen, Territory Operator for Story County) and Mrs. Lakatos(Shelby Dairy Queen, Pottawattamie Territory Operator) to unlawfully collect debt, their Territory Agreement only allows them to sub-franchise soft serve “Dairy Queen” sales, but they are collecting franchise fees illegally.
    5. Dairy Queen should want to come clean and fix the illegal enterprise. These documents will show American Dairy Queen is part of a racketeering scheme to defraud franchisees through blatant anti-trust violations. They have also committed violent acts to cover up this getting out in the open. Dairy Queen uses unsavory characters to carry out these crimes.
    6. . The Plaintiff further alleges that, in effectuating this conspiracy, defendant and its affiliates, “through Mr. Sorenson, jointly cut off supply and ultimately terminate their contracts with Guy Blume.” These acts were done to cover up fraudulent acts, through a pattern of Racketeering.
    7. There is overwhelming evidence supporting these allegations, The Territory agreements will show American Dairy Queen and its affiliates’ acted in concert to commit intentional fraud. The Territory Agreements will show American Dairy Queen has clear link to its affiliates and hold them liable for their affiliate’s actions and they colluded to commit acts of Racketeering and commit fraud by concealment and intentional fraud. This information will allow a Racketeering case against Ed Sorenson, Cindy Lakatos and American Dairy Queen. “collectively defendants” The Plaintiff alleges the “Territory Agreements” will show, concerted nature of defendant’s and its affiliates’ Racketeering as well as products, monopoly activity in controlling markets through an illegal concerted effort.
    8. The Territory Agreements will show that American Dairy Queens brutal actions of its affiliates was Part of a Collusive Scheme by these Racketeers to continue to defraud millions from its franchisees through racketeering by hiding the Territory agreements under a veil of secrecy.
    9. Defendant’s illegal scheme consists of two primary components. First, defendants engage in a policy of fraudulently and deceptively inducing franchisees into purchasing franchises by intentionally misrepresenting the true nature of the contractual relationship by hiding “Territory Agreements” under a veil of secrecy and pleading complete ignorance as the franchisees get cheated all for the sake of Dairy Queen Profits. They allow these “Territory Operators” to collect fees for products in non-system foods (that are not part of the Dairy Queen System) these people are sub-franchisors of Dairy Queen. Sorenson and Lakatos do not have a sublicense agreement or any addendum that allows them to act on behalf of American Dairy Queen as a sub-franchisor for Dairy Queen Food items. The Territory Agreements of Sorenson and Lakatos will demonstrate that defendant’s and affiliates were aware, through contractual agreements that there conduct was illegal. Consequently, affiliates were assured that they could charge and unlawfully collect debt (on Non Dairy Queen foods) if they would keep silent about American dairy Queens Kickback scheme on illegal surcharges on non-system foods by illegally defrauding franchisees on Non-system foods another unlawful collection of debt. Territory operators work in concert with ADQ to keep the Rank and File sub-franchisees silent.
    10. As discussed above, the acts of American Dairy Queen and its affiliates are a concerted effort. Indeed, Plaintiff asserts that American Dairy Queen and is affiliates are “exercising its monopsony power in the marketplace . . . to impose noncompetitive prices for franchisees.” Ultimately, franchisees are being turned upside down to collect fees illegally not only on the franchise side but also on the supply side. Information contained in these agreements and territory rights is patently relevant to any assessment of this claim because it will allow plaintiff to expose this illegal enterprise and concerted mob effort For example, if American dairy queen USCI warehouses charges case surcharges and forces non system to buy 10lb cases of product as system stores get 20lb cases because each case is charged a delivery surcharge which increases the cost to the franchises this is in addition to paying 25 to 75 percent higher prices for these products. (Believe me if they could get away with 1lb cases they would). Blume, in the operation location in Ames, IA, was threatened by an ADQ territory representative who repeatedly levied verbal accusations at Blume stating, “he’s a crazy M-fer and going to kill someone” followed by the ADQ representative threatening to punch Blume in the face. Blume repeatedly called ADQ headquarters and was told that while they (ADQ) were sorry there was nothing that could be done. Other Franchisees have had the same problems. The aforementioned ADQ representative colluded with ADQ legal counsel to force Blume to cease operations at several of his stores. They did this with little or no notice and through the unethical practice of instructing preferred suppliers to either place Blume on cash on deliver (COD) credit terms or to shut off his supply completely. See Exhibit P Blume Filed a Temporary restraining order in 2010 to protect his Employees from abusive mistreatment by ADQ Territory Representative as well as criminal trespassing. This harassment continues to this day. On or about April 15, 2011, store employees in another Blume-owned store in Huxley, Iowa were told directly by Mr. Ed Sorenson that Mr. Blume “will be shut down and all vendor supply cut off…. Because he talked to the president of American Dairy Queen about Blumes misconduct and they have decided to shut him off on supply like they did in Ames.” (no notice given) Several other comments by Defendants were malicious and delivered with the full intent to defame Mr. Blume and to significantly harm his business reputation and livelihood. Complaints about these activities to ADQ have fallen on deaf ears. Blume asks the court to grant him protection under the “Iowa Franchise Act.” Blume is not an attorney and asks the court for protection under this Franchise statute. The statute states a franchisee may not waive the protections provided by the statute.

    11. The DQ tradition you grew up with is continuously growing as new locations are opening in both new and existing markets. Our brands–Dairy Queen, Orange Julius and Karmelkorn–have very high favorable consumer awareness. Most importantly, we thrive because of our hard-working franchisees. The vast majority of our locations are franchised–we own and operate very few stores. We are strong believers in franchising, unlike many of our competitors who operate a significant number of their own stores. While we have grown over the years and adapted to changing market conditions, IDQ Companies’ family of fast food concepts have remained rooted in the tradition of DQ quality and customer satisfaction.

    Key Dates:

    1927: J.F. McCullough and his son Alex found Homemade Ice Cream Co. in Iowa
    1938: Trial sales of soft ice cream prove a hit with the public.
    1940: First Dairy Queen Store opens in Joliet, Illinois; others quickly follow.
    1948: Non-profit Dairy Queen National Trade Association (DQNTA) is formed.
    1955: DQNTA becomes a for-profit company (DQNTC) and relocates to St. Louis, Missouri.
    1962: International Dairy Queen (IDQ) takes over DQNTC and moves to Minneapolis.
    1970: Investor group headed by Bill McKinstry and Harris Cooper takes control of IDQ.
    1972: IDQ stock begins trading over the counter; first Dairy Queen is opened in Japan.
    1985: The Blizzard, a soft ice cream treat with other blended-in items, proves a huge success.
    1998: Berkshire Hathaway, Inc. purchases IDQ for $585 million.
    2000: IDQ settles antitrust lawsuit brought by its franchisees six years before.

    Company History:
    International Dairy Queen, Inc. licenses, services, and develops over 5,900 Dairy Queen stores in the United States, Canada, and numerous foreign countries, including Austria, Slovenia, China, Oman, and Guam. In addition to selling its famous dairy desserts, many of the stores also sell hamburgers, chicken, hot dogs, and a variety of beverages. The company also owns Karmelkorn Shoppes, Inc., a franchisor of over 30 retail stores that sell popcorn, candy, and other items, as well as Orange Julius, a franchisor of some 400 stores which feature blended drinks made from orange juice, various fruits, and fruit flavors. In 1998 International Dairy Queen was purchased by Warren Buffett’s Berkshire Hathaway Inc.
    1920-40: A Good Idea in Search of an Audience
    The founders of Dairy Queen, J.F. ‘Grandpa’ McCullough and his son Alex, originally established the Homemade Ice Cream Company in 1927. Located in Davenport, Iowa, the two men sold a variety of ice cream products throughout the Quad Cities area (which includes Moline and Rock Island, Illinois, and Bettendorf and Davenport, Iowa). In order to expand their operations, during the early 1930s the McCullough’s moved their business to Green River, Illinois, and purchased a former cheese factory in which they located their ice cream mix plant.
    When the McCullough’s made ice cream at their plant in Green River, it was a complicated process. Butterfat, milk solids, sweetener, and stabilizer were first combined, then mixed, and finally put into a batch freezer where the combination was chilled, given a specific amount of air (technically called ‘overrun’), and flavored. The product was denser and richer than most ice creams, with less overrun. When the temperature reached 23 degrees Fahrenheit, a spigot was opened in the freezer and the soft ice cream flowed into three-gallon containers. The containers were covered with lids, frozen at minus-ten degrees Fahrenheit, and delivered to customers. When an ice cream store was ready to serve the product, the ice cream was put into a dipping cabinet and the temperature increased to five degrees Fahrenheit.
    The ice cream was frozen solid, not for the pleasure and enjoyment of the customer, but for the convenience of the manufacturer and store owner. Yet the elder McCullough had known for a long time that ice cream at colder temperatures numbed the tastebuds and resulted in a much less flavorful product; soft, fresh ice cream drawn from a spigot at approximately 23 degrees Fahrenheit tasted best. He began to wonder if there was some way to dispense semi-frozen ice cream that kept its shape but soon realized that the batch freezers in use during the 1930s were
    unsuitable. An entirely different type of freezer was required and, moreover, every ice cream store that wished to dispense the new product would have to purchase at least one of the new freezers. Faced with these difficulties, Grandpa McCullough decided to give up the idea as impractical.
    After a few years, however, Grandpa McCullough was still thinking about soft ice cream, and he convinced his son that they should find out whether or not the product would capture people’s tastebuds. They asked one of their customers, Sherb Noble, if he would arrange a special offering of soft ice cream at his store in Kankakee, Illinois. With an advertisement of ‘All you can eat for 10 cents,’ the sale was held in early August 1938. Using an ordinary commercial batch freezer, the men put the soft ice cream into five gallon containers and then hand-dipped the product into 16-ounce cups. In two hours, Noble and the McCullough’s dished out over 1,600 servings. A short time later, another sale of soft ice cream was offered at Mildred’s Ice Cream Shop in Moline. The response from the public was the same. With such overwhelming success, the McCullough’s began searching for the type of freezer that would make dispensing soft ice cream a reality.
    The McCullough’s approached two manufacturers of dairy equipment and asked if they would be interested in designing a machine that dispensed semi-frozen dairy products into dishes or ice cream cones. The first manufacturer immediately rejected their proposal, and the second firm, Stoelting Brothers Company in Kiel, Wisconsin, thought the idea lacked potential. With nowhere else to go, the McCullough’s seemed to arrive at a dead end. However, one day while Grandpa McCullough was casually paging through the want ads in the Chicago Tribune he noticed an advertisement for a continuous freezer that would dispense soft ice cream. The ad had been place by Harry M. Oltz.
    Oltz and the McCullough’s met in the summer of 1939. Having already received the patent for his freezer in 1937, Oltz extended the production rights to his new partners, as well as rights for the exclusive use of the freezer in Illinois, Wisconsin, and all the states west of the Mississippi River. According to the agreement, Oltz kept exclusive rights to use of the freezer in all states east of the Mississippi and would receive continuous royalties based on the number of gallons of soft serve ice cream processed through all the dispensing freezers produced under the patent. Oltz then moved to Miami, Florida, and established AR-TIK Systems, Inc., a firm that would find stores to serve soft ice cream in the eastern United States. Meanwhile, the McCullough’s returned to the Stoelting Brothers and reached an agreement with them to manufacture a soft-serve ice cream freezer for their own company.
    1940: Dairy Queen is Born
    The first Dairy Queen store opened in Joliet, Illinois, on June 22, 1940. Jointly owned by the McCullough’s and Sherb Noble, the store was managed by Jim and Elliot Grace. By the end of the summer, the store had grossed $4,000, and Noble decided to buy out the McCullough’s’ interest in that store. On April 1, 1941, the McCullough’s opened another store in Moline and once again contracted the Graces to manage it for them. Additional stores were opened in Aurora, Illinois, and Davenport, Iowa, and by the end of 1942 there were a total of eight Dairy Queen businesses in operation. However, with the advent of World War II, manufacturing materials used for building the freezers were reassigned to the war effort. Without new freezers, no new stores were able to open for the duration of the war.
    Despite the inability of the McCullough’s to open more stores, they remained active. During the war, father and son sold rights to would-be store owners to use the Dairy Queen freezer and mix, and develop businesses in certain geographical areas of the country. Since they both suspected that the popularity of Dairy Queen would be brief, it was more sensible to the McCullough’s to sell territories outright rather than to arrange an ongoing royalty system. All profits were up front, and if the product lost its appeal there was no fear of losing any income. Unfortunately, the McCullough’s’ method of contracting the development of new territories was extremely informal–sometimes scribbled on a napkin, paper sack, or daily newspaper–and this led to a host of problems later on.
    Impressed with the long lines at the Dairy Queen store in Moline, Harry Axene, a sales manager for a farm equipment company, approached Grandpa McCullough and soon became a 50-50 partner in the mix company. He also purchased the territory rights for Illinois and Iowa at a price of $12,000. By the end of the war, Axene had purchased the remaining interest in the mix company and, more importantly, had seen the future of Dairy Queen in franchising. In November 1946, Axene organized a meeting with 26 potential investors at the LeClaire Hotel in Moline. Excited about organizing a national Dairy Queen franchise system, Axene introduced the idea of selling territories based on a royalty system where territory store owners would pay Axene an initial fee plus an ongoing royalty fee for the soft serve mix. Even though no formal organization resulted from this meeting, interest in Dairy Queen stores grew at a tremendous pace. With only eight stores in operation at the end of the war, by the end of 1946 there were 17, and by the end of 1947 there were over 100 Dairy Queen stores operating throughout the United States.
    In 1948, Axene arranged for 35 store owners and territory operators to meet in Minneapolis with the purpose of establishing a national organization. In December of the same year, the first official meeting of the newly incorporated Dairy Queen National Trade Association (DQNTA) was held in Davenport, Iowa. Organized as a not-for-profit corporation, with C.R. Medd as its first president, national offices were soon established in the city. The DQNTA was created in order to standardize cones, plastic goods, and all other materials used in Dairy Queen stores, along with coordinating all the various kinds of advertising for Dairy Queen products. By the early 1950s, membership in the DQNTA had grown to nearly 900 dues-paying members.
    An Expanding Menu in the 1950s
    There were 1,400 Dairy Queen stores open for business in 1950, and up until that time the menu was limited to sundaes and cones for immediate consumption, or pints and quarts to take home. When supermarkets began to sell ice cream at low prices and when air conditioning and television began keeping people home on sultry summer evenings, sales in Dairy Queen stores across the country began to suffer. In order to keep attracting customers, most stores responded to requests for an expanded menu. In 1949, milkshakes and malts were made available, and banana splits were added in 1951. Toppings for sundaes were expanded to include hot fudge, chocolate, strawberry, pineapple, butterscotch, and other flavors. Take home novelty products were also introduced, including the Dilly bar, a soft-serve, chocolate-dipped confection with a wooden tongue depressor inserted for the customer to hold while eating.
    During the 1950s, Dairy Queen stores were also challenged by the emergence of fast food outlets that offered hamburgers, hot dogs, french fries, and various soft drinks. Since these outlets served full meals, they remained open the entire year; Dairy Queen stores were put at a disadvantage since they were boarded up for most of the winter season. In order to stay competitive, store operators in different parts of the country began to offer various food products, from bowls of chili to pork fritters. Yet the lack of a standardized menu brought complaints from customers, until the Brazier system of broiled burgers, hot dogs, barbecued beef, french fries, and onion rings was introduced in 1958. With the introduction of this system, the quality control and standardization of meat products helped to increase profits for store owners.
    Though the DQNTA had been formed in 1948 to standardize products and services for store operators, it’s not-for-profit status rendered it unable to enforce any of its policies. As a result, the DQNTA was reformed in 1955 and made a for-profit corporation. Renamed the Dairy Queen National Development Company, its members gave it more latitude and authority to implement uniform products, operating practices, standards, and services to all Dairy Queen stores, though it had no franchising rights. Relocating its offices to St. Louis, Missouri, the new company immediately initiated a consumer research program and lobbied for a standardized mix formula for all soft serve products.
    After years of involvement, the family members who had started Dairy Queen slowly left the company. Grandpa McCullough had retired during the late 1940s, while his son retired in 1953. Harry Oltz also retired during the late 1940s, while his son Hal continued the family’s involvement with the Dairy Queen system. Harry Axene presented the idea of an automatic continuous freezer to the Dairy Queen store operators convention in 1949, but when his proposal was rejected he severed ties with the system and formed the Tastee Freeze business, which he operated on the Pacific coast for 20 years. Only Alex’s son, Hugh, remained to look after the McCullough family interests during the 1950s, and by 1960 trouble was brewing on the horizon.
    1960s: Legal Troubles Lead to a Change in Ownership
    Harry Oltz’s patent on his continuous freezer expired in 1954, and a number of store operators refused to continue paying royalties. Hugh McCullough responded with a lawsuit to prove that franchisees were not only paying royalties for use of the freezer, but for use of the trade name. The dispute became even more complicated when a group of store owners who had acquired their territory and franchise rights from Harry Axene filed suit to prove that people who had purchased territory rights from Axene had the right to use the Dairy Queen name because it was Axene and not the McCullough’s who owned the rights.
    As the legal battles dragged on and on in the courts, Hugh McCullough grew more and more weary, and finally agreed to sell all his holdings and the rights to the name Dairy Queen. For $1.5 million in cash, McCullough relinquished his claim to all territory and trade name rights. Thus in March 1962, a new corporation, International Dairy Queen, was formed by a group of investors led by Burt Myers, who served as chairman of the board, and Gilbert Stein, who became president.
    American Dairy Queen’s illegal enterprise continued through the unlawful collection of debt. Contracts were embellished by territory operators like Sorenson and Lakatos and American Dairy Queen colluded right along with them to this day to cheat and defraud franchisees through its concerted, collusive scheme. Creating Monopoly power in territories.
    Headquartered in Minneapolis, management immediately created a wholly-owned subsidiary, American Dairy Queen Corporation, to take care of trademarks, collect royalties, and sell store franchises. More importantly, the new management quickly cleared up all the remaining lawsuits and established undisputed ownership of the name Dairy Queen. In addition, management inaugurated a standardized food program, implemented a national advertising and marketing program, created a national training school, imposed product uniformity at over 60 percent of Dairy Queen stores, revised contracts to cover percentages of sales rather than gallons of soft serve mix, and increased the number of employees in the national office from five to 125.
    During the mid-1960s, International Dairy Queen consolidated its domestic operations by purchasing the franchising rights of Harry Oltz’s AR-TIK Systems, including seven southeastern states, and by securing the development rights for territories in numerous states. The confusion over who owned territory in what state, and whether fees were outstanding or not, was due to the McCullough’s’ tendency during the early years to sell territories and prospective store locations in a haphazard manner. Management’s intention was to provide more effective services and standardize products by ironing out these problems. At the same time, management launched an aggressive acquisition strategy by purchasing interests in franchise operations within the recreation industry. A ski-rental firm in Denver was bought first, and was soon followed by a franchise for camping equipment.
    Stop committing fraud, and force the territory operators to follow the contracts and only sell “Dairy Queen” franchises based on their territory agreement. This will stop the criminal acts. Non-system stores ran by Territory operators are only allowed to collect franchise fees on Ice-cream sales and some of the Territory agreements only allow them to charge a maximum of .29 cents per gallon of soft-serve ice-cream. I guess we will have to see what the Territory agreements of Sorenson and Lakatos state.
    1970s: Further Leadership Changes and a Return to Profitability
    The company’s consolidation of operating territory and its acquisition strategy proved costly, and a $2 million loss was forecast for fiscal 1970. With a growing cash flow problem that made it a potential takeover target, company management decided to accept the overtures of a new investment group. Headed by men who were part of the development of National Car Rental System, Inc., the group offered $3 million in cash with $2 million in credit to provide financing for working capital and expansion needs. In return, the investors assumed both majority interest and effective control of International Dairy Queen. Bill McKinstry became executive committee chairman and chairman of the board of directors and Harris Cooper was named president.
    McKinstry’s and Cooper’s reorganization strategy had immediate effects. By discontinuing one of the company’s divisions, closing 16 accounting and regional offices, and standardizing operating procedures and product lines, International Dairy Queen soon became profitable once again. In 1972, the company began trading its stock on the over-the-counter market; during the same year, its stock price increased from $1.50 per share to $22.75.
    In May 1972, the first Dairy Queen store was opened in Tokyo. While 75 stores were operating outside the United States and Canada in 1976, more than 150 stores in Barbados, Guatemala, Iceland, Japan, Panama, Puerto Rico, Trinidad, the United Arab Emirates, and Hong Kong were operating by the end of the decade.
    International Dairy Queen’s total revenues in 1979 amounted to $956 million; as the system celebrated its 40th anniversary in 1980 total revenues came to $1.2 billion. Within the fast food industry, Dairy Queen ranked fifth in total sales volume behind McDonald’s, Kentucky Fried Chicken, Burger King, and Wendy’s; the company ranked third in total number of stores behind McDonald’s and KFC. In the United States, Dairy Queen had 4,314 stores in operation, with 365 in Canada, 123 in Japan, and over 30 in eight other foreign countries.
    In 1976, McKinstry was replaced as chairman by John Mooty, who worked well with President Cooper. Due to a sudden fall in stock prices during the mid-1970s, Mooty implemented a stock repurchasing plan to provide more stability for the company. By the early 1980s, International Dairy Queen had used nearly $40 million to buy back two-thirds of its outstanding shares on the stock market. At the end of the decade, the performance of the stock was widely regarded as one of the best; an individual who had invested $10,000 in Dairy Queen stock in 1980 would have a portfolio worth $470,000 in 1990.
    1980s-90s: New Products and Restaurant Chains
    Under Mooty’s and Cooper’s stewardship, International Dairy Queen had introduced both the Peanut Butter Parfait and Fudge Brownie Delight, both of which were highly successful novelty products. However, it was the introduction of the Blizzard, a concoction of soft-serve ice cream blended with candy, cookies, or fruit, that secured Dairy Queen’s ranking as the number one treat chain during the 1980s. In 1985 alone, the year it was introduced, the Blizzard achieved sales of over 100 million units. Along with the success of the Dairy Queen stores, the company’s purchase of Golden Skillet, a chain of fried chicken restaurants; KarmelKorn Shoppes, Inc., a 60-year-old popcorn and candy franchise; and Orange Julius, a franchise selling fruit-flavored blended drinks and various snack products, secured the parent’s position as the eighth ranked fast food chain in the United States. International Dairy Queen also purchased 60 percent of a staffing agency, Firstaff, Inc., in 1989.
    As the company entered the 1990s, John Mooty remained chairman of the board of directors and Mike Sullivan had replaced Cooper as president. Slow domestic growth and international expansion continued. Within the United States, the company was developing opportunities to open stores in shopping malls, office complexes, railroad stations, airports, and other non-traditional markets. In the international arena, the company initiated development programs in Thailand, Cyprus, Kuwait, Oman, Taiwan, and Indonesia, and planned a major campaign to open stores in Western and Eastern Europe.
    In 1994 a dispute with franchisees surfaced when a group of store owners filed suit against International Dairy Queen, alleging that their efforts to develop alternative sources of food and paper supplies had been thwarted by the parent company. Two years later the case was granted class-action status by a federal court.
    Continuing to test new marketing concepts, in 1996 the company unveiled a new, smaller prototype store in Caledonia, Minnesota. The “1500 Series” store, only 1,500 square feet in size, had half the capacity of a typical 90-seat restaurant and a smaller kitchen area. The intent was to develop a store that was appropriate for markets of 2,500 people or less. Franchisee interest was reportedly strong. The following year the company sold its 60 percent interest in Firstaff to AccuStaff, Inc. of Florida, and also jettisoned its long-time advertising agency, Campbell Mithun Esty, replacing it with Grey Advertising of New York.
    Late 1990s Acquisition by Berkshire Hathaway
    The biggest news of 1997 came in the fall, when it was announced that the company would be sold to Berkshire Hathaway Inc. of Omaha, Nebraska. Investment guru Warren Buffett controlled Berkshire, which would pay $585 million in stock and cash. Owners of Dairy Queen shares grumbled that the amount was low, but the deal was approved by voting stockholders and finalized in early 1998. The sale had been spurred by the death of Rudy Luther, a Twin Cities-based car dealer who owned 15 percent of Dairy Queen. When Luther’s heirs decided to sell his stake, Buffett was approached. Having previously sought to buy the entire company, he refused to take only a portion and renewed his earlier offer, which was now accepted. Buffett pledged to be a “hands off” owner, and no major management or structural changes were planned.
    Grey Advertising delivered the company’s biggest promotional campaign ever during the summer of 1998. A new tag line, “Meet me at DQ,” and an emphasis on the chain’s hometown feel were features of the $25 million push. The first television spots were scheduled to run in the United States and Canada beginning in July.
    In 2000 the six-year-old lawsuit with franchisees was finally settled. International Dairy Queen agreed to contribute $5 million per year for six years to the store owners’ national advertising fund, while also giving the Dairy Queen Operators’ Cooperative $6 million to help ensure availability of alternate sources of food and supplies. The court-approved settlement was hailed by all sides as a fair one. At the end of the year CEO Michael Sullivan stepped down and became chairman of the board, with chief financial officer Chuck Mooty taking over the top position. Mooty, age 39, was the son of John Mooty, who was named chairman-emeritus.
    Turning the corner into the 21st century, International Dairy Queen was facing the future with renewed vigor. The deep pockets of Warren Buffett and an experienced team of leaders provided the proper conditions for continued success. The company’s ongoing international expansion was further extending the reach of one of the most recognizable advertising symbols in the world: “The Cone with the Curl on Top.”
    12. Racketeer influenced and Corrupt Organizations Act (RICO) 18 U.S.C § § 1961, 1962
    (a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer. The Defendants are unlawfully collecting franchise fees for Non-system foods that they have no contract with American Dairy Queen to sub-license or franchise these products. This is a collusive scheme by the defendants.
    (b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. The Defendants clearly are violating this by working with American Dairy Queen to defraud franchisees through Interstate commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt. Ed Sorenson, Cindy Lakatos and American Dairy Queen Employees are aware of this unlawful collection of debt (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. The Plaintiff is a Third party Beneficiary with American Dairy Queen of The Territory operators agreement for Pottawattamie county in Shelby Iowa which is operated by Mrs. Lakatos and her illegal enterprise Oshlo Wilkinson LLC, Ed Sorenson which owns Story county Territory Agreement is operating an illegal enterprise through EE Sorenson LLC. The Territory agreements will show a conspiracy between American Dairy Queen and it Territory Representatives to unlawfully collect debt.
    13. Plaintiff alleges defendants have made threats anonymously to cause physical harm if he did not keep quiet. The threat stated “if I don’t quit Fucking around with people’s livelihoods and ability to collect Franchise Fees I could end up in a ditch”. Plaintiff took this as he would end up dead. Plaintiff Exhibit T is an example of a territory agreement set up in Iowa. Plaintiff was told by ADQ that all the “Territory agreements” are very similar and are based on cents per gallon of Ice cream mix. Territory Operators pay American Dairy Queen Four cents per gallon for Ice cream mix used and the max that can be charged to a sub franchisee is .29 cents a gallon. In all the Territory agreements I have seen it does not allow the Territory Operator to act on behalf of American Dairy Queen but in all cases they do. In Iowa American Dairy Queen Territory operator has made derogatory comments to kids, women and Franchisees. American Dairy Queen has been made aware of this on more than one occasion and has turned a deaf ear. Restraining orders have been place on these individuals. They have collected fees over the maximum amount that is allowed under their “Territory agreement”. This amongst many other contractual issues has been brought to ADQ’s attention and that is when the mob like behavior started. Plaintiff states it is not worth getting killed over. Plaintiff will continue to send his pleas for help to state government to hear these cries for justice of oppressed franchisees, and protection from the Racketeers. Plaintiff is very scared but all that is needed is for one authority’s to take actions against the mob like criminal acts by the defendants. Plaintiff affirmatively states that all it would take to show wrong doing is to get a copy of territory agreement and all franchise agreements under the territory and it will show that hundreds of thousands of dollars are being made by fraudulent contracts that the Defendants do not have a contractual right granted to receive franchise fees in excess of .29 cents per gallon.
    It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt. (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.

    14. William Killion one of the best Franchisor attorney’s of all time is representing American Dairy Queen has stated that American Dairy Queen and EE Sorenson LLC are not the acts of American Dairy Queen. Plaintiff alleges the two groups have acted and colluded together to conduct racketeering activity and break laws. American Dairy Queen needs to provide “Territory Agreement” between the parties which will show collectively they are Defendants and Racketeers. Exhibit T another sub-franchise agreement License under 3 d states “Permit others to use and enjoy the rights and privilege set forth in Paragraph A, B and C above, provided however, that each such subcontract shall be in such form as Company may from time to time prescribe, shall be approved by the company in writing and shall include the terms, conditions and controls set forth herein, and provided further, that two (2) copies of each such subcontract shall be furnished to company within 10 days of the execution thereof. The Form of Subcontract currently prescribed and approved by the Company is attached hereto and made a part hereof by reference, marked Exhibit A. Territory agreements do not give the Territory Operator the right to terminate sub franchisee only the Company has the right. This lawsuit addresses a flawed system manipulated by those in complete control for their own self-serving gain. Plaintiff alleges with the amount of money at stake who knows what crimes these Racketeers would commit all for the sake of money.
    15. Plaintiff alleges the abuse has been so venomous all for the sake of keeping the racketeering practices quiet so crimes could be committed with impunity. Plaintiff only tried to enforce his contractual rights it’s a sham a cover up by Defendants. Plaintiff can only hold on but prays for action that can at least protect his family and look into this matter. The Governor’s office has been helpful I don’t know what else I can do I just need “reasonable man law” to prevail. Plaintiff hopes one agency will sit down and go over the aforementioned contracts they will see why the malicious acts by Defendants. They show no respect for following the contracts and will go to great lengths including Racketeering to cover up these violations all for making money through acts of Racketeering.
    16. Defendants are hiding under avail of secrecy covering up mob-like behavior which Dairy Queen has condoned at least 10 other franchisees have experience the above acts. These business practices seem common in the Dairy Queen system. Since the filing I have received anonymous threats stating “if I don’t quit Fucking around with people’s livelihoods and ability to collect Franchise Fees I could end up in a ditch”. I am just asking someone to help. Plaintiff states beyond being lied to about the rights of the territory operator collecting more fees than the contract states but also entering into Territory representatives have entered into agreements fraudulently without having the contractual right to enter in such agreements clear violations of Disclosure laws. Plaintiff’s life has been threatened anonymously on several different occasions presumably from other territory operators. I asked this court please review the contracts. Can we get a court date set in hurry I think all this could be figured out quickly just drop off all contracts and it will show the Plaintiffs Allegations are all true, unless American Dairy Queen violates Berkshire Hathaway’s code of ethics. Plaintiff States Defendants in “Territory Agreement” for Story County and Pottawattamie county pay 4 cents a gallon for ice cream mix. Also under Defendants disclosure document Exhibit W page 35 paragraph states Certain Franchisees, sub-franchisees, outside suppliers and ADQ contribute sales promotion dollars, and all of these dollars are administered by ADQ. Currently you must pay us a sales promotion fee of 1% we use 7% of this fee to cover administration expenses, send a small percentage of the fee to ADQ (specifically, $.04 for every gallon of mix that our franchisees buy), and use or distribute the balance of the fee for local advertising. Other Franchisees and sub franchisees may pay greater, lesser or no sales promotion program fees. Plaintiff affirmatively states the Defendants are not telling the truth the .04 cents is for Royalty that is paid to ADQ this is another way the racketeers make more money on advertising fees they are not contractually obligated to receive. Again the Plaintiff states the Royalty is suppose to be no more than .29 cents and Mr. Sorenson and Mrs. Lakatos royalty to Dairy Queen is .04 cents a gallon. This is hidden by Defendants under a veil of secrecy to make more money off the backs of DQ operators showing no respect to the contracts they need to adhere to. Mrs. Lakatos is collecting Fees on Food Sales she is not Entitled to. Exhibit X Huxley franchise agreement makes assertions that he has the ability to control the Trademark usage. It also states he and American Dairy Queen and Plaintiff Alleges his contract with American Dairy Queen only gives the defendants the right to sub- franchise ice cream products “ Dairy Queen” and not to Inspect only the Company can Inspect which is American Dairy Queen….. This Document will show Defendants Racketeering has unlawfully collected debt of franchisees for over 40 years.
    18 U.S.C § 1963. Criminal penalties

    17. Whoever violates any provision of section 1962 of this chapter shall be fined under this title or imprisoned not more than 20 years (or for life if the violation is based on a racketeering activity for which the maximum penalty includes life imprisonment), or both, and shall forfeit to the United States
    18. Plaintiff alleges these acts are similar to crimes Bernie Madoff committed and they should get 20 years, also alleges the Defendants are capable of murder. It’s in the contracts Mr. Killion can be the best attorney in the world bring out the contracts. Plaintiff alleges a legal Territory agreement review so everyone has a handle on what the contracts allow. Plaintiff’s life has been threatened by bringing up this point. Plaintiff alleges Defendant has gone to great lengths to conceal its Fraud.

    19. Plaintiff alleges these acts are similar to crimes Bernie Madoff committed and they should get 20 years, also alleges the Defendants are capable of murder. It’s in the contracts Mr. Killion can be the best attorney in the world bring out the contracts. Plaintiff alleges a legal Territory agreement review so everyone has a handle on what the contracts allow. Plaintiff’s life has been threatened by bringing up this point. Plaintiff alleges Defendant has gone to great lengths to conceal its Fraud.

    20. Plaintiff Guy Blume is a Franchisee in the Dairy Queen system and a citizen of the state of Iowa. maintains his principal place of business at 4309 NW 5th Street, Ankeny, Iowa, 50023
    21. ADQ is a Delaware Corporation that maintains its principal place of business at 7505 Metro Boulevard, Edina, Minnesota, and is therefore a citizen of Minnesota.
    22. EE Sorenson LLC, Is an Iowa corporation, EE Sorenson, LLC is an Iowa Limited Liability Corporation with Ed Sorenson as a sole Member that maintains its principal place of business at 2016 Indian Grass Court, Ames, Iowa 50014. EE Sorenson LLC is a citizen of Iowa, Dairy Queen Sub licensor under a “territory agreement” With American Dairy Queen. EE Sorenson, LLC is an alter ego to Edward E. Sorenson Sole Member of EE Sorenson LLC. The acts of EE Sorenson LLC are the acts of Ed Sorenson and vice versa
    23. Ed Sorenson is citizen of Iowa Residing at 2016 Indian Grass Court, Ames, Iowa 50014. Ed Sorenson is a Dairy Queen “Territory Operator” covering Story and Boone County in Iowa. Who is under a “territory agreement” with American Dairy Queen. The Acts of Ed Sorenson are the acts of EE Sorenson LLC and vice versa.
    24. Cindy Lakatos, is a citizen of Iowa Residing at 109 Sleepy Hollow Council Bluffs, Iowa, 51503. Cindy Lakatos is a Dairy Queen “Territory Operator” covering Pottawattamie county in Iowa. Who is under a “territory agreement” with American Dairy Queen. The acts of Cindy Lakatos are the acts of Oshlo Wilkinson LLC and vice versa.
    25. Oshlo Wilkinson LLC, is an Iowa corporation governed under the laws of Iowa. Making it a citizen of Iowa Residing at 109 Sleepy Hollow Council Bluffs, Iowa, 51503. Oshlo Wilkinson is a Dairy Queen “Territory Operator” covering Pottawattamie county in Iowa. Who is under a “territory agreement” with American Dairy Queen. The acts of Oshlo Wilkinson are the acts of Cindy Lakatos and vice versa.

    26. This Court has proper Venue and Jurisdiction over this action pursuant to 18 U.S.C. § 1964 and § 1965. Venue and process, Court has proper jurisdiction because we have Federal Questions 28 U.S.C. § 1331. 617.3 of the Iowa code all agreements were made in Iowa also venue is proper under 28 U.S.C §1391 the acts were committed in Iowa. The amount in the controversy Exceeds $75,000 exclusive of interests and costs.

    (a) The district courts of the United States shall have jurisdiction to prevent and restrain violations of section 1962 of this chapter by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons. a) Any civil action or proceeding under this chapter against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs. The alleged Racketeering happened by American Dairy Queen known as Defendants in concert with Ed Sorenson.
    (b) In any action under section 1964 of this chapter in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.
    (c) In any civil or criminal action or proceeding instituted by the United States under this chapter in the district court of the United States for any judicial district, subpenas issued by such court to compel the attendance of witnesses may be served in any other judicial district, except that in any civil action or proceeding no such subpoena shall be issued for service upon any individual who resides in another district at a place more than one hundred miles from the place at which such court is held without approval given by a judge of such court upon a showing of good cause.
    (d) All other process in any action or proceeding under this chapter may be served on any person in any judicial district in which such person resides, is found, has an agent, or transacts his affairs.
    27. The value of the damages Guy Blume seeks is greater than $75,000, exclusive of interest and costs, Guy Blume is a citizen of Iowa. The Amount in the controversy exceeds $75,000.

    28. Defendants were not entitled to collect franchise fees on Non ice cream sales in Shelby, Huxley and Ames. They received fees they were not entitled to.
    29. Story County territory agreement is for soft serve only and does not allow fees for Food items.
    30. Pottawattamie County Territory agreement is for soft serve only and does not allow franchise fees for food items.
    31. The Defendants in Ames and Huxley and Shelby entered into sub-franchise agreements they were not authorized to do under their TOA agreement with ADQ.
    32. The Defendants License agreement with ADQ only allows for food.
    33. The Territory agreements in Pottawattamie and Story County are contracts made for the benefit of a Third person. (the sub-franchisee)
    34. Only third parties who are “intended beneficiaries” have enforceable contract rights. In order to qualify as an intended beneficiary the third party must meet two requirements; (1) the third party must show that recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and (The Territory agreement gives the third party right to the benefits of the contract)(2) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.(The Territory agreements is for Ice-cream sales of Dairy Queen) A classic illustration of the third party beneficiary principle is the case of Lawrence v. Fox, 20 N.Y. 268, (1859).
    35. By charging as a Dairy Queen For non system food sales that are not part of the Territory agreement in Story County or Pottawattamie county is a fraudulent act.
    36. Essentially this would be breach of contract by not honoring the Territory agreements.
    37. Plaintiff alleges that the parties committed a civil conspiracy. They engaged in an agreement between two or more persons to commit a wrongful act by collecting on foods they were not entitled to.
    38. These acts were made by using mail and interstate wires to commit Mail Fraud and Wire Fraud.
    Defendant and Iowa law firms working with American Dairy Queen (some who are licensed to practice law) asserted false claims to cover up Fraud, Theft and mob-like behavior and blatant disrespect for the law. Plaintiff has attempted on numerous occasions to have his pleas for fair dealings heard by ADQ but met with limited response and, in many cases, outright disrespect and resistance to respond in good faith. The Defendant has made many absolutely false statements that can be easily defended by companies, individuals other Franchisee’s all of them are citizens of Iowa. Plaintiff Alleges American Dairy Queen has a complaint in Minneapolis to avoid being able to be linked with the Defendants who colluded with ADQ commit violations of the Racketeer Influenced and Corrupt Organization (“RICO”) that Defendant has work with American Dairy Queen to commit crimes against the Plaintiff in concert with attorneys in Iowa have done similar acts against other franchisees in Iowa to cover up misdeeds. Plaintiff only has one option to protect his employees is to file a lawsuit against Defendant who acted in Concert with American Dairy Queen and commits egregious acts to this very day. Plaintiff alleges Tortuous interference of his contracts happen to this very day through Jim Mollendor Exhibit 3 affidavit shows actions by the president of American Dairy Queen (John Gainor) working in concert with Defendant. Plaintiff alleges he would not put anything past this mob-like Henchman Ed Sorenson that shows little respect for contractual obligations and Iowa Law.
    In Franchisor and Franchisee it relationships it comes down to each party following the contracts either verbal agreements or written contracts. Blume tried to enforce his contractual rights. Plaintiff has reached out to American Dairy Queen about Defendant who Plaintiff alleges to be conjoined with on several occasions to discuss his contracts. Ames was authorized by the Defendant a prominent Ames business man was present who can validate this sale was approved by the Defendant. Defendants Attorney 3 months after the purchase sent and an e-mail stating Due-Diligence is running into problems. See Exhibit P all vendors and supplies were transferred to the Plaintiff.
    Plaintiff tried to enforce his contractual rights. American Dairy Queen and Defendant colluded with Goodwin Law Office in Des Moines and started mob like actions against the Plaintiff. These actions included threats of Physical Violence coming into stores and saying they are shutting the Plaintiff down. Up until this point the plaintiff never received bad inspection reports. Health Department officials stated the complaints by the Defendants were not accurate. Defendants were talking to the employees telling them not to clean it was the owners responsibility. Plaintiff tried to call American Dairy Queen to stop and was told to “Shut Up”. By the plaintiff standing up for his contractual rights this is when Defendants mob like actions even became more egregious. See Exhibit 3 An affidavit by Jim Mollendor stating: On April 15, 2011, Ed Sorenson an American Dairy Queen Representative called Jim Mollendor. He had just come back from a Dairy Queen meeting where he met with the President John Gainor of America Dairy Queen about Guy Blume and getting him out of the Dairy Queen Business. American Dairy Queen Territory Representative said they are working together to remove him and have a lawsuit in Minnesota. Defendants also said American Dairy Queen has cut him off on supply in Ames by shutting off his supplies and they are going to shut him down in Huxley.
    Defendant said Guy Blume had sexual Molestation charges against him in Huxley Dairy Queen. Defendant has a list of Seven Girls that met in the Dairy Queen Territory representatives Lawyers office and took statements from these Girls.” Tapes exists of employees of Plaintiff “saying Ed and the Big boss are working to try and get as much dirt on Guy as possible Dairy Queen said the more the better and asked to get people on the list” they were told to lie…
    I Jim Mollendor, have worked in the stores that Guy Blume owns for over a year and never had one employee ever tell me that he has made a pass or an advance on any employee or themselves. The employees at the Huxley Dairy Queen have said American Dairy Queen Territory representative comes into the store and tells them how he and American Dairy Queen President (John Gainor) are going to shut down the store. The employees are afraid of the Defendants or just don’t want to hear how they are going to lose their jobs. I think he should take this up with Guy and not the employee’s. This is when the proverbial wheel fell off. Defendant ignored contractual obligations and shut Guy Blume down in Ames where Defendant colluded with American Dairy Queen and cut off supply Jim McDonald and Lorna Lauridson were made aware of this by Roberts Dairy main office. The actions above permeated through Blumes franchises which employed over 100 people some were scared of ADQ. It almost ceased plaintiffs operations completely. Plaintiff tried to reach out to the new American Dairy Queen Counsel about issues and she did not know of any improper actions in Ames or Red Oak and was woefully inadequate to help. After this conversation the plaintiff alleges Defendants in order to cover up their crimes went to his vendor Hawkeye Food service and put him on COD hoping this would bankrupt and there mob like acts would bankrupt and silence the Plaintiff so the crimes could be committed with impunity. This Tortuous interference of Mr. Blumes business has cost him unnecessary stress and serious financial loss. These venomous mobs like actions happen to this very day. Verbal threats are made on a weekly basis to shut him down scaring the employees. These actions have been done to other franchisees in Iowa. The affidavit Exhibit 3 shows even the President of American Dairy is working in Concert with Defendant. Plaintiff states we have an Elephant in the room show the “Territory agreement” and the fraud will be uncovered.
    40. MR. Blumes tires have been punctured using razor blades. In front of his home. He has contacted the Police. He has contacted several other authorities to investigate these illegal enterprises.
    41. Defendants day to day activities in furtherance of the schemes alleged in this complaint violate the implied covenant of Good Faith and fair dealing inherent in the “Iowa Franchise Act”. By defendant’s enforcing biased and discriminating policies, procedures and practices (not applied equally to all franchisees this mandate to buy more expensive foods and alleged inspection fees and operational standards designed to deliberately decrease or eliminate defendants obligations to compensate franchisees for their purchases of mandated products, while concurrently creating an environment designed to keep out spoken franchisees “in line” and “toeing the line” regarding defendants’ unfair, unethical, and deceptive business practices. The Defendants did not disclose the Territory agreements and violated 436.2 rules for accurate disclosure. They also violated the business opportunities act in Iowa.
    42. Plaintiff brings this action alleging claims for: (a) violations of the Racketeer Influenced and Corrupt Organization Act (“RICO”) 18 U.S.C § § 1961, 1962 (c) (b) violations of sections 4 and 16 of the Clayton Act, by reason of the Sherman Act, 15 U.S.C. §§ 1 and 2; (c) and violations of the Iowa Competition law. (d) By improper disclosure violations under the Iowa Business opportunities act. (e) violations of the “Iowa Consumer Fraud Act” (f) common law fraud (g) breach of contract (h) economic duress; and (i) Intentional fraud (j) Fraud by concealment (k) Fraud by inducement (l) securities fraud
    (m) consumer fraud (n) Intentional affliction of emotional distress (o) collusion (p) good faith and fair dealing.
    43. The Plaintiff seeks as relief a return of all the money that was stolen and relief from the fraud committed by Defendant. Plaintiff seeks an Injunction restraining Defendant from harassing and threatening him. Complaints about these activities to ADQ have fallen on deaf ears. Plaintiff asks the court to grant him protection under the “Iowa Franchise Act.” Plaintiff is not an attorney and asks the court for protection under this Franchise statute. The statute states a franchisee may not waive the protections provided by the statute.
    44. . The Rule of reason under the Sherman act15 U.S.C. § 2 certainly would apply to a Affiliate of American Dairy Queen committing acts of racketeering in order to restraint trade at a Dairy Queen location in Ames his territory for the self-serving purpose of removing competition for his own financial gain at his Son’s stores less than four miles away.
    45. The Rule of Reason the Sherman act15 U.S.C. § 2 certainly would apply to an organization who restrains trade like in Story county by Racketeering it is obvious by Forcing out other intrabrand competition (like another Dairy Queen) quick look standards should relieve should relieve the anti-trust Plaintiff from extensive detailed market analysis in a prima facie case. If it is obvious that restraint likely impairs competition, the restraint should be presumed unlawful.
    46. The ability to buy food items through dairy queen warehouses at a lower cost than non-system Foods on items for food. French fry containers, baskets, fries, burgers, etc. Some Non system foods stores buy these items anyhow.
    47. Under these contracts money is paid into advertising and Point of Purchase materials are supplied.
    48. No pricing formula or transparency on buying is ever given to franchisees based on the commodities. It would be an open an honest thing to do. Brazier agreements were set up to help convert stores into food as suppose- to ice cream and significantly increased royalties for American Dairy Queen.


    49. Plaintiff Alleges This is a system that uses Territory Operators through “Territory agreements” to act on behalf of ADQ and manage the trademarks and collect franchise fees and pay American Dairy Queen a percentage or cents per gallon. The Territory Operators are given the right to act as the judge jury and

  • July 8, 2012 at 10:51 am

    I am a DQ Franchisee and everything IDQ does has to do with their profit and bottom line. – the sign changeout was a pure profit to them and did nothing for the franchisee. DQ base buisnes is Ice cream, and the constantly give it away to sell a hamburger, because they make more money ( they own the cows ). They are now forcing all DQ’s to install Orange Julious at inflated equipment costs and with short shelf life on ingredients if your not selling a 100 day you will never recoupe your costs. I have heard many franchisees say we are not McDs or Sonic and don’t want to be. One DQ rep said if you don’t like it sell and go get a desk job – I guess that why he has a desk job

  • July 15, 2016 at 3:28 pm

    As part of a many year franchise family, I applaud the plaintiff for speaking up. I would be petrified to do so after having dealings with DQ corporate. Their operation is an extortion racket pure and simple. Forcing sign changes, upgrades, Bake ovens, Orange Julius…..with no option for the franchisee. We are looking at $300,000.00 in mandated changes…..that’s a lot of ice cream sales to try to recoup a forced expenditure.

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