DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud
Dickey’s Barbecue Restaurants, Inc., franchise salesman Jerrel Denton, & President Roland Dickey Jr. are being sued by franchisee Justin Trouard for alleged violations of Maryland franchise registration and disclosure law including disclosure violations, illegal earnings claims, and fraud.
(UnhappyFranchisee.Com) According to a lawsuit filed in the United States District Court of Maryland on May 28, 2014, Justin Trouard “was induced to purchase a Dickey’s Barbecue Pit franchise and suffered financial loss in excess of $1,000,000.”
The lawsuit JUSTIN D. TROUARD, JESSICA CHELTON v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR. & JERREL DENTON was filed by attorneys Andrew K. Wible, Russell J. Gaspar, & C. Patteson Cardwell, IV of Cohn Mohr, LLP of Washington, D.C.
It includes familiar allegations that we’ve heard before about Director of Franchise Sales Jerrel Denton’s pre-sale representations.
Dickey’s Alleged Illegal Earnings Claims
According to the complaint:
On or about August 7, 2012, Trouard had a telephone conversation with Denton regarding Dickey’s franchise opportunities, and Trouard’s interest in opening a franchise in Alexandria, Virginia. During the phone conversation, Denton made express financial performance representations regarding Trouard’s potential earnings from the operation of the franchise. Specifically, Denton represented that:
a. the typical Dickey’s franchisee earns $80,000 – $100,000 per month in gross profit;
b. the typical Dickey’s franchisee would earn a monthly net profit of between 17-20% of the gross; and
c. during the time Denton had been working for Dickey’s, not a single restaurant had failed due to poor financial performance.
Franchisor’s are prohibited from making earnings claims that are not disclosed in Item 19 of their Franchise Disclosure Document. According to the lawsuit:
In connection with the sale of a Dickey’s Barbecue Pit franchise to Trouard in August 2012 and February 2013, Dickey’s, by and through its authorized agent Jerrel Denton, made numerous representations of, or from which could be ascertained, specific levels or ranges of actual or potential sales, income, or profit from Dickey’s franchised units, which earnings claims were not included in any FDD provided to Trouard. This conduct was in violation of MD. CODE REGS. (COMAR) 02.02.08.16(D)(3) and, by operation of law, Section 14-229(a)(3) of the Act.
Dickey’s Allegedly Understated Start-up Costs
According to the complaint:
11. During the same phone conversation, Denton made express representations regarding the low initial investment required to open a Dickey’s franchise. Specifically, Denton represented that:
a. the average cost to open a restaurant using a second generation restaurant space was $60,000 – $70,000;
b. some franchisees had successfully opened second generation restaurants for as little as $30,000;
c. a major feature of Dickey’s system, which allowed them to keep their opening costs so low, was that they recommended franchisees obtain second hand restaurant spaces, and allowed and encouraged franchisees to use second hand equipment and furniture to outfit the restaurant;
d. Dickey’s had a “team of ladies” that search the internet on behalf of franchisees and locate second hand restaurant equipment and furniture;
e. that Dickey’s “team of ladies” could obtain chairs, which cost $60 new, for $5.
Trouard’s actual start-up costs were significantly higher than represented by Denton and by the Dickey’s FDD:
Specifically, the statements made by Denton on august 7 and the information contained in Item 7 of the FDDs materially misrepresented the initial investment amount required to open a Dickey’s franchise. Denton represented to Trouard that a second generation restaurant could be converted to a Dickey’s restaurant for $70,000 or less, and that many franchisees had converted second generation restaurants for as little as $30,000. The FDDs stated that the total initial investment required to open a Dickey’s restaurant from a second generation restaurant was between approximately $109,000 and $163,000. Trouard’s actual initial investment was more than $370,000.
More Dickey’s Barbecue Pit franchise allegations
The complaint includes many other allegations, including advertising promises not kept, and the fact that the franchisee was provided with an invalid disclosure document:
12. During the same phone conversation, Denton made express representations regarding the advertising support that Dickey’s provided its franchisees. Specifically, Denton represented that “a portion of the monthly royalty fee went to ‘ad fund’ that was used exclusively for promotion in the franchisee’s local area.” Denton made this representation without disclosing the manner by which the funds are to be raised and spent, or that Trouard would be able to obtain an accounting of those expenditures.
13. After the phone call, Denton sent Trouard by email a copy of Dickey’s Virginia Franchise Disclosure Document for 2011 (“2011 VA FDD”). A copy of the 2011 VA FDD is attached as Exhibit A.
14. Trouard, a resident of Maryland, was unaware that the 2011 VA FDD was not registered under the Act.
Of course, the validity of these allegations haven’t been proven in a court of law, but the number of similar complaints we are receiving here at Unhappy Franchisee World Headquarters is setting off alarm bells and launching red flags aplenty.
When it comes to Dickey’s Barbecue franchise sales practices, where there’s smoke there may indeed be fire… and not that lovely BBQ kind.
Caveat Emptor.
Also read:
Read the lawsuit: JUSTIN D. TROUARD, JESSICA CHELTON v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR. & JERREL DENTON
Read more posts:
DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?
DICKEY’S BARBECUE PIT Franchise Complaints
DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy
DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender
DICKEY’S Franchise: Open Letter to Roland Dickey, Jr.
ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY? SHARE A COMMENT BELOW.
Tags: Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise lawsuit, Dickey’s Barbecue Pit franchise complaints, Dickey’s Barbecue Pit franchisee lawsuit, Roland Dickey Jr., Roland Dickey, Dickey’s Barbecue Pit closed, Dickey’s complaints, Jerrel Denton, Dickey’s Jerrel Denton, Justin Trouard, Justin Trouard lawsuit, Cohn Mohr, C. Patteson Caldwell
I have been a Dickey’s Barbecue franchisee for 8 years and disagree with all of these statements. I can tell you I had some very tough financial years in 2008 & 2009 and the team at Dickey’s did nothing but help me get through that time and come out the other side a very successful operator. They never turned their back on me and continued to coach and drive my profits since day 1. The entire team at the office has always supported every aspect of our partnership. I was told from the beginning that my success is their success and their success is my success, and I couldn’t asked for anything more in a partnership with the team at Dickey’s.
You can disagree all you choose to, but being a Dickey’s employee who just lost her job yesterday due to the restaurant not making enough money, I couldn’t agree with any of these claims more. Not too long before the Dickey’s I worked at closed, maybe less than a month before, another Dickey’s closed for the very same reason. Two stores, such a short distance apart, in such a small period of time? That’s not a good sign. Might I add, that other Dickey’s was open for less than a year! About a year and a half ago, I want to say, Dickey’s corporate came in to speak with one of the owners of the Dickey’s I worked at. They were rude, and not very helpful when speaking to her. The restaurant was open for 4 years, and the owners gave it so many chances, but it had finally reached the point where they couldn’t do it anymore. Dickey’s corporate has a ton of issues that they need to fix.
Guest that may have been your experience. It doesn’t matter.
Dickey’s chose not to provide an Item Earnings Claim in their FDD.
They may verbal earnings claims and made Item 7 Estimated Investment claims that were materially different than what is in their FDD.
That’s illegal and reckless.
If they had proof of financial performance and lower build out costs Dickey’s should have put them in the FDD..
I’m the guest that used to work at a Dickey’s. Guess I’ll just call myself Guest2, haha.
I just wanted to include that when corporate met with the owner, I overheard them repeating something back to her that she said to them. It was along the lines of “so you want to sell the restaurant because we ripped you off?”. Which, in turn, looks like they did.
Guest who is a franchisee, you just got lucky with running into nice corporate employees.
It would be interesting to know why the stores are losing money. The facebook page for the tennesee store that closed has pictures of a full restaurant and a long line, but it looks like it was open less than 6 months. Heavy debt or low sales or low margins?
Guest3:
This and another lawsuit I plan to post today allege that Dickey’s provided both highly inflated (and illegal) revenue earnings claims and grossly understated start-up costs. So while the sales were there, the costs and debt service were overwhelming. It appears that franchisees who thought they had adequate funding found themselves unable to pay their bills or weather the start-up phase due to costs that were twice what they were allegedly told to anticipate..
From the Trouard lawsuit:
“On February 22, 2013, Trouard officially opened the restaurant for business. In total, Trouard expended more than $370,000 to open his Dickey’s franchise, more than twice as much as the highest estimated initial investment for a “Restaurant Conversion” as stated in the 2011 MD FDD.
“58. In the first month of operations, using Dickey’s monthly sales and revenue (“MSR”) forms to perform the calculations, Trouard earned a net profit of approximately $10,000. However, in reality, Trouard lost money. This is because Dickey’s MSR forms did not account for costs associated with the bar in Trouard’s restaurant, such as alcohol and entertainment costs. Also, the $10,000 was based on no rent, which was free for the first seven months, and also didn’t account for sales and use taxes.
“59. Since opening in February 2013, Trouard’s restaurant lost money every single month, causing Trouard and Chelton to incur significant debts.
“60. In January 2014, unable to pay the rent and overwhelmed with other debts and expenses incurred in connection with his purchase of the franchise, Trouard closed the restaurant.”
Thanks. The carrot is the low franchise fee and the low equipment costs. I really considered applying for a Dickeys franchise in early 2013. I considered again this year, but my calculations did’nt show covering the investment costs. At the one in my area, the owners seem to always be there. I took that to be another warning sign.
It is a shame we have to spend so much time trying not to get taken for both your hard work and your life savings.
We could all be helped if a franchisor was required to provide examples of actual earnings for a group of existing stores.
That would at least give you something more realistic to go on. They could give us amounts that royalties were based on. That would help.
Caveat emptor, let the buyer beware, does’nt help when you could’nt see a reason to not trust the disclosure documents.
These postings will save someone else from bankrupcy or lost savings, or lawsuit. I know its saved me. My estimate would be at least $100,000 or more.
These folks have lost more. Thanks again.
I have a bit more of a view than most of those that post here.
I was Mr. Neighbors manager who opened the store with/for him. I cannot comment on conversations between Mr. Neighbors and Dickey’s. I can however say that I was brought in because I had 20 years in the restaurant industry and he had three days.
Mr. Neighbors bragged that he spent three days working at Dairy Queen and quit because he couldn’t smoke a cigarette. He bragged about his previous drug use on my second day working there. My wife and I worked over 100 hours per week for 5 weeks straight at less than minimum wage to get his store open and save him some money.
During training and after opening Mr. Neighbors was more interested in acting like a business owner than truly being one. Immediately after opening he worked very little in the restaurant 2 and 1/2 days. He gave a very half-hearted effort training and opening his store and blamed everyone but himself for anything that went wrong. He failed to learn or perform anything in the store (positions, scheduling, truck ordering, labor forecasting, recipes).
I left 6 weeks after opening because of morality disagreements with him. We opened the store above Dickeys sales forecast for us (which James agreed with), we met food cost and was within 1% of labor from week 2 till I left. The sales were there, the training was there, and the food was great when prepared by company standards which he didnt like doing.
Mr. Neighbors didn’t want Dickeys paperwork done after the trainer left because he said it took up to much time. I viewed all the documents Mr. Neighbors checked and signed and I do not see how he can blame anyone but himself. He did not put in the work nor the learning to succeed that is why he failed. Sales dropped and labor went through the roof after I left (according to several of his staff and promoted managers).
When the store closed four months after opening only three out of 30 original staff remained. I believe that is the truest sign of leadership and trust is those who will stand by your side, and he failed with more than just money.
I am a current Dickeys franchise owner. I can definitely agree that their sales process is high pressure and they do claim no experience needed. I was open about having bad credit with no way to get a loan and that I had $80K to open a store. I was told that was more then enough. The real estate team was high pressure too telling me to sign a lease fast to meet some internal time line of being open in 90 days. Was even told how much money I was losing by not signing. I pushed back until I was threatened that if I didn’t open on time I would be in default and then sued. That in mind I was rushed into a lot of decisions I didn’t feel we’re the best. I had to borrow money from family because the $80k was not enough. Even threatened that I would not be allowed to open because my walls were not right. I was bounced aroundd to different staff (4 project managers,,3 store open staff in 90 days) that were never updated with what the last had committed to. We did open and had some very rough months. We are still open but only because of the fear of law suit from Dickey corporate and I have put everything I have into this place. We stay with in the Dickey’s 36% Cogs (38 if you look at internal paperwork), 22% labor,10% lease, 9% royalties (5 royalty, 4 ad fund) and and 15% misc they don’t really discuss ( utilities, Dickeys mandatory services, license fees, etc). I make about 5% of the gross sales.
I can’t close with out being sued, I can’t sell because it not worth much according to Dickey’s. I have put everything I have into this and now I’m a slave because of the fear they put in me. I was even pressured with in 6 months of opening to purchase a 2nd franchise because I was told that is where the money is. Again bad credit and not much profit I could not open and I’m out that money too. We get a new rep from corp about every 60 days and they all have the same training I received. No real help except to quote training material.
I really would have loved for this to be a success and I strangely still do. My best advice is this is not for the inexperienced restaraunt person or family investment. You have experience or have an investment group this may be for you. That is what they are targeting now from what my last area director told me.
No name because of fear
Get a lawyer and an accountant with restaurant experience. Use one of the non-profits so you won’t have to deal with expensive fees. Get some outside advice so you can get some sleep at night.
He I’m a dickeys owner and I look for other owners planing law suit dickeys corporate to file in group. Contact me [redacted].
ADMIN Note: We don’t allow posting of personal contact information in the comments. If you are a franchise owner looking to contact others, you can email ADMIN confidentially at UnhappyFranchisee[at]gmail.com.
Dickey’s franchise owners who want to sue Dickeys listen carefully.
You are not even close to being ready to do it or get your demands met by Dickey’s.
You need to get a dozen of you together and put up $1500 each to start an association of franchisees.
You skip this step you will most assuredly fail to get you goals achieved.
P.S. Don’t give me the typical carping that you are all so broke and in debt from your Dickey’s franchise investment you couldn’t afford the $1500. Oh and no attorney worth their salt will do a lawsuit for you on contingency.
Dickey’s has made a lot of money paying lip service to franchise sales compliance.
They will not change their franchise sales practices until they are compelled to and even then they may continue to ignore it and continue making illegal earnings claims.
As far as after the sale franchise owner profitability that will not get fixed without a coordinated effort by franchisees.
Dickey’s more like Quizno’s in its arrogance than it is like a well respected franchise company.
Once a year I go to the supermarket to the right of the Dickey’s in Germantown, MD for hard-to-get foods. I was curious about what Dickey’s was all about. I found this article in the Gazette, a free community newspaper:
http://www.gazette.net/article/20140806/NEWS/140809580/dickey-x2019-s-barbecue-pit-reopens-in-germantown-plans-to-apply&template=gazette
The article gives the re-opening as of July 31, 2014. The article states the restaurant closed in Jan, 2014 “because it didn’t meet the standards set by Dickey’s”. I smelled a rat, so I surfed the Internet and found this story. Yelpers posted a number of reviews after the re-opening.
That will eliminate kids free Sundays. My local dickeys is crowded on kids free Sunday.
We were the first Dickey’s to open in our State. We were told that our break even point (using formula given by Dickey’s Corporate – Roland Dickey Jr himself – to be more specific) was 55K/month. Three months after I opened, they came in and reassessed my store, and told me it was now $116k/month. Yep, it more than doubled! I was in a sinking ship, and wasn’t even given a small cup of help from head office, to bail myself out. Their formula was garbage, and we were set up for failure, bankruptcy, and foreclosure on our home. I believe they wanted me to open, lose out, sell to someone else for pennies on the dollar, so they might have a chance. The new owners did not make it either. I think it went through three owners, before finally closing for good.
In your opinion what was really wrong with it? High rent, forced to buy meat products from the wrong supplier? No advertising? Overcharged by contractors when setting up the store? It might help someone else if you tell us.
I put the down on two Dickeys locations.. went to thier franchisee school in dallas for three weeks, witch you pay almost $2,000 for. Not to mention they have you work thier stores (for training smh) more like free labor all day shifts. Not to mentione the hotels and normal every day cost of staying in a town you do not live in. And what happens? I dont get either place. Nothing from my doing, one the building had structure issues and the other the previous owner decided he wanted to keep the place but change it to an other resturant.. Dickeys swore they would find me stores.. even better stores.. well that has never happened. That was over 8 months ago. So now i am jist requesting my investment back to witch was agreed on. But now i can get no one one the phone or to respond to my emails. Now I have to hire a lawyer with whatever money I have left after all of this.