Is DICKEY’S BBQ Hiding Franchise Failures?

A Dickey’s franchise owner claims that the franchisor is hiding franchise failures by reselling and reopening failed locations over and over to a stream of new owners… a technique known as franchise churning.

(UnhappyFranchisee.ComFranchise churning is a predatory franchise practice used by disreputable franchisors to create the appearance of success despite losses and franchise failures suffered by its franchisees.

Generating new franchise fees, transfer fees and store opening fees from a succession of new owners can also be a franchisor’s motivation for churning.

It works like this:  When a franchise location fails, the franchisor tries to find another buyer to take over the franchise location as quickly as possible, often at a reduced price.

The failed franchisee generally gets nothing in the deal, and the franchisor may generate new franchise fees, a referral fee, store opening fee or other revenue.

The franchisor generally (in our experience) makes no effort to determine or correct the reason for the initial failure, and to the public it just looks like a temporary closure.

Dickeys logoIf and when the second owner and subsequent owners fail, the franchisor just resells the location to new franchisees for new franchise fees.

With franchise churning, a chain could boast that it had no or very few stores closed, because its many franchise failures are simply recorded as “transfers,” not as closures.

A given location might look highly successful because it’s been open for 5 years when really 4 or 5 owners have lost their investments along the way.

We received a franchisee complaint alleging that the fast-growing Dickey’s Barbecue Pit franchise chain is engaged in churning its locations.

We investigated and, while we can’t definitively support the allegations, we did seem to find an abnormally large number of franchise transfers and news stories of Dickey’s locations closing and reopening with new owners.

Are you familiar with the Dickey’s Barbecue Pit franchise?  What do you think?  Share a comment – positive or negative –  below.

Is Dickey’s Hiding Franchise Failures by Reselling Failed Stores?

Our Dickey’s franchisee whistleblower states that, rather than closing failed or failing franchises, Dickey’s tries to keep them limping along until they find new franchise owners to buy them.

Dickey’s franchisee says:

I was also told that for locations that can’t stay open anymore, the family will waive royalties, calling it “royalty relief” until they can find someone to assume your store (for free) so that they don’t have a high store closure rate.

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The failed franchisees reward for this is that they don’t have to pay them the $800,000 they threaten to sue you for.

The $800,000 Dickey’s franchisee refers to comes from a “liquidated damages” clause in Dickey’s franchise agreement stating that if a franchisee closes a store before its 20 year term is up, the franchisee owes Dickey’s all the royalties and fees they would have paid if they remained open for the rest of the term.

This unrealistic and draconian fee, the franchisee claims, is simply used as a bludgeon, a threat that can be lifted if the failed franchisee does not interfere with the churning process.

[Graphic, below:  A Google search of terms like “Dickey’s reopens” or “Dickey’s new ownership” reveals numerous news stories and headlines of stores being closed and later reopened by new franchise owners.  This seems to provides anecdotal support for the Dickey’s franchisee’s allegation of churning.]

Dickey's logo

Dickey’s FDD Reveals a 22% Franchise Turnover Rate

An analysis of Dickey’s past Franchise Disclosure Document (FDDs) shows how transferring struggling or failing locations to new franchise owners can obscure the true nature of failed franchises.

Between 2012 – 2014, there were a total of 430 Dickey’s franchise locations open.  Of those, only 24 locations were terminated, reacquired by the franchisor or ceased operation for other reasons, giving the appearance of a 6% franchisee turnover rate.

However, if you go by the number of franchise agreements (including transfers), there were 518 franchises under contract during that time, including 88 transfers to new owners.  That would indicate that 112 franchisees exited the system (through termination, reacquisition, ceased operation or transfer) indicating a higher turnover rate of 22%.

Dickey's

Another indicator of franchise failures is the 2015 The Coleman Report, which publishes the default rates of franchisees who financed their franchises with Small Business Administration (SBA) guaranteed loans.

According to the 2015 Franchise Coleman Report, 8 Dickey’s SBA 504 loans were approved between 2005 – 2014 and $5,083,000 was disbursed.  So far 1 of the 8 (13%) has repaid in full and 3 (38%) Dickey’s franchisees defaulted on their SBA loans.

According to the 2015 Franchise Coleman Report, 128 Dickey’s SBA 7(a) loans were approved between 2005 – 2014 and $35,793,800 was disbursed.  So far 18 (14%) of the 128 have repaid in full and 12 (9%) Dickey’s franchisees defaulted on their SBA loans.

Also read:

Are DICKEY’S BARBECUE PIT Franchise Owners Being Exploited?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE PIT: How to Lose Everything in 5 Years or Less (Part 1)

DICKEY’S BARBECUE PIT: How to Lose Everything in 5 Years or Less (Part 2)

DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud

DICKEY’S Franchise: Open Letter to Roland Dickey, Jr.

DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?

 

 

ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

 

Contact UnhappyFranchisee.com

Tags:  Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise lawsuit, Dickey’s class action,  Dickey’s franchise complaints, Dickey’s franchisee lawsuit, Roland Dickey Jr., Roland Dickey, Dickey’s Barbecue Pit closed, Dickey’s complaints,

5 thoughts on “Is DICKEY’S BBQ Hiding Franchise Failures?

  • May 13, 2015 at 11:20 am
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    I am the former owner of a Dickey’s Franchise.

    Was the most expensive business education I ever encountered. Still $160K in debt due to their inept “development staff”. Sold it back to Dickey’s to keep from getting sued (a nice little scare tactic). They already have a new owner. Not sure if he had to pay the full franchise fee again.

    But I cashed in 2 retirement accounts to help fund this endeavor that was doomed to fail from the get go. They sell you by telling you all this support and help you get from the corporate office, only to get snubbed when things are doing south.

    Their development staff pressured us into making a hasty location decision….one I am still paying for. They have ridiculous timelines for their staff so they can make “goal”, while not providing accurate information that leads you to some bad decision making. I could go on and on.

    DO NOT BUY THIS FRANCHISE! Email me if you want further info.

  • January 21, 2016 at 4:35 pm
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    churning is a everyday thing at dickeys thats why they will come into your restaurant when they know your bleeding out and take pictures to use against you so they can blame the franchisee for there failures instead of running there end right and helping the franchisee they would rather get more money from a new person and new franchise fees and drain the next person than fix it judgement day will come for people who prey on trusting people. just call any other dickies ask how there doing. i am sure his mother and father and brother are rolling over in there grave or maybe they were same and there under your feet.if you would like to lose a lot of money call dickeys open one of there restaurants beware though they make more money when when you close

  • January 22, 2016 at 9:19 am
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    Do you mind telling us what went wrong at your location? High rent or bad supplies or no advertising?

  • April 5, 2016 at 1:08 pm
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    There no one thing that ruins a franchise. He had the right to pick the location and construct how he wanted. He decided to let someone else decide for him and now he’s blaming them. They lead him to make a bad decision.

  • October 27, 2016 at 3:49 pm
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    I think all the comments defending dickeys must be employees. No normal sane person would blame franchisees if they knew the truth

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