Dickey’s franchise owners report that franchisor Dickey’s Barbecue Restaurants, Inc. (DBRI) is refusing to share the accounting of the systemwide franchisee marketing fund, as required by the Dickey’s Franchise Agreement. According to franchisees, DBRI representatives have been ignoring requests or making up excuses for the delays for months. UnhappyFranchisee.com is inviting DBRI executives to explain if and why the marketing fund “statement of operations” is being withheld.
(UnhappyFranchisee.Com) In addition to royalties and other fees, most franchisors require their franchisees to pay into a systemwide advertising or marketing fund to be used to create marketing materials and advertising campaigns to promote awareness and sales for franchise stores in the system.
Franchisees contribute a percentage of their sales (generally 1% – 2%) into the fund which is, according to the franchise agreement. Franchisors generally reserve sole discretion in how to use the funds, but are obligated to use the funds for activities that benefit franchisees and are prohibited from defraying general expenses or using the fund to promote its franchise opportunity.
Often, contributions from vendors or others for marketing support are deposited into and managed within the Marketing Fund. While the franchisor generally manages the Systemwide Marketing Fund, it is the franchisee’s money they are managing, and most franchise agreements require the franchisor to produce an annual accounting of revenues, uses and expenditures of the funds and provide that report to franchisees upon request.
Dickey’s franchisees: Have you requested the Fiscal 2016 Systemwide Marketing Fund Report? What response did you get? Please share a comment below or email in confidence to UnhappyFranchisee[at]gmail.com.
DBRI executives and marketing team: Is the Fiscal 2016 Systemwide Marketing Fund Report? If not, why not… and when will it be available? Please share below or email to UnhappyFranchisee[at]gmail.com.
Dickey’s Requires Franchisees to Pay 4% of Net Sales into the Marketing Fund.
In addition to a 5% Royalty, $99 per month Technology Support Fee, and $58 per month Sales Reporting System Software Fee, Dickey’s requires franchisees to pay 4% of Net Sales into the Marketing Fund each week.
According to Article 6 of the current Franchise Agreement, “A statement of the operations of the Marketing Fund shall be prepared annually by Dickey’s and shall be made available to you [the franchisee] upon request.”
According to the Dickey’s Franchise Disclosure Document (FDD):
A statement of the operations of the Marketing Fund will be prepared annually by Dickey’s and will be made available to you upon request, as well as an accounting of Marketing Fund expenditures. Dickey’s is not obligated to provide an accounting of each marketing program and spend for your individual Restaurant. The Marketing Fund is audited on an annual basis as part of Dickey’s annual audit.
For fiscal year ending May 31, 2016, monies in the Marketing Fund were expended as follows:
Media Placement 67.93%
1 The category of “Other” includes Branding Support Social Media and Public Relations.
Source: 2016 Dickey’s Franchise Disclosure Document
The Dickey’s 2016 FDD, issued August 26, 2016, indicates that the audit of the marketing fund for Fiscal Year ending May 31, 2016 has been completed and should have been available for franchisees who requested in August, 2016 if not much earlier.
Yet franchisees report that their requests for the systemwide marketing report have been ignored or rebuffed with a variety of excuses.
Why Are Dickey’s Franchisees Not Being Given the Marketing Fund Accounting?
Numerous Dickey’s franchisees*, who wish to remain anonymous for fear of reprisals from DBRI, report that they have made numerous requests through the BOSS internal ticketing system, by requests made to their Franchise Directors, or through direct communication with Dickey’s Vice President of Marketing Emily Bennett.
One owner stated:
I requested the most recent marketing audit earlier this week and didn’t get a response. I re-requested it last night. Crickets.
We know numerous owner operators who have requested it…since it is required to be turned over on demand per the FA this should be a master file (suppose to encompass the entire marketing fund we get to see where every dollar goes that gets paid into it not just what we pay into it) the request should be forwarded to someone in accounting who has that file attach to an email and send it…
Another Dickey’s Franchise Owner stated:
I submitted a request through the BOSS system and still have no answer. Over a week ago.
Another Dickey’s Franchisee stated:
I have requested the the accounting report for the marketing fund for months. I have been told that they are “working on it,” and will get it to me as soon as it’s ready. Why would they have to “work on it.”? The franchise agreement says they do it as part of the audit. It should be a file that was available for distribution to franchisees last summer. It sounds fishy that they have to “work on” an audited accounting.
Another Dickey’s Franchisee stated:
I was told that they received my request and had to forward it to Legal for approval. What does the Legal department have to do with it? Why wouldn’t the Marketing Department be sending out the Marketing Accounting as required by the contract? I was also told we would have to set up a meeting to go over it. Why is this such a big deal? What are they hiding?
Another Dickey’s Franchisee reported:
A tactic I have heard from several o/o’s is that when you request the marketing accounting they only address ad expenditures in your specific market and ignore the request for the systemwide fund accounting. When pressed, I’ve heard that Emily Bennett and others say that a personal meeting or Skype conference are required before they can release the marketing accounting. That’s clearly not how the contract reads.
Another Dickey’s Franchise Owner claims:
I was told by another franchisee that Emily Bennett acted like [his/her] request was the only one they’ve received. I know for a fact that’s not true. Many of us have noticed a sharp decline in marketing, and we have the right to know how DBRI is spending our millions.
* Some of the specific details of these franchisee statements were mixed around to obscure the identities of these franchisees. Others are heresay, referring to what franchisees heard from other franchisees.
Franchisees are always suspicious, and withholding required disclosures fuels those suspicions even more.
Franchisees are naturally suspicious of the franchisor, and potential misuse of the advertising fund is one of the areas that breeds the most suspicion.
As Dickey’s has grown, so has the marketing fund which has topped $13,000,000 in Fiscal 2016.
According to an analysis of Dickey’s franchise disclosure documents by a Dickey’s franchisee, advertising contributions have grown to more than $13M in Fiscal 2016.
Despite the growth of the marketing fund, franchisees have noted the drop in effectiveness of their marketing over the past year.
And as the fund grows larger, so will the suspicions and conspiracy theories.
In the last week or so alone, we have heard franchisee suspicions that Dr. Pepper is paying DBRI for the plastic Big Yellow Cups which bear the Dr. Pepper logo, yet DBRI is still charging franchisees for the cups which allegedly cost them nothing.
Another rumor is that Warner Bros. actually paid DBRI for promoting the ill-planned, error-ridden “The Middle” Family Reunion Sweepstakes anywhere from $20,000 to $500,000.
DBRI required the franchisees to display the materials, but isn’t sharing any of the revenue with franchisees.
There is no substantiation to these rumors – but they are good examples of the suspicions that grow when a franchisor is not transparent with its franchisees – and withholds contractually required disclosures of how it is using millions of dollars of the franchisees’ money.
Advice to DBRI CEO Laura Rea Dickey, President Renee Roozen, VP Emily Bennett: Stop “working on” the marketing fund report and just release it, as you are contractually obligated to do.
And start getting real, honest feedback from franchisees on what they need in the way of marketing and start giving them a say in how their money is spent.
McDonald’s franchisees were heavily involved in marketing planning and new product development from early on – and it worked out pretty well for McDonald’s over the years.
ARE YOU FAMILIAR WITH THE DICKEY’S “THE MIDDLE” FAMILY REUNION SWEEPSTAKES? PLEASE SHARE A COMMENT, TIP OR UPDATE BELOW.
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