Smokin’ Dutchman Holdings, a four-unit Dickey’s Barbecue Pit operator in Michigan, has filed for Chapter 11 Bankruptcy protections, citing onerous financial demands imposed by Dickey’s as a major factor. While Dickey’s charges a 6% royalty rate and a 3% marketing rate for its franchisees, Smokin’ Dutchman blames the franchising requirements for its fiscal problems. Although Dickey’s has not responded to requests for comment on the matter, its SVP of franchise relations, Jeff Gruber, has stated that the brand provided extensive operational support to Smokin’ Dutchman in an effort to stabilize their business operations.
Dickey’s, which had 485 units in 2021, saw a decrease in unit count in fiscal 2023 due to the net loss of franchised and company-owned stores. The brand’s units are typically small, ranging from 1,500 to 2,200 square feet for traditional restaurants, and 400 to 1,000 square feet for non-traditional locations. Smokin’ Dutchman’s units are all traditional restaurants, as confirmed by Google Maps Streetview photographs.
Dickey’s is currently in the midst of a capital reinvestment program to provide restaurant upgrades and local advertising across the brand. While the exact details of financial projections for franchised units are not disclosed in Dickey’s Franchise Disclosure Document (FDD), Smokin’ Dutchman reported an annual revenue of $3,336,000 for 2023, averaging at roughly $830,000 per store.
This bankruptcy filing by Smokin’ Dutchman is just one example of a franchisee seeking relief from financial obligations through the courts. With ongoing disputes between franchisors and franchisees, the issue of financial demands and support becomes crucial for the success of franchise operations.
In conclusion, the situation between Smokin’ Dutchman and Dickey’s Barbecue Pit highlights the challenges that franchise operators can face in meeting financial demands and maintaining profitability. As the restaurant industry continues to evolve, it is important for both franchisors and franchisees to communicate effectively and work together to ensure the success of their operations.
Source link
