DICKEY’S BARBECUE PIT Franchise Warning

Dickey’s Barbecue Pit franchise complaints include dishonest and illegal franchise sales tactics, illegal and inflated earnings claims, understated investment costs, improper franchise disclosure, and more.  While these complaints are allegations and franchisee opinions, we suggest that prospective franchisees should pay particular attention to these areas while investigating the Dickey’s franchise opportunity.

(UnhappyFranchisee.Com)  Matt & Carla Chorley are no strangers to research.  Prior to investing in a Dickey’s Barbecue Pit franchise, Matt was the Senior Director of Operations at a biotechnology company and Carla had been Director of Operations at a life sciences firm.

Unfortunately, the Chorley’s learned the expensive lesson to not base their research on representations allegedly made by a Dickey’s Barbecue Pit franchise salesman.

In a lawsuit filed May 21, 2014 in the United States District Court of Maryland (CHORLEY ENTERPRISES, INC., MATTHEW and CARLA CHORLEY v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR., & JERREL DENTON), the Chorleys claim that Dickey’s Director of Development Jerrel Denton induced them with illegal and inflated earnings claims, with grossly understated start-up costs, and with the false promise that they could keep costs low by sourcing used equipment… which they were later prohibited from doing.

By trusting the representations made by Dickey’s and Jerrel Denton, the Chorleys claim to have lost more than $300,000.

To add insult to injury, Dickey’s is seeking more than $600,000 in liquidated damages from the Chorleys.

Are you familiar with the Dickey’s franchise opportunity?  Please share your opinion – positive or negative – below.

The allegations in the Chorley lawsuit are strikingly similar to those in the Trouard franchisee lawsuit, discussed here: DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud

Dickey’s Franchise Warning:  Alleged Illegal Earnings Claims

Franchisors are forbidden from making financial performance representations for new outlets unless those representations are documented in Item 19 of their Franchise Disclosure Document (FDD).

According to Dickey’s FDD:  “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets.  We also do not authorize our employees or representatives to make any such representations either orally or in writing.”

However, the Chorley lawsuit alleges:

[Director of Development Jerrel] Denton made express financial performance representations regarding Chorley’s potential earnings from the operation of the franchise. Specifically, Denton represented that:

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a. depending on size, Dickey’s restaurants averaged between $800,000 and $1,200,000 per store in annual revenues;

b. “the worst operators are making 10% net profit in each store”; and

c. based on the particular market in which Chorley was looking to operate, he should be able to do over $1,000,000 in annual revenues with one store.

…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 the 2011 FDD. 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 Franchise Warning:  Alleged Misrepresentation of Start-Up Costs

According to the Chorley lawsuit, the cost to open a Dickey’s outlet was almost double the amount the franchisee was told:

…the statements made by Denton on October 4 and the information contained in Item 7 of the 2011 FDD materially misrepresented the initial investment amount required to open a Dickey’s franchise. Denton represented to Chorley that a prior food service facility could be converted to a Dickey’s restaurant for $30,000 or less, and that $89,000 was sufficient funds to open 3 such restaurants. The 2011 FDD stated that the total initial investment required to open a Dickey’s restaurant from a prior food service facility was between $63,556 and $162,438. Chorley’s actual initial investment was more than $300,000.

Dickey’s Franchise Warning:  Alleged Misrepresentation Regarding Used Equipment

The Trouard lawsuit, the Chorley lawsuit, and franchisee James Neighbors all contend that they were made certain promises by the sales staff that were contradicted by the operations staff AFTER the franchise agreement was signed.

The Chorleys were allegedly told upfront that they could save costs by purchasing used equipment, but were forbidden to do so once they signed the agreement:

The projected equipment costs were 5 to 10 times greater than the $10,000 and $20,000 figure Denton represented to Chorley in October 2012, several multiples greater than the $13,701 figure listed in Item 7 for a “Non-Traditional Conversion”, and well more than double the $37,633 listed in Item 7 for a “Restaurant Conversion”.

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44. On information and belief, Chorley alleges that Dickey’s intentionally withheld the equipment cost information from Chorley until after he had executed the lease because the lease obligation would make it less likely that Chorley would seek to terminate the Franchise Agreement once the huge discrepancy between the actual equipment costs and the costs stated in the 2011 FDD was revealed.

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45. Confronted with projected equipment costs that more than doubled the highest estimate provided in the 2011 FDD, Chorley told Dickey’s that he wanted to acquire used equipment, which was one of the key features and selling points of the Dickey’s system as represented by Denton and on which Chorley had relied on in making his decision to purchase the franchise. Chorley explained that he was expressly told by Denton that Dickey’s had a “team” whose sole purpose was helping a franchisee source used equipment… Dickey’s responded that Chorley would not be allowed to equip his restaurant with used equipment…

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…When Chorley again told Dickey’s he wanted to source used equipment, Lauren Parker, Dickey’s Associate Director of Development, flatly told Chorley that he was “not allowed to source used equipment.”

Dickey’s Franchise Warning:  Alleged Misrepresentation of Construction Costs

According to the Chorley complaint:

The final cost of construction to convert the Frederick Property into a Dickey’s Barbecue Pit was more than triple the cost Chorley had been told by Denton, and several multiples higher than the amounts listed for “leasehold improvements” in Item 7 of the 2011 FDD for either the “Non-Traditional Conversion” or “Restaurant Conversion”.

Dickey’s Franchise Warning:  Alleged Misrepresentation of Leasing Rates

According to the Chorley complaint, Dickey’s forced them into accepting unrealistically high rent:

The monthly rental amount Dickey’s proposed in the LOI was approximately $7,800 per month, which was significantly higher than what had been listed in Item 7 of the 2011 FDD… Chorley felt pressured by Dickey’s real estate team to sign the LOI and move forward. On or about November 8, 2012, Ellis told Chorley that if he did not sign the LOI, the timeline for opening his restaurant would be delayed, resulting in a default under the Franchise Agreement.

Dickey’s Franchise Warning:  Alleged Hard-Selling a Development Agreement

The Chorley complaint alleges the common franchise add-on sales tactic of scaring a franchisee into paying a fee to fend off development of adjacent territories:

In or about April 8, 2013, prior to the opening of Chorley’s first restaurant, Denton contacted Chorley by phone and advised him that there was “tons of activity in [his] area” and that Dickey’s was about to sell a franchise to another operator near Chorley’s restaurant in Frederick, Maryland.

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… Denton told Chorley that the only way he could protect his store from direct competition from another local franchisee was to purchase the territory through a development agreement.

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…[Denton told Chorley] he could expect his second store to generate $1,000,000 in revenue with 10% profit.

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…Having already spent or committed to spend more than double his original investment budget, Chorley was particularly sensitive to the threat competition posed to that investment… As a result, Chorley executed a developer agreement [and]… paid Dickey’s a development fee of $15,000.

Chorley, of course, never had the chance to open the second store and Dickey’s kept the $15,000.

Dickey’s Franchise Warning:  You’ll Get Sued for Failing

Franchisors are fond of saying that “we’re all in this together,” and that they only succeed when their franchisees succeed.

However, some franchisors not only are unsympathetic when franchisees fail, they sue them for the royalties and marketing fees they would have paid had they been successful, liquidated damages, and/or other forms of failure fees.

According to the Chorley lawsuit, even after the couple lost $300,000 and paid an additional $15,000 development fee, Dickey’s is seeking damages for more than $600,000.

Dickey’s is seeking the same from franchisee Justin Trouard, and is demanding $675,122.55 from James Neighbors, who was forced to close after only 3 months.

We’ve heard the same from many, many franchisees:  When franchisees fail, they fail alone.

Also read:

The Chorly lawsuit:  CHORLEY ENTERPRISES, INC., MATTHEW and CARLA CHORLEY v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR., & JERREL DENTON

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?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy… Then Sues Him

 

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