Are DICKEY’S BARBECUE PIT Franchise Owners Being Exploited?
A Dickey’s Barbecue Pit franchisee predicts that the company will soon face a backlash from the exploitation of franchise owners by a greedy Dickey’s franchisor. He claims the Dickey’s is receiving kickbacks (rebates) on franchisee purchases and hides franchise failures by churning locations.
(UnhappyFranchisee.Com) We received a disturbing email from an anonymous reader who claims to be a long-time Dickey’s franchise owner.
He claims that after years of being a part of the “Dickey’s family” and following all of the rules, he finds himself in the worst sales month in memory.
He claims he was sold the dream that he could build up a successful store and be able to retire before long.
He says the dream has turned into a nightmare in which he and his family work harder and harder “just to keep the lights on.”
The Dickey’s franchisee’s message includes two powerful opinions that prospective franchisees should definitely investigate and consider:
- That Dickey’s is not only collecting 9% in royalties and advertising fees, but is making most of its income from vendor rebates (which would add to franchisee’s costs), and
- That Dickey’s is hiding its many franchise failures by reselling failed franchises to new owners, a practice called “churning” which hides franchise failures by classifying them as “transfers.” (We discuss this complaint here: Is DICKEY’S BBQ Hiding Franchise Failures?)
Are Dickey’s Barbecue Franchise Owners Getting Burned?
The Dickey’s Barbecue Pit franchise owner has concerns that Roland Dickey and Dickey’s management are profiting from their expenditures.
He claims franchisees are not only paying royalties and advertising fees, their purchases are also funding kickback-like rebates being funneled back to Dickey’s corporate.
He writes:
A few years back one of my family members took a position at the Corporate Office in the legal team, and they shared with me that the largest profit center wasn’t from the 5% they collect in royalties, or the 4% they collect in the marketing fund, instead its in the money they get back from their vendors that is the largest profit driver in the company and the reason why the family is so admit about 100% purchasing compliance.
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The sad part about hearing this is that I started out wanting to own several locations, but after they took the 9% they outlined in my contract and then took more behind my back, I am left trying to scrape by and working 70 hours a week…
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I have read all about Quizno’s and their lawsuits with the Franchisor, and I expect for this to happen to Dickeys as well, however my savings are depleted and I could not even dream of paying a retainer for a law firm to represent me, but I will jump as fast as possible on the class action suits when they happen.
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Should you decide to buy a Dickeys, then call the Owners in your area for their feelings on the brand. If you own a Dickeys, I was told these are the people you would want to subpoena for your lawsuits:
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- Tim Sharp – Former Vice President of Operations
- Jeff Forrester – Former Vice President of Purchasing
- Sarah Walters – Former Council
- Carlos Reyes – Former Chief Financial Officer
- Daniel Sibley – Former Regional Director of Operations
- Corey Wilsey – Former Regional Director of Operations
- Stephen Gellman – Former Regional Director of Operations
- JT Thomson – Former Area Developer in Utah
- Meg Heinzelman – Former Area Developer in Pennsylvania
- Greg Walacheck – Former Area Developer in South Carolina
- Sonny Dewitt – Former Area Developer in Indiana
UPDATE on Dickey’s Vendor Rebates
After posting the above, we checked in the Dickey’s 2014 Franchise Disclosure Document (FDD) and found this diclosure:
Certain approved suppliers currently or may hereafter pay to Dickey’s or an affiliate compensation or otherwise credit the account of Dickey’s or an affiliate sales incentives or rebates in amounts based on a certain percentage of the purchases you may make from such suppliers. During the fiscal year ending May 31, 2014, Dickey’s and its affiliates realized $6,224,041 from vendor rebates or credits which represented 20.4% of Dickey’s total revenues of $30,544,859. Dickey’s and its affiliates apply such sums to defray its costs in discharging its duties and obligations to its franchisees, to partially fund the Marketing Fund, and to generate revenues.
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Percentage of Total Purchases Represented by Required Purchases
We anticipate that the required purchases and leases from approved suppliers will constitute the substantial majority of all purchases by you for the development and operation of the Restaurant.
Dickey’s estimates that up to 50% of your initial investment to establish and open the Restaurant shall be applied to required purchases and leases, and that up to 75% of your expenditures to operate the Restaurant shall be applied to required purchases and leases.
At the time the FDD was published, there were 403 Dickey’s franchises open.
So the yearly rebates Dickey’s corporate receives amounts to about $15,000 per franchise.
We investigate the second allegation that Dickey’s is hiding franchise failures, here: Is DICKEY’S BBQ Hiding Franchise Failures?
We are all patiently waiting for the class action suits to come, should you file one, please let all of us know on this website.
Also read:
DICKEY’S BARBECUE PIT Franchise Complaints
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: Roland Dickey Sells to, Then Sues, Registered Sex Offender
DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy… Then Sues Him
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,
I am the former area developer for UT, CO, WY, MT, ID and NV. They got my name wrong in the post. We are currently contemplating creating an owners group like there are with other franchises which would give owners more of a unified voice. With regards to the post about kickbacks (both known and secretive ones) I would rather not go into that while we are still trying to work things out with Dickey’s. I have received several calls as a result of the post but until we figure things out with regards to our resolution I need to hold off on discussing it. We still have a number of stores and I really love the food and the market segment however we have learned a lot of discouraging things recently but we are trying to maintain a positive attitude about it all.
JT and other Dickey’s franchisees:
I have and continue to receive emails from current Dickey’s franchise owners who are interested in organizing an Independent Franchise Owner’s Association. I believe every franchise organization should have a franchisee owner’s association independent of the franchisor to speak for the franchisees and advocate for their interests. It is your right to do so. Anyone interested please contact me confidentially at UnhappyFranchisee[at]gmail.com.
A bit of a correction on the above post: Originally we said that the vendor rebates were “secret.” Also, the franchisee commenter states that “the money they get back from their vendors that is the largest profit driver in the company.”
I checked the 2014 Dickey’s Franchise Disclosure Documents and found this disclosure:
Revenue from Franchisee Purchases and Payments from Designated Suppliers
Certain approved suppliers currently or may hereafter pay to Dickey’s or an affiliate compensation or otherwise credit the account of Dickey’s or an affiliate sales incentives or rebates in amounts based on a certain percentage of the purchases you may make from such suppliers. During the fiscal year ending
May 31, 2014, Dickey’s and its affiliates realized $6,224,041 from vendor rebates or credits which represented 20.4% of Dickey’s total revenues of $30,544,859. Dickey’s and its affiliates apply such sums to defray its costs in discharging its duties and obligations to its franchisees, to partially fund the Marketing Fund, and to generate revenues.
Percentage of Total Purchases Represented by Required Purchases
We anticipate that the required purchases and leases from approved suppliers will constitute the substantial majority of all purchases by you for the development and operation of the Restaurant.
Dickey’s estimates that up to 50% of your initial investment to establish and open the Restaurant shall be applied to required purchases and leases, and that up to 75% of your expenditures to operate the Restaurant shall be applied to required purchases and leases.
So… the existence of rebates is NOT secret and, according to Dickey’s, is 20% of their revenue. At the time this FDD was filed there were 403 Dickey’s franchises so the total rebates come to about $15,000 per store.
It is only secretive if it isn’t disclosed in the Item 8 of the FDD.
True. As long as the disclosure in Item 8 is accurate. It would be better if there were more details as to what the rebates are being generated from, such as how much is from mark-ups of opening supplies & equipment and how much is from, say, ongoing food purchases.
I think its damaging to the franchise relationship when franchisors are getting rebates/kickbacks from vendors. Franchisees are naturally suspicious and resistant to the franchisor’s guidance. It’s even worse when franchisees have reason to suspect that the franchisors may have a secret motive for telling them to buy certain things or join certain programs.
Do a search on this site for the Quiznos million sub giveaway fiasco. Quiznos mandated giving away a massive number of subs at franchisees expense. Franchisees were furious because the Franchisor was still making money on the markup of the food products franchisees were giving away.
IMHO it would be better for the franchisor to pass all savings and rebates on to franchisees, even if it meant raising the royalty slightly just to eliminate this potential conflict of interest.
Unionization or owner group of the entire industry would be ideal. But let’s face it. People are going to want to make their own decisions weather or not a standard is in place. That’s the whole reason why people are filing lawsuits and withholding information from their claims. Franchises always have conflict of interests. Promos, marketing, management, etc. all of those can conflict the way profit is made. It’ll be hard to get the balance right if people aren’t guided and supported in proper ways. The franchisee is ultimately held accountable for the success of the business. It would be great to have some tax breaks or incentives or regulations nationally for new business owners to open these types of businesses. Hopefully they all get the positivity and success they are fighting for.