MJP –
As a result of “franchising requirements,” a once-popular BBQ joint unexpectedly declares bankruptcy in Michigan.
Using the “extreme” franchising requirements of the brand as an excuse, Smokin’ Dutchman Holdings, which runs four Dickey’s Barbecue Pit restaurants in Michigan, has filed for Chapter 11 bankruptcy.
The beloved restaurant franchisee’s financial problems were laid bare in Monday’s court records, which revealed the bankruptcy petition.
Sonny’s BBQ has more than 500 sites in 38 states, but Dickey’s Barbecue Pit has twice as many.
The Smokin’ Dutchman’s decision to seek debt relief is reportedly influenced by the franchise’s increasingly unrealistic financial demands, according to CEO Krage Fox.
This is part of a larger pattern in the franchise industry, as other franchisees have recently filed for bankruptcy as well.
The 25-location Arby’s operator Miracle Restaurant Group, which blamed the economy for its financial problems, filed for Chapter 11 on June 20.
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A 6% royalty fee and a 3% marketing cost are known to franchisees, although Fox did not say which specific franchising requirements caused the financial burden. These rates are supposedly lower than those of many comparable brands.
Jeff Gruber, Dickey’s Senior Vice President, responded to the bankruptcy petition by disputing Fox’s assertions about the franchising agreements.
In an email, he said that around 18 months ago, Dickey’s had helped Smokin’ Dutchman stabilize their firm by providing substantial operational support.
As part of a capital reinvestment initiative that involves enhancements for all Dickey’s sites, Gruber pledged that Dickey’s will continue to offer help.
Local advertising campaigns, updated technology, remodeled interiors, and new signs will all be part of these renovations.
Smokin’ Dutchman estimated yearly revenue of about $3.34 million in 2023, with an average of over $830,000 per location. However, Dickey’s does not reveal exact sales data in its Franchise Disclosure Document.
Problems have arisen in recent years, and the company has lost over fifteen franchised restaurants.
Suburban shopping centers and busy streets are home to Dickey’s Barbecue Pit locations, but franchises are feeling the heat as financial strains increase.
