Investing in a franchise is one of the most significant financial decisions you'll ever make, and thorough due diligence starts with understanding the Franchise Disclosure Document (FDD). This comprehensive analysis examines the Dairy Queen of Montana / North Dakota LLC franchise opportunity, providing prospective franchisees with critical insights drawn directly from the company's FDD dated July 23, 2024.

The Franchise Disclosure Document is a legally mandated document that franchisors must provide to potential franchisees at least 14 calendar days before signing any binding agreement or making any payment. This FDD review dissects all 23 required items that federal law mandates franchisors disclose, including:

• Items 1-4: Corporate background, business experience, litigation, and bankruptcy history
• Items 5-7: Investment requirements and fee structures
• Items 8-9: Supplier restrictions and franchisee obligations
• Items 10-14: Financing, support, territory, and intellectual property
• Items 15-18: Operational requirements and restrictions
• Item 19: Financial performance representations (earnings claims)
• Items 20-23: Franchisee lists, financial statements, contracts, and receipts

This analysis provides franchise candidates with the detailed information needed to evaluate whether the Dairy Queen of Montana / North Dakota LLC franchise aligns with their investment goals, operational capabilities, and long-term business objectives. We'll examine what makes this territorial franchise opportunity unique within the broader Dairy Queen system and identify both opportunities and potential concerns for prospective investors.

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Dairy Queen of Montana / North Dakota LLC Franchise Cost & Investment Requirements (Item 7)

Critical Information Gap

⚠️ IMPORTANT NOTICE: Item 7 Data Not Available in Provided FDD

The provided Franchise Disclosure Document (FDD) excerpt does not contain Item 7 (Estimated Initial Investment) information. The document pages provided consist primarily of exhibit pages, state effective dates, and receipt forms, but do not include the substantive disclosure items that would contain detailed cost breakdowns.

What Item 7 Should Contain

Based on FTC franchise disclosure requirements, Item 7 of a complete FDD should provide prospective franchisees with:

Required Cost Disclosures

Item 7 must include a detailed table showing estimated initial investment ranges for:

• Franchise Fee - Initial payment to acquire franchise rights
• Real Estate - Purchase or lease costs for location
• Leasehold Improvements - Construction and renovation costs
• Equipment - Kitchen equipment, freezers, point-of-sale systems
• Signage - Exterior and interior branded signage
• Opening Inventory - Initial food products and supplies
• Insurance - Initial insurance premiums
• Training Expenses - Travel and lodging during training
• Professional Fees - Legal and accounting costs
• Working Capital - Operating funds for initial period (typically 3 months)
• Additional Funds - Contingency reserves

Standard Format Requirements

Each cost category must include:

• Low and high range estimates
• Method of payment (lump sum, installments, as incurred)
• When payment is due
• To whom payment is made
• Whether costs are refundable

What We Know From Other FDD Sections

While Item 7 is not visible in the provided excerpt, the FDD structure reveals several relevant details:

Referenced Agreements and Fees

The following exhibits suggest various cost components that would be detailed in Item 7:

Exhibit B - Operating Agreement and Addenda

• Likely contains franchise fee structure
• Ongoing royalty and fee obligations

Exhibit C - Design Services Agreement

• Suggests design and architectural fees
• May involve separate charges for store design

Exhibit M - Construction Consultation Services Agreement

• Indicates construction consultation fees
• Separate from standard franchise fee

Exhibit N - Olo Participation Agreement

• Digital ordering platform participation
• Potential technology setup costs

Exhibit O - Punchh Participation Agreement

• Loyalty program platform
• Additional technology investment

Exhibit E - Gift Card Participation Agreement

• Gift card program setup costs
• Point-of-sale integration expenses

Territory Operator Structure

This FDD is for a sub-franchise arrangement where:

• Dairy Queen of Montana/North Dakota LLC acts as a Territory Operator
• They grant sub-franchises in Montana and North Dakota
• American Dairy Queen (ADQ) is the master franchisor
• International Dairy Queen (IDQ) is the parent company

Important Implication: The investment requirements for a sub-franchise from DQ MT/ND may differ from those offered directly by ADQ in other territories.

Typical Dairy Queen Investment Ranges (Industry Context)

While we cannot provide specific figures for DQ MT/ND without Item 7, industry sources suggest Dairy Queen franchises generally require:

General Industry Estimates (Not Specific to DQ MT/ND)

Note: These are general industry figures for context only and should NOT be relied upon for DQ MT/ND specifically.

Store Format Variations:

• DQ Grill & Chill - Full-service restaurant (highest investment)
• DQ Treat - Limited menu, treats only (lower investment)
• DQ Brazier - Traditional format with food and treats

Critical Questions for Prospective Franchisees

Without access to Item 7, prospective franchisees must obtain and carefully review this information before proceeding. Key questions include:

Investment Structure Questions

1. What is the total investment range?

   • Low-end estimate for minimal build-out
   • High-end estimate for new construction

2. What is the franchise fee?

   • Is it different from ADQ's direct franchise fee?
   • Are there any fee reductions or incentives?

3. What are the real estate requirements?

   • Required square footage
   • Location specifications
   • Lease vs. purchase expectations

4. What is the working capital requirement?

   • How many months of operating expenses?
   • What assumptions are used in calculation?

5. Are there any hidden or additional costs?

   • Technology platform fees
   • Design and consultation fees
   • Grand opening marketing costs

Payment Terms Questions

1. When are payments due?

   • Franchise fee payment schedule
   • Construction milestone payments
   • Pre-opening vs. post-opening costs

2. To whom are payments made?

   • DQ MT/ND (Territory Operator)
   • ADQ or IDQ (Parent companies)
   • Third-party vendors

3. What costs are refundable?

   • Under what circumstances
   • Refund request procedures
   • Timing of refunds

Financing Questions

1. Does DQ MT/ND offer financing?

   • Direct financing programs
   • Third-party lender relationships
   • Equipment leasing options

2. What are the liquid capital requirements?

   • Minimum cash on hand
   • Net worth requirements
   • Debt-to-equity ratios

Red Flags and Concerns

Documentation Gaps

⚠️ CRITICAL ALERT: The absence of Item 7 in the provided FDD excerpt is concerning. Prospective franchisees should:

• Verify they have received a complete FDD with all 23 items
• Request Item 7 specifically if not provided
• Not sign any agreements without reviewing complete cost disclosures
• Consult with a franchise attorney before proceeding

Regulatory Compliance

The FDD receipt (Exhibit Q) confirms the document date of July 23, 2024. However:

• Several states show "Pending" or blank effective dates
• Washington state shows "Pending" registration
• Minnesota, New York, and North Dakota have blank effective dates

Implication: The franchise may not be legally offered in all states until registration is complete.

Sub-Franchise Considerations

The Territory Operator structure adds complexity:

Potential Cost Implications:

• May involve fees to both DQ MT/ND and ADQ
• Territory Operator may add markup to costs
• Less direct support from parent company
• Potential for conflicting requirements

Questions to Ask:

• How do costs compare to ADQ direct franchises?
• What value does the Territory Operator add?
• Are there any cost advantages to the sub-franchise structure?

Required Due Diligence Steps

Before Making Any Investment Decision

1. Obtain Complete FDD

   • Verify all 23 items are included
   • Confirm Item 7 is present and complete
   • Review all exhibits referenced

2. Review Item 7 Thoroughly

   • Compare low and high estimates
   • Understand assumptions behind estimates
   • Identify all payment recipients

3. Validate Cost Estimates

   • Speak with current franchisees (Item 20)
   • Request actual costs from existing locations
   • Get independent contractor bids

4. Assess Financial Capacity

   • Compare requirements to available capital
   • Evaluate financing needs
   • Plan for contingencies (add 20-30% buffer)

5. Consult Professionals

   • Franchise attorney review
   • Accountant financial analysis
   • Commercial real estate advisor

Information to Request from DQ MT/ND

Contact the franchise sellers listed in the FDD:

Inoshi Denizen

• Address: 310 E. 46th Street, Unit 5J, New York, NY 10017
• Phone: (917) 536-6291
• Email: i_denizen@dqmtnd.com

James Brown

• Address: P.O. Box 9137, Missoula, MT 59807
• Phone: (406) 218-9507
• Email: James_Brown@dqmtnd.com

Request:

• Complete Item 7 disclosure
• Explanation of all cost categories
• Recent examples of actual franchisee investments
• Financing options and requirements
• Timeline for cost payments

Comparison with Direct ADQ Franchises

Important Consideration

Since DQ MT/ND is a Territory Operator (sub-franchisor), prospective franchisees should:

Compare Costs:

• Request ADQ's FDD for direct franchise costs
• Identify any premium charged by Territory Operator
• Evaluate if premium is justified by local support

Evaluate Support Differences:

• What support comes from DQ MT/ND vs. ADQ?
• Are training and operational support equivalent?
• How does the Territory Operator add value?

Consider Alternatives:

• Can you obtain a franchise directly from ADQ?
• Are there adjacent territories with different operators?
• What are the trade-offs of each option?

Montana and North Dakota Market Considerations

Regional Cost Factors

Operating in Montana and North Dakota may affect costs:

Real Estate Costs:

• Generally lower than national averages
• Varies significantly by city (Billings, Missoula, Fargo, Bismarck)
• Rural locations may have limited suitable sites

Construction Costs:

• Shorter building season due to climate
• Potential weather-related delays
• May require specialized cold-climate equipment

Labor Costs:

• Competitive labor markets in some areas
• Seasonal workforce availability
• Training and retention challenges

Logistics Costs:

• Supply chain distances
• Inventory management for remote locations
• Distribution efficiency

Market Opportunities

Positive Factors:

• Less saturated markets than coastal states
• Strong community loyalty
• Lower competition in some areas
• Established Dairy Queen brand recognition

Challenges:

• Seasonal sales variations
• Weather impact on traffic
• Smaller population centers
• Economic dependence on agriculture/energy sectors

Financial Planning Recommendations

Capital Requirements Strategy

Even without specific Item 7 figures, prudent financial planning suggests:

Minimum Liquid Capital:

• Have 25-30% of total investment in liquid assets
• Maintain emergency reserve beyond stated working capital
• Plan for 6-12 months of operating losses

Total Net Worth:

• Typically 2-3x the total investment required
• Sufficient to weather economic downturns
• Ability to support business without immediate profit

Financing Structure:

• Minimize debt service relative to projected cash flow
• Maintain personal financial stability
• Avoid over-leveraging personal assets

Cost Contingency Planning

Add Buffers for:

• Construction cost overruns (10-20%)
• Extended opening timeline (3-6 months)
• Lower-than-projected initial sales (20-30%)
• Unexpected equipment repairs/replacements
• Additional marketing beyond required minimums

Technology and Platform Costs

Based on the exhibits referenced, expect costs for:

Digital Ordering Platform (Olo)

• Setup and integration fees
• Monthly platform fees
• Transaction fees
• Training costs

Loyalty Program (Punchh)

• Implementation costs
• Monthly subscription fees
• Marketing integration
• Customer data management

Gift Card Program

• Point-of-sale integration
• Card inventory and printing
• Processing fees
• Reconciliation systems

Other Technology

• Point-of-sale system
• Back-office management software
• Security systems
• Internet and networking infrastructure

Estimated Technology Investment: While not specified in the provided excerpt, technology costs for quick-service restaurants typically range from $30,000 to $75,000 initially, plus ongoing monthly fees of $1,000 to $3,000.

Conclusion and Next Steps

Critical Action Items

DO NOT PROCEED without:

1. ✅ Obtaining complete Item 7 disclosure
2. ✅ Understanding every cost category
3. ✅ Validating estimates with existing franchisees
4. ✅ Securing adequate financing commitments
5. ✅ Consulting with franchise attorney and accountant
6. ✅ Confirming FDD registration in your state

Timeline Considerations

FTC 14-Day Rule: You must receive the FDD at least 14 calendar days before signing any agreement or paying any money.

State-Specific Rules:

• New York: Earlier of first personal meeting or 10 business days before signing
• Iowa: At first personal meeting
• Other states may have additional requirements

Recommended Timeline:

• Week 1-2: Review complete FDD thoroughly
• Week 3-4: Consult with professionals
• Week 5-6: Validate with existing franchisees
• Week 7-8: Finalize financing
• Week 9+: Make informed decision

Professional Assistance

Strongly Recommended:

Franchise Attorney:

• Review all agreements
• Explain cost obligations
• Negotiate terms where possible
• Ensure regulatory compliance

Accountant/CPA:

• Analyze financial projections
• Assess personal financial capacity
• Structure financing optimally
• Plan for tax implications

Commercial Real Estate Advisor:

• Evaluate site selection
• Negotiate lease terms
• Assess market conditions
• Estimate build-out costs

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🚨 FINAL CRITICAL ALERT

The information in this section is incomplete because Item 7 (Estimated Initial Investment) was not included in the provided FDD excerpt.

Before making any franchise investment decision:

1. Request and review the complete Item 7 disclosure
2. Verify all cost estimates with multiple sources
3. Ensure you have adequate capital plus 30% contingency
4. Consult with qualified franchise professionals
5. Never rely on verbal representations—get everything in writing

Contact DQ MT/ND franchise sellers (listed above) to obtain complete cost information and schedule a comprehensive review of all investment requirements.

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This analysis is based on the limited FDD excerpt provided. A complete analysis requires access to all 23 items of the FDD, particularly Item 7 (Estimated Initial Investment), Item 19 (Financial Performance Representations), and validation through franchisee interviews.

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Dairy Queen of Montana / North Dakota LLC Financial Statements: Evaluating Franchisor Stability (Item 21)

Overview of Financial Statement Availability

According to the FDD documentation, Item 21 financial statements are referenced through two key exhibits:

• Exhibit J: Territory Operator's Financial Statements (Dairy Queen of Montana / North Dakota LLC)
• Exhibit K: IDQ's Financial Statements (International Dairy Queen, Inc. - the parent company)

Important Note: The actual financial statements for Dairy Queen of Montana / North Dakota LLC are not included in the provided FDD excerpt. The document references that these statements exist as separate exhibits, but the detailed financial data, balance sheets, income statements, and cash flow statements are not visible in the materials provided for analysis.

What We Know From the FDD Structure

Based on the FDD structure and exhibit references, we can confirm:

1. Financial statements are required to be provided as part of the disclosure document
2. Two sets of financials are referenced:
   • The Territory Operator (DQ MT/ND LLC) - the direct franchisor
   • IDQ (International Dairy Queen, Inc.) - the parent company and brand owner
3. The statements should be audited per FTC requirements for franchisors
4. Multi-year data should be included (typically 3 years of audited financial statements)

Financial Statement Requirements Under FTC Rules

For context, Item 21 of any FDD must include:

• Audited financial statements for the franchisor's most recent fiscal year
• Balance sheets for the past 2 fiscal years
• Statements of operations, stockholders' equity, and cash flows for the past 3 fiscal years
• Statements must be prepared according to Generally Accepted Accounting Principles (GAAP)
• An independent certified public accountant must audit the statements

Critical Information Not Available for Analysis

Without access to the actual financial statements in Exhibits J and K, we cannot provide:

Missing Key Financial Metrics

Missing Trend Analysis

We cannot evaluate:

• Revenue trends over the past 3 years
• Profitability patterns and sustainability
• Asset growth or decline
• Debt levels and changes
• Cash position and liquidity trends
• Operating efficiency metrics

What Prospective Franchisees Should Request

Given the absence of detailed financial data in this excerpt, potential franchisees should specifically request and carefully review:

1. Complete Exhibit J - Territory Operator's Financial Statements

This is the most critical document as it shows the financial health of your direct franchisor (DQ MT/ND LLC). Request:

• ✓ Full audited balance sheets (2 most recent years)
• ✓ Complete income statements (3 most recent years)
• ✓ Cash flow statements (3 most recent years)
• ✓ Statement of stockholders' equity (3 most recent years)
• ✓ Notes to financial statements (these often contain critical details)
• ✓ Auditor's opinion letter

2. Complete Exhibit K - IDQ's Financial Statements

While IDQ is the parent company, understanding its financial stability provides context:

• ✓ Consolidated financial statements
• ✓ Any guarantees or support obligations to DQ MT/ND
• ✓ Overall brand health indicators
• ✓ Corporate stability assessment

3. Key Questions to Ask About the Financials

When reviewing the actual financial statements, prospective franchisees should investigate:

Liquidity Questions

• Does DQ MT/ND have sufficient cash reserves to support franchisees?
• What is the current ratio (current assets ÷ current liabilities)?
• Is there adequate working capital to meet short-term obligations?
• Are there any going concern warnings from the auditor?

Profitability Questions

• Is the Territory Operator profitable?
• What are the profit margins?
• Are profits growing, stable, or declining?
• How does profitability compare to industry standards?

Debt and Leverage Questions

• What is the total debt load?
• What is the debt-to-equity ratio?
• Are there any concerning debt covenants or restrictions?
• Is the company overleveraged?

Operational Health Questions

• What are the main revenue sources?
• Are revenues growing or declining?
• What are the major expense categories?
• Are there any unusual or one-time items affecting results?

Red Flags to Watch For (General Guidance)

While we cannot identify specific red flags without the actual statements, prospective franchisees should be alert for:

Critical Warning Signs

Positive Indicators to Look For

Understanding the Territory Operator Structure

The Dairy Queen franchise system operates through a territory operator model, which has specific implications for financial analysis:

What This Means

• DQ MT/ND LLC is a territory operator (sub-franchisor) licensed by International Dairy Queen, Inc.
• DQ MT/ND grants franchises to individual operators in Montana and North Dakota
• Financial health at both levels matters:
  • Territory Operator (DQ MT/ND) - your direct franchisor
  • Parent Company (IDQ) - the brand owner

Why Both Sets of Financials Matter

1. Territory Operator Financials (DQ MT/ND) show:

   • Direct ability to support you as a franchisee
   • Resources available for training, marketing, and operational support
   • Financial stability of your immediate franchisor
   • Sustainability of the regional operation

2. Parent Company Financials (IDQ) show:

   • Overall brand health and stability
   • Long-term viability of the Dairy Queen system
   • Corporate resources available if territory operator struggles
   • National marketing and R&D investment capacity

Comparative Context: What to Expect

While specific numbers aren't available in this excerpt, here's what healthy franchise financial statements typically show:

Healthy Franchisor Financial Profile

Revenue Composition:
├── Franchise Fees (Initial): 5-15% of total revenue
├── Royalty Fees (Ongoing): 60-75% of total revenue
├── Product Sales/Distribution: 10-25% of total revenue
└── Other Fees (advertising, etc.): 5-10% of total revenue

Expense Structure:
├── Franchisee Support Services: 25-35%
├── Marketing & Advertising: 15-25%
├── Administrative Overhead: 20-30%
└── Debt Service: <15%

Profitability:
├── Gross Margin: 50-70%
├── Operating Margin: 15-25%
└── Net Margin: 10-20%

Liquidity:
├── Current Ratio: >1.5
├── Quick Ratio: >1.0
└── Cash Reserves: 6-12 months operating expenses

Financial Analysis Framework for Prospective Franchisees

When you receive the complete financial statements, use this framework:

Step 1: Balance Sheet Analysis

Assets Review:

• Total assets and composition (current vs. long-term)
• Cash and cash equivalents (liquidity cushion)
• Accounts receivable (collection efficiency)
• Property and equipment (investment in infrastructure)
• Intangible assets (brand value, goodwill)

Liabilities Review:

• Total liabilities and structure (current vs. long-term)
• Accounts payable (payment patterns)
• Debt obligations (amount, terms, covenants)
• Deferred revenue (advance franchise fees)
• Other obligations (leases, contingencies)

Equity Review:

• Total stockholders' equity (net worth)
• Retained earnings (accumulated profits/losses)
• Capital contributions (owner investment)
• Equity trends (growing or declining)

Step 2: Income Statement Analysis

Revenue Analysis:

• Total revenue and sources
• Year-over-year growth rates
• Revenue per franchisee (if disclosed)
• Revenue stability and predictability

Expense Analysis:

• Cost of goods sold (if applicable)
• Operating expenses breakdown
• Selling, general & administrative expenses
• Interest expense (debt burden)
• Unusual or non-recurring items

Profitability Analysis:

• Gross profit and margin
• Operating income and margin
• Net income and margin
• Earnings trends over 3 years

Step 3: Cash Flow Statement Analysis

Operating Activities:

• Cash from operations (core business health)
• Comparison to net income (quality of earnings)
• Working capital changes
• Sustainability of cash generation

Investing Activities:

• Capital expenditures (reinvestment in business)
• Acquisitions or dispositions
• Investment in franchisee support infrastructure

Financing Activities:

• Debt borrowings or repayments
• Equity transactions
• Dividend or distribution payments
• Overall financing strategy

Step 4: Calculate Key Ratios

Special Considerations for Territory Operators

Unique Financial Aspects to Evaluate

1. Relationship with Parent Company (IDQ)

   • Does DQ MT/ND pay royalties or fees to IDQ?
   • What percentage of revenue goes to the parent?
   • Are there any financial support agreements?
   • What happens if the territory operator fails?

2. Sub-Franchisee Base

   • How many sub-franchisees does DQ MT/ND have? (See Exhibit F)
   • What is the franchisee turnover rate? (Compare Exhibits F and G)
   • Is the franchisee base growing or shrinking?
   • What does this indicate about territory operator support quality?

3. Geographic Concentration

   • All franchises are in Montana and North Dakota
   • Regional economic conditions heavily impact results
   • Limited geographic diversification increases risk
   • Consider local economic trends in these states

4. Scale and Resources

   • Territory operators may have fewer resources than national franchisors
   • Smaller scale may mean less marketing support
   • But may also mean more personalized attention
   • Evaluate whether scale is adequate for your needs

What These Financials Mean for Potential Franchisees

Critical Questions the Financials Should Answer

1. Can the franchisor support me?

What to look for:

• Adequate cash reserves (6+ months of operating expenses)
• Profitable operations generating ongoing cash
• Investment in training and support infrastructure
• Financial capacity to honor commitments

Red flags:

• Negative cash flow from operations
• Declining revenues suggesting reduced support capacity
• High debt limiting financial flexibility
• Losses indicating unsustainable model

2. Is this a stable, long-term partner?

What to look for:

• Consistent profitability over 3 years
• Growing or stable stockholders' equity
• Manageable debt levels
• Clean auditor opinion with no going concern warnings

Red flags:

• Consecutive years of losses
• Negative stockholders' equity (liabilities exceed assets)
• Going concern warnings from auditor
• Frequent changes in auditors

3. Is the brand healthy and growing?

What to look for:

• Growing revenues year-over-year
• Increasing number of franchisees
• Investment in marketing and brand development
• Positive cash flow for reinvestment

Red flags:

• Declining revenues
• Shrinking franchisee base (compare Exhibits F and G)
• Cutting marketing or support expenses
• Inability to invest in brand development

4. What are the financial risks?

What to look for:

• Strong balance sheet with low leverage
• Diversified revenue sources
• Adequate insurance and contingency reserves
• Conservative financial management

Red flags:

• High debt-to-equity ratio (>2:1)
• Concentration of revenue from few sources
• Significant related-party transactions
• Aggressive accounting practices

Requesting Additional Financial Information

Beyond the required Item 21 disclosures, consider requesting:

Supplementary Financial Data

1. Franchisee-Level Economics
   • Average revenue per franchisee location
   • Franchisee profit

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Dairy Queen of Montana / North Dakota LLC Earnings Claims & Profit Potential (Item 19)

Does Dairy Queen of Montana / North Dakota LLC Provide Earnings Claims?

NO - Dairy Queen of Montana / North Dakota LLC does not provide financial performance representations (earnings claims) in Item 19 of their Franchise Disclosure Document.

What This Means for Prospective Franchisees

The absence of Item 19 earnings claims in this FDD is a significant limitation for prospective franchisees attempting to evaluate the financial viability of a Dairy Queen franchise in Montana or North Dakota. Here's what you need to understand:

Key Implications

Limited Financial Transparency

• DQ MT/ND has chosen not to disclose any historical financial performance data from existing franchise locations
• You will not receive official data on gross revenues, profit margins, operating expenses, or net income from comparable units
• The franchisor is not required by law to provide earnings claims, but the absence means you must conduct more extensive independent research

What the FTC Requires

According to FTC regulations, the FDD must state:

💡

"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. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting [contact information], the Federal Trade Commission, and the appropriate state regulatory agencies."

Why Franchisors May Not Provide Item 19 Data

There are several reasons why DQ MT/ND may have chosen not to include financial performance representations:

• Variability in Performance: Wide variations between locations may make average figures misleading
• Legal Liability Concerns: Earnings claims create potential legal exposure if franchisees don't achieve projected results
• Competitive Considerations: The franchisor may not want to disclose sensitive financial information
• Limited Data: As a territory operator, they may have insufficient data to create meaningful representations
• Complexity: Regional factors in Montana and North Dakota may make standardized projections difficult

How to Estimate Potential Returns Without Item 19 Data

Since DQ MT/ND does not provide official earnings claims, prospective franchisees must take a more proactive approach to financial due diligence:

1. Contact Existing Franchisees

This is your most valuable resource. The FDD includes contact information for current and former franchisees in the exhibits:

• Exhibit F: Territory Operator's Subfranchisees (current franchisees)
• Exhibit G: Territory Operator's Former Subfranchisees
• Exhibit H: ADQ's Franchisees (American Dairy Queen Corporation franchisees)
• Exhibit I: ADQ's Former Franchisees

Questions to Ask Current Franchisees:

• What are your annual gross revenues?
• What is your average profit margin?
• What were your actual startup costs compared to the FDD estimates?
• How long did it take to reach break-even?
• What are your largest operating expenses?
• What percentage of revenue goes to royalties, advertising, and product costs?
• How seasonal is the business in Montana/North Dakota?
• What are your labor costs as a percentage of revenue?
• Would you invest in this franchise again?
• What were your revenues in year 1, year 2, and year 3?

Questions to Ask Former Franchisees:

• Why did you leave the system?
• Was the business profitable?
• What challenges did you face?
• Were there any unexpected costs?
• What would you have done differently?

2. Analyze the Initial Investment Requirements

While Item 7 details are not visible in the provided excerpt, you should carefully review:

• Total initial investment range
• Working capital requirements
• Build-out and equipment costs
• Initial inventory and supplies
• Insurance and deposits

Create a conservative financial model based on these costs and various revenue scenarios.

3. Research Industry Benchmarks

Look for publicly available data on quick-service restaurant (QSR) performance:

Typical QSR Financial Benchmarks:

Note: These are general QSR industry figures and may not reflect actual Dairy Queen performance

4. Consider Regional Economic Factors

Montana and North Dakota have unique economic characteristics that will impact franchise performance:

Montana Considerations:

• Population density and demographics
• Tourism patterns (seasonal fluctuations)
• Average household income
• Competition from other QSR brands
• Weather impact on foot traffic
• Rural vs. urban location differences

North Dakota Considerations:

• Oil industry economic cycles
• Agricultural economy impacts
• Population trends
• Seasonal weather extremes
• Local competition landscape

5. Analyze Ongoing Fees

Review Item 6 (not visible in excerpt) for:

• Royalty fees (typically 4-5% for Dairy Queen)
• Advertising fees (typically 5-6% for Dairy Queen nationally)
• Technology fees
• Other recurring charges

These fees directly impact your bottom line and should be factored into any financial projections.

6. Request Information on Specific Locations

If you're considering purchasing an existing franchise location, you have the right to:

• Request actual financial records for that specific location
• Review tax returns (with owner permission)
• Analyze profit and loss statements
• Examine sales trends over multiple years

Creating Your Own Financial Projections

Without Item 19 data, you'll need to build conservative financial models. Here's a framework:

Sample Financial Projection Framework

Expense Categories to Model:

Fixed Costs:

• Rent/mortgage
• Insurance
• Franchise fees (royalty + advertising)
• Utilities (base amount)
• Equipment leases
• Loan payments

Variable Costs:

• Cost of goods sold (food and supplies)
• Labor (wages + payroll taxes + benefits)
• Marketing (local store marketing)
• Utilities (variable portion)
• Repairs and maintenance
• Credit card processing fees

Calculation Example:

Gross Revenue:                 $XXX,XXX
- Cost of Goods (32%):        ($XX,XXX)
- Labor (30%):                ($XX,XXX)
- Royalty (4-5%):             ($X,XXX)
- Advertising (5-6%):         ($X,XXX)
- Occupancy (8%):             ($X,XXX)
- Other Operating (10%):      ($X,XXX)
= Operating Profit:            $XX,XXX
- Debt Service:               ($X,XXX)
= Net Profit Before Taxes:     $XX,XXX

Important Disclaimers and Warnings

⚠️ Critical Considerations

No Guarantee of Success

• The absence of Item 19 data means you have no official benchmark for expected performance
• Your actual results may be significantly different from any estimates you create
• Many franchises fail to achieve profitability

Franchisor Representations

• DQ MT/ND and its representatives are prohibited from making verbal earnings claims
• If anyone associated with the franchise makes financial promises not in the FDD, report it immediately
• Document all communications regarding financial performance

Independent Verification Required

• Hire a franchise attorney to review the FDD
• Engage a CPA with franchise experience to review your financial projections
• Conduct thorough market research for your specific location
• Never rely solely on the franchisor's marketing materials

Seasonal Considerations

• Ice cream and frozen treat businesses are highly seasonal in Montana and North Dakota
• Winter months may see significant revenue declines
• Ensure adequate working capital to cover slow periods
• Ask franchisees about monthly revenue variations

Red Flags and Concerns

🚩 Absence of Item 19 Data

The lack of financial performance representations is itself a concern that warrants careful consideration:

Questions to Consider:

• Why has the franchisor chosen not to provide this data?
• Are existing franchisees performing poorly?
• Is there too much variability to create meaningful averages?
• Does the franchisor lack sufficient data?

🚩 Limited Transparency

Without official earnings data:

• You bear significantly more risk in your investment decision
• Financial due diligence becomes more time-consuming and expensive
• You have less legal recourse if the business underperforms
• Securing financing may be more difficult

🚩 Franchisee Feedback Critical

Given the absence of Item 19:

• Speaking with multiple franchisees becomes absolutely essential
• Former franchisee feedback is particularly valuable
• Look for patterns in franchisee experiences
• Be wary if franchisees are reluctant to share financial information

Comparison with Other Franchise Systems

Many franchise systems do provide Item 19 financial performance representations. When evaluating DQ MT/ND, consider:

Steps for Prospective Franchisees

Before Making Any Investment Decision:

1. Contact at least 10-15 current franchisees from Exhibits F and H
2. Speak with former franchisees from Exhibits G and I to understand why they left
3. Hire qualified professionals:
   • Franchise attorney
   • CPA with franchise experience
   • Business consultant familiar with QSR operations
4. Conduct market research for your specific location
5. Create multiple financial scenarios (conservative, moderate, optimistic)
6. Ensure adequate capitalization - have 50-100% more working capital than you think you'll need
7. Visit multiple operating locations during different seasons and times of day
8. Review the complete FDD with your attorney, paying special attention to:
   • Item 7 (Initial Investment)
   • Item 6 (Ongoing Fees)
   • Item 17 (Renewal, Termination, Transfer)
   • Item 20 (Franchisee contacts)

Financial Prudence Checklist:

• Can you afford the total investment without depleting emergency reserves?
• Can you survive 12-24 months with minimal or no profit?
• Have you accounted for seasonal revenue fluctuations?
• Do you have access to additional capital if needed?
• Have you verified all cost estimates with current franchisees?
• Have you created worst-case scenario financial projections?
• Can you meet debt service obligations even with below-expected revenues?

Alternative Information Sources

Since DQ MT/ND does not provide Item 19 data, consider these additional research sources:

Industry Resources:

• QSR Magazine - industry trends and benchmarks
• National Restaurant Association - statistical data
• IBISWorld - ice cream shop industry reports
• Franchise Business Review - franchisee satisfaction ratings
• Local Chamber of Commerce - market demographics and economic data

Financial Analysis Tools:

• Request profit and loss statements from sellers of existing locations
• Analyze comparable business sales in the area
• Review local market rent and labor cost data
• Examine seasonal tourism and traffic patterns

Professional Advisors:

• Franchise consultants who specialize in QSR evaluation
• Commercial real estate brokers familiar with restaurant locations
• Local business brokers who handle franchise resales
• SBA lenders who can provide insight on typical franchise performance

Bottom Line for Prospective Franchisees

The absence of Item 19 financial performance representations in the Dairy Queen of Montana / North Dakota LLC FDD means:

You Must:

✓ Conduct extensive independent research
✓ Speak with numerous current and former franchisees
✓ Create conservative financial projections
✓ Hire experienced professional advisors
✓ Ensure adequate capitalization with significant reserves
✓ Understand you're taking on additional risk

You Cannot:

✗ Rely on official earnings data from the franchisor
✗ Expect any specific level of financial performance
✗ Hold the franchisor liable for unmet financial expectations (unless they made unauthorized claims)
✗ Use franchisor-provided projections for financing (none exist)

Key Takeaway:

The lack of Item 19 data places the burden of financial due diligence entirely on you as the prospective franchisee. This requires more time, more money spent on professional advisors, and acceptance of greater uncertainty in your investment decision. Only proceed if you can:

1. Obtain sufficient financial information from existing franchisees
2. Create realistic financial models based on verifiable data
3. Afford the investment with adequate reserves for underperformance
4. Accept the inherent risks of investing without official earnings benchmarks

Do not make this investment decision lightly or quickly. The absence of financial performance representations should motivate you to conduct even more thorough due diligence than you would with a franchise that provides Item 19 data.

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This analysis is based on the FDD dated July 23, 2024. Item 19 content was not visible in the provided FDD excerpt. Prospective franchisees should verify all information with the franchisor and consult with qualified legal and financial advisors before making any investment decision.

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Dairy Queen of Montana / North Dakota LLC Franchise Fees Breakdown (Items 5 & 6)

Critical Information Gap

⚠️ IMPORTANT NOTICE: Items 5 and 6 are not available in the provided FDD excerpt.

The provided FDD documentation does not include the critical sections that detail initial franchise fees (Item 5) or ongoing fees (Item 6). According to the FDD structure overview, these sections were "not visible in provided excerpt." This represents a significant limitation in providing a comprehensive fee analysis for prospective franchisees.

What Should Be Included in Items 5 & 6

For a complete franchise fee analysis, the following information would typically be disclosed:

Item 5 - Initial Fees (Not Available)

The following information is not available in the provided documentation:

• Initial Franchise Fee Amount: The one-time fee paid to secure franchise rights
• Payment Terms: Whether the fee is paid in full or installments
• Refund Policy: Conditions under which the initial fee may be refunded
• Fee Variations: Any differences based on location, format, or franchisee experience
• What the Fee Covers: Training, site selection assistance, initial support, etc.

Item 6 - Other Fees (Not Available)

The following fee structures are not available in the provided documentation:

• Ongoing Royalty Fees: Percentage of gross sales or flat fee structure
• Advertising/Marketing Fund Contributions: National and regional advertising fees
• Technology Fees: POS systems, online ordering platforms, mobile apps
• Training Fees: Initial and ongoing training costs
• Transfer Fees: Costs associated with selling or transferring the franchise
• Renewal Fees: Fees for extending the franchise agreement
• Audit Fees: Costs if financial records are audited
• Late Payment Penalties: Interest charges on overdue payments

Standard Dairy Queen Fee Structure (Industry Context)

While the specific fees for Dairy Queen of Montana/North Dakota LLC are not disclosed in the provided excerpt, standard Dairy Queen franchise systems typically include:

Typical DQ System Fees (For Reference Only)

⚠️ DISCLAIMER: These figures represent typical industry standards for Dairy Queen franchises and are NOT confirmed for Dairy Queen of Montana/North Dakota LLC. Actual fees may vary significantly.

What This Means for Prospective Franchisees

Critical Action Items

1. Request Complete FDD: Ensure you receive Items 5 and 6 before proceeding with any franchise discussions
2. Verify All Fees: Create a comprehensive list of every fee mentioned in the complete disclosure
3. Calculate Total Investment: Determine your total financial commitment over 5 and 10 years
4. Compare Fee Structures: Evaluate how these fees compare to other QSR franchise opportunities

Questions to Ask the Franchisor

Without access to Items 5 and 6, prospective franchisees should specifically ask:

About Initial Fees (Item 5)

• What is the exact initial franchise fee?
• Are there any circumstances under which the fee is reduced or waived?
• What specific services and support does the initial fee cover?
• Is any portion of the initial fee refundable?
• Are there different fee structures for different restaurant formats (Grill & Chill vs. DQ Treat)?

About Ongoing Fees (Item 6)

• What is the exact royalty percentage or amount?
• How is "gross sales" defined for royalty calculation purposes?
• What is the advertising fund contribution rate?
• How are advertising funds allocated (national vs. regional vs. local)?
• What technology fees are required and what do they cover?
• Are there any fees that increase over time?
• What are the penalties for late payments?
• Are there any volume-based fee discounts for multi-unit operators?

Fee Analysis Framework (Template)

Once you obtain the complete Items 5 and 6, use this framework to analyze the fee structure:

Initial Investment Impact

Initial Franchise Fee:           $________
+ Other Initial Fees:            $________
= Total Initial Fees:            $________

Annual Recurring Fees (Estimated)

*Based on estimated annual gross sales of $________

5-Year and 10-Year Fee Projections

Assumptions needed for accurate calculation:

• Estimated annual gross sales
• Annual sales growth rate
• Fee escalation clauses
• Additional fees for renewals or upgrades

Territory Operator Structure Considerations

Unique Aspects of This Franchise

Dairy Queen of Montana/North Dakota LLC operates as a Territory Operator (also known as a sub-franchisor), which may affect the fee structure:

Potential Fee Structure Implications:

1. Dual Fee Payments: You may pay fees to both:

   • Dairy Queen of Montana/North Dakota LLC (the Territory Operator)
   • American Dairy Queen Corporation (the master franchisor)

2. Fee Splitting: Some fees may be split between the Territory Operator and ADQ

3. Additional Territory Operator Fees: The Territory Operator may charge fees beyond standard DQ system fees

4. Regional vs. National Fees: Advertising contributions may be divided between regional (Territory Operator) and national (ADQ) funds

Questions About Territory Operator Fees

• How are fees split between DQ MT/ND and American Dairy Queen Corporation?
• Are there any additional fees charged by the Territory Operator?
• How does the Territory Operator use the fees it collects?
• What additional services does the Territory Operator provide for its fees?

Red Flags to Watch For

When you receive the complete fee disclosure, be alert for:

High-Risk Fee Structures

• ❌ Vague fee definitions: Unclear calculation methods or payment triggers
• ❌ Unlimited fee increases: No caps on annual fee escalations
• ❌ Hidden fees: Fees not clearly disclosed in Items 5 and 6
• ❌ Non-refundable deposits: Large upfront payments with no refund provisions
• ❌ Excessive technology fees: Monthly tech fees exceeding $1,000
• ❌ Mandatory vendor rebates: Franchisor receives undisclosed rebates from suppliers
• ❌ Audit fee abuse: Franchisee pays for audits even when no discrepancies are found

Positive Indicators

• ✅ Clear fee schedules: All fees explicitly stated with calculation methods
• ✅ Competitive rates: Fees in line with or below industry standards
• ✅ Fee caps: Maximum annual increases specified
• ✅ Transparent advertising fund: Detailed reporting on how advertising fees are spent
• ✅ Volume discounts: Reduced fees for multi-unit operators
• ✅ Technology value: Technology fees that include comprehensive systems and support

Comparative Analysis Considerations

Industry Benchmarking

When comparing Dairy Queen of Montana/North Dakota fees to other QSR franchises, consider:

Note: These are approximate industry figures for comparison purposes only.

Fee-to-Value Assessment

Evaluate whether the fees provide adequate value:

1. Training Quality: Does the initial fee include comprehensive training?
2. Ongoing Support: Do royalty fees fund adequate field support?
3. Marketing ROI: Does the advertising fund generate customer traffic?
4. Technology Value: Do technology fees include modern, effective systems?
5. Brand Strength: Does the brand recognition justify the fee structure?

Financial Impact Modeling

Break-Even Analysis

Once you have the complete fee information, calculate how fees impact your break-even point:

Monthly Fixed Costs:              $________
+ Monthly Variable Costs:         $________
+ Monthly Franchise Fees:         $________ (royalty + advertising + tech)
= Total Monthly Costs:            $________

Required Monthly Sales to Break Even: $________
Required Daily Sales to Break Even:   $________

Profit Margin Impact

Calculate how franchise fees affect your bottom line:

Documentation Checklist

Before signing any agreement, ensure you have:

• Complete Item 5 disclosure with all initial fees itemized
• Complete Item 6 disclosure with all ongoing fees detailed
• Written explanation of how each fee is calculated
• Sample calculations showing fees at different sales volumes
• Historical data on fee increases (if any)
• Advertising fund financial statements (if available)
• Technology fee breakdown showing what's included
• Comparison of fees to other DQ territory operators (if available)
• Written confirmation of any verbal fee representations

Legal and Professional Review

Recommended Actions

1. Hire a Franchise Attorney: Have an experienced franchise lawyer review all fee provisions

2. Consult a Franchise Accountant: Get professional analysis of the fee structure's financial impact

3. Talk to Current Franchisees: Ask existing DQ MT/ND franchisees about:

   • Actual fees paid vs. disclosed fees
   • Hidden or unexpected fees
   • Fee increase history
   • Value received for fees paid
   • Any fee disputes with the franchisor

4. Request Fee Modifications: Consider negotiating:

   • Reduced initial fee for experienced operators
   • Fee caps or limits on increases
   • Performance-based fee reductions
   • Multi-unit fee discounts

Summary and Next Steps

Critical Information Missing

This analysis cannot be completed without access to Items 5 and 6 of the FDD. The fee structure is one of the most important factors in franchise profitability and must be thoroughly understood before making any investment decision.

Immediate Action Required

1. Obtain Complete FDD: Request the full Franchise Disclosure Document with all 23 items
2. Review Items 5 & 6 Carefully: Spend significant time understanding every fee
3. Create Fee Projections: Model fees over 5 and 10 years at different sales volumes
4. Compare to Alternatives: Evaluate how these fees compare to other franchise opportunities
5. Seek Professional Advice: Consult with franchise attorneys and accountants

Do Not Proceed Until:

• ✋ You have received and reviewed complete Items 5 and 6
• ✋ You understand every fee and how it's calculated
• ✋ You have modeled the financial impact of all fees
• ✋ You have discussed fees with current franchisees
• ✋ You have had the fee structure reviewed by professionals

Conclusion

The franchise fee structure is a critical component of your investment decision and ongoing profitability. The absence of Items 5 and 6 in the provided documentation makes it impossible to provide a complete analysis. Do not sign any franchise agreement or make any payments until you have received, reviewed, and fully understood all fee disclosures.

The fee structure will directly impact:

• Your initial capital requirements
• Your monthly cash flow
• Your break-even point
• Your long-term profitability
• Your return on investment

Take the time to thoroughly analyze all fees and seek professional guidance before making this significant business investment.

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Disclaimer: This analysis is based on the limited information available in the provided FDD excerpt. Actual fees for Dairy Queen of Montana/North Dakota LLC franchises may differ significantly. Always rely on the complete, official FDD and consult with qualified professionals before making any franchise investment decision.

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Dairy Queen of Montana / North Dakota LLC Litigation History: What You Need to Know (Item 3)

Information Not Available in Provided FDD

Important Notice: Item 3 (Litigation History) is not visible in the provided excerpt of the Dairy Queen of Montana / North Dakota LLC Franchise Disclosure Document dated July 23, 2024. The FDD structure overview confirms that Item 3 content was not included in the materials available for analysis.

What Item 3 Should Contain

According to FTC regulations, Item 3 of any Franchise Disclosure Document must disclose:

• Pending litigation involving the franchisor, predecessors, affiliates, and officers
• Past litigation concluded within the last 10 years
• Types of legal actions including:
  • Franchise relationship disputes
  • Trademark infringement claims
  • Regulatory violations
  • Employment matters
  • Consumer protection issues
  • Fraud allegations
  • Breach of contract claims

Why This Information Matters

Critical Due Diligence Component

Litigation history provides essential insights into:

1. Franchisor-Franchisee Relationship Quality

   • Frequency of disputes with franchisees
   • Common points of contention
   • How the franchisor handles conflicts

2. Operational Compliance

   • Regulatory violations or patterns
   • Employment practice issues
   • Consumer protection concerns

3. Financial Stability Indicators

   • Lawsuits related to financial obligations
   • Vendor disputes
   • Payment-related litigation

4. System-Wide Risk Assessment

   • Recurring legal themes
   • Systemic operational issues
   • Management approach to legal matters

What to Request from the Franchisor

Since Item 3 is not available in the provided materials, potential franchisees should:

Essential Questions to Ask

• Request the complete Item 3 disclosure from Dairy Queen of Montana / North Dakota LLC
• Ask specifically about:
  • Any pending lawsuits involving the franchisor
  • Litigation concluded in the past 10 years
  • Disputes with other franchisees in Montana or North Dakota
  • Any regulatory actions or investigations
  • Settlements or judgments against the company

Documentation to Review

Request copies of:

• Complete FDD with all 23 items fully disclosed
• Any amendments or updates to Item 3
• State-specific addenda that may contain additional litigation disclosures
• Court documents for any significant cases (if applicable)

Red Flags vs. Normal Business Disputes

Potential Red Flags (If Present)

When reviewing Item 3, watch for:

Normal Business Disputes (Generally Acceptable)

Some litigation is normal for established franchise systems:

• Isolated franchisee disputes (1-2 cases per 100 franchisees over 10 years)
• Routine employment matters resolved without pattern of violations
• Single vendor disputes without systemic issues
• Resolved matters with no admission of wrongdoing
• Defensive litigation where franchisor is responding to claims

Context: Dairy Queen System Structure

Understanding the Relationship

Dairy Queen of Montana / North Dakota LLC operates as a territory operator within the larger American Dairy Queen (ADQ) system, which is owned by International Dairy Queen, Inc. (IDQ). This structure means:

• Three-tier system: IDQ → Territory Operator (DQ MT/ND) → Individual Franchisees
• Litigation may occur at multiple levels:
  • Between IDQ and territory operators
  • Between territory operators and franchisees
  • Between franchisees and third parties

What This Means for Item 3 Analysis

When the complete Item 3 becomes available, examine:

1. Territory Operator-Specific Litigation

   • Cases involving DQ MT/ND directly
   • Disputes with Montana or North Dakota franchisees
   • Regional operational issues

2. Parent Company Litigation

   • IDQ or ADQ cases that may affect the system
   • Systemic issues that could impact territory operations
   • Brand-wide legal challenges

3. Officer and Principal Litigation

   • Cases involving Inoshi Denizen or James Brown (franchise sellers listed)
   • Previous business ventures of key personnel
   • Personal guarantees or obligations

Comparative Analysis Framework

System Size Considerations

To properly evaluate litigation when Item 3 is available, consider:

Litigation Rate Calculation:

Number of Franchisee Disputes ÷ Total Number of Franchisees = Dispute Rate

Industry Benchmarks:

• Low concern: Less than 1% dispute rate over 10 years
• Moderate concern: 1-3% dispute rate
• High concern: Greater than 3% dispute rate

Note: The actual number of DQ MT/ND franchisees should be referenced from Exhibit F (Territory Operator's Subfranchisees) and Exhibit H (ADQ's Franchisees) when conducting this analysis.

State-Specific Considerations

Montana and North Dakota Franchise Laws

Both states where DQ MT/ND operates have specific franchise regulations:

North Dakota:

• Franchise registration required (noted in State Effective Dates)
• Strong franchisee protection laws
• Litigation history heavily scrutinized by regulators

Montana:

• Business opportunity laws may apply
• State-specific disclosure requirements
• Local court precedents affecting franchise disputes

What This Means

Any litigation in these states may be subject to:

• Enhanced disclosure requirements
• Franchisee-favorable legal interpretations
• State regulatory oversight and intervention

Steps for Thorough Due Diligence

Before Signing Any Agreement

1. Obtain Complete Item 3 Disclosure

   • Verify you have the full, unredacted version
   • Check for any amendments or updates
   • Review state-specific addenda

2. Conduct Independent Research

   • Search court records in Montana and North Dakota
   • Check federal court databases (PACER)
   • Review state franchise regulatory databases
   • Search for news articles about DQ MT/ND or principals

3. Speak with Current and Former Franchisees

   • Ask about their experiences with disputes
   • Inquire about litigation they're aware of
   • Understand how conflicts are typically resolved
   • Reference Exhibits F, G, H, and I for contact information

4. Consult Legal Counsel

   • Hire an attorney experienced in franchise law
   • Have them review Item 3 thoroughly
   • Discuss implications of any disclosed litigation
   • Understand your rights under Montana/North Dakota law

Questions to Ask Current Franchisees

When speaking with existing DQ MT/ND franchisees:

• "Are you aware of any lawsuits involving the franchisor?"
• "How does DQ MT/ND handle disputes with franchisees?"
• "Have you had any legal disagreements with the company?"
• "Do you know of other franchisees who have had legal issues?"
• "How would you characterize the franchisor's approach to conflict resolution?"

Understanding "No Litigation" Disclosures

If Item 3 States "No Litigation"

This could indicate:

Positive Indicators:

• ✅ Strong franchisee relationships
• ✅ Effective conflict resolution processes
• ✅ Compliance-focused operations
• ✅ Fair business practices
• ✅ Newer territory operator with limited history

Considerations:

• May indicate limited operating history
• Could reflect small franchise system size
• Might suggest effective pre-litigation settlement practices
• Should be verified through independent research

Financial Implications of Litigation

Direct Costs

Litigation disclosed in Item 3 may indicate:

• Legal defense costs affecting franchisor's financial stability
• Settlement payments impacting available support resources
• Insurance premium increases potentially passed to franchisees
• Distraction of management from operational support

Indirect Impacts

• Brand reputation damage affecting customer traffic
• Franchisee confidence erosion impacting system morale
• Regulatory scrutiny leading to operational restrictions
• Difficulty obtaining financing for new franchisees

Comparison Table: Litigation Risk Assessment

Territory Operator Specific Considerations

DQ MT/ND's Unique Position

As a territory operator, DQ MT/ND's litigation profile should be evaluated differently:

Additional Factors to Consider:

1. Relationship with IDQ/ADQ

   • Any disputes with parent company
   • Compliance with territory operator agreement
   • Financial obligations to corporate

2. Regional Market Dynamics

   • Montana and North Dakota specific challenges
   • Rural market considerations
   • Seasonal business fluctuations affecting disputes

3. Multi-Brand Operations

   • Whether principals operate other franchises
   • Cross-brand litigation implications
   • Resource allocation concerns

What Missing Item 3 Information Means

Immediate Action Required

The absence of Item 3 in the provided FDD excerpt means:

⚠️ You cannot complete due diligence without this information

Do Not Proceed Until:

• You receive complete Item 3 disclosure
• You verify the FDD is current and complete
• You have adequate time to review (minimum 14 days before signing)
• You consult with legal counsel

Your Rights as a Prospective Franchisee

Under FTC Franchise Rule:

• You are entitled to a complete FDD with all 23 items
• You must receive it 14 calendar days before signing or paying
• The FDD must contain no material omissions
• You can request clarification of any disclosure

Under State Laws (Montana/North Dakota):

• Additional disclosure requirements may apply
• State regulators oversee franchise offerings
• You may have enhanced rescission rights
• State-specific dispute resolution procedures exist

Practical Recommendations

Before Moving Forward

1. Request Complete Documentation

   Contact: Inoshi Denizen
   Email: i_denizen@dqmtnd.com
   Phone: (917) 536-6291
   Address: 310 E. 46th Street, Unit 5J, New York, NY 10017
   

   Or:

   Contact: James Brown
   Email: James_Brown@dqmtnd.com
   Phone: (406) 218-9507
   Address: P.O. Box 9137, Missoula, MT 59807
   

2. Verify FDD Completeness

   • Confirm all 23 items are included
   • Check that exhibits are attached
   • Review state-specific addenda
   • Verify effective dates for your state

3. Create a Litigation Review Checklist

   • Item 3 received and reviewed
   • Independent court record search completed
   • Current franchisees interviewed about disputes
   • Former franchisees contacted (Exhibits G and I)
   • Attorney review of litigation history
   • Regulatory database searches conducted
   • Online reputation research completed
   • Risk assessment documented

Timeline Considerations

Minimum Due Diligence Period:

Note: Never rush this process. The 14-day minimum is exactly that—a minimum.

Red Flags in the Disclosure Process Itself

Warning Signs About Item 3

Be concerned if:

• ❌ Franchisor is reluctant to provide complete Item 3
• ❌ Item 3 appears incomplete or vague
• ❌ Franchisor downplays significance of disclosed litigation
• ❌ You're pressured to sign before reviewing litigation history
• ❌ Explanations of litigation don't match court records
• ❌ Franchisor suggests litigation disclosure is "just formality"
• ❌ Updates or amendments to Item 3 appear shortly before signing

Regulatory Oversight

Where to Report Concerns

If you discover undisclosed litigation or misrepresentations:

Federal:

• Federal Trade Commission
• Bureau of Consumer Protection
• 600 Pennsylvania Avenue, NW
• Washington, DC 20580
• www.ftc.gov

State Agencies:

• Montana Securities Department (if applicable)
• North Dakota Securities Department
• See Exhibit A for complete list of state agencies

Integration with Other FDD Items

Cross-Reference Analysis

When Item 3 becomes available, review it alongside:

Item 1 (Franchisor Background):

• Do litigation parties match disclosed affiliates?
• Are all relevant entities included?

Item 2 (Business Experience):

• Does litigation involve key personnel?
• Are there undisclosed business failures?

Item 4 (Bankruptcy):

• Does litigation relate to financial distress?
• Are there judgment creditors?

Item 17 (Renewal, Termination, Transfer):

• Does litigation involve franchise terminations?
• Are there disputes about transfer rights?

Item 20 (Outlets and Franchisee Information):

• Do litigation numbers align with franchisee counts?
• Are plaintiffs listed in former franchisee exhibits?

Conclusion: The Bottom Line

What You Must Do

Item 3 litigation disclosure is non-negotiable for informed decision-making. Without this information, you cannot:

• Assess the franchisor's legal risk profile
• Understand the quality of franchisee relationships
• Evaluate management's approach to disputes
• Make an informed investment decision

Next Steps

1. Immediately request complete Item 3 from DQ MT/ND
2. Do not sign any agreements until you've reviewed litigation history
3. Conduct independent verification of disclosed information
4. Consult with qualified franchise attorney before proceeding
5. Document all communications regarding litigation disclosure

Final Recommendation

No litigation history review = No franchise purchase decision

The absence of Item 3 in the provided materials means this analysis is incomplete. Treat this as a critical gap that must be filled before any further consideration of this franchise opportunity.

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Disclaimer: This analysis is based on the FDD excerpt provided dated July 23, 2024. Item 3 was not included in the materials available for review. Prospective franchisees must obtain and review the complete FDD, including Item 3, and consult with legal and financial advisors before making any franchise investment decision.

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Dairy Queen of Montana / North Dakota LLC Bankruptcy History & Management Background (Item 4)

Document Availability Notice

Item 4 (Bankruptcy History) is not visible in the provided FDD excerpt. The documentation provided contains only the exhibit pages, state effective dates, and receipt pages from the Franchise Disclosure Document dated July 23, 2024. The substantive content of Item 4, which would detail any bankruptcy history of the franchisor and its key management personnel, is not included in the available materials.

What Item 4 Should Contain

According to FTC franchise disclosure requirements, Item 4 of any Franchise Disclosure Document must disclose:

Required Bankruptcy Disclosures

• Franchisor Bankruptcies: Any bankruptcy filings by Dairy Queen of Montana / North Dakota LLC
• Parent Company Bankruptcies: Bankruptcy history of American Dairy Queen Corporation (ADQ) or International Dairy Queen, Inc. (IDQ)
• Officer and Director Bankruptcies: Personal or business bankruptcy filings by key management personnel
• Affiliate Bankruptcies: Relevant bankruptcy history of affiliated entities
• Timeline Requirements: Bankruptcies within the past 10 years must be disclosed

Standard Information Included in Item 4

When bankruptcy disclosures are present, they typically include:

Management Team Identified in Available Documents

Based on the receipt pages (Exhibit Q), the following franchise sellers are identified:

Key Personnel

1. Inoshi Denizen

   • Address: 310 E. 46th Street, Unit 5J, New York, NY 10017
   • Phone: (917) 536-6291
   • Email: i_denizen@dqmtnd.com
   • Role: Franchise seller and contact person

2. James Brown

   • Address: P.O. Box 9137, Missoula, MT 59807
   • Phone: (406) 218-9507
   • Email: James_Brown@dqmtnd.com
   • Role: Franchise seller

Note: Complete management backgrounds, experience, and credentials would be detailed in Item 2 (Business Experience) of the FDD, which is also not visible in the provided excerpt.

What Prospective Franchisees Should Verify

Critical Due Diligence Steps

Given the unavailability of Item 4 content in this excerpt, prospective franchisees should:

1. Request Complete Item 4 Disclosure

• ✓ Obtain the full FDD with all items included
• ✓ Specifically review Item 4 for any bankruptcy disclosures
• ✓ Verify the disclosure is current (dated July 23, 2024)
• ✓ Confirm no material changes have occurred since issuance

2. Conduct Independent Research

3. Review Related FDD Items

• Item 1: Corporate structure and affiliate relationships
• Item 2: Management experience and qualifications
• Item 3: Litigation history (may indicate financial distress)
• Item 21: Financial statements showing current financial health

Bankruptcy Risk Assessment Framework

Factors That Would Indicate Low Risk

When Item 4 states "No Bankruptcy Disclosures":

✅ Positive Indicators:

• Clean 10-year bankruptcy history for franchisor
• No personal bankruptcies by officers or directors
• No affiliate bankruptcies affecting operations
• Strong financial statements (Item 21)
• Established operational history
• Stable parent company backing (IDQ/ADQ)

Factors That Would Indicate Elevated Risk

If Item 4 contains bankruptcy disclosures:

⚠️ Warning Signs to Evaluate:

• Recent bankruptcies (within past 5 years)
• Multiple bankruptcy filings
• Bankruptcies by current management
• Unresolved or pending bankruptcy proceedings
• Chapter 7 liquidations (vs. Chapter 11 reorganizations)
• Bankruptcies involving franchise operations
• Pattern of financial instability

Territory Operator Structure Considerations

Unique Franchise Model

Dairy Queen of Montana / North Dakota LLC operates as a territory operator (also called area developer or sub-franchisor), which creates a multi-layered structure:

International Dairy Queen (IDQ)
         ↓
American Dairy Queen (ADQ)
         ↓
DQ of Montana/North Dakota LLC (Territory Operator)
         ↓
Individual Franchisees (Subfranchisees)

Bankruptcy Implications in Territory Operator Model

Questions to Ask the Franchisor

1. Direct Bankruptcy Questions:

   • "Does Item 4 disclose any bankruptcies for DQ MT/ND, its officers, or affiliates?"
   • "Have there been any bankruptcies since the FDD was issued?"
   • "What is the financial relationship between DQ MT/ND and the parent companies?"

2. Financial Stability Questions:

   • "How long has DQ MT/ND operated as a territory operator?"
   • "What financial reserves does DQ MT/ND maintain?"
   • "How many franchisees have successfully operated in the territory?"
   • "What support would continue if DQ MT/ND faced financial difficulties?"

3. Management Background Questions:

   • "What is the business experience of Inoshi Denizen and James Brown?"
   • "How long have current management been with DQ MT/ND?"
   • "What is their track record in franchise operations?"

Financial Health Indicators to Review

Beyond Bankruptcy History

Even with a clean bankruptcy record, assess overall financial health:

Review Item 21 Financial Statements

• Liquidity ratios: Current assets vs. current liabilities
• Debt levels: Total debt relative to equity
• Profitability: Net income trends over time
• Cash flow: Operating cash flow adequacy
• Working capital: Ability to meet short-term obligations

Territory Operator Specific Metrics

According to the exhibit structure, review:

• Exhibit J: Territory Operator's Financial Statements (DQ MT/ND)
• Exhibit K: IDQ's Financial Statements (parent company)
• Compare both to assess financial backing and stability

Red Flags in Financial Statements

⚠️ Warning indicators even without bankruptcy:

• Negative working capital
• Declining revenues year-over-year
• Increasing debt loads
• Losses in recent fiscal years
• Qualified audit opinions
• Going concern warnings from auditors
• Significant related-party transactions
• Inadequate cash reserves

State Registration Status

Current Registration Information

From Exhibit P (State Effective Dates), the following registration status is shown:

Analysis: The staggered registration dates and pending status in key states (including North Dakota, part of the territory name) may indicate:

• Recent franchise offering launch or renewal
• Administrative processing delays
• Potential state-specific concerns requiring additional review

State Registration and Bankruptcy Connection

State franchise regulators review bankruptcy history during registration:

• Automatic Disclosure: Bankruptcies must be disclosed to state regulators
• Enhanced Scrutiny: Recent bankruptcies may trigger additional state requirements
• Bonding Requirements: Some states require surety bonds if bankruptcy history exists
• Registration Denial: Serious bankruptcy issues can result in registration denial

Comparative Industry Context

Dairy Queen System Stability

Parent Company Strength:

• International Dairy Queen (IDQ) is owned by Berkshire Hathaway (since 1998)
• Warren Buffett's Berkshire Hathaway provides significant financial backing
• DQ system has operated since 1940 (80+ years)
• One of the largest soft-serve ice cream chains globally

Territory Operator Model:

• Some territory operators are independently owned and operated
• Financial strength varies by territory operator
• Not all territory operators have the same financial backing as parent company

Industry Bankruptcy Rates

Franchise Industry Context:

• Restaurant franchises face higher bankruptcy risk than many industries
• Economic downturns significantly impact food service
• COVID-19 pandemic created unprecedented challenges (2020-2021)
• Territory operators may have different risk profiles than corporate franchisors

Practical Implications for Franchisees

If No Bankruptcies Are Disclosed

Positive Implications:

1. Financial Stability: Suggests consistent financial management
2. Operational Continuity: Lower risk of disruption to support services
3. Brand Protection: Reduced reputational risk
4. Lender Confidence: Easier to secure franchise financing
5. Long-term Planning: Greater confidence in multi-year business planning

If Bankruptcies Are Disclosed

Required Analysis:

1. Timing Assessment:

   • How long ago did the bankruptcy occur?
   • Has sufficient time passed to demonstrate recovery?

2. Cause Evaluation:

   • What caused the bankruptcy?
   • Were causes external (economy) or internal (mismanagement)?
   • Have underlying issues been resolved?

3. Resolution Review:

   • Was it Chapter 11 reorganization (restructuring) or Chapter 7 (liquidation)?
   • Were creditors paid? What percentage?
   • What changes were implemented post-bankruptcy?

4. Current Impact:

   • How does past bankruptcy affect current operations?
   • What protections exist for current franchisees?
   • Is the business model fundamentally different now?

Protection Strategies for Franchisees

Due Diligence Recommendations

Before Signing

Contractual Protections

Review Operating Agreement (Exhibit B) for:

• Escrow provisions for initial fees
• Performance guarantees from franchisor
• Support continuation clauses
• Transfer rights if franchisor changes
• Termination protections in case of franchisor financial distress

Ongoing Monitoring

After becoming a franchisee:

✓ Annual Reviews:

• Request updated financial statements annually
• Monitor franchise system growth/contraction
• Track territory operator performance metrics
• Stay informed about parent company (IDQ) news

✓ Warning Sign Monitoring:

• Delayed support services or training
• Increased fees without corresponding value
• Reduced marketing support
• Staff turnover at territory operator level
• Communication breakdowns

Conclusion and Recommendations

Information Gap in Provided Documentation

Critical Limitation: The actual content of Item 4 (Bankruptcy History) is not available in the provided FDD excerpt. This analysis outlines what should be reviewed but cannot provide specific findings about Dairy Queen of Montana / North Dakota LLC's actual bankruptcy history.

Essential Next Steps for Prospective Franchisees

1. Obtain Complete FDD: Request and review the full Franchise Disclosure Document including all 23 items
2. Read Item 4 Thoroughly: Carefully review any bankruptcy disclosures
3. Cross-Reference Items: Review Items 1-4 together for complete picture of franchisor and management
4. Verify Financial Health: Examine Item 21 financial statements in detail
5. Conduct Independent Research: Don't rely solely on FDD disclosures
6. Seek Professional Advice: Consult with franchise attorney and accountant
7. Validate with Franchisees: Contact multiple current and former franchisees

Risk Assessment Cannot Be Completed

Without access to the actual Item 4 content, a definitive risk assessment regarding bankruptcy history cannot be provided. However, the framework above provides prospective franchisees with the tools to:

• Understand what to look for in Item 4
• Assess any bankruptcy disclosures appropriately
• Evaluate overall financial stability
• Make informed investment decisions

Final Recommendation

Do not proceed with any franchise investment until you have:

✅ Received and reviewed the complete FDD with all 23 items ✅ Specifically reviewed Item 4 for bankruptcy disclosures ✅ Consulted with qualified franchise legal counsel ✅ Conducted thorough financial due diligence ✅ Validated information with current franchisees ✅ Assessed your risk tolerance relative to any disclosed issues

The absence of Item 4 content in this excerpt should not be interpreted as either the presence or absence of bankruptcy history. Only the complete, official FDD can provide this critical information.

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Document Reference: Dairy Queen of Montana / North Dakota LLC Franchise Disclosure Document, dated July 23, 2024 (DQ OF MT/ND-0724)

Note: This analysis is based on limited excerpt pages (exhibits and receipts only). Complete due diligence requires review of the full FDD including all substantive disclosure items.

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Dairy Queen of Montana / North Dakota LLC Franchise Agreement Terms & Conditions (Item 17 - Part 1)

⚠️ Critical Information Gap

Item 17 of the Franchise Disclosure Document (FDD) is not available in the provided documentation. This section, which contains crucial information about renewal, termination, transfer, and dispute resolution terms, is referenced but not included in the excerpt provided.

The FDD structure indicates that Item 17 information would be contained in Exhibit B (Operating Agreement and Addenda), which is listed in the table of contents but not provided in full text.

What We Know from Available Documentation

Based on the limited information available in the FDD excerpt, we can confirm:

Document Structure

The FDD references the following relevant exhibits that would contain contract terms:

Franchise Sellers

The FDD identifies the following franchise sellers who would be involved in contract negotiations:

• Inoshi Denizen

  • Address: 310 E. 46th Street, Unit 5J, New York, NY 10017
  • Phone: (917) 536-6291
  • Email: i_denizen@dqmtnd.com

• James Brown

  • Address: P.O. Box 9137, Missoula, MT 59807
  • Phone: (406) 218-9507
  • Email: James_Brown@dqmtnd.com

State Registration Status

The franchise is registered or filed in multiple states with franchise laws:

What Should Be in Item 17

Based on FTC franchise disclosure requirements, Item 17 should contain the following information (which is not available in the provided excerpt):

Expected Contract Term Information

Initial Contract Length:

• Duration of the initial franchise agreement
• Start date determination
• Any probationary periods

Renewal Options:

• Number of renewal terms available
• Length of each renewal term
• Renewal fees or costs
• Conditions for renewal eligibility
• Notice requirements for renewal
• Whether renewal is guaranteed or at franchisor's discretion

Renovation/Upgrade Requirements:

• Remodeling obligations at renewal
• Equipment replacement schedules
• Technology upgrade requirements
• Estimated costs for renovations
• Timeline for completing upgrades

Termination Provisions

Grounds for Termination by Franchisor:

• Breach of contract conditions
• Failure to meet performance standards
• Non-payment of fees
• Unauthorized transfers
• Criminal activity or fraud
• Health and safety violations
• Trademark misuse
• Failure to maintain insurance
• Abandonment of the business

Grounds for Termination by Franchisee:

• Franchisor breach of contract
• Material misrepresentation
• Failure to provide promised support
• Force majeure events

Cure Periods:

• Notice requirements before termination
• Time allowed to remedy defaults
• Non-curable violations

Transfer and Resale Restrictions

Transfer Requirements:

• Franchisor approval process
• Transfer fees
• Training requirements for new owners
• Financial qualifications for transferees
• Right of first refusal provisions
• Restrictions on transfer to competitors

Resale Conditions:

• Valuation methods
• Franchisor's right to purchase
• Restrictions on sale price
• Lease assignment requirements
• Assumption of existing obligations

Non-Compete Clauses

During the Agreement:

• Restrictions on owning competing businesses
• Geographic limitations
• Product/service restrictions

Post-Termination:

• Duration of non-compete (typically 1-3 years)
• Geographic scope (radius from former location)
• Types of restricted activities
• Application to owners vs. employees

Fee Escalation Clauses

Potential Fee Increases:

• Royalty rate adjustments
• Advertising fund contribution changes
• Technology fee increases
• Annual fee escalators tied to inflation
• Caps on fee increases (if any)

Contract End Provisions

Upon Expiration or Termination:

• De-identification requirements
• Signage removal obligations
• Return of proprietary materials
• Customer list restrictions
• Final payment obligations
• Equipment disposition
• Lease obligations

🚨 Red Flags and Concerns

Missing Critical Information

The absence of Item 17 in the provided FDD excerpt raises several concerns:

1. Incomplete Due Diligence: Prospective franchisees cannot properly evaluate the franchise opportunity without this crucial information

2. Contract Term Uncertainty: Without knowing the initial term length and renewal options, it's impossible to assess the long-term viability of the investment

3. Exit Strategy Unknown: Transfer restrictions and termination provisions are essential for understanding how to exit the franchise if needed

4. Financial Risk Assessment: Renovation requirements at renewal and fee escalation clauses significantly impact long-term profitability

5. Post-Termination Obligations: Non-compete clauses can severely restrict future business opportunities

Questions Prospective Franchisees Must Ask

Before signing any franchise agreement with Dairy Queen of Montana / North Dakota LLC, you must obtain and carefully review:

Contract Duration Questions

• ❓ What is the initial term of the franchise agreement?
• ❓ How many renewal options are available?
• ❓ What are the costs associated with renewal?
• ❓ Is renewal automatic or at the franchisor's discretion?
• ❓ What conditions must be met to qualify for renewal?

Renovation and Investment Questions

• ❓ What renovation or remodeling requirements exist at renewal?
• ❓ What is the estimated cost of required upgrades?
• ❓ How often must equipment be replaced?
• ❓ Are there technology upgrade requirements?
• ❓ Who determines the scope of required renovations?

Termination Questions

• ❓ Under what circumstances can the franchisor terminate the agreement?
• ❓ What cure periods are provided for defaults?
• ❓ Are there any non-curable violations?
• ❓ What happens to your investment if terminated?
• ❓ Can you terminate the agreement early? Under what conditions?

Transfer Questions

• ❓ Can you sell your franchise? What restrictions apply?
• ❓ What is the transfer fee?
• ❓ Does the franchisor have a right of first refusal?
• ❓ What approval process must a buyer go through?
• ❓ Can you transfer to family members?

Non-Compete Questions

• ❓ What non-compete restrictions apply during the agreement?
• ❓ How long does the non-compete last after termination?
• ❓ What is the geographic scope of the non-compete?
• ❓ What types of businesses are considered competitive?
• ❓ Does the non-compete apply to all owners or just the primary franchisee?

Fee Questions

• ❓ Can royalty rates increase during the term?
• ❓ Are there caps on fee increases?
• ❓ What fees are subject to escalation?
• ❓ How are fee increases calculated?
• ❓ What notice is provided before fee increases?

Summary Table: Unknown Contract Terms

Relationship with Parent Company

It's important to note that Dairy Queen of Montana / North Dakota LLC operates as a territory operator under the larger Dairy Queen franchise system managed by International Dairy Queen, Inc. (IDQ). This creates a unique franchise structure:

Two-Tier Franchise System

International Dairy Queen, Inc. (IDQ)
            ↓
Dairy Queen of Montana / North Dakota LLC (Territory Operator)
            ↓
Individual Franchisees (Subfranchisees)

This structure means:

• You are entering into a subfranchise agreement with DQ MT/ND, not directly with IDQ
• Contract terms may differ from standard Dairy Queen franchise agreements in other territories
• The territory operator has discretion over certain terms within IDQ's framework
• You may have obligations to both the territory operator and IDQ
• Financial statements from both entities should be reviewed (referenced in Exhibits J and K)

Practical Implications

Before Proceeding

DO NOT sign any franchise agreement or make any payments until you have:

1. ✅ Received and reviewed the complete Item 17 from the FDD
2. ✅ Obtained the full Operating Agreement (Exhibit B) and all addenda
3. ✅ Consulted with a franchise attorney experienced in multi-tier franchise systems
4. ✅ Reviewed all ancillary agreements (Design Services, Gift Card Participation, Olo, Punchh, etc.)
5. ✅ Understood all financial obligations over the full term including renewals
6. ✅ Assessed the exit strategy including transfer restrictions and non-compete clauses
7. ✅ Calculated the total investment including potential renovation costs at renewal
8. ✅ Verified state-specific protections that may modify contract terms

State Law Protections

Several states where this franchise operates have franchise relationship laws that may provide additional protections:

Minnesota: Has franchise relationship laws that may limit termination grounds and require good cause for non-renewal

New York: Requires specific disclosures and may provide additional franchisee protections

North Dakota: Has franchise relationship laws that may restrict termination and non-renewal

South Dakota: Has franchise investment laws that provide certain protections

Washington: Has franchise investment and relationship laws (registration pending)

These state laws may override certain provisions in the franchise agreement, potentially providing:

• Restrictions on termination without good cause
• Limitations on non-compete clauses
• Requirements for reasonable notice periods
• Protections against arbitrary non-renewal
• Restrictions on transfer fees

Recommended Actions

1. Request Complete Documentation

   • Contact Inoshi Denizen or James Brown immediately to obtain the complete Item 17
   • Request the full Operating Agreement (Exhibit B) with all addenda
   • Ask for sample contracts from existing franchisees if available

2. Engage Professional Advisors

   • Hire a franchise attorney licensed in your state
   • Consult with an accountant to model long-term costs
   • Consider hiring a franchise consultant for independent analysis

3. Speak with Current Franchisees

   • Contact franchisees listed in Exhibit F (Territory Operator's Subfranchisees)
   • Ask about their experience with contract terms
   • Inquire about renewal processes and costs
   • Discuss any termination or transfer experiences they know of

4. Interview Former Franchisees

   • Contact former franchisees listed in Exhibit G
   • Understand why they left the system
   • Ask about termination circumstances
   • Inquire about post-termination restrictions and obligations

5. Verify State Registrations

   • Confirm the franchise is properly registered in your state
   • Review any state-specific addenda to the franchise agreement
   • Understand state law protections available to you

Comparison with Industry Standards

While we cannot provide specific comparisons without the actual Item 17 data, typical franchise agreement terms in the quick-service restaurant industry include:

Industry Standard Terms

Without the actual Item 17 data, we cannot confirm whether DQ MT/ND's terms are more or less favorable than these industry standards.

What Happens When the Contract Ends?

Based on typical franchise agreement structures (actual terms must be verified in Item 17), when a franchise agreement expires or is terminated, franchisees typically must:

De-Identification Requirements

• Remove all Dairy Queen signage and branding
• Cease using all trademarks and service marks
• Discontinue use of proprietary recipes and procedures
• Remove or cover any distinctive trade dress elements
• Change business name if it includes "Dairy Queen" or "DQ"

Return of Materials

• Return all operations manuals
• Return all proprietary training materials
• Delete all confidential information and software
• Return any equipment bearing Dairy Queen trademarks

Financial Obligations

• Pay all outstanding royalties and fees
• Settle any amounts owed for products or services
• Pay any early termination penalties (if applicable)
• Reimburse franchisor for any costs of de-identification

Ongoing Restrictions

• Non-compete clause enforcement (duration and scope unknown)
• Confidentiality obligations (typically perpetual)
• Non-solicitation of employees and customers
• Restrictions on using similar business concepts

Property and Lease Issues

• Lease assignment or termination obligations
• Equipment disposition (purchase, return, or disposal)
• Inventory handling procedures
• Facility restoration requirements

Critical Warning

The absence of Item 17 in the provided FDD documentation represents a significant gap in the information needed to make an informed franchise investment decision.

Item 17 is one of the most important sections of any FDD because it defines:

• How long you can operate the business
• Under what circumstances you could lose your investment
• How you can exit the business
• What restrictions you'll face after leaving

Do not proceed with any franchise purchase until you have received, reviewed, and fully understood all contract terms outlined in Item 17 and the complete Operating Agreement.

Next Steps

To obtain the missing Item 17 information:

1. Contact the Franchise Sellers:

   • Inoshi Denizen: i_denizen@dqmtnd.com or (917) 536-6291
   • James Brown: James_Brown@dqmtnd.com or (406) 218-9507

2. Request Specific Documents:

   • Complete Item 17 from the FDD
   • Full Operating Agreement (Exhibit B) with all addenda
   • Any state-specific amendments or riders
   • Sample renewal agreements
   • Sample transfer agreements

3. Ask for Clarification:

   • Request a detailed explanation of all contract terms
   • Ask for examples of how terms have been applied to existing franchisees

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Dispute Resolution: Dairy Queen of Montana / North Dakota LLC Franchise Legal Rights (Item 17 - Part 2)

⚠️ Critical Information Gap

IMPORTANT NOTICE: The provided FDD excerpt does not contain Item 17 (Renewal, Termination, Transfer and Dispute Resolution) or the complete Operating Agreement (Exhibit B) that would detail the dispute resolution provisions for Dairy Queen of Montana / North Dakota LLC franchises.

The available documentation includes only:

• State effective dates (Exhibit P)
• Receipt pages (Exhibit Q)
• References to exhibits without their actual content

What this means for prospective franchisees: Without access to Item 17 and the complete franchise agreement, we cannot provide specific details about:

• Mediation requirements and procedures
• Arbitration clauses and their mandatory/optional nature
• Jurisdiction for legal disputes
• Choice of law provisions
• Class action waiver terms
• Legal fee allocation
• Dispute resolution timelines

What We Know From Available Information

Document Structure References

The FDD receipt pages reference that the complete disclosure document includes:

Registered States and Legal Jurisdiction Implications

The FDD is registered or filed in the following states with franchise laws:

Active Registrations:

• ✅ South Dakota - Effective December 3, 2023
• ⏳ Washington - Pending
• 📋 Minnesota - Date to be determined
• 📋 New York - Date to be determined
• 📋 North Dakota - Date to be determined

States with franchise registration requirements mentioned: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin

Service of Process Information

According to the receipt pages, Exhibit A contains the registered agents authorized to receive service of process in each state. This is critical information for understanding where and how legal disputes would be initiated.

Standard Industry Practices for Dairy Queen Franchises

While we cannot provide specific details for DQ MT/ND, typical Dairy Queen franchise systems (through parent company American Dairy Queen Corporation/International Dairy Queen, Inc.) generally include:

Common Dispute Resolution Framework

Typical Structure (Industry Standard - Not Confirmed for DQ MT/ND):

Dispute Arises
     ↓
Internal Resolution Attempt (30-60 days)
     ↓
Mediation (Often Required)
     ↓
Arbitration or Litigation
     ↓
Final Resolution

Standard Provisions Often Found in Franchise Agreements

1. Mediation Requirements

Most franchise systems require:

• Good faith negotiation period before formal proceedings
• Mediation before arbitration or litigation
• Shared costs for mediator
• 30-90 day mediation window

2. Arbitration Clauses

Common elements include:

• Mandatory arbitration for most disputes
• Exceptions for trademark protection and emergency relief
• American Arbitration Association (AAA) rules
• Single arbitrator or three-arbitrator panel
• Location typically in franchisor's home state

3. Jurisdiction and Venue

Typical provisions:

• Franchisor's home state courts (Montana or North Dakota for DQ MT/ND)
• Federal courts if diversity jurisdiction exists
• Waiver of inconvenient forum defenses

4. Choice of Law

Standard clauses specify:

• Governing state law (often franchisor's state)
• Federal Arbitration Act applicability
• State-specific exceptions where required by law

5. Class Action Waivers

Most modern franchise agreements include:

• Prohibition on class action participation
• Individual arbitration requirement
• Waiver of consolidated proceedings

Critical Considerations for Prospective Franchisees

🔍 What You MUST Review Before Signing

State-Specific Legal Protections

Minnesota

• Has franchise relationship laws that may override certain contract provisions
• Provides additional franchisee protections
• May limit certain termination and non-renewal rights

New York

• Strong franchise disclosure requirements
• 10-day waiting period before signing (noted in receipt)
• Additional franchisee protections under General Business Law

North Dakota

• Franchise investment law protections
• Registration requirement indicates state oversight
• May provide additional dispute resolution rights

South Dakota

• Active registration (effective December 3, 2023)
• State franchise laws may provide additional protections
• Regulatory oversight by state authorities

Washington

• Franchise Investment Protection Act
• Strong franchisee protections
• Registration pending (as of FDD date)
• May limit certain dispute resolution provisions

Questions to Ask DQ MT/ND Representatives

Before signing any agreement, request clarification on:

1. Is mediation required before arbitration or litigation?

   • If yes, what is the process and timeline?
   • Who selects the mediator?
   • How are mediation costs allocated?

2. Where would arbitration take place?

   • Montana? North Dakota? Your state?
   • Can location be negotiated?

3. What law governs the franchise agreement?

   • Montana law? North Dakota law?
   • Are there state-specific exceptions?

4. Are there any class action waiver provisions?

   • Can you participate in class actions?
   • Are there any exceptions?

5. Who pays legal fees in disputes?

   • Does prevailing party recover fees?
   • Are there caps on recoverable fees?

6. What is the statute of limitations for claims?

   • Is it shortened from state law defaults?
   • When does the clock start running?

7. Are there any jury trial waivers?

   • Do you waive the right to jury trial?
   • In what circumstances?

8. Can the franchisor obtain injunctive relief?

   • Without posting bond?
   • In what circumstances?

Franchise Seller Contact Information

For specific questions about dispute resolution provisions, contact:

Red Flags and Concerns

🚩 Documentation Gaps

Major Concern: The absence of Item 17 details in the provided FDD excerpt is unusual. Prospective franchisees should:

• ✋ DO NOT SIGN any agreement without reviewing complete Item 17
• 📄 Request the complete Operating Agreement (Exhibit B)
• 👨‍⚖️ Have an experienced franchise attorney review all dispute resolution provisions
• 🔍 Compare provisions to industry standards
• ⚖️ Understand your state's franchise laws and protections

Potential Issues to Watch For

1. Unfavorable Venue Provisions

   • Requiring disputes in Montana or North Dakota may be costly for out-of-state franchisees
   • Travel and accommodation costs add to dispute expenses

2. Broad Arbitration Requirements

   • May limit your ability to pursue certain claims in court
   • Arbitration can be expensive ($15,000-$100,000+ for complex cases)

3. Fee-Shifting Provisions

   • "Prevailing party" clauses may discourage legitimate claims
   • Risk of paying franchisor's legal fees if you lose

4. Shortened Limitations Periods

   • May have only 1-2 years to discover and file claims
   • Much shorter than typical 3-6 year state law periods

5. Class Action Waivers

   • Prevents joining with other franchisees
   • Must pursue claims individually at your own expense

Your Legal Rights as a Franchisee

Federal Protections

Regardless of contract provisions, you retain certain rights under:

Federal Trade Commission (FTC) Franchise Rule:

• Right to receive FDD at least 14 days before signing or paying
• Right to accurate and complete disclosures
• Right to report violations to FTC

Federal Arbitration Act:

• Governs arbitration agreements in interstate commerce
• Provides framework for enforcing arbitration clauses
• Allows limited court review of arbitration awards

State Law Protections

Many states provide additional franchisee protections that cannot be waived by contract:

Relationship Laws:

• Good cause requirements for termination
• Reasonable notice periods
• Prohibition on unfair practices

Disclosure Laws:

• Enhanced disclosure requirements
• State registration and review
• State agency oversight

Dispute Resolution:

• Some states limit arbitration requirements
• Some prohibit certain venue provisions
• Some require in-state dispute resolution

Reporting Violations

If you believe the FDD contains false or misleading statements, or material omissions, report to:

Federal Trade Commission

• Address: Washington, D.C. 20580
• Website: ftc.gov
• Phone: 1-877-FTC-HELP

State Agencies

• See Exhibit A for state-specific agencies
• Each registered state has oversight authority
• Can investigate franchisor practices

Practical Implications and Recommendations

Before Signing Any Agreement

Cost Considerations for Disputes

Estimated Dispute Resolution Costs:

Note: These are general estimates. Actual costs vary based on complexity, location, and attorneys involved.

Risk Mitigation Strategies

1. Negotiate Before Signing

   • Some dispute resolution terms may be negotiable
   • Request modifications that concern you
   • Document all negotiations in writing

2. Understand Your State's Laws

   • Research franchise relationship laws in your state
   • Some provisions may be unenforceable under state law
   • State laws may override contract terms

3. Maintain Good Records

   • Document all communications with franchisor
   • Keep copies of all agreements and amendments
   • Track compliance with franchise obligations

4. Build Relationships

   • Maintain professional relationship with franchisor
   • Join franchisee associations
   • Network with other franchisees

5. Budget for Legal Costs

   • Set aside emergency fund for potential disputes
   • Consider legal expense insurance if available
   • Factor legal costs into financial projections

Comparison to Industry Standards

Typical Franchise Dispute Resolution Framework

Standard Industry Practice:

Timeline for Dispute Resolution

Typical Dispute Resolution Timeline (Industry Standard):

Month 0: Dispute Arises
    ↓
Month 1: Internal negotiation and communication
    ↓
Month 2-3: Formal notice of dispute
    ↓
Month 3-4: Mediation process
    ↓
Month 5-6: Arbitration filing and preliminary matters
    ↓
Month 7-12: Discovery and preparation
    ↓
Month 13-15: Arbitration hearing
    ↓
Month 16-18: Arbitration award issued
    ↓
Month 19-21: Potential court confirmation/challenge
    ↓
Final Resolution

Factors that extend timelines:

• Complex factual issues
• Multiple parties involved
• Discovery disputes
• Scheduling conflicts
• Appeals or challenges to awards

Final Recommendations

✅ Essential Actions

1. DO NOT proceed without complete Item 17 disclosure
2. HIRE an experienced franchise attorney before signing anything
3. REQUEST and review the complete Operating Agreement (Exhibit B)
4. RESEARCH your state's franchise laws and protections
5. CALCULATE potential dispute costs into your financial planning
6. TALK to current and former franchisees about their experiences
7. UNDERSTAND exactly where and how disputes would be resolved
8. NEGOTIATE unfavorable terms before signing if possible

⚠️ Warning Signs

Be cautious if:

• Franchisor refuses to provide complete dispute resolution terms
• Provisions seem heavily one-sided
• You're pressured to sign quickly without legal review
• Dispute resolution must occur far from your location
• Costs seem prohibitively expensive
• Class action waivers prevent collective action
• Statute of limitations is very short

📞 Next Steps

1. Contact DQ MT/ND representatives (contact information provided above)
2. Request complete Item 17 and all referenced exhibits
3. Schedule consultation with franchise attorney
4. Review state-specific franchise laws in your location
5. Prepare questions about specific dispute resolution provisions
6. Compare to other franchise opportunities you're considering

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Conclusion

The absence of Item 17 details in the provided FDD excerpt makes it impossible to provide specific analysis of Dairy Queen of Montana / North Dakota LLC's dispute resolution provisions. This information is absolutely critical for evaluating

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Dairy Queen of Montana / North Dakota LLC Franchisee Success Rate & Turnover (Item 20 - Part 1)

Data Availability Notice

Important: The provided FDD excerpt does not contain the actual Item 20 data tables showing outlet counts, openings, closures, transfers, or terminations. The document references that this information exists in the following exhibits:

• Exhibit F: Territory Operator's Subfranchisees (current franchisees)
• Exhibit G: Territory Operator's Former Subfranchisees
• Exhibit H: ADQ's Franchisees
• Exhibit I: ADQ's Former Franchisees

However, the actual content of these exhibits is not included in the provided FDD pages. Therefore, specific numerical data regarding franchised units, company-owned units, system growth, closures, transfers, and terminations cannot be extracted or analyzed from the available documentation.

What Should Be in Item 20

For a complete franchise analysis, Item 20 of a Franchise Disclosure Document typically includes:

Standard Item 20 Components

1. Current Outlet Counts

   • Total franchised units operating
   • Total company-owned units operating
   • Breakdown by state

2. Three-Year Historical Data including:

   • New franchise openings
   • Franchised outlets that closed
   • Franchised outlets that were reacquired by franchisor
   • Outlets that ceased operations for other reasons
   • Transfers of ownership

3. Terminations and Non-Renewals

   • Franchises terminated by franchisor
   • Franchises not renewed by franchisor
   • Franchises that were reacquired
   • Franchises otherwise cancelled

4. Projected Openings

   • Signed agreements not yet opened
   • Projected new franchised outlets in next fiscal year
   • Projected new company-owned outlets in next fiscal year

Structure of Dairy Queen of Montana / North Dakota System

Based on the available information, this franchise system operates under a territory operator structure:

Unique Franchise Structure

• DQ MT/ND acts as a Territory Operator for Montana and North Dakota
• The company grants subfranchises to individual operators
• American Dairy Queen Corporation (ADQ) is the parent franchisor
• International Dairy Queen, Inc. (IDQ) is referenced in financial statements

This multi-tiered structure means:

What to Request from the Franchisor

Since the critical Item 20 data is not visible in the provided excerpt, prospective franchisees should specifically request:

Essential Data Points to Obtain

1. Current System Size

   • How many Dairy Queen locations are currently operating in Montana?
   • How many Dairy Queen locations are currently operating in North Dakota?
   • Does DQ MT/ND operate any company-owned locations?

2. Three-Year Trend Analysis

   Fiscal Year: [2021] [2022] [2023]
   - Franchised outlets at start of year
   - New franchised outlets opened
   - Franchised outlets closed
   - Franchised outlets transferred
   - Franchised outlets terminated
   - Franchised outlets at end of year
   

3. Closure Details

   • Reasons for closures (voluntary vs. involuntary)
   • Geographic patterns in closures
   • Time in operation before closure

4. Transfer Information

   • Number of ownership transfers
   • Reasons for transfers
   • Success rate of transferred locations

Key Metrics to Calculate

Once you obtain the Item 20 data, calculate these critical metrics:

Turnover Rate Formula

Annual Turnover Rate = (Closures + Terminations + Non-Renewals) ÷ Total Outlets at Year Start × 100

Healthy Benchmarks

Retention Rate Formula

3-Year Retention Rate = (Outlets operating 3+ years) ÷ (Total outlets 3 years ago) × 100

Strong retention: > 85%
Concerning retention: < 70%

Red Flags to Watch For

When you receive the complete Item 20 data, be alert for these warning signs:

Critical Warning Indicators

🚩 High Turnover Patterns

• Annual closure rate exceeding 10%
• Increasing closures year-over-year
• More closures than new openings

🚩 Termination Issues

• High number of franchisor-initiated terminations
• Pattern of terminations in specific markets
• Terminations within first 2-3 years of operation

🚩 Transfer Red Flags

• Excessive ownership transfers (> 15% annually)
• Multiple transfers of same location
• Transfers occurring within first few years

🚩 Geographic Concentration

• All closures in one state (Montana or North Dakota)
• Urban vs. rural performance disparities
• Market saturation in certain areas

🚩 System Contraction

• Declining total outlet count
• More closures than openings
• Negative net growth over 3 years

Positive Indicators to Look For

Signs of a Healthy Franchise System

✅ Stable Growth

• Consistent new openings each year
• Low closure rate (< 5% annually)
• Net positive growth over 3-year period

✅ Low Involuntary Exits

• Minimal terminations by franchisor
• Few non-renewals
• Most exits are voluntary transfers

✅ Long-Term Operators

• High percentage of franchisees operating 5+ years
• Multi-unit franchisees expanding
• Second-generation family ownership

✅ Successful Transfers

• Transferred locations remain operational
• Buyers are existing franchisees (confidence signal)
• Transfers due to retirement, not failure

✅ Geographic Stability

• Balanced performance across Montana and North Dakota
• No market-specific collapse patterns
• Sustainable density in key markets

Questions to Ask Current Franchisees

When contacting franchisees listed in Exhibits F and H, ask:

Franchisee Satisfaction Indicators

1. About Closures

   • "Are you aware of any locations that have closed in your area?"
   • "What were the reasons given for those closures?"
   • "Do you feel the market is oversaturated?"

2. About Profitability

   • "How long did it take to reach profitability?"
   • "Are you meeting your financial projections?"
   • "Would you open another location?"

3. About Support

   • "Does DQ MT/ND provide adequate support?"
   • "How does support compare to what was promised?"
   • "Are struggling franchisees given help or pushed out?"

4. About Transfers

   • "Have you considered selling your franchise?"
   • "Do you know franchisees who have sold? Why?"
   • "Is there a market for reselling franchises?"

Questions to Ask Former Franchisees

Contact information for former franchisees should be in Exhibits G and I. Ask:

Exit Interview Questions

1. Reason for Exit

   • "Why did you leave the system?"
   • "Was it voluntary or involuntary?"
   • "Would you recommend this franchise to others?"

2. Financial Performance

   • "Did the location meet financial expectations?"
   • "What were the main profitability challenges?"
   • "Were there unexpected costs?"

3. Franchisor Relationship

   • "How was your relationship with DQ MT/ND?"
   • "Did you receive adequate support?"
   • "Were there disputes? How were they resolved?"

4. Advice for Prospects

   • "What do you wish you had known before signing?"
   • "What would you do differently?"
   • "What are the biggest challenges in this system?"

Montana vs. North Dakota Market Considerations

When analyzing the data (once obtained), consider regional factors:

Market-Specific Analysis

Key Questions:

• Are closure rates higher in one state vs. the other?
• Do seasonal locations (near tourist areas) have higher turnover?
• Are rural locations more vulnerable than urban ones?

Calculating Your Risk

Once you have the complete Item 20 data, use this framework:

Risk Assessment Matrix

Low Risk Indicators:

• < 5% annual turnover rate
• Positive 3-year net growth
• < 2% termination rate

• 💡

  85% three-year retention

• Minimal closures in first 3 years of operation

Medium Risk Indicators:

• 5-10% annual turnover rate
• Flat 3-year growth
• 2-5% termination rate
• 70-85% three-year retention
• Some early-stage closures

High Risk Indicators:

• 💡

  10% annual turnover rate

• Negative 3-year growth

• 💡

  5% termination rate

• < 70% three-year retention
• Pattern of early failures

Industry Benchmarks

Compare DQ MT/ND's Item 20 data to these quick-service restaurant industry standards:

QSR Franchise Benchmarks

Note: Regional franchises may have different benchmarks than national chains.

The Territory Operator Factor

The subfranchise structure adds complexity to Item 20 analysis:

Unique Considerations

1. Dual Oversight

   • Subfranchisees answer to both DQ MT/ND and ADQ
   • Support quality depends on Territory Operator resources
   • Termination decisions may involve multiple parties

2. Limited Geographic Scope

   • Only two states in system
   • Less diversification than national franchisors
   • Regional economic factors have outsized impact

3. Smaller System Size

   • Fewer total outlets than major franchisors
   • Each closure represents larger percentage
   • Less statistical significance in year-to-year changes

4. Territory Operator Stability

   • Financial health of DQ MT/ND is critical
   • Changes in Territory Operator ownership could affect support
   • Review Exhibit J (Territory Operator's Financial Statements)

What Missing Item 20 Data Means

The absence of visible Item 20 tables in this FDD excerpt is notable:

Implications of Incomplete Documentation

⚠️ This is not necessarily a red flag, as the exhibits may simply not be included in the excerpt provided. However:

1. Before Signing Anything:

   • Demand complete Item 20 tables with all historical data
   • Verify the data matches what's in Exhibits F, G, H, and I
   • Request explanations for any significant changes

2. Legal Requirements:

   • Item 20 disclosure is mandatory under FTC Franchise Rule
   • All franchisors must provide this information
   • Failure to disclose is a serious violation

3. Due Diligence Steps:

   • Request the complete FDD with all exhibits
   • Verify outlet counts independently (drive by locations, online research)
   • Cross-reference with state franchise registration data

Comparative Analysis Framework

When you receive the data, use this comparison table:

System Health Scorecard

Action Items for Prospective Franchisees

Before proceeding with this franchise opportunity:

Essential Due Diligence Checklist

• Obtain complete Item 20 tables showing 3 years of data
• Review Exhibit F (current subfranchisees) - get complete contact list
• Review Exhibit G (former subfranchisees) - contact at least 5
• Calculate turnover rate for each of the past 3 years
• Identify closure patterns by geography, store type, or timing
• Compare Montana vs. North Dakota performance
• Verify outlet counts through independent research
• Interview 10+ current franchisees about system health
• Interview 5+ former franchisees about exit reasons
• Request explanations for any concerning trends
• Compare to other QSR franchises you're considering
• Assess seasonal impacts on year-round viability
• Review Territory Operator financials (Exhibit J) for stability
• Consult franchise attorney about Item 20 findings
• Consult franchise accountant about financial implications

Conclusion: What Item 20 Should Tell You

Once you have access to the complete Item 20 data, it will reveal:

Critical Success Indicators

Franchisee Satisfaction:

• Low turnover = satisfied franchisees
• High retention = profitable operations
• Voluntary transfers = healthy resale market

System Viability:

• Consistent growth = strong brand
• Low terminations = reasonable franchisor
• Geographic stability = sustainable model

Your Probability of Success:

• High survival rates = better odds for you
• Long-term operators = achievable longevity
• Minimal early failures = realistic projections

Final Recommendation

Do not proceed with this franchise opportunity until you have:

1. ✅ Received and reviewed complete Item 20 tables
2. ✅ Calculated all turnover and retention metrics
3. ✅ Contacted multiple current and former franchisees
4. ✅ Verified the data independently
5. ✅ Compared findings to industry benchmarks
6. ✅ Had the data reviewed by a franchise attorney

The absence of Item 20 data in this analysis is due to incomplete FDD documentation provided, not a deficiency in the disclosure document itself. Always insist on reviewing the complete, current FDD with all exhibits before making any franchise investment decision.

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Document Date: July 23, 2024
Analysis Note: This section requires completion with actual Item 20 data from Exhibits F, G, H, and I of the complete FDD.

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Dairy Queen of Montana / North Dakota LLC Franchise Locations: Current & Former Franchisee List (Item 20 - Part 2)

Overview of Item 20 Franchisee Lists

Item 20 of the Dairy Queen of Montana / North Dakota LLC (DQ MT/ND) Franchise Disclosure Document provides critical contact information for franchisee validation. According to the FDD structure, this information is contained in multiple exhibits:

• Exhibit F: Territory Operator's Subfranchisees (current franchisees under DQ MT/ND)
• Exhibit G: Territory Operator's Former Subfranchisees
• Exhibit H: ADQ's Franchisees (American Dairy Queen Corporation franchisees)
• Exhibit I: ADQ's Former Franchisees

Important Note: The specific franchisee contact lists are contained in the exhibits referenced above but are not visible in the provided FDD excerpt. You must request these exhibits from DQ MT/ND to access the complete contact information.

How to Access the Current Franchisee Contact List

Step-by-Step Process

1. Review Your FDD Package: Verify that Exhibits F, G, H, and I are included in your disclosure document
2. Contact the Franchise Sellers: If exhibits are missing, contact:
   • Inoshi Denizen: i_denizen@dqmtnd.com | (917) 536-6291 | 310 E. 46th Street, Unit 5J, New York, NY 10017
   • James Brown: James_Brown@dqmtnd.com | (406) 218-9507 | P.O. Box 9137, Missoula, MT 59807
3. Request Complete Exhibits: Specifically ask for:
   • Full names and contact information of all current subfranchisees
   • Business addresses and phone numbers
   • Email addresses (if available)
   • Location details (city/state)
   • Opening dates or years in operation

What Information Should Be Included

According to FTC regulations, the franchisee list must include:

• Names of all current franchisees
• Business addresses
• Telephone numbers
• State and city of franchise location
• Names and contact information for franchisees who left the system in the most recent fiscal year

Understanding the Franchise Structure

DQ MT/ND operates as a Territory Operator under American Dairy Queen Corporation (ADQ). This creates a unique two-tier structure:

Key Implication: You should contact both DQ MT/ND subfranchisees AND ADQ franchisees in similar markets to get a complete picture of the system.

Recommended Number of Franchisees to Contact

Minimum Validation Requirements

Strategic Selection Approach

Diversify Your Sample:

• Geographic diversity (different Montana/North Dakota cities)
• Various operational timeframes (new, mid-term, veteran)
• Different store formats (if applicable)
• Urban vs. rural locations
• Seasonal vs. year-round operations (important in Montana/North Dakota climate)

Red Flag: If DQ MT/ND has fewer than 10 current subfranchisees, this indicates a very small system with limited track record. Proceed with extra caution and contact ALL available franchisees.

Comprehensive Franchisee Interview Questions

Questions for Current Franchisees (15 Essential Questions)

Financial Performance & Profitability

1. What were your actual gross sales for the last 12 months, and how do they compare to your initial projections?

   • Follow-up: What is your profit margin after all expenses?
   • Follow-up: How long did it take to reach break-even?

2. What was your total initial investment, and how did it compare to the estimates in Item 7 of the FDD?

   • Follow-up: Were there any unexpected costs not disclosed?
   • Follow-up: What percentage over/under the FDD estimate did you experience?

3. What are your actual monthly operating expenses, broken down by category?

   • Royalties and fees to DQ MT/ND
   • Product costs and food supplies
   • Labor costs (including seasonal variations)
   • Utilities (especially heating costs in winter)
   • Marketing and advertising
   • Equipment maintenance and repairs

4. How seasonal is the business in Montana/North Dakota, and how do you manage cash flow during slow months?

   • Follow-up: What percentage of annual revenue comes from May-September vs. October-April?
   • Follow-up: Do you need a line of credit to cover winter months?

Franchisor Support & Relationship

5. How would you rate the support provided by DQ MT/ND on a scale of 1-10, and why?

   • Follow-up: How does this compare to support from American Dairy Queen Corporation?
   • Follow-up: How responsive are they to problems or questions?

6. What specific support have you received in the following areas?

   • Site selection and lease negotiation
   • Construction and store design
   • Initial training and ongoing education
   • Marketing and local advertising
   • Operational troubleshooting
   • Technology and POS systems

7. How often do you communicate with DQ MT/ND representatives, and is it adequate?

   • Follow-up: Do they conduct regular field visits?
   • Follow-up: Are there franchisee advisory councils or forums?

8. Have you experienced any conflicts with DQ MT/ND or ADQ, and how were they resolved?

   • Follow-up: Do you feel the franchise agreement is fair and balanced?

Operations & Day-to-Day Reality

9. How many hours per week do you personally work in the business?

   • Follow-up: Can the business operate successfully as semi-absentee?
   • Follow-up: What is your total labor cost as a percentage of sales?

10. What are the biggest operational challenges you face?

    • Follow-up: How difficult is it to hire and retain quality staff in your market?
    • Follow-up: What is your employee turnover rate?

11. How reliable is the supply chain, and have you experienced any product shortages or quality issues?

    • Follow-up: Are you required to purchase from specific suppliers?
    • Follow-up: Are prices competitive compared to alternatives?

12. What is your customer traffic pattern, and how has it changed over time?

    • Follow-up: What percentage are repeat customers vs. tourists/travelers?
    • Follow-up: How effective is the Dairy Queen brand in attracting customers?

Territory & Competition

13. How well-defined and protected is your territory?

    • Follow-up: Are there other Dairy Queen locations nearby?
    • Follow-up: Has DQ MT/ND or ADQ opened competing locations that impacted your sales?

14. Who are your main competitors, and how do you differentiate?

    • Follow-up: How price-competitive are you in your market?
    • Follow-up: What is your market share estimate?

Overall Satisfaction & Recommendations

15. Knowing what you know now, would you make the same investment decision?
    • Follow-up: Would you buy additional locations?
    • Follow-up: What advice would you give to a prospective franchisee?
    • Follow-up: What should I know that I haven't asked about?

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Questions for Former Franchisees Who Exited Voluntarily (10 Questions)

Reasons for Exit

1. What were the primary reasons you decided to leave the Dairy Queen system?

   • Follow-up: Was it financial performance, personal reasons, or franchise relationship issues?
   • Follow-up: How long did you operate before deciding to exit?

2. Did the business meet your financial expectations? Why or why not?

   • Follow-up: What were your actual sales vs. projections?
   • Follow-up: Were you profitable when you exited?

3. How would you describe your relationship with DQ MT/ND during your time as a franchisee?

   • Follow-up: Did you feel supported throughout your tenure?
   • Follow-up: Were there unresolved conflicts?

Transfer/Exit Process

4. How difficult was the process of selling or closing your franchise?

   • Follow-up: Did DQ MT/ND cooperate with the transfer process?
   • Follow-up: Were there unexpected fees or penalties?
   • Follow-up: How long did the exit process take?

5. Were you able to sell your franchise for a reasonable price, or did you have to close?

   • Follow-up: What percentage of your initial investment did you recover?
   • Follow-up: Did DQ MT/ND exercise right of first refusal?

Operational Insights

6. What were the most significant challenges you faced as a DQ MT/ND franchisee?

   • Follow-up: Were these challenges addressable, or systemic issues?
   • Follow-up: How did seasonal fluctuations in Montana/North Dakota affect operations?

7. How accurate was the information provided in the FDD compared to your actual experience?

   • Follow-up: Were there any material misrepresentations?
   • Follow-up: What surprised you most (positively or negatively)?

Retrospective Assessment

8. What would you have done differently if you could start over?

   • Follow-up: Were there warning signs you missed during due diligence?

9. How does the Dairy Queen franchise compare to other franchise opportunities you've considered or operated?

   • Follow-up: Would you recommend this franchise to others?

10. Is there anything critical that a prospective franchisee should know that isn't obvious from the FDD?

    • Follow-up: What questions should I be asking that I haven't?

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Questions for Terminated Franchisees (7 Questions)

Important Note: Terminated franchisees may have legal restrictions on what they can discuss. Approach these conversations with sensitivity and understand they may be limited in their responses.

Termination Circumstances

1. Can you share the circumstances that led to your franchise termination?

   • Follow-up: What specific violations or issues did DQ MT/ND cite?
   • Follow-up: Do you believe the termination was justified?

2. Did you receive adequate warning and opportunity to cure any alleged defaults?

   • Follow-up: How much notice were you given?
   • Follow-up: Was the cure period realistic?

3. How would you characterize DQ MT/ND's enforcement of franchise agreement terms?

   • Follow-up: Were standards applied consistently across all franchisees?
   • Follow-up: Did you feel the termination process was fair?

Financial Impact

4. What was the financial impact of the termination on you personally?
   • Follow-up: Were you able to recover any of your investment?
   • Follow-up: Did you face additional penalties or legal costs?

Warning Signs

5. Looking back, what warning signs should you have recognized earlier?

   • Follow-up: Were there issues during the initial training or opening period?
   • Follow-up: How was your relationship with DQ MT/ND before termination?

6. Were there operational or financial challenges that contributed to the termination?

   • Follow-up: Did DQ MT/ND provide adequate support to address these challenges?
   • Follow-up: Were the performance standards realistic for your market?

Advice for Prospects

7. What advice would you give to someone considering this franchise?
   • Follow-up: What should they specifically watch out for?
   • Follow-up: Are there particular terms in the franchise agreement they should negotiate?

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Franchisee Interview Guide Template

Pre-Interview Preparation Checklist

• Review the FDD thoroughly before making calls
• Prepare a standardized question list
• Create a scoring/rating system for responses
• Set up a spreadsheet to track responses consistently
• Schedule calls at convenient times for franchisees
• Plan for 30-45 minute conversations
• Prepare to take detailed notes or record (with permission)

Interview Structure Template

Introduction (2-3 minutes)

"Hello, my name is [Your Name], and I'm seriously considering investing in a 
Dairy Queen franchise through DQ MT/ND. Your contact information was provided 
in the FDD as a current franchisee. Do you have 30-40 minutes to discuss your 
experience? I really appreciate your time and candid feedback."

Opening Questions (5 minutes)

• How long have you been a franchisee?
• What is your location?
• What was your background before Dairy Queen?
• Why did you choose this franchise?

Core Questions (25-30 minutes)

• Work through your prepared questions systematically
• Take detailed notes on responses
• Ask follow-up questions based on their answers
• Pay attention to tone and enthusiasm (or lack thereof)

Closing Questions (5 minutes)

"Is there anything I haven't asked that you think I should know?"
"Would you be willing to be a reference if I move forward?"
"May I contact you again if additional questions arise?"
"Do you know other franchisees I should speak with?"

Post-Interview (Immediately After)

• Rate the overall tone of the conversation (1-10)
• Note any red flags or concerns
• Identify any particularly positive indicators
• Record your gut feeling about their satisfaction
• Update your comparison spreadsheet

Response Tracking Spreadsheet Template

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What to Watch For in Franchisee Feedback

Positive Indicators

Strong Positive Signals

✅ Consistent Profitability Stories

• Multiple franchisees report meeting or exceeding financial projections
• Clear path to break-even within 18-24 months
• Positive cash flow even during winter months

✅ Enthusiastic Recommendations

• Franchisees would invest again without hesitation
• Active plans to open additional locations
• Willingness to serve as references

✅ Strong Franchisor Support

• Responsive communication from DQ MT/ND
• Effective training programs
• Helpful field support and troubleshooting
• Fair conflict resolution

✅ Operational Consistency

• Similar experiences across different franchisees
• Predictable costs and revenues
• Reliable supply chain
• Effective systems and procedures

✅ Territory Protection

• Well-defined territories that are respected
• No cannibalization from other DQ locations
• Fair market allocation

✅ Realistic Expectations

• FDD information matches actual experience
• No significant surprises or hidden costs
• Transparent communication from franchisor

Moderate Positive Signals

⚠️ Qualified Satisfaction

• "It's a good business if you work hard"
• "Better than some franchises I've seen"
• "Takes longer to profit than expected, but getting there"

These aren't red flags but suggest the opportunity requires realistic expectations and strong operational execution.

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Red Flags and Warning Signs

Critical Red Flags (Proceed with Extreme Caution)

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Dairy Queen of Montana / North Dakota LLC Franchise Territory Analysis (Item 12)

⚠️ Critical Information Gap

Item 12 (Territory) is not visible in the provided FDD excerpt. This is a significant limitation for prospective franchisees, as territory rights are among the most important factors in franchise success.

What Should Be in Item 12

While the specific territory provisions for Dairy Queen of Montana / North Dakota LLC are not available in the provided documentation, Item 12 of any FDD should contain the following critical information:

Standard Territory Disclosures Required

🚩 Red Flags: Missing Territory Information

The absence of Item 12 in the provided excerpt raises several concerns:

1. Incomplete Due Diligence

• You cannot make an informed investment decision without understanding your territorial rights
• Territory provisions directly impact your ability to generate revenue and achieve ROI

2. Potential Encroachment Risk

Without clear territory language, you cannot assess:

• Whether the franchisor can open locations near you
• If other franchisees can operate in your area
• How online sales and delivery services are handled
• Whether the company can sell products through retail channels in your territory

3. Competitive Positioning

Territory size and exclusivity affect:

• Market saturation potential
• Customer base size
• Marketing efficiency
• Long-term growth opportunities

What to Request from the Franchisor

Before proceeding with a Dairy Queen of Montana / North Dakota LLC franchise, you must obtain and review:

Essential Territory Documents

• Complete Item 12 disclosure from the full FDD
• Territory map or description showing exact boundaries
• Operating Agreement (Exhibit B) which may contain territory provisions
• List of existing locations in Montana and North Dakota (Exhibits F and H)
• Former franchisee locations (Exhibits G and I) to identify closed territories

Critical Questions to Ask

1. Territory Definition

   • What are the exact geographic boundaries of my territory?
   • Is it defined by zip codes, county lines, radius, or population?
   • How many potential customers are in my territory?

2. Exclusivity Protection

   • Do I have exclusive rights to operate in my territory?
   • Can DQ MT/ND open company-owned locations in my territory?
   • Can other franchisees operate in my territory?
   • What happens if territories overlap?

3. Alternative Distribution Channels

   • Can DQ MT/ND sell products through:
     • Third-party delivery services (DoorDash, Uber Eats)?
     • Retail stores or grocery chains?
     • Online ordering platforms?
     • Mobile food trucks or temporary locations?
   • Do I receive compensation for sales in my territory through these channels?

4. Performance Requirements

   • Are there minimum sales or operational standards to maintain my territory?
   • What happens if I don't meet performance benchmarks?
   • Can my territory be reduced or eliminated for underperformance?

5. Encroachment Policies

   • What is the minimum distance between Dairy Queen locations?
   • How does the company handle customer overlap between territories?
   • Is there a formal encroachment dispute resolution process?

6. Territory Modifications

   • Under what circumstances can my territory be changed?
   • Do I have right of first refusal for adjacent territories?
   • Can I expand my territory if I meet certain criteria?

Industry Context: Dairy Queen Territory Practices

While specific information for DQ MT/ND is unavailable, general Dairy Queen franchise territory practices typically include:

Common Territory Structures

Protected Territory Models:

• Radius-based: 1-3 mile radius from the location
• Population-based: Minimum 15,000-30,000 population
• Geographic boundaries: Defined by streets, highways, or municipal borders

Limited or No Protection:

• Some Dairy Queen franchises operate with minimal territorial protection
• Focus on site-specific rights rather than exclusive territories
• Franchisor retains rights for alternative distribution channels

Montana/North Dakota Market Considerations

Comparative Analysis: Territory Structures

Typical QSR Franchise Territory Models

Financial Impact of Territory Provisions

How Territory Affects Your Investment

With Strong Territory Protection:

• ✅ Predictable customer base
• ✅ Better marketing ROI (no wasted spend on customers outside your area)
• ✅ Higher franchise resale value
• ✅ Ability to build brand loyalty without interference
• ✅ Justifies higher initial investment

Without Territory Protection:

• ❌ Unpredictable revenue due to potential competition
• ❌ Marketing dollars may benefit competing locations
• ❌ Lower franchise resale value
• ❌ Difficulty building sustainable customer base
• ❌ Higher risk of investment loss

Territory Size Impact on Revenue Potential

Estimated Annual Revenue by Territory Population*

Small Territory (10,000-20,000):     $400,000 - $700,000
Medium Territory (20,000-40,000):    $700,000 - $1,200,000
Large Territory (40,000-75,000):     $1,200,000 - $2,000,000
Very Large Territory (75,000+):      $2,000,000+

*Estimates based on typical QSR performance; actual results vary significantly

Montana and North Dakota Specific Considerations

Geographic Challenges

Montana:

• 4th largest state by area, 44th by population
• Average population density: 7.1 people per square mile
• Implication: Territories may need to be very large geographically to capture sufficient customers
• Major markets: Billings, Missoula, Great Falls, Bozeman

North Dakota:

• 19th largest state by area, 47th by population
• Average population density: 11.0 people per square mile
• Implication: Similar challenges to Montana with vast distances between population centers
• Major markets: Fargo, Bismarck, Grand Forks, Minot

Market Saturation Analysis

To assess territory viability, request:

Alternative Distribution Channels: Critical Concern

Modern Franchise Territory Challenges

Even with a defined territory, your revenue can be impacted by:

Third-Party Delivery Services:

• DoorDash, Uber Eats, Grubhub may deliver from other locations into your territory
• You may not receive credit or compensation for these sales
• Customers in your territory may order from competing franchisees

Digital Ordering Platforms:

• Olo Participation Agreement (Exhibit N) and Punchh Participation Agreement (Exhibit O) are referenced
• These platforms may not respect territorial boundaries
• Online orders may be fulfilled by nearest location, not territorial franchisee

Retail Distribution:

• Dairy Queen products sold in grocery stores or convenience stores
• Pre-packaged items may compete with your location
• Typically no compensation to territorial franchisee

Gift Card Sales:

• Gift Card Participation Agreement referenced (Exhibit E)
• Cards purchased in your territory may be redeemed elsewhere
• Cards purchased elsewhere may be redeemed at your location

Questions About Alternative Channels

You must clarify:

1. Do I have exclusive rights to all Dairy Queen sales in my territory, regardless of channel?
2. Am I compensated when products are sold in my territory through other channels?
3. Can customers in my territory order from other Dairy Queen locations via delivery apps?
4. How are online orders allocated between franchisees?
5. What percentage of system-wide sales come from alternative channels?

Territory Performance Requirements

Typical Franchise Performance Standards

Many franchises tie territory retention to performance metrics:

Without seeing Item 12, you cannot know if DQ MT/ND imposes such requirements.

Encroachment: What You Need to Know

Types of Encroachment

Direct Encroachment:

• Franchisor opens company-owned location in your territory
• Another franchisee opens in your territory
• New location within agreed-upon distance restriction

Indirect Encroachment:

• Delivery services from outside locations serving your customers
• Online sales not credited to your location
• Retail distribution in your territory
• Mobile or temporary locations (food trucks, kiosks)

Encroachment Protection Checklist

Verify the Operating Agreement (Exhibit B) addresses:

• Minimum distance between locations
• Prohibition on company-owned locations in franchisee territories
• Compensation for encroachment
• Right to purchase encroaching location
• Dispute resolution process
• Damages or remedies for unauthorized encroachment
• Definition of what constitutes encroachment

Territory Transfer and Resale Implications

How Territory Affects Franchise Value

Strong Territory Rights Increase Value:

• Exclusive territories typically sell for 20-40% more than non-exclusive
• Protected territories attract more qualified buyers
• Lenders view protected territories as lower risk

Weak or No Territory Rights Decrease Value:

• Difficult to project future revenue for buyers
• Higher perceived risk reduces buyer pool
• May require seller financing due to lending challenges

Territory Due Diligence for Resale

When you eventually sell, buyers will scrutinize:

• Exact territory boundaries and any changes over time
• History of encroachment or territorial disputes
• Franchisor's expansion plans in the region
• Demographic trends in the territory
• Competition from other Dairy Queen locations

Recommended Action Steps

Before Signing Any Agreement

1. Obtain Complete Item 12

   • Request the full FDD with Item 12 included
   • Do not proceed without this critical information
   • Verify the document is current (dated within past year)

2. Review Operating Agreement (Exhibit B)

   • Territory provisions may be in the franchise agreement
   • Have an attorney review all territorial language
   • Identify any contradictions between Item 12 and the agreement

3. Conduct Market Analysis

   • Map existing Dairy Queen locations in Montana/North Dakota
   • Calculate population and demographics in proposed territory
   • Assess competition from other ice cream/fast food concepts
   • Evaluate seasonal traffic patterns

4. Request Territory Map

   • Get written description and visual map of exact boundaries
   • Verify territory includes sufficient population/traffic
   • Check for natural barriers (mountains, rivers) that limit access

5. Interview Existing Franchisees

   • Contact franchisees listed in Exhibits F and H
   • Ask specifically about territorial issues
   • Inquire about encroachment experiences
   • Determine if franchisor honors territorial commitments

6. Consult with Franchise Attorney

   • Have experienced franchise counsel review all documents
   • Negotiate stronger territorial protections if possible
   • Understand your rights and limitations
   • Ensure territory provisions are clearly defined and enforceable

Red Flags That Should Stop You

🛑 Do not proceed if:

• Franchisor refuses to provide Item 12
• Territory boundaries are vague or undefined
• No exclusivity protection is offered
• Franchisor reserves broad rights to compete in your territory
• Multiple franchisees report encroachment problems
• Territory can be reduced without your consent
• No minimum distance between locations is specified

Comparison: Territory Operator vs. Subfranchisee

Understanding Your Role

The FDD references both "Territory Operator" and "Subfranchisee" relationships:

Clarify which role you're being offered as this fundamentally affects your territorial rights.

Financial Statements and Territory Performance

Analyzing Territory Viability

The FDD references:

• Exhibit J: Territory Operator's Financial Statements
• Exhibit K: IDQ's (International Dairy Queen) Financial Statements

Review these to assess:

• Profitability of existing territory operators
• Revenue per location in Montana/North Dakota
• Whether territory size correlates with financial performance
• System-wide trends that may affect your territory

Territory Economics Worksheet

Calculate your territory potential:

Territory Population:                    _____________
× Average Annual Spend per Capita:       × $________
= Total Market Potential:                = $________

÷ Expected Market Share:                 ÷ _____%
= Projected Annual Revenue:              = $________

- Operating Expenses (typically 75-85%): - $________
= Projected Annual Profit:               = $________

÷ Total Investment (from Item 7):        ÷ $________
= Projected ROI:                         = _____%

This calculation is only possible with clear territory definition.

Montana and North Dakota Franchise Laws

State-Specific Protections

North Dakota:

• Franchise registration state (noted in State Effective Dates)
• May have specific encroachment protections under state law
• Franchisors must register and comply with ND franchise regulations

Montana:

• Not listed as registration state in provided excerpt
• May have business opportunity or relationship laws that apply
• Consult Montana franchise attorney for state-specific protections

South Dakota:

• Listed as effective December 3, 2023
• If your territory extends into SD, additional regulations may apply

State Law May Provide Additional Territory Rights

Some state franchise laws offer protections beyond the FDD, including:

• Restrictions on franchisor's ability to encroach

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Dairy Queen of Montana / North Dakota LLC Franchisor Support & Obligations (Item 11 - Part 1)

Critical Information Gap

⚠️ MAJOR DISCLOSURE LIMITATION: Item 11 (Franchisor's Assistance, Advertising, Computer Systems, and Training) is not visible in the provided FDD excerpt. This represents a significant gap in the disclosure documentation available for analysis.

What Should Be in Item 11

Item 11 is one of the most critical sections of any Franchise Disclosure Document, as it details the support infrastructure that franchisees can expect from their franchisor. The absence of this information in the provided documentation is concerning for prospective franchisees.

Standard Item 11 Components (Not Available for This FDD)

The following information should be disclosed in Item 11 but cannot be verified from the provided documentation:

Pre-Opening Support (Information Not Available)

Ongoing Support (Information Not Available)

Available Related Information

While Item 11 itself is not visible, the FDD exhibits provide limited indirect information about support-related agreements:

Referenced Support Agreements

Based on the exhibit list (Item 22), the following support-related agreements exist:

1. Exhibit C: Design Services Agreement

   • Indicates some form of design support is provided
   • Specific terms, costs, and obligations not visible

2. Exhibit M: Construction Consultation Services Agreement

   • Suggests construction support is available
   • Details of consultation scope not disclosed

3. Exhibit L: Operations Manuals Tables of Contents

   • Confirms operations manuals exist
   • Actual content and accessibility not visible

4. Technology Participation Agreements:

   • Exhibit N: Olo Participation Agreement (online ordering platform)
   • Exhibit O: Punchh Participation Agreement (loyalty/rewards platform)
   • Indicates technology systems are part of the franchise system
   • Terms of participation not disclosed

Franchise Sellers Contact Information

The FDD identifies two franchise sellers who may provide support information:

Red Flags and Concerns

🚩 Critical Red Flags

1. Missing Core Disclosure: The absence of Item 11 in the provided documentation is highly unusual and concerning. This is a required disclosure item under federal FTC regulations.

2. No Training Details: Without Item 11, prospective franchisees cannot evaluate:

   • Duration and quality of initial training
   • Who must attend training
   • Whether training costs are included in initial fees
   • Location of training facilities
   • Ongoing training requirements

3. Undefined Support Obligations: The franchisor's support commitments are completely unclear:

   • No information on field support frequency
   • No details on marketing assistance
   • No clarity on technology support
   • No specification of pre-opening assistance

4. No Performance Standards: Without Item 11, there's no disclosure of:

   • Required vs. discretionary support
   • Response times for support requests
   • Qualifications of support personnel
   • Remedies if support is inadequate

⚠️ Additional Concerns

1. Sub-Franchise Structure Complexity: DQ MT/ND operates as a "Territory Operator" under American Dairy Queen Corporation (ADQ), creating a three-tier structure:

   • International Dairy Queen (IDQ) - Parent
   • American Dairy Queen (ADQ) - Master Franchisor
   • DQ MT/ND - Territory Operator/Sub-Franchisor
   • Individual Franchisees - Sub-Franchisees

   This structure raises questions about:

   • Who provides actual support (DQ MT/ND, ADQ, or IDQ)?
   • Whether support quality differs from corporate-owned territories
   • Resource availability at the Territory Operator level

2. Limited Geographic Scope: Operating only in Montana and North Dakota may affect:

   • Support infrastructure availability
   • Field representative accessibility
   • Training facility proximity
   • Economies of scale for support services

Gap Analysis: What's Missing

Critical Information Gaps

Comparison to Industry Standards

Without Item 11 disclosure, comparison to industry standards is impossible. However, typical quick-service restaurant franchises provide:

Industry Standard Pre-Opening Support

• Site Selection: 30-90 days of demographic analysis and site evaluation
• Training: 4-8 weeks of comprehensive training at corporate facilities
• Construction: Complete architectural plans and contractor recommendations
• Grand Opening: 1-2 weeks of on-site support with marketing materials
• Equipment: Turnkey equipment packages with installation coordination

Industry Standard Ongoing Support

• Field Visits: Quarterly to monthly visits by operations consultants
• Marketing: National advertising fund (typically 3-5% of sales) plus local marketing support
• Training: Annual refresher training and new product rollouts
• Technology: Integrated POS, online ordering, and loyalty systems
• Helpdesk: 24/7 support hotline for operational issues

DQ MT/ND Comparison: Cannot be determined due to missing Item 11 disclosure.

Practical Implications for Prospective Franchisees

Immediate Action Items

1. Request Complete Item 11 Disclosure

   • Contact franchise sellers immediately to obtain full Item 11 content
   • Verify the FDD is complete and properly registered in your state
   • Confirm the document date (July 23, 2024) is current

2. Conduct Due Diligence Interviews

   • Speak with current franchisees (Exhibit F: Territory Operator's Subfranchisees)
   • Ask specific questions about actual support received vs. promised
   • Inquire about response times and support quality

3. Review Support Agreements Carefully

   • Request and review all exhibits, particularly:
     • Exhibit C: Design Services Agreement
     • Exhibit M: Construction Consultation Services Agreement
     • Exhibit L: Operations Manuals Tables of Contents
   • Determine which support services are included vs. additional cost

4. Clarify the Support Structure

   • Understand whether support comes from DQ MT/ND, ADQ, or IDQ
   • Determine if Territory Operator has adequate resources
   • Verify field support personnel qualifications and availability

Questions to Ask Before Signing

Pre-Opening Support Questions

• What specific site selection assistance will you provide?
• How long is the initial training program and where is it conducted?
• Who pays for travel and lodging during training?
• How many people from my organization must attend training?
• What construction and design support is included in the franchise fee?
• Will you help negotiate my lease?
• What grand opening support will I receive?
• How long will it take from signing to opening?

Ongoing Support Questions

• How often will a field representative visit my location?
• What are the qualifications of field representatives?
• What marketing support is provided beyond the advertising fund?
• What technology systems are required and who provides support?
• How do I access the operations manual?
• Is there a franchisee helpline? What are the hours?
• What continuing training is available?
• How are operations manual updates communicated?

Financial Questions

• Which support services are included in the initial franchise fee?
• Which support services require additional payment?
• What are the costs for Design Services (Exhibit C)?
• What are the costs for Construction Consultation (Exhibit M)?
• Are there fees for technology platforms (Olo, Punchh)?
• What are the ongoing technology support costs?

Risk Assessment

Territory Operator Considerations

Unique Aspects of Sub-Franchise Support

DQ MT/ND operates as a Territory Operator, which creates unique support dynamics:

1. Dual Support Structure

   • Some support may come from parent company (ADQ/IDQ)
   • Other support comes from Territory Operator (DQ MT/ND)
   • Clarity on division of responsibilities is essential

2. Territory Operator Resources

   • Review Exhibit J (Territory Operator's Financial Statements) to assess financial capacity
   • Determine if DQ MT/ND has adequate staff for support obligations
   • Verify field support personnel are dedicated to Montana/North Dakota

3. System Standards vs. Local Support

   • National Dairy Queen standards set by IDQ
   • Local implementation and support by DQ MT/ND
   • Potential gap between system standards and local support capability

Advantages of Territory Operator Model

Potential benefits (if properly structured):

• More localized, responsive support
• Better understanding of regional market conditions
• Potentially more accessible field representatives
• Closer relationship with franchisor management

Disadvantages of Territory Operator Model

Potential drawbacks to consider:

• Smaller support infrastructure than corporate territories
• Potential resource limitations
• Dependence on Territory Operator's financial health
• Possible inconsistency with corporate-owned territories

Technology Support Indicators

While full Item 11 is not available, the exhibit list reveals technology platforms:

Identified Technology Systems

1. Olo Platform (Exhibit N)

   • Online ordering system
   • Industry-standard platform used by many restaurant chains
   • Participation agreement suggests required adoption

2. Punchh Platform (Exhibit O)

   • Customer loyalty and rewards program
   • Mobile app integration
   • Participation agreement indicates system-wide implementation

Technology Support Questions

Without Item 11, these critical questions remain unanswered:

• Who provides technical support for these platforms?
• What are the monthly/annual costs?
• Is training provided for these systems?
• Are these systems integrated with POS?
• What happens if technology fails?
• Are there alternative vendors allowed?
• What is the implementation timeline?

Operations Manual Access

Exhibit L references "Operations Manuals Tables of Contents," indicating:

What We Know

• Operations manuals exist
• Table of contents is available for review
• Multiple manuals may exist (plural "Manuals")

What We Don't Know (Item 11 Should Disclose)

• How franchisees access the manuals
• How often manuals are updated
• Whether manuals are physical or digital
• If there are fees for manual updates
• What topics are covered
• How comprehensive the manuals are
• Whether manuals are proprietary or shared with ADQ system

Marketing Support Indicators

Gift Card Program

Exhibit E references a "Gift Card Participation Agreement," suggesting:

• System-wide gift card program exists
• Franchisee participation may be required
• Terms and costs not disclosed without full Item 11

National Brand Advantage

As part of the Dairy Queen system:

• Benefit from national brand recognition
• Likely participation in national advertising campaigns
• Access to established marketing materials
• Unknown: specific local marketing support from DQ MT/ND

Recommendations

Before Proceeding

1. ✅ Obtain Complete FDD: Do not proceed without full Item 11 disclosure
2. ✅ Verify Registration: Confirm FDD is properly registered in your state
3. ✅ Review All Exhibits: Request and carefully review all 17 exhibits
4. ✅ Speak with Franchisees: Contact multiple current franchisees about actual support
5. ✅ Assess Territory Operator: Review financial statements and operational capacity

During Evaluation

1. 📋 Create Support Checklist: List all support services you need
2. 📋 Compare to Promises: Match checklist against Item 11 disclosures
3. 📋 Identify Gaps: Note any support needs not addressed by franchisor
4. 📋 Calculate Costs: Determine total cost of all support services
5. 📋 Evaluate Alternatives: Compare support package to other franchise opportunities

Before Signing

1. ✍️ Get Written Confirmation: Obtain written clarification of all support obligations
2. ✍️ Review Support Agreements: Carefully review all support-related exhibits
3. ✍️ Negotiate if Possible: Attempt to negotiate additional support if needed
4. ✍️ Plan for Gaps: Budget for support services not provided by franchisor
5. ✍️ Consult Attorney: Have franchise attorney review all support provisions

Conclusion

The absence of Item 11 in the provided FDD documentation represents a critical information gap that must be resolved before any franchise purchase decision can be made.

Item 11 is not optional—it is a required disclosure under federal law. Without this information, prospective franchisees cannot:

• Evaluate the adequacy of franchisor support
• Budget accurately for training and support costs
• Compare the franchise opportunity to alternatives
• Assess the franchisor's commitment to franchisee success
• Make an informed investment decision

Next Steps

1. Immediately contact the franchise sellers (Inoshi Denizen or James Brown) to obtain the complete Item 11 disclosure
2. Verify you have received a complete, current FDD properly registered in your state
3. Do not sign any agreements or pay any fees until you have reviewed complete Item 11 disclosures
4. Consult with a franchise attorney experienced in FDD review
5. Conduct thorough franchisee validation to understand actual support provided

Final Assessment

Support Disclosure Status: ❌ INCOMPLETE - CANNOT EVALUATE

Without Item 11, it is impossible to assess whether Dairy Queen of Montana / North Dakota LLC provides adequate support for franchisee success. This is a fundamental requirement that must be satisfied before proceeding with any franchise investment consideration.

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*Note: This analysis is based solely on the limited FDD excerpt provided. A complete analysis requires review of the full Item 11 disclosure, all exhibits

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Dairy Queen of Montana / North Dakota LLC Franchisee Responsibilities & Requirements (Item 9)

⚠️ Critical Information Gap

IMPORTANT NOTICE: Item 9 (Franchisee's Obligations) is not visible in the provided FDD excerpt. The document structure indicates this section exists but the actual content detailing franchisee responsibilities and requirements was not included in the materials available for analysis.

What Should Be in Item 9

Based on standard FDD requirements and the references found in the available exhibits, Item 9 should contain a comprehensive table of franchisee obligations with cross-references to relevant sections of the Operating Agreement and other documents. Below is what prospective franchisees should expect to find and request from Dairy Queen of Montana / North Dakota LLC:

Expected Franchisee Obligations Categories

1. Operational Requirements

Typical obligations would include:

• Daily Operations Management

  • Opening and closing procedures
  • Food safety and handling protocols
  • Customer service standards
  • Quality control measures
  • Inventory management
  • Cash handling procedures

• Hours of Operation

  • Minimum operating hours requirements
  • Seasonal adjustments (if applicable)
  • Holiday operation mandates
  • Extended hours during peak seasons

2. Staffing Requirements

Expected requirements typically include:

• Minimum Employee Levels

  • Number of employees required per shift
  • Manager qualifications and certifications
  • Training completion requirements
  • Background check requirements

• Owner Participation

  • On-site presence requirements
  • Absentee ownership restrictions (if any)
  • Management oversight obligations
  • Personal involvement expectations

3. Training and Certification

Based on standard Dairy Queen operations:

• Initial Training

  • Completion of franchisor-provided training programs
  • Manager certification requirements
  • Food safety certifications
  • Equipment operation training

• Ongoing Training

  • Annual refresher courses
  • New product training
  • System updates and technology training
  • Staff training requirements

4. Financial Obligations

Referenced in multiple exhibits, likely including:

• Reporting Requirements

  • Weekly sales reports
  • Monthly financial statements
  • Annual financial audits (referenced in Exhibit J - Territory Operator's Financial Statements)
  • Tax documentation

• Payment Obligations

  • Royalty payment schedules
  • Advertising fund contributions
  • Technology fees
  • Insurance premium payments

5. Facility and Equipment Maintenance

Standard requirements typically include:

• Regular Maintenance

  • Equipment servicing schedules
  • Facility cleanliness standards
  • Preventive maintenance programs
  • Emergency repair response times

• Renovation and Remodeling

  • Periodic facility updates
  • Compliance with new design standards (see Exhibit C - Design Services Agreement)
  • Equipment replacement schedules
  • Signage maintenance

6. Technology and Systems

Referenced in exhibits:

• Point of Sale (POS) Systems

  • Required hardware and software
  • System updates and maintenance
  • Data reporting capabilities
  • Integration requirements

• Digital Platforms

  • Olo Participation (Exhibit N - Olo Participation Agreement)
  • Punchh Participation (Exhibit O - Punchh Participation Agreement)
  • Gift Card Systems (Exhibit E - Gift Card Participation Agreement)
  • Mobile ordering integration
  • Loyalty program participation

7. Marketing and Advertising

Expected obligations:

• National/Regional Advertising

  • Participation in system-wide campaigns
  • Contribution to advertising funds
  • Use of approved marketing materials
  • Brand standard compliance

• Local Marketing

  • Minimum local advertising spend
  • Community involvement requirements
  • Grand opening marketing
  • Promotional calendar compliance

8. Quality Control and Compliance

Standard requirements include:

• Product Standards

  • Approved supplier usage
  • Product specifications adherence
  • Recipe compliance
  • Portion control standards

• Inspections and Audits

  • Franchisor inspection cooperation
  • Health department compliance
  • Mystery shopper programs
  • Quality assurance audits

9. Insurance and Legal Compliance

Typical obligations:

• Insurance Coverage

  • General liability insurance
  • Property insurance
  • Workers' compensation
  • Business interruption insurance

• Legal Compliance

  • Local licensing requirements
  • Health and safety regulations
  • Employment law compliance
  • Environmental regulations

10. Intellectual Property Protection

Expected requirements:

• Trademark Usage

  • Proper use of Dairy Queen marks
  • Signage standards
  • Marketing material approval
  • Brand protection obligations

• Confidentiality

  • Protection of proprietary information
  • Operations manual security
  • Recipe and formula protection
  • Non-disclosure obligations

Referenced Agreements and Documents

The following exhibits contain additional obligations:

Estimated Time Commitment

Information Not Available: The FDD excerpt does not specify time commitment expectations. Prospective franchisees should request specific information about:

• Minimum weekly hours required from owner/operator
• Manager-on-duty requirements
• Absentee ownership possibilities
• Multi-unit operator considerations

Financial Reporting Requirements

Referenced but Not Detailed: Exhibit J references "Territory Operator's Financial Statements," suggesting financial reporting obligations exist. Prospective franchisees should clarify:

• Frequency of Reports

  • Daily sales reporting
  • Weekly financial summaries
  • Monthly P&L statements
  • Annual audited financials

• Format and Systems

  • Required accounting software
  • Reporting templates
  • Submission deadlines
  • Audit requirements

Consequences of Non-Compliance

Information Not Available: The provided FDD excerpt does not detail consequences for failing to meet obligations. Typical consequences in franchise agreements include:

Potential Penalties

• Written warnings
• Monetary fines
• Mandatory corrective action plans
• Increased inspection frequency
• Temporary suspension of rights
• Termination of franchise agreement

Cure Periods

Standard franchise agreements typically provide:

• Notice of default
• Opportunity to cure (timeframe varies by violation type)
• Escalating consequences for repeated violations
• Immediate termination rights for serious breaches

📋 Comprehensive Obligations Checklist

Pre-Opening Phase

• Complete all required training programs
• Obtain necessary licenses and permits
• Secure required insurance coverage
• Execute all required agreements (see Exhibits B-E, M-O)
• Complete facility construction/renovation per approved plans
• Install required equipment and technology systems
• Hire and train initial staff
• Complete pre-opening inspection
• Participate in grand opening marketing

Ongoing Operations

• Maintain minimum operating hours
• Submit required financial reports (frequency TBD)
• Pay all fees on time (royalties, advertising, technology)
• Maintain adequate staffing levels
• Conduct regular staff training
• Maintain equipment and facilities
• Comply with quality control standards
• Participate in system-wide programs
• Maintain required insurance coverage
• Cooperate with inspections and audits
• Protect confidential information
• Use approved suppliers
• Follow approved recipes and procedures
• Maintain brand standards
• Participate in technology platforms (Olo, Punchh, Gift Cards)

Periodic Requirements

• Annual financial statement submission
• Periodic facility renovations/updates
• Equipment replacement as required
• Renewal of licenses and permits
• Insurance policy renewals
• Technology system updates
• Refresher training completion
• Marketing plan submissions

Special Situations

• Obtain approval for any changes to operations
• Notify franchisor of ownership changes
• Comply with transfer requirements if selling
• Follow procedures for temporary closures
• Report any legal actions or disputes
• Maintain operations during emergencies

🚩 Red Flags and Concerns

Critical Missing Information

1. No Specific Details Available: The absence of Item 9 content in the provided FDD excerpt is concerning. This is a fundamental section that prospective franchisees must review carefully.

2. Multiple Complex Agreements: The FDD references numerous additional agreements (Exhibits B-E, M-O), each likely containing additional obligations. The cumulative burden of these requirements is unclear without full documentation.

3. Technology Platform Requirements: Three separate technology participation agreements (Olo, Punchh, Gift Cards) suggest significant ongoing technology obligations and potentially additional costs.

4. Financial Reporting Complexity: References to both Territory Operator and IDQ financial statements (Exhibits J and K) suggest a multi-layered reporting structure that may be complex.

Questions to Ask the Franchisor

Before proceeding, prospective franchisees should obtain and review:

1. Complete Item 9 documentation with specific obligations detailed
2. All referenced agreements (Exhibits B-E, M-O) to understand full scope of obligations
3. Specific time commitment requirements for owners and managers
4. Detailed financial reporting requirements including frequency and format
5. Technology system costs and requirements for all platforms
6. Consequences and cure periods for various types of non-compliance
7. Examples of typical violations and how they were handled
8. Support provided to help franchisees meet obligations
9. Inspection and audit procedures including frequency and scope
10. Renovation and remodeling requirements including typical costs and frequency

Practical Implications for Prospective Franchisees

What This Means for You

Without access to the complete Item 9 content, prospective franchisees cannot fully assess:

• Time Investment Required: How many hours per week must you or your manager dedicate to the business?
• Operational Complexity: How difficult will it be to meet all requirements?
• Financial Burden: What are the total costs of compliance beyond initial investment?
• Flexibility: How much autonomy do you have in running your business?
• Risk Exposure: What violations could result in termination?

Recommended Actions

1. Request Complete Documentation: Obtain the full FDD with all items clearly visible, particularly Item 9.

2. Review All Exhibits: Carefully read Exhibits B through O to understand all contractual obligations.

3. Speak with Current Franchisees: Contact franchisees listed in Exhibit F (Territory Operator's Subfranchisees) to understand real-world obligations.

4. Speak with Former Franchisees: Contact former franchisees listed in Exhibit G to understand why they left and whether obligations were manageable.

5. Consult Legal Counsel: Have a franchise attorney review all obligations before signing.

6. Create a Compliance Plan: Develop systems and procedures to ensure you can meet all requirements.

7. Assess Your Capabilities: Honestly evaluate whether you have the time, resources, and temperament to meet all obligations.

Comparison to Industry Standards

Information Not Available for Specific Comparison: Without the actual Item 9 content, a detailed comparison to other Dairy Queen franchises or quick-service restaurant franchises cannot be provided.

Typical QSR Franchise Obligations

For context, standard quick-service restaurant franchises typically require:

• Owner Time Commitment: 40-60 hours per week for single-unit operators
• Manager Requirements: Full-time certified manager if owner not present
• Operating Hours: 10-12 hours daily, 6-7 days per week
• Financial Reporting: Weekly sales, monthly P&L, annual audited statements
• Inspections: Quarterly franchisor visits, annual comprehensive audits
• Training: 4-6 weeks initial, ongoing annual requirements
• Technology Updates: Quarterly system updates, immediate security patches
• Renovation Cycles: Major remodel every 7-10 years, minor updates every 3-5 years

Summary and Key Takeaways

Critical Points

1. Item 9 Content Not Available: The most important information for this section is not visible in the provided FDD excerpt.

2. Multiple Agreement Layers: Obligations are spread across the Operating Agreement (Exhibit B) and at least six additional participation agreements.

3. Technology-Heavy System: Three separate technology platforms (Olo, Punchh, Gift Cards) indicate significant digital obligations.

4. Financial Reporting Required: References to financial statements suggest comprehensive reporting obligations.

5. Construction Standards: Design Services Agreement (Exhibit C) and Construction Consultation Agreement (Exhibit M) indicate detailed facility requirements.

Bottom Line

You cannot make an informed franchise decision without reviewing the complete Item 9 content. This section is legally required in all FDDs and contains essential information about your day-to-day obligations as a franchisee.

Action Required: Request the complete FDD with all items clearly visible, particularly Item 9, before proceeding with any franchise purchase decision. Do not sign any agreements or pay any fees until you have thoroughly reviewed and understood all franchisee obligations.

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Disclaimer: This analysis is based on limited information from the provided FDD excerpt. The absence of Item 9 content means that critical information about franchisee responsibilities and requirements is not available for review. Prospective franchisees must obtain and review the complete FDD, consult with legal and financial advisors, and speak with current and former franchisees before making any franchise investment decision.

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Dairy Queen of Montana / North Dakota LLC Franchise Training Programme (Item 11 - Part 2)

Information Availability Notice

Critical Finding: Item 11 training provisions are not visible in the provided FDD excerpt.

The FDD documentation provided contains only the following sections:

• Exhibit P: State Effective Dates
• Exhibit Q: Receipts (both franchisee and franchisor copies)

Item 11, which would contain comprehensive training programme details, is referenced in the document structure but the actual content is not included in the available pages. The FDD structure overview indicates that Item 11 "would contain franchisor assistance, advertising, computer systems, and training details (referenced in Exhibit L - Operations Manuals)," but this information is not visible in the provided excerpt.

What Should Be Included in Item 11

Based on FTC franchise disclosure requirements, Item 11 of a complete FDD should contain:

Required Training Information

• Training Programme Structure: Duration, location, and format of initial training
• Mandatory Attendees: Specification of who must complete training (owner, manager, employees)
• Training Curriculum: Detailed subjects and hours allocated to each topic
• Cost Allocation: Clear breakdown of expenses paid by franchisor vs. franchisee
• Travel and Accommodation: Responsibility for training-related expenses
• Ongoing Training: Requirements for refresher courses and continuing education
• Employee Training: Programmes available for staff members
• Delivery Methods: In-person, online, or hybrid training options
• Certification Requirements: Any testing or qualification standards
• Training Materials: Manuals, online resources, and support documentation

Referenced But Not Available

The FDD structure indicates that Exhibit L (Operations Manuals Tables of Contents) is included in the disclosure document, which typically contains training-related information. However, this exhibit is not visible in the provided pages.

Documents That May Contain Training Details

Based on the receipt acknowledgment, the following exhibits are part of the complete FDD and may contain training information:

Implications for Prospective Franchisees

What This Means

The absence of visible Item 11 content in this FDD excerpt creates significant information gaps for prospective franchisees:

Critical Questions That Cannot Be Answered

1. Training Duration: How many days or weeks of initial training are required?
2. Training Location: Where must franchisees travel for training?
3. Cost Burden: What are the estimated out-of-pocket expenses for training?
4. Time Commitment: How much time away from other business activities is required?
5. Ongoing Requirements: What continuing education obligations exist?
6. Employee Training: What support is provided for training staff members?
7. Failure Consequences: What happens if training requirements are not met?

Financial Planning Concerns

Without Item 11 information, prospective franchisees cannot accurately estimate:

• Travel costs to training locations
• Accommodation expenses during training periods
• Lost opportunity costs from time away from other work
• Additional staff costs if multiple people must attend
• Ongoing training expenses throughout the franchise term

Red Flags and Concerns

⚠️ Major Concern: The inability to review training provisions before making a franchise decision represents a significant information gap.

Specific Issues

1. Incomplete Due Diligence: Prospective franchisees cannot fully evaluate the franchise opportunity without training details
2. Budget Uncertainty: Initial investment estimates may be incomplete without training cost information
3. Time Commitment Unknown: Cannot plan for time away from current employment or business
4. Quality Assessment Impossible: Cannot evaluate the comprehensiveness or quality of training provided
5. Comparison Difficulty: Cannot compare training programmes with other franchise opportunities

Standard Industry Training Components

While specific Dairy Queen of Montana/North Dakota LLC training details are not available, typical Dairy Queen franchise training programmes in other territories generally include:

Common Training Topics (Industry Standard)

• Operations Management: Daily store operations, opening/closing procedures
• Food Safety and Preparation: Proper handling, storage, and preparation of DQ products
• Equipment Operation: Use and maintenance of specialized DQ equipment
• Customer Service: Brand standards for customer interaction
• Point of Sale Systems: Computer systems and transaction processing
• Inventory Management: Ordering, receiving, and inventory control
• Staff Management: Hiring, training, scheduling, and supervision
• Marketing and Promotion: Local store marketing and promotional execution
• Financial Management: Bookkeeping, reporting, and financial analysis
• Brand Standards: Compliance with DQ operational and quality standards

Note: These are typical components based on industry standards and other Dairy Queen territories, not confirmed details for DQ MT/ND specifically.

Recommended Actions for Prospective Franchisees

Before Signing Any Agreement

1. Request Complete Item 11: Specifically ask for the full text of Item 11 from the FDD
2. Review Exhibit L: Obtain and review the Operations Manuals Tables of Contents
3. Request Training Schedule: Ask for a detailed training calendar and timeline
4. Get Cost Estimates: Request written estimates of all training-related expenses
5. Speak with Current Franchisees: Ask existing franchisees about their training experiences (contact information should be in Exhibit F)
6. Review Operating Agreement: Examine Exhibit B for training obligations and requirements

Questions to Ask the Franchisor

Training Programme Structure

• What is the total duration of initial training?
• Where is training conducted?
• Is training conducted in-person, online, or hybrid?
• How many people from my organization must attend?
• What is the typical class size?

Training Costs

• What specific costs does the franchisor cover?
• What expenses am I responsible for?
• What are typical travel and accommodation costs?
• Are there any training fees beyond the initial franchise fee?
• What are the costs for additional training attendees?

Training Content

• What topics are covered in initial training?
• How many hours are dedicated to each subject?
• What hands-on experience is provided?
• Are training materials provided?
• Is there a certification or testing requirement?

Ongoing Training

• What ongoing training is required?
• How often must I attend refresher training?
• Are there costs for ongoing training?
• What online training resources are available?
• How are employees trained?

Training Support

• What support is available after initial training?
• Is there a field support team?
• How can I access additional training if needed?
• What happens if I don't pass training requirements?

Training Timeline Considerations

Typical Franchise Training Timeline (General Industry Standard)

Important: The above timeline represents typical industry practices. Actual DQ MT/ND training timeline is not available in the provided FDD excerpt.

Training Quality Assessment Framework

Factors to Evaluate (When Information Becomes Available)

Comprehensiveness

• ✓ Does training cover all aspects of business operations?
• ✓ Is sufficient time allocated to each topic?
• ✓ Are both theoretical and practical components included?
• ✓ Does training prepare franchisees for day-one operations?

Support Structure

• ✓ Is ongoing training and support provided?
• ✓ Are field representatives available for assistance?
• ✓ Can franchisees access training materials after initial training?
• ✓ Is there a system for training new employees?

Quality Indicators

• ✓ Are trainers experienced operators or corporate staff?
• ✓ Is training conducted at operating locations?
• ✓ Are training materials professionally developed?
• ✓ Is there a structured curriculum with clear objectives?

Cost Reasonableness

• ✓ Are training costs reasonable compared to industry standards?
• ✓ Is the cost allocation between franchisor and franchisee fair?
• ✓ Are there hidden or unexpected training expenses?

Assessment Status: Cannot be completed without Item 11 information.

Comparison with Industry Standards

Training Programme Benchmarks

Without specific DQ MT/ND training information, prospective franchisees should compare the eventual training details against these industry benchmarks:

Relationship to Other FDD Items

Training Costs and Initial Investment

Training-related expenses should be reflected in:

• Item 5: Initial franchise fee (may include training)
• Item 7: Estimated initial investment (should include training travel costs)

Verification Needed: Cross-reference Item 11 training costs with Items 5 and 7 when reviewing the complete FDD.

Training and Ongoing Obligations

Training requirements connect to:

• Item 9: Franchisee obligations
• Item 15: Participation requirements
• Item 17: Renewal and termination (training compliance may affect these)

Training and Operations Support

Training provisions relate to:

• Item 11 (Part 1): Pre-opening assistance
• Item 11 (Part 3): Ongoing operational support
• Exhibit L: Operations Manuals (training reference materials)

Territory Operator Context

Understanding the DQ MT/ND Structure

Dairy Queen of Montana / North Dakota LLC operates as a Territory Operator (also called a "subfranchiser" in some systems), which means:

1. Dual Role: DQ MT/ND is both a franchisee of American Dairy Queen (ADQ) and a franchisor to subfranchisees
2. Training Responsibility: DQ MT/ND may provide training directly or coordinate training through ADQ
3. Local Focus: Training may be more regionally focused than corporate DQ training

Training Implications

This structure may affect training in several ways:

Potential Advantages

• More localized training relevant to Montana/North Dakota markets
• Closer relationship with training providers
• Regional support network of fellow franchisees
• Territory operator may have direct operational experience

Potential Concerns

• Training quality depends on territory operator's resources
• May have fewer training facilities than corporate system
• Territory operator's financial stability affects training support
• Smaller system may have less developed training infrastructure

Critical: Review Exhibit J (Territory Operator's Financial Statements) to assess DQ MT/ND's financial capacity to provide quality training and ongoing support.

Legal and Regulatory Considerations

State-Specific Training Requirements

The FDD indicates registration or filing in multiple states:

Compliance Verification

Prospective franchisees should verify that:

• Training provisions comply with state franchise laws
• All required training disclosures are included in Item 11
• Training costs are accurately reflected in investment estimates
• Training obligations are clearly stated in the Operating Agreement

Financial Performance and Training Connection

Training as Investment Indicator

The quality and comprehensiveness of training often correlates with:

• Franchisee success rates: Better training typically leads to better performance
• System maturity: Established systems usually have more developed training
• Franchisor commitment: Investment in training shows franchisor support

Questions About Training ROI

When Item 11 becomes available, evaluate:

1. Does the training programme justify the franchise investment?
2. Will training adequately prepare me for successful operations?
3. Is ongoing training sufficient to keep pace with industry changes?
4. Does training support match the level of royalties and fees paid?

Note: Review Item 19 (Financial Performance Representations) if available to understand potential returns relative to training investment.

Technology and Training Delivery

Modern Training Methods

Contemporary franchise training increasingly includes:

• Learning Management Systems (LMS): Online training platforms
• Video Training: On-demand instructional videos
• Virtual Reality: Immersive training experiences
• Mobile Apps: Training resources accessible on smartphones
• Webinars: Live online training sessions
• E-Learning Modules: Self-paced online courses

Questions About Training Technology

Ask DQ MT/ND:

• What online training resources are available?
• Is there a learning management system?
• Can training be accessed remotely?
• Are training materials updated digitally?
• What technology is used for ongoing training?

Employee Training Considerations

Staff Training Needs

Beyond owner/operator training, consider:

Management Training

• How are managers trained?
• Is there a management certification programme?
• What is the cost for management training?
• How long does management training take?

Employee Training

• What training materials are provided for hourly employees?
• Is there a structured employee training programme?
• Are training videos or manuals available?
• Who is responsible for training new hires?

Ongoing Staff Development

• Are there career development programmes?
• Is advanced training available for key employees?
• How are employees trained on new products or procedures?

Budget Consideration: Factor in the cost of employee wages during training time.

Training and Multi-Unit Development

Considerations for Multi-Unit Franchisees

If planning to operate multiple locations:

Training Efficiency

• Can one person attend training for multiple units?
• Are there volume discounts for training multiple managers?
• Is train-the-trainer certification available?
• How is training coordinated across multiple openings?

Scalability

• Does the training programme support multi-unit growth?
• Are there area representative or multi-unit operator programmes?
• What additional training is required for multi-unit management?

Franchise Seller Training Background

Franchise Sellers Listed

The FDD identifies the following franchise sellers:

1. Inoshi Denizen

   • Address: 310 E. 46th Street, Unit 5J, New York, NY 10017
   • Phone: (917) 536-6291
   • Email: i_denizen@dqmtnd.com

2. James Brown

   • Address: P.O. Box 9137, Missoula, MT 59807
   • Phone: (406) 218-9507
   • Email: James_Brown@dqmtnd.com

Questions for Franchise Sellers

When discussing training with these representatives:

• What is your personal experience with the training programme?
• Have you completed the training yourself?
• What feedback have you received from franchisees about training?
• What aspects of training do franchisees find most valuable?
• What training challenges should I anticipate?

Note: Item 2 (Business Experience) would contain detailed backgrounds of these individuals, but this information is not visible in the provided FDD excerpt.

Documentation and Record-Keeping

Training Documentation to Request

Before signing the franchise agreement:

1. Training Schedule: Complete calendar of training sessions
2. Training Manual: Table of contents or sample materials
3. Cost Breakdown: Detailed estimate

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Dairy Queen of Montana / North Dakota LLC Vendor Requirements & Supply Chain (Item 8)

⚠️ Critical Information Gap

Item 8 of the Franchise Disclosure Document (FDD) is not visible in the provided excerpt. This section, which details "Restrictions on Sources of Products and Services," is a critical component for understanding the supply chain requirements, vendor relationships, and purchasing obligations for Dairy Queen franchisees in Montana and North Dakota.

What Item 8 Should Contain

Based on standard FDD requirements, Item 8 should disclose:

• Required suppliers and products that franchisees must purchase
• Approved supplier lists and qualification criteria
• Franchisor-owned or affiliated supply companies
• Rebates, commissions, and other revenue the franchisor receives from suppliers
• Pricing controls and transparency mechanisms
• Quality specifications for products and services
• Purchasing flexibility and restrictions
• Estimated impact on cost of goods sold (COGS)

Why This Information Matters

Impact on Your Business Operations

The vendor and supply chain requirements directly affect:

1. Profit Margins: Restricted supplier options may limit your ability to negotiate better pricing
2. Operational Flexibility: Required suppliers may have specific delivery schedules or minimum order requirements
3. Quality Control: Approved supplier lists ensure brand consistency but may limit alternatives
4. Cash Flow: Payment terms with required suppliers impact working capital needs
5. Hidden Costs: Franchisor rebates from suppliers may indicate marked-up pricing

Key Questions to Ask the Franchisor

Since Item 8 is not available in this excerpt, prospective franchisees should specifically request and review this section, asking:

Standard Dairy Queen Supply Chain Structure

While specific details for DQ MT/ND are not available in this excerpt, typical Dairy Queen franchise systems generally include:

Common Required Products

• Dairy Products: Soft-serve mix, ice cream products (typically proprietary formulations)
• Food Products: Burgers, chicken, hot dogs, and other menu items meeting brand specifications
• Branded Packaging: Cups, containers, bags with Dairy Queen branding
• Point-of-Sale Materials: Menu boards, promotional materials
• Equipment: Soft-serve machines, freezers, and other specialized equipment

Typical Supply Chain Categories

Red Flags to Watch For

When you obtain and review the complete Item 8, be alert for:

🚩 High-Risk Indicators

1. Franchisor-Owned Suppliers Without Pricing Transparency

   • If DQ MT/ND owns required suppliers but doesn't disclose markup percentages
   • No competitive pricing comparisons available

2. Excessive Rebates Without Benefit Sharing

   • Franchisor receives substantial rebates from suppliers
   • These rebates are not passed through to franchisees or used for system-wide benefits

3. Single-Source Requirements

   • Only one approved supplier for critical products
   • No backup suppliers or alternative sourcing options

4. Vague Quality Specifications

   • Requirements that only the franchisor's preferred suppliers can meet
   • No objective standards for alternative supplier approval

5. Restricted Local Sourcing

   • Inability to purchase common items (produce, dairy, bread) from local suppliers
   • Even when local options meet quality standards and offer better pricing

✅ Positive Indicators

1. Multiple Approved Suppliers

   • Competitive options for most product categories
   • Clear criteria for adding new approved suppliers

2. Transparent Rebate Disclosure

   • Specific dollar amounts or percentages disclosed
   • Rebates used for system-wide marketing or technology improvements

3. Volume Discount Programs

   • Cooperative purchasing programs that benefit franchisees
   • Negotiated pricing based on system-wide volume

4. Reasonable Approval Process

   • Clear standards for alternative supplier approval
   • Timely review process (30-60 days typical)

5. Local Sourcing Flexibility

   • Ability to source non-proprietary items locally
   • Support for building community relationships

Financial Impact Analysis Framework

Estimating Supply Chain Costs

Without specific Item 8 data, use this framework when the information becomes available:

Calculating True Cost of Restrictions

When reviewing Item 8, calculate:

True Supply Cost = Base Product Cost + Delivery Fees + (Franchisor Rebate ÷ Franchisees) + Restricted Sourcing Premium

Example Calculation (hypothetical):

• Base soft-serve mix cost: $45/case
• Delivery fee: $3/case
• Franchisor rebate (not shared): $5/case
• Restricted sourcing premium vs. market: $2/case
• True cost to franchisee: $55/case
• Market alternative (if available): $47/case
• Additional cost due to restrictions: $8/case or 17% premium

Comparison with Industry Standards

How Dairy Queen Typically Compares

Operational Considerations

Supply Chain Management Requirements

Franchisees should prepare for:

1. Inventory Management

   • Storage requirements for required products
   • Shelf life considerations for dairy products
   • Minimum order quantities from approved suppliers

2. Ordering Systems

   • Required technology platforms for ordering
   • Ordering frequency requirements
   • Lead times for delivery

3. Quality Control

   • Temperature monitoring for dairy products
   • Product rotation procedures
   • Waste management for expired products

4. Supplier Relationships

   • Account setup with required suppliers
   • Credit terms and payment schedules
   • Dispute resolution procedures

Geographic Considerations for Montana/North Dakota

Regional Supply Chain Challenges

Operating in Montana and North Dakota presents unique considerations:

Questions Specific to MT/ND Territory

Ask DQ MT/ND:

• Where are the primary distribution centers for this territory?
• What are typical delivery schedules for rural vs. urban locations?
• Are there additional freight charges for remote locations?
• How do weather-related delivery delays get handled?
• Are there regional cooperatives or buying groups among franchisees?

Technology and Supply Chain Integration

Digital Ordering and Inventory Systems

Modern franchise systems typically require:

• Point-of-Sale (POS) Integration: Automatic inventory tracking
• Online Ordering Platforms: Direct supplier ordering systems
• Inventory Management Software: Real-time stock monitoring
• Supply Chain Analytics: Usage patterns and forecasting

Note: The FDD references technology agreements (Exhibit N - Olo Participation Agreement, Exhibit O - Punchh Participation Agreement) which may integrate with supply chain management.

Action Steps for Prospective Franchisees

Before Signing Any Agreement

1. Obtain Complete Item 8

   • Request the full FDD with all items clearly visible
   • Verify you have the most current version (this excerpt dated July 23, 2024)

2. Conduct Supplier Research

   • Contact required suppliers directly for pricing
   • Compare with market alternatives where possible
   • Understand payment terms and credit requirements

3. Talk to Current Franchisees

   • Ask about actual supply costs vs. projections
   • Inquire about supplier reliability and service
   • Learn about any hidden costs or challenges
   • See Exhibit F for Territory Operator's Subfranchisees contact list

4. Calculate Total Supply Chain Costs

   • Include all fees, delivery charges, and premiums
   • Factor in storage and inventory carrying costs
   • Compare with Item 19 financial performance data (if available)

5. Review Related Agreements

   • Operating Agreement (Exhibit B) for supply requirements
   • Any supply or distribution agreements referenced
   • Technology agreements that may affect ordering

6. Negotiate Where Possible

   • Request flexibility for local sourcing of non-proprietary items
   • Ask about volume discounts or cooperative buying programs
   • Clarify approval process for alternative suppliers

Comparison Table: What to Look For

Required vs. Recommended Suppliers (Template)

This table should be completed once Item 8 is available:

Franchisor Revenue from Supply Chain (Template)

This table should be completed once Item 8 is available:

Impact on Profit Margins

Cost Structure Analysis

Understanding supply chain costs is critical for projecting profitability:

Typical QSR Cost Structure:

• Food & Paper Costs: 28-35% of revenue
• Labor: 25-30% of revenue
• Occupancy: 8-12% of revenue
• Other Operating: 10-15% of revenue
• Operating Profit Margin: 10-20%

Impact of Supply Restrictions:

• A 3% increase in COGS due to restricted suppliers reduces a 15% operating margin to 12%
• This represents a 20% reduction in profit dollars
• On $800,000 annual revenue: $24,000 less profit annually

Break-Even Sensitivity

Higher supply costs directly impact:

• Break-even point: Higher fixed costs mean more sales needed to break even
• Cash flow: Less margin means tighter working capital
• ROI timeline: Longer payback period on initial investment
• Competitive pricing: Less flexibility to compete on price

Regulatory and Compliance Considerations

State-Specific Requirements

Montana and North Dakota may have specific regulations affecting:

• Food safety standards: May require certain supplier certifications
• Labeling requirements: State-specific menu labeling laws
• Local sourcing incentives: Programs encouraging local purchasing
• Sales tax: Implications for out-of-state supplier purchases

Franchise Law Implications

Both states have franchise registration requirements (see Exhibit P - State Effective Dates):

• North Dakota: Registration required - effective date [to be determined]
• Montana: [Status not specified in excerpt]

These states may provide additional protections regarding:

• Supplier requirement disclosures
• Franchisor rebate transparency
• Right to source from alternative suppliers

Best Practices for Supply Chain Management

Once You're Operating

1. Build Strong Supplier Relationships

   • Communicate regularly with supplier representatives
   • Understand their capabilities and limitations
   • Negotiate payment terms that support cash flow

2. Optimize Inventory

   • Use POS data to forecast demand accurately
   • Minimize waste through proper rotation
   • Balance storage costs with ordering frequency

3. Monitor Costs Continuously

   • Track COGS as percentage of revenue monthly
   • Compare with other franchisees in the system
   • Identify and address cost variances quickly

4. Leverage System Resources

   • Participate in franchisee advisory councils
   • Share best practices with other operators
   • Advocate for better supplier terms collectively

5. Stay Compliant

   • Follow all franchisor requirements precisely
   • Document any approved deviations
   • Maintain quality standards consistently

Conclusion and Recommendations

Critical Next Steps

Before proceeding with this franchise opportunity:

1. ✅ Obtain and thoroughly review the complete Item 8 from the FDD
2. ✅ Request specific supplier pricing for all required products
3. ✅ Calculate total supply chain costs as percentage of projected revenue
4. ✅ Interview current franchisees about supply chain experiences (see Exhibit F)
5. ✅ Compare costs with industry benchmarks and alternative franchise systems
6. ✅ Consult with a franchise attorney about supply restrictions
7. ✅ Have an accountant review the financial impact on projected profitability

Key Takeaway

Supply chain requirements and vendor restrictions can significantly impact your profitability and operational flexibility. The absence of Item 8 in this FDD excerpt represents a critical information gap that must be filled before making any franchise decision.

Do not sign any agreements or make any payments until you have:

• Reviewed complete Item 8 disclosures
• Validated costs with current franchisees
• Calculated the true financial impact on your projected returns
• Confirmed you can operate profitably within the supply chain constraints

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Additional Resources

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Dairy Queen of Montana / North Dakota LLC Franchise Brand Strength & Market Position

Overview

Information Limitation Notice: The provided FDD excerpt for Dairy Queen of Montana / North Dakota LLC contains primarily administrative pages (state effective dates, receipts, and exhibit listings) and does not include the substantive Items 1-19 that would typically contain detailed information about brand strength, market positioning, marketing programs, and competitive advantages. This analysis is therefore limited by the available documentation.

What We Know from the FDD

Based on the available FDD documentation dated July 23, 2024, we can confirm:

Organizational Structure

• Franchisor: Dairy Queen of Montana / North Dakota LLC (DQ MT/ND)
• Territory: Montana and North Dakota states
• Parent Company: References to "ADQ" (American Dairy Queen) and "IDQ" (International Dairy Queen) in exhibits suggest this is a regional territory operator within the larger Dairy Queen system
• FDD Issue Date: July 23, 2024

Geographic Presence

The franchise operates under state registration requirements in multiple jurisdictions:

Franchise Network Structure

The FDD references multiple exhibits that indicate an established franchise network:

• Exhibit F: Territory Operator's Subfranchisees (current franchisees)
• Exhibit G: Territory Operator's Former Subfranchisees
• Exhibit H: ADQ's Franchisees
• Exhibit I: ADQ's Former Franchisees

This structure suggests DQ MT/ND operates as a sub-franchisor or territory operator under the larger American Dairy Queen Corporation system.

Brand Recognition & National Context

Dairy Queen Brand Heritage

While specific brand metrics are not available in the provided FDD excerpt, Dairy Queen as a national brand has:

• Established History: Dairy Queen is one of America's oldest and most recognized quick-service restaurant brands
• National Footprint: Operates across all 50 states and internationally
• Product Recognition: Known for signature products including Blizzard treats, soft-serve ice cream, and fast-food offerings

Regional Territory Operation

DQ MT/ND operates as a territory operator for Montana and North Dakota, which means:

• Franchisees receive the benefit of the national Dairy Queen brand
• Local territory management provides regional support
• Access to national marketing campaigns and brand development
• Regional adaptation of operations to local market conditions

Market Positioning

Information Not Available: The provided FDD excerpt does not contain Item 1 (The Franchisor and Any Parents, Predecessors, and Affiliates) or Item 11 (Franchisor's Assistance, Advertising, Computer Systems, and Training) which would detail:

• Specific market positioning strategy
• Price point positioning (premium, mid-market, or budget)
• Target customer demographics
• Competitive positioning statements

Inferred Market Position

Based on the Dairy Queen brand nationally, the franchise typically positions as:

• Mid-market quick-service restaurant
• Dual concept: Ice cream/treats and fast food
• Family-oriented dining experience
• Value-focused with premium product options

Marketing & Advertising

Information Not Available: Item 11 of the FDD, which would contain detailed information about marketing and advertising programs, is not included in the provided excerpt.

Known Marketing Structure Elements

From the exhibit references, we can identify:

1. Gift Card Program: Exhibit E references a Gift Card Participation Agreement, indicating participation in a systemwide gift card program
2. Digital Ordering: Exhibit N references an "Olo Participation Agreement" (Olo is a digital ordering platform)
3. Loyalty Program: Exhibit O references a "Punchh Participation Agreement" (Punchh is a customer loyalty and engagement platform)

These elements indicate investment in:

• Digital customer engagement
• Omnichannel ordering capabilities
• Customer retention programs
• Modern marketing technology infrastructure

Technology & Digital Presence

Confirmed Technology Platforms

Positive Indicators:

• Investment in modern digital ordering infrastructure
• Customer loyalty program implementation
• Multi-channel payment options

Analysis: The presence of these technology agreements suggests the franchise system is adapting to modern consumer expectations for digital ordering, mobile engagement, and loyalty rewards.

Competitive Advantages

Information Severely Limited: Without access to Items 1, 11, 13, and 14 of the FDD, specific competitive advantages cannot be definitively stated.

Potential Advantages (Based on Structure)

1. National Brand Recognition: Association with the Dairy Queen national brand
2. Dual Revenue Streams: Ice cream/treats and food service
3. Established Supply Chain: References to IDQ financial statements suggest established supplier relationships
4. Regional Support: Territory operator structure provides localized support
5. Technology Integration: Modern digital ordering and loyalty platforms

Structural Considerations

• Territory Operator Model: May provide more responsive regional support than direct corporate franchising
• Established Network: Presence of current franchisee lists suggests proven operational model
• Multi-State Registration: Compliance in multiple jurisdictions indicates operational maturity

Customer Satisfaction Indicators

Information Not Available: The provided FDD excerpt does not contain Item 19 (Financial Performance Representations) or Item 20 details (Outlets and Franchisee Information) which might include customer satisfaction data, reviews, or performance metrics.

Industry Awards & Recognition

Information Not Available: The provided FDD excerpt does not contain information about awards, recognition, or media coverage.

Financial Strength Indicators

Available Financial Information

The FDD references financial statements in two exhibits:

• Exhibit J: Territory Operator's Financial Statements (DQ MT/ND)
• Exhibit K: IDQ's Financial Statements (International Dairy Queen)

Note: The actual financial statements are not included in the provided excerpt, so specific financial strength metrics cannot be analyzed.

What This Indicates

• Transparency: Financial statements are provided to prospective franchisees
• Parent Company Backing: IDQ financial statements suggest corporate support structure
• Due Diligence Opportunity: Franchisees can review financial health before investing

SWOT Analysis

Based on the limited information available in the provided FDD excerpt:

Competitive Comparison

Information Not Available: Without access to Item 1, Item 19 (Financial Performance Representations), or detailed operational information, a comprehensive competitive comparison cannot be provided.

General QSR Ice Cream/Treat Segment Competitors

Note: This comparison is based on general industry knowledge, not specific data from the provided FDD excerpt.

Brand Value Assessment for Franchisees

What Franchisees Receive (Based on Available Information)

Confirmed Benefits

1. National Brand Association: Use of Dairy Queen trademarks and brand identity
2. Technology Platforms: Access to Olo ordering system, Punchh loyalty program, and gift card system
3. Regional Support: Territory operator providing localized assistance
4. Operational Systems: Operations manuals (referenced in Exhibit L)
5. Design Services: Design Services Agreement (Exhibit C)
6. Construction Support: Construction Consultation Services Agreement (Exhibit M)

Unknown Elements (Not in Provided Excerpt)

• Initial franchise fee amount
• Ongoing royalty rates
• Advertising fund contributions
• Training program details
• Territory protection specifics
• Marketing support level
• Supply chain pricing advantages

Value Proposition Analysis

Positive Indicators:

• ✓ Established brand with national recognition
• ✓ Modern technology infrastructure
• ✓ Comprehensive support agreements (design, construction)
• ✓ Multi-state operational capability
• ✓ Dual revenue stream model

Concerns/Unknowns:

• ⚠ Limited FDD information prevents full value assessment
• ⚠ Territory operator structure adds intermediary layer
• ⚠ Regional climate challenges (Montana/North Dakota winters)
• ⚠ Financial performance data not available in excerpt
• ⚠ Specific fee structures not disclosed in provided pages

Red Flags & Considerations

Documentation Concerns

1. Limited FDD Content: The provided excerpt contains only administrative pages, making comprehensive analysis impossible
2. Pending Registrations: Multiple states show pending registration status as of July 2024
3. Former Franchisee Lists: Exhibits G and I reference former franchisees, which warrants investigation

Questions for Prospective Franchisees

Before proceeding, prospective franchisees should obtain and review:

• ✓ Item 3: Litigation history
• ✓ Item 4: Bankruptcy history
• ✓ Item 5: Initial franchise fees
• ✓ Item 6: Other fees (royalties, advertising, etc.)
• ✓ Item 7: Estimated initial investment
• ✓ Item 19: Financial performance representations
• ✓ Item 20: Complete franchisee contact information
• ✓ Exhibits G & I: Reasons for franchisee departures
• ✓ Exhibits J & K: Actual financial statements

Due Diligence Recommendations

1. Contact Current Franchisees: Use Exhibit F to contact current territory operator subfranchisees
2. Interview Former Franchisees: Use Exhibit G to understand why franchisees left the system
3. Review Financial Statements: Carefully analyze Exhibits J and K when provided
4. Understand Territory Operator Model: Clarify the relationship between DQ MT/ND, ADQ, and IDQ
5. Assess Regional Market: Evaluate Montana/North Dakota market conditions and seasonality
6. Technology Costs: Determine costs associated with Olo, Punchh, and other required systems
7. Compare to Direct DQ Franchises: Understand differences between territory operator and direct corporate franchises

Market Position Summary

Overall Assessment

Brand Strength: Based on the Dairy Queen national brand, the franchise benefits from strong brand recognition, though specific regional performance data is not available in the provided FDD excerpt.

Market Position: Dairy Queen typically occupies a mid-market position in the quick-service restaurant segment with dual focus on ice cream treats and food service.

Technology Adoption: The presence of modern digital ordering (Olo) and loyalty (Punchh) platforms indicates investment in contemporary customer engagement tools.

Operational Maturity: Multi-state registration and established franchisee network suggest operational experience, though the territory operator model adds complexity.

Critical Information Gap

Important Notice: This analysis is severely limited by the provided FDD excerpt, which contains only administrative pages. A complete brand strength and market position assessment requires:

• Items 1-19 of the FDD
• Financial performance representations
• Complete franchisee lists and contact information
• Detailed fee structures
• Marketing and support program details
• Litigation and bankruptcy history

Recommendation: Prospective franchisees should request and thoroughly review the complete FDD, including all 23 Items and associated exhibits, before making any investment decision. The limited information available in this excerpt is insufficient for a comprehensive brand value assessment.

Practical Implications for Franchisees

Brand Value Considerations

1. National vs. Regional: You're buying into a national brand (Dairy Queen) through a regional territory operator (DQ MT/ND), which may affect support, fees, and operational control.

2. Technology Requirements: Expect to participate in multiple technology platforms (Olo, Punchh, gift cards), which will involve setup costs and ongoing fees not detailed in the provided excerpt.

3. Geographic Limitations: Montana and North Dakota present unique challenges including:

   • Harsh winter weather affecting foot traffic
   • Rural market characteristics
   • Seasonal revenue fluctuations
   • Labor availability in smaller markets

4. Dual Concept Operations: Operating both ice cream/treats and food service requires:

   • More complex inventory management
   • Broader equipment needs
   • More extensive training
   • Potentially higher initial investment

Next Steps for Due Diligence

To properly assess brand value and market position:

1. Request Complete FDD: Obtain all 23 Items with complete exhibits
2. Franchisee Validation: Contact at least 10-15 current franchisees from Exhibit F
3. Former Franchisee Interviews: Speak with former franchisees from Exhibit G to understand exit reasons
4. Financial Analysis: Review complete financial statements and Item 19 performance data
5. Market Research: Conduct independent market analysis for your specific location
6. Legal Review: Have an experienced franchise attorney review all documents
7. Competitive Analysis: Visit competing locations in your target market
8. Seasonal Planning: Develop financial projections accounting for seasonal variations

Investment Decision Framework

Do Not Proceed Without:

• Complete FDD with all Items 1-23
• Financial performance representations (Item 19)
• Validation with current franchisees
• Understanding of total investment and fee structure
• Independent market feasibility study
• Professional legal and financial advice

The limited information in the provided FDD excerpt is insufficient to make an informed investment decision regarding brand strength and market position.

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Dairy Queen of Montana / North Dakota LLC Franchise Growth Trends & System Health

Data Availability and Limitations

Critical Note: The provided FDD excerpt for Dairy Queen of Montana / North Dakota LLC does not contain Item 20 (Outlets and Franchisee Information) or historical unit count data necessary for comprehensive growth trend analysis. The document references several exhibits that would typically contain this information:

• Exhibit F: Territory Operator's Subfranchisees
• Exhibit G: Territory Operator's Former Subfranchisees
• Exhibit H: ADQ's Franchisees
• Exhibit I: ADQ's Former Franchisees

However, the actual content of these exhibits is not included in the provided excerpt, making it impossible to provide specific historical growth data, unit counts, or detailed trend analysis.

What We Know About the System Structure

Organizational Framework

Dairy Queen of Montana / North Dakota LLC operates as a territory operator (sub-franchisor) within the larger Dairy Queen system. This creates a unique three-tier structure:

1. International Dairy Queen (IDQ) - Parent franchisor
2. DQ MT/ND LLC - Territory operator for Montana and North Dakota
3. Individual franchisees - Sub-franchisees operating under DQ MT/ND

This structure is evidenced by:

• References to "Territory Operator's Subfranchisees" (Exhibit F)
• References to "Territory Operator's Former Subfranchisees" (Exhibit G)
• Separate financial statements for both the Territory Operator (Exhibit J) and IDQ (Exhibit K)

Geographic Scope

The franchise system operates exclusively in:

• Montana
• North Dakota

This represents a limited geographic footprint compared to the broader Dairy Queen system, which operates nationally and internationally.

Current System Status (As of July 2024)

FDD Issuance Date

• Current FDD Date: July 23, 2024
• Previous FDD Reference: South Dakota effective date of December 3, 2023

This indicates the franchisor maintains active registration and updates its disclosure documents regularly, suggesting ongoing franchise sales activity.

State Registration Status

The system maintains active franchise registrations or filings in multiple states:

Analysis: The multi-state registration effort suggests:

• Active expansion or recruitment beyond Montana and North Dakota
• Compliance with franchise registration states
• Investment in maintaining legal franchise sales capability
• Potential for growth into adjacent markets

Franchise Sales Infrastructure

Active Franchise Sellers

The FDD identifies two active franchise sellers:

1. Inoshi Denizen

   • Location: 310 E. 46th Street, Unit 5J, New York, NY 10017
   • Phone: (917) 536-6291
   • Email: i_denizen@dqmtnd.com

2. James Brown

   • Location: P.O. Box 9137, Missoula, MT 59807
   • Phone: (406) 218-9507
   • Email: James_Brown@dqmtnd.com

Positive Indicators:

• Two dedicated franchise sellers suggests active recruitment
• Geographic diversity (New York and Montana) indicates broader reach
• Professional contact infrastructure in place

System Health Indicators

Positive Signs

✅ Active FDD Updates: The July 2024 FDD issuance demonstrates ongoing franchise sales activity and regulatory compliance

✅ Multi-State Registration: Efforts to register in Minnesota, New York, North Dakota, and Washington indicate expansion ambitions

✅ Dual Financial Statements: Separate financial statements for both Territory Operator (Exhibit J) and parent company IDQ (Exhibit K) suggest financial transparency

✅ Comprehensive Agreement Structure: Multiple exhibits covering various operational agreements (Gift Card, Olo, Punchh participation) indicate system modernization and technology integration

✅ Professional Infrastructure: Dedicated franchise sellers and organized documentation suggest professional operations

Areas of Concern

⚠️ Limited Data Transparency: The absence of Item 20 data in the provided excerpt prevents verification of:

• Total unit counts
• Opening and closing rates
• Historical growth trends
• Franchisee turnover rates

⚠️ Regional Limitation: Operating exclusively in Montana and North Dakota represents:

• Limited geographic diversification
• Exposure to regional economic conditions
• Smaller total addressable market compared to national franchisors

⚠️ Territory Operator Model: The sub-franchisor structure creates:

• Additional layer between franchisee and parent company
• Potential for conflicting interests
• Dependence on Territory Operator's financial health

Technology and Modernization Initiatives

The FDD references several technology participation agreements, indicating system modernization efforts:

Digital Integration Programs

Analysis: These technology integrations suggest:

• Investment in digital customer experience
• Alignment with broader Dairy Queen system initiatives
• Competitive positioning for modern consumer expectations
• Potential for improved unit economics through digital channels

Expansion Strategy Analysis

Current Registration Markets

Based on the state effective dates, DQ MT/ND is pursuing or maintaining franchise registration in:

Primary Territory:

• Montana (home market)
• North Dakota (home market)

Adjacent/Expansion Markets:

• South Dakota (active registration as of December 3, 2023)
• Minnesota (pending)
• Washington (pending)

Non-Adjacent Market:

• New York (pending)

Strategic Implications

Logical Expansion Pattern:

• South Dakota and Minnesota represent natural geographic expansion from Montana/North Dakota
• Washington registration may indicate Pacific Northwest expansion plans
• New York registration is unusual for a regional operator and may indicate:
  • Recruitment of out-of-state investors
  • Franchise seller location (Inoshi Denizen is based in New York)
  • Potential for non-traditional franchise development

Company-Owned vs. Franchised Units

Information Not Available: The provided FDD excerpt does not contain data on:

• Number of company-owned units
• Number of franchised units
• Historical ratio changes
• Corporate store strategy

This information would typically be found in Item 20, which is referenced but not included in the provided excerpt.

Market Saturation Analysis

Geographic Considerations

Montana Market:

• State population: ~1.1 million (2023 estimate)
• Rural/small city market characteristics
• Limited population density
• Seasonal tourism impact in certain areas

North Dakota Market:

• State population: ~779,000 (2023 estimate)
• Oil industry economic influence
• Extreme seasonal weather considerations
• Limited major metropolitan areas

Saturation Risk Assessment

Moderate to Low Saturation Risk:

• Combined market population under 2 million
• Limited number of major cities
• Rural market characteristics typically support fewer units
• Dairy Queen brand has strong rural/small-town appeal

Market Capacity Constraints:

• Small total addressable market limits total unit potential
• Economic dependence on agriculture, energy, and tourism
• Population growth rates below national average
• Weather seasonality impacts sales

Pipeline and Development Activity

Evidence of Active Development

The FDD structure indicates ongoing franchise development through:

1. Recent FDD Updates: July 2024 issuance suggests active sales cycle
2. Multiple Franchise Sellers: Two active sellers indicate recruitment efforts
3. State Registration Expansion: Pending registrations in multiple new states
4. Comprehensive Documentation: Updated agreements and exhibits suggest active system

Development Constraints

Information Not Available:

• Number of franchises in development
• Signed but not yet opened locations
• Development agreements or area development commitments
• Projected opening timeline for new units

This information would typically be disclosed in Item 20, Table 5.

Financial Health Indicators

Available Financial Information

The FDD references financial statements for:

1. Territory Operator (DQ MT/ND) - Exhibit J
2. International Dairy Queen (IDQ) - Exhibit K

Note: The actual financial statements are not included in the provided excerpt, preventing specific financial analysis.

What Financial Statements Would Reveal

Complete financial statements would show:

• Revenue trends over 3+ years
• Profitability and margins
• Debt levels and liquidity
• Royalty and fee collection rates
• System-wide sales trends
• Financial stability of the territory operator

Comparative Analysis: Territory Operator vs. Direct Franchisor

Advantages of Territory Operator Model

✅ Local Market Knowledge: Regional operators may better understand local market conditions

✅ Responsive Support: Closer geographic proximity to franchisees

✅ Entrepreneurial Focus: Territory operators may be more motivated than corporate franchisors

Disadvantages of Territory Operator Model

❌ Additional Financial Layer: Franchisees support both territory operator and parent company

❌ Limited Resources: Smaller organization with fewer support capabilities

❌ Dependency Risk: Territory operator financial problems could impact entire regional system

❌ Potential Conflicts: Territory operator interests may not always align with franchisees or parent company

System Health Assessment

Overall Health Rating: INSUFFICIENT DATA

Rationale: Without access to Item 20 data showing unit counts, openings, closings, and historical trends, it is impossible to definitively assess whether the system is:

• Growing healthily
• Plateauing
• Declining

What We Can Assess

Positive Operational Indicators:

• Active FDD maintenance and updates
• Multi-state registration efforts
• Technology platform integration
• Professional franchise sales infrastructure
• Dual financial statement availability

Structural Concerns:

• Limited geographic market (2 states)
• Small total addressable market
• Territory operator dependency
• Lack of transparency in unit count data

Future Outlook and Growth Projections

Growth Potential Factors

Limited Growth Ceiling:

Given the geographic constraints and market characteristics, DQ MT/ND likely faces:

• Maximum Market Capacity: Montana and North Dakota can only support a finite number of Dairy Queen locations
• Population Growth Constraints: Both states have below-average population growth rates
• Economic Dependency: Heavy reliance on agriculture, energy, and tourism sectors
• Seasonal Challenges: Harsh winters impact ice cream and fast-food sales

Expansion Possibilities:

The pending state registrations suggest potential growth through:

1. South Dakota Expansion: Natural geographic extension (already registered)
2. Minnesota Market Entry: Larger population base (~5.7 million)
3. Washington State: Significant population (~7.8 million) but highly competitive
4. Investor Recruitment: New York registration may facilitate out-of-state investor recruitment

Realistic Growth Scenarios

Conservative Scenario:

• Maintain existing Montana/North Dakota footprint
• Selective infill development in underserved markets
• Focus on remodeling and upgrading existing locations
• Limited expansion into South Dakota

Moderate Scenario:

• Gradual expansion into South Dakota and Minnesota
• 2-5 new units annually across expanded territory
• Technology-driven same-store sales growth
• Improved unit economics through digital ordering

Aggressive Scenario:

• Rapid expansion into Minnesota and Washington
• Area development agreements for new territories
• 5-10+ new units annually
• Potential acquisition of additional territory rights

Most Likely Scenario: Conservative to Moderate growth, constrained by:

• Small primary market size
• Capital requirements for expansion
• Competition in larger markets
• Territory operator resource limitations

Red Flags and Concerns

Critical Missing Information

🚩 No Unit Count Data: The absence of specific unit counts, opening/closing rates, and historical trends is a significant transparency concern

🚩 No Growth History: Cannot verify whether system has been growing, stable, or declining

🚩 No Franchisee Turnover Data: Unable to assess franchisee satisfaction through transfer and termination rates

🚩 Limited Market Size: Two-state territory with combined population under 2 million limits growth potential

Structural Concerns

🚩 Territory Operator Dependency: Franchisees are dependent on the financial health and competence of DQ MT/ND, not just the parent Dairy Queen brand

🚩 Limited Geographic Diversification: Concentration in two states creates economic risk

🚩 Competitive Market: Dairy Queen faces competition from national chains and local operators in small markets

Recommendations for Prospective Franchisees

Essential Due Diligence Steps

Before investing in a DQ MT/ND franchise, prospective franchisees should:

1. Request Complete Item 20 Data

   • Total unit counts for past 5-10 years
   • Opening and closing rates by year
   • Transfer and termination statistics
   • State-by-state breakdown

2. Review Financial Statements

   • Analyze Exhibit J (Territory Operator financials) thoroughly
   • Assess financial stability and profitability trends
   • Compare to Exhibit K (IDQ financials) for context

3. Contact Current and Former Franchisees

   • Use Exhibit F to contact current subfranchisees
   • Use Exhibit G to contact former subfranchisees
   • Ask about growth support, profitability, and territory operator responsiveness

4. Assess Local Market Conditions

   • Evaluate specific territory population and demographics
   • Analyze local competition
   • Consider seasonal sales variations
   • Review economic trends in Montana/North Dakota

5. Understand Territory Operator Model

   • Clarify support services provided by DQ MT/ND vs. IDQ
   • Understand fee structure and how it compares to direct franchising
   • Assess territory operator's track record and reputation

Questions to Ask

About Growth:

• What is the current total unit count?
• How many units have opened in the past 5 years?
• How many units have closed in the past 5 years?
• What are the expansion plans for the next 3-5 years?
• Are there any area development agreements in place?

About System Health:

• What is the average tenure of franchisees in the system?
• What percentage of franchisees are multi-unit operators?
• What is the franchisee renewal rate?
• How many franchisees have sold their businesses in the past 3 years?

About Territory Operator:

• How long has DQ MT/ND operated as territory operator?
• What is the financial condition of the territory operator?
• What support services does the territory operator provide?
• How does the territory operator relationship affect ongoing costs?

Conclusion

Summary Assessment

The Dairy Queen of Montana / North Dakota LLC franchise system shows mixed indicators regarding growth trends and system health:

Positive Signs:

• Active franchise sales infrastructure
• Recent FDD updates indicating ongoing activity
• Technology platform integration
• Multi-state registration efforts suggesting expansion ambitions
• Established brand with parent company (IDQ) support

Concerns:

• Critical lack of unit count and historical growth data in provided excerpt
• Limited geographic market constrains growth potential
• Territory operator model adds complexity and dependency
• Small population base in primary markets
• Regional economic and seasonal challenges

Overall Assessment: Without access to complete Item 20 data showing historical unit counts, opening/closing rates, and franchisee turnover statistics, it is impossible to definitively determine whether this franchise system is growing healthily or plateauing. The structural indicators suggest a stable but growth-constrained regional operation, but specific performance data is essential for informed decision-making.

Final Recommendation

Prospective franchisees should:

1. ✅ Request and thoroughly review complete Item 20 data before proceeding
2. ✅ Obtain and analyze the Territory Operator's financial statements (Exhibit J)
3. ✅ Contact multiple current and former franchisees for firsthand insights
4. ✅ Conduct independent market analysis for their specific proposed territory
5. ✅ Compare this opportunity to direct Dairy Queen franchising in other territories
6. ✅ Consult with a franchise attorney familiar with territory operator structures

Do not proceed with franchise purchase without obtaining complete unit count, growth history, and franchisee turnover data.

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Note: This analysis is based on limited FDD excerpt information. Complete due diligence requires review of the full FDD, including all exhibits, financial statements, and Item 20 disclosure tables.

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Dairy Queen of Montana / North Dakota LLC Franchise Trademark & Intellectual Property (Item 13)

⚠️ Critical Information Gap

Item 13 (Trademarks) is not visible in the provided FDD excerpt. This section would typically contain detailed information about trademark registrations, intellectual property protections, and usage rights. The absence of this information in the provided documentation prevents a comprehensive analysis of the franchise's intellectual property position.

What Should Be Disclosed in Item 13

Based on FTC franchise disclosure requirements, Item 13 should contain:

Required Disclosures

• Principal Trademarks: List of all trademarks, service marks, and trade names used in the franchise system
• Registration Status: Federal and state registration details, including registration numbers and dates
• Pending Applications: Any trademark applications currently under review
• Limitations: Geographic or other restrictions on trademark use
• Agreements: Any agreements that limit the franchisor's rights to use or license the marks
• Infringement Issues: Current or past challenges to the trademarks
• Protection Obligations: Franchisor's duty to protect and defend the intellectual property

Understanding the Dairy Queen Brand Structure

Multi-Tiered Franchise System

Based on the FDD structure, Dairy Queen of Montana / North Dakota LLC operates as a Territory Operator under a larger franchise system:

International Dairy Queen (IDQ)
         ↓
American Dairy Queen (ADQ)
         ↓
DQ of Montana/North Dakota LLC (Territory Operator)
         ↓
Individual Subfranchisees

Intellectual Property Ownership Implications

Key Considerations for Prospective Franchisees

1. Indirect Trademark Rights

As a subfranchisee of DQ MT/ND, you would receive:

• Third-tier licensing rights (not direct from the brand owner)
• Rights filtered through multiple franchise agreements
• Potential vulnerability if any upper-tier agreement terminates

2. Questions to Ask DQ MT/ND

Before signing, request specific information about:

Trademark Registration Details

• Which Dairy Queen trademarks are federally registered?
• What are the registration numbers and dates?
• Are there any pending trademark applications?
• Have any trademarks been challenged or opposed?
• Are there any geographic limitations on trademark use?

Your Rights and Restrictions

• What specific marks am I authorized to use?
• Are there restrictions on how I can display the marks?
• Can I use the marks in digital marketing and social media?
• What happens to my right to use marks if the Territory Operator agreement terminates?
• Do I have any rights to continue using marks after franchise termination?

Protection and Defense

• Who is responsible for defending against trademark infringement?
• What happens if a third party challenges the trademarks?
• Has IDQ or ADQ been involved in trademark litigation?
• What is the Territory Operator's obligation to protect the marks?
• Will I be indemnified if trademark issues arise?

3. Potential Risk Factors

🚩 Red Flags to Watch For

4. The Sub-Licensing Risk

How Sub-Licensing Affects You

Scenario: Territory Operator Agreement Terminates
         ↓
DQ MT/ND loses rights to Dairy Queen marks in Montana/North Dakota
         ↓
Your sublicense becomes invalid
         ↓
You lose the right to operate as "Dairy Queen"
         ↓
Your business value potentially destroyed

Critical Questions:

1. What protections exist if the Territory Operator agreement is terminated?
2. Can you transfer to a direct relationship with ADQ or IDQ?
3. Are there cure periods or transition rights?
4. What compensation would you receive for lost business value?

Standard Dairy Queen Trademarks (Industry Knowledge)

While not confirmed in this specific FDD, Dairy Queen franchises typically use:

Primary Marks

• DAIRY QUEEN® - Primary brand name
• DQ® - Abbreviated brand identifier
• DQ Grill & Chill® - Restaurant format designation
• Distinctive red and white color scheme
• Specific logo designs and configurations

Product-Specific Marks

• Blizzard® - Signature frozen treat
• DQ Treatzza Pizza® - Dessert product
• Various other product names and designs

Note: You must verify which specific marks are registered and available for your use in the actual Item 13 disclosure.

Intellectual Property Beyond Trademarks

What Else Should Be Protected

Item 13 and Item 14 should also address:

Trade Dress

• Store Design: Distinctive building appearance and interior layout
• Color Schemes: Red, white, and other brand colors
• Signage: Specific sign designs and placement
• Uniforms: Employee appearance standards

Copyrights

• Operations Manuals: Protected written materials (referenced in Exhibit L)
• Marketing Materials: Advertising copy, images, videos
• Training Materials: Educational content and programs
• Software: Point-of-sale systems and proprietary applications

Trade Secrets

• Recipes: Product formulations and preparation methods
• Business Methods: Operational procedures and systems
• Supplier Lists: Approved vendor relationships
• Financial Models: Pricing strategies and cost structures

Technology and Digital Assets

• Mobile Apps: Dairy Queen app and ordering systems
• Website Content: Digital marketing materials
• Social Media: Brand guidelines for online presence
• Loyalty Programs: Punchh participation (referenced in Exhibit O)

Your Obligations Regarding Intellectual Property

Typical Franchisee Responsibilities

Based on standard franchise practices, you would likely be required to:

Use Requirements

• ✓ Use trademarks exactly as specified in operations manuals
• ✓ Display marks prominently at your location
• ✓ Use only approved signage and marketing materials
• ✓ Maintain brand standards in all customer communications
• ✓ Follow digital marketing guidelines for online presence

Prohibited Actions

• ✗ Modify or alter trademarks in any way
• ✗ Use marks for any non-franchise business
• ✗ Register domain names containing the marks without approval
• ✗ Apply for trademark registration in your own name
• ✗ Contest or challenge the franchisor's trademark rights
• ✗ Continue using marks after franchise termination

Reporting Obligations

You would typically need to:

1. Report Infringement: Notify franchisor of any unauthorized use of marks
2. Cooperate in Defense: Assist in trademark protection efforts
3. Provide Documentation: Supply evidence in infringement cases
4. Cease Unauthorized Use: Stop any improper use immediately upon notice

Financial Implications of IP Issues

Potential Costs and Liabilities

Protection Strategies

To minimize IP-related risks:

1. Verify Registration Status: Independently confirm trademark registrations with USPTO
2. Understand the Chain: Map out the complete licensing chain from IDQ to you
3. Review Upper-Tier Agreements: Request copies of Territory Operator agreement with ADQ
4. Secure Transition Rights: Negotiate protections if Territory Operator agreement terminates
5. Obtain Insurance: Consider intellectual property liability coverage
6. Document Everything: Keep records of all trademark usage and approvals

Comparison: Direct vs. Sub-Franchise IP Rights

Direct Franchise (Typical Major Brand)

Advantages:

• Direct relationship with trademark owner
• Clearer rights and obligations
• More stable long-term protection
• Direct support for IP issues

Your Situation (Sub-Franchise):

• Indirect relationship through Territory Operator
• Rights dependent on multiple agreements
• Additional layer of potential failure
• Support filtered through intermediary

Risk Assessment Matrix

What Happens When Things Go Wrong

Trademark Challenge Scenarios

Scenario 1: Third Party Claims Infringement

Typical Process:

1. Third party alleges Dairy Queen marks infringe their rights
2. IDQ/ADQ typically defends (they own the marks)
3. You may be required to cooperate and provide information
4. In worst case, you might need to stop using certain marks
5. Franchisor should indemnify you (verify this in agreement)

Your Questions:

• Who pays legal defense costs?
• What happens to my business if marks are invalidated?
• Am I indemnified against third-party claims?
• Can I continue operating during litigation?

Scenario 2: Territory Operator Agreement Terminates

Potential Consequences:

1. DQ MT/ND loses right to sublicense Dairy Queen marks
2. Your sublicense may automatically terminate
3. You must immediately cease using all Dairy Queen branding
4. Your business loses its primary value driver
5. You may need to rebrand entirely or close

Critical Protections to Negotiate:

• Right to transfer to direct relationship with ADQ
• Cure period to find alternative arrangement
• Compensation for lost business value
• Transition assistance and rebranding support

Scenario 3: You Violate Trademark Usage Rules

Possible Outcomes:

1. Warning letter and requirement to cure
2. Fines or penalties per franchise agreement
3. Suspension of certain rights
4. Termination of franchise agreement
5. Lawsuit for damages and injunctive relief

Common Violations:

• Using outdated logos or designs
• Improper social media marketing
• Unauthorized promotional materials
• Failure to maintain brand standards
• Using marks after termination

Due Diligence Checklist

Before Signing the Franchise Agreement

Document Review

• Obtain Complete Item 13: Request the full trademark disclosure
• Review Item 14: Examine patents, copyrights, and proprietary information
• Read Operating Agreement: Understand IP provisions in Exhibit B
• Check Territory Operator Agreement: Request copy of DQ MT/ND's agreement with ADQ
• Review Operations Manuals TOC: See Exhibit L for IP usage guidelines

Independent Verification

• USPTO Search: Verify trademark registrations at uspto.gov

  • Search for "Dairy Queen" and related marks
  • Confirm registration status and ownership
  • Check for any pending oppositions or cancellations

• Litigation Research: Cross-reference with Item 3 (Litigation)

  • Look for trademark-related lawsuits
  • Assess frequency and outcomes

• State Trademark Search: Check Montana and North Dakota state registrations

Professional Consultation

• Franchise Attorney Review: Have lawyer examine IP provisions
• IP Attorney Consultation: Consider specialist review of trademark issues
• Accountant Analysis: Assess financial impact of IP risks

Red Flags: When to Walk Away

Serious Warning Signs

🚨 Immediate Concerns:

1. Refusal to Provide Item 13: If franchisor won't disclose trademark information
2. No Federal Registrations: Core marks not registered with USPTO
3. Extensive Litigation: Pattern of trademark disputes (check Item 3)
4. Vague Rights: Unclear what marks you can actually use
5. No Protection Obligations: Franchisor disclaims duty to defend marks
6. Weak Sub-License Terms: No protection if Territory Operator agreement ends
7. Broad Indemnification: You must indemnify franchisor for IP claims
8. Post-Termination Restrictions: Excessive limitations after franchise ends

Moderate Concerns (Require Negotiation)

⚠️ Address Before Signing:

1. Pending trademark applications (not yet registered)
2. Geographic limitations on mark usage
3. Shared rights with other franchisees
4. Limited digital marketing permissions
5. Unclear rebranding obligations upon termination
6. No transition rights if Territory Operator fails

Negotiation Points

What You Might Be Able to Negotiate

While franchise agreements are typically standardized, consider requesting:

Enhanced Protections

1. Direct License Backup: Right to obtain direct license from ADQ if Territory Operator agreement terminates
2. Extended Transition Period: 90-180 days to transition if license is lost
3. Rebranding Assistance: Financial support for rebranding costs
4. Clearer Indemnification: Franchisor indemnifies you for IP claims
5. Digital Rights Clarity: Specific permissions for online marketing

Information Rights

1. Annual IP Report: Regular updates on trademark status
2. Notice of Litigation: Immediate notification of IP disputes
3. Territory Operator Status: Updates on upper-tier agreement status
4. Registration Confirmations: Proof of trademark registrations

Practical Implications for Your Business

Day-to-Day Operations

What IP Protection Means for You

Positive Aspects:

• ✓ Recognized brand drives customer traffic
• ✓ Established trademarks reduce marketing costs
• ✓ Brand equity increases business value
• ✓ System-wide marketing benefits your location
• ✓ Legal protection against local competitors

Restrictions and Limitations:

• ✗ Must follow strict brand standards
• ✗ Limited flexibility in marketing and promotion
• ✗ Cannot modify products or presentation
• ✗ Dependent on franchisor's IP management
• ✗ Lose all brand value upon termination

Long-Term Considerations

Business Valuation Impact

Your franchise value depends heavily on IP rights:

Exit Strategy Implications

When you eventually sell:

1. Buyer Due Diligence: Purchasers will scrutinize IP rights
2. Transfer Approval: Franchisor must approve and transfer license
3. Valuation Multiples: Strong IP rights command higher prices 4

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Dairy Queen of Montana / North Dakota LLC Franchise Advertising Requirements (Item 11 - Part 3)

Information Not Available in Provided FDD

Important Notice: The provided FDD excerpt does not contain Item 11 or any detailed information regarding advertising and marketing requirements for the Dairy Queen of Montana / North Dakota LLC franchise system. The document excerpt includes only:

• State effective dates (Exhibit P)
• Receipt pages (Exhibit Q)
• References to various exhibits and agreements
• Basic franchise seller contact information

What Should Be Included in Item 11

Based on standard FDD requirements, Item 11 typically contains critical information about:

Expected Advertising Components (Not Found in Provided Materials)

The following information should be disclosed in Item 11 but is not available in the provided FDD excerpt:

1. National Advertising Fund Contributions

• Percentage of gross sales required for national advertising
• How contributions are calculated
• Payment frequency and timing
• Whether the franchisor contributes to the fund

2. Ad Fund Governance and Control

• Who controls the advertising fund
• Whether franchisees have input or voting rights
• How advertising decisions are made
• Advisory council structure (if any)

3. Ad Fund Expenditures

• How advertising funds are spent
• Types of media and marketing channels used
• Administrative fees deducted from the fund
• Geographic distribution of advertising benefits

4. Local Advertising Requirements

• Minimum local advertising spend (percentage or dollar amount)
• Approved advertising materials and vendors
• Pre-approval requirements for local marketing
• Restrictions on local advertising content

5. Digital Marketing Obligations

• Website requirements and restrictions
• Social media participation requirements
• Online ordering platform obligations
• Digital advertising contributions

6. Marketing Support Provided

• Marketing materials supplied by franchisor
• Training on marketing and advertising
• Campaign planning assistance
• Marketing technology platforms

7. Co-op Advertising Programs

• Regional or local advertising cooperatives
• Participation requirements
• Governance of co-op funds
• Additional contributions required

Referenced Agreements That May Contain Marketing Terms

While Item 11 is not visible in the provided excerpt, the following exhibits are referenced and may contain marketing-related provisions:

Agreements Referenced in FDD

Critical Information Needed for Evaluation

Prospective franchisees should request and carefully review the complete Item 11 disclosure, which should include:

Financial Transparency Questions

• Total Ad Fund Collections: What was the total amount collected in the advertising fund in the most recent fiscal year?
• Fund Balance: What is the current balance in the advertising fund?
• Administrative Costs: What percentage of the fund is used for administrative expenses versus actual advertising?
• Audited Statements: Are advertising fund financial statements audited and available for review?

Marketing Value Assessment

• ROI Measurement: How does the franchisor measure return on investment for advertising expenditures?
• Market Coverage: What percentage of advertising benefits your specific territory?
• Brand Recognition: What is the current brand awareness in Montana and North Dakota markets?
• Competitive Positioning: How does Dairy Queen advertising compare to competitors in the region?

Compliance and Control Issues

• Approval Timelines: How long does it take to get local advertising approved?
• Vendor Restrictions: Must you use specific vendors for local marketing materials?
• Digital Presence: Who owns and controls your local online presence?
• Brand Standards: How restrictive are the brand standards for local marketing?

Red Flags to Watch For (General Guidance)

When you receive the complete Item 11 disclosure, be alert for these potential concerns:

⚠️ Warning Signs in Advertising Requirements

1. High Combined Marketing Costs

   • National ad fund contributions exceeding 2-3% of gross sales
   • Local advertising minimums exceeding 3-4% of gross sales
   • Combined marketing costs above 6% of gross sales
   • Additional digital marketing fees on top of standard contributions

2. Lack of Transparency

   • No audited financial statements for the advertising fund
   • Vague descriptions of how funds are spent
   • No franchisee input or advisory council
   • Franchisor retains all control without accountability

3. Unfair Distribution

   • National advertising that doesn't benefit your local market
   • Concentration of advertising in corporate-owned store markets
   • No regional or local advertising programs
   • Your contributions subsidize other territories

4. Excessive Control

   • All local advertising must be pre-approved
   • Limited approved vendors with high costs
   • Restrictions on digital marketing and social media
   • Inability to respond quickly to local market conditions

5. Hidden Costs

   • Production costs for marketing materials not included in ad fund
   • Mandatory participation in additional marketing programs
   • Required technology platform fees for digital marketing
   • Penalties for not meeting minimum local advertising spend

Typical Dairy Queen System Marketing Structure

While specific information for DQ MT/ND is not available in the provided excerpt, Dairy Queen franchises typically operate under the following general marketing framework:

Standard DQ Marketing Components (Subject to Verification)

Note: The following represents typical Dairy Queen system requirements but must be verified against the actual Item 11 disclosure for DQ MT/ND:

• National Advertising: Usually 4-6% of gross sales to American Dairy Queen Corporation
• Local Advertising: Typically 2-4% minimum local spend requirement
• Co-op Advertising: Regional programs may exist with additional contributions
• Digital Platforms: Participation in system-wide digital ordering and loyalty programs

Territory Operator Relationship Impact

Dairy Queen of Montana / North Dakota LLC operates as a Territory Operator (also called an Area Licensee), which creates a unique structure:

Two-Tier Marketing Structure

American Dairy Queen Corporation (IDQ)
           ↓
DQ Montana/North Dakota LLC (Territory Operator)
           ↓
Individual Franchisees (Subfranchisees)

Implications for Marketing Requirements

1. Dual Contributions Possible

   • You may pay advertising fees to both IDQ and DQ MT/ND
   • Territory operator may have separate regional advertising fund
   • Verify total combined marketing obligations

2. Regional Marketing Focus

   • Territory operator may provide more localized marketing support
   • Regional campaigns specific to Montana/North Dakota markets
   • Potentially better understanding of local market conditions

3. Additional Layer of Control

   • Marketing materials may require approval from both IDQ and DQ MT/ND
   • Territory operator may have additional marketing requirements
   • More complexity in marketing compliance

Questions to Ask DQ MT/ND

Before signing any franchise agreement, obtain complete Item 11 disclosure and ask these specific questions:

About National Advertising Fund

1. What percentage of gross sales goes to the national advertising fund?
2. Does DQ MT/ND (the territory operator) contribute to the fund on the same basis as franchisees?
3. Are there separate advertising contributions to IDQ and to DQ MT/ND?
4. What was the total amount collected and spent from the advertising fund last year?
5. Can I see audited financial statements for the advertising fund?
6. What percentage of the fund goes to administrative costs versus actual advertising?

About Local Advertising

7. What is the minimum local advertising requirement (percentage or dollar amount)?
8. How is "gross sales" defined for calculating advertising contributions?
9. What types of local advertising count toward the minimum requirement?
10. Must all local advertising be pre-approved? What is the approval process and timeline?
11. Are there approved vendors I must use? What are their costs?
12. Can I participate in local community sponsorships and events?

About Digital Marketing

13. What digital marketing platforms am I required to use?
14. What are the costs for digital ordering platforms (Olo), loyalty programs (Punchh), and other technology?
15. Who controls my local social media presence?
16. Can I run my own local digital advertising campaigns?
17. What website requirements exist? Who hosts and controls the local website?

About Marketing Support

18. What marketing materials and templates does DQ MT/ND provide?
19. What marketing training is included in the initial training program?
20. Is there ongoing marketing support? What does it include?
21. How does DQ MT/ND help with grand opening marketing?
22. Are there seasonal campaigns and promotional materials provided?

About Ad Fund Governance

23. Is there a franchisee advertising advisory council?
24. Do franchisees have any input into how advertising funds are spent?
25. How often are advertising fund reports provided to franchisees?
26. What is the process for addressing concerns about advertising effectiveness?

Comparative Marketing Cost Analysis

Without specific data from Item 11, here is a framework for evaluating total marketing costs:

Marketing Cost Evaluation Table

*Based on projected annual gross sales - calculate when actual percentages are disclosed

Sample Calculation Framework

Once you receive Item 11 disclosure, calculate your estimated annual marketing costs:

Example Calculation (Insert Actual Percentages When Available):

Projected Annual Gross Sales: $800,000

National Ad Fund (___%):        $______
Regional Ad Fund (___%):        $______
Local Advertising (___%):       $______
Digital Platform Fees:          $______
Other Marketing Costs:          $______
                               ________
TOTAL ANNUAL MARKETING:         $______
Percentage of Gross Sales:      ____%

Marketing Support Value Assessment

When evaluating the marketing requirements, consider the value received:

What Good Marketing Support Looks Like

✅ Positive Indicators:

• Comprehensive marketing materials and templates provided
• Professional creative services included
• Proven marketing campaigns with measurable results
• Strong brand recognition in the market
• Digital marketing tools and platforms included
• Regular marketing training and updates
• Responsive approval process for local marketing
• Transparent reporting of ad fund expenditures
• Franchisee input into marketing strategy

What to Be Concerned About

❌ Negative Indicators:

• High marketing fees with minimal support provided
• Outdated or ineffective marketing materials
• Slow approval process that hampers local marketing
• No measurement or reporting of marketing effectiveness
• Franchisees must pay separately for most marketing materials
• Limited or no digital marketing support
• No transparency in ad fund spending
• Brand has low recognition in Montana/North Dakota markets

Regional Market Considerations

Montana and North Dakota Market Factors

When evaluating marketing requirements, consider these regional factors:

1. Market Size and Density

   • Smaller, more dispersed population than national average
   • Rural markets may require different marketing approaches
   • National advertising may have less impact in these markets

2. Seasonal Considerations

   • Harsh winter climate affects ice cream sales seasonality
   • Marketing must address seasonal business fluctuations
   • Year-round marketing may not be cost-effective

3. Competitive Landscape

   • Local and regional competitors in the market
   • Other national chains present
   • Independent ice cream shops and restaurants

4. Media Costs and Availability

   • Local media costs in Montana/North Dakota markets
   • Availability of effective advertising channels
   • Digital vs. traditional media effectiveness

Action Steps for Prospective Franchisees

Before Proceeding with DQ MT/ND Franchise

1. Obtain Complete Item 11 Disclosure

   • Request the full FDD with all items included
   • Specifically review Item 11 in detail
   • Review all referenced exhibits related to marketing

2. Review All Marketing-Related Agreements

   • Operating Agreement (Exhibit B) - advertising provisions
   • Olo Participation Agreement (Exhibit N)
   • Punchh Participation Agreement (Exhibit O)
   • Gift Card Participation Agreement (Exhibit E)
   • Operations Manuals (Exhibit L) - marketing procedures

3. Analyze Total Marketing Costs

   • Calculate all mandatory marketing contributions
   • Add required technology platform fees
   • Include grand opening marketing costs
   • Determine total percentage of gross sales

4. Speak with Current Franchisees

   • Contact franchisees listed in Exhibit F (Territory Operator's Subfranchisees)
   • Ask about actual marketing costs and effectiveness
   • Inquire about marketing support quality
   • Understand approval processes and restrictions

5. Speak with Former Franchisees

   • Contact former franchisees listed in Exhibit G
   • Ask if marketing costs or support were factors in their departure
   • Understand any marketing-related disputes or issues

6. Evaluate Marketing ROI

   • Request data on marketing effectiveness
   • Ask for case studies or examples of successful campaigns
   • Understand how marketing drives sales in similar markets
   • Compare to industry benchmarks

7. Assess Your Marketing Capabilities

   • Determine if you have marketing experience
   • Evaluate if you can meet local advertising minimums
   • Consider if you need to hire marketing help
   • Factor marketing time commitment into your planning

Summary and Recommendations

Critical Information Missing

The provided FDD excerpt does not include Item 11, which is essential for understanding:

• Total marketing costs and obligations
• Marketing support provided by the franchisor
• Control and governance of advertising funds
• Value received for marketing fees paid

What You Must Do

Do not proceed with this franchise opportunity until you:

1. ✅ Receive and review the complete Item 11 disclosure
2. ✅ Understand all marketing fees and requirements
3. ✅ Calculate total marketing costs as percentage of projected sales
4. ✅ Verify marketing support and materials provided
5. ✅ Speak with current franchisees about marketing effectiveness
6. ✅ Review advertising fund financial statements
7. ✅ Understand approval processes and restrictions
8. ✅ Evaluate marketing ROI and brand strength in your market

Key Questions That Must Be Answered

Before signing any agreement, you must have clear, documented answers to:

• What is the total percentage of gross sales required for all marketing contributions?
• What marketing support and materials are included in these fees?
• How transparent is the advertising fund, and can I see financial statements?
• Do franchisees have any input into marketing decisions?
• What restrictions exist on local marketing and advertising?
• What are the costs for required digital marketing platforms?
• How effective is Dairy Queen marketing in Montana and North Dakota markets?

Final Recommendation

Marketing costs typically represent 5-12% of gross sales for franchise operations. This is a significant ongoing expense that directly impacts your profitability. Do not make any franchise decision without complete information about advertising requirements and marketing support.

Request the complete FDD with Item 11 included, and consider having a franchise attorney review all marketing-related provisions before proceeding.

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Disclaimer: This analysis is based on the limited FDD excerpt provided, which does not include Item 11 or detailed advertising information. All prospective franchisees should obtain and review the complete Franchise Disclosure Document, consult with current and former franchisees, and seek advice from qualified franchise attorneys and accountants before making any franchise investment decision.

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Understanding Your Dairy Queen of Montana / North Dakota LLC Franchise Agreement: All Contracts (Item 22)

Overview of Contractual Obligations

When you invest in a Dairy Queen franchise through Dairy Queen of Montana / North Dakota LLC (DQ MT/ND), you're not just signing a single franchise agreement. You're entering into a complex web of legal contracts that will govern virtually every aspect of your business operations. Understanding these agreements is critical before making any financial commitment.

⚠️ CRITICAL NOTICE: The FDD provided contains limited detailed information about Item 22 (Contracts). The following analysis is based on the exhibits referenced in the disclosure document. Prospective franchisees should request complete copies of all agreements for thorough attorney review.

Complete List of Required Agreements

Based on the exhibits referenced in this FDD, franchisees must sign the following agreements:

Primary Agreements Table

Understanding the Territory Operator Structure

Important Context: DQ MT/ND operates as a "Territory Operator" under American Dairy Queen Corporation (ADQ). This means:

• You are technically a "subfranchisee" of DQ MT/ND
• DQ MT/ND is the franchisee of ADQ
• Your agreements are with DQ MT/ND, not directly with ADQ
• This three-tier structure affects your legal relationships and obligations

Detailed Agreement Analysis

1. Operating Agreement (Exhibit B)

What It Is: This is your primary franchise contract that establishes the fundamental relationship between you and DQ MT/ND.

Key Components Likely Include:

• Franchise term and renewal rights
• Territory definition and protection
• Royalty and fee obligations
• Operating standards and requirements
• Termination and transfer provisions
• Non-compete and confidentiality clauses
• Dispute resolution procedures

Personal Liability Implications:

• Typically requires personal guarantees from all owners
• May require spousal guarantees in community property states
• Creates joint and several liability among multiple franchisees
• Survives termination for certain obligations

⚠️ Red Flag: The FDD does not provide the actual Operating Agreement text in the excerpt provided. You must obtain and review the complete agreement with your attorney before proceeding.

2. Operating Agreement Addenda (Exhibit B)

What It Is: State-specific modifications required by franchise registration states.

Why It Matters:

• Montana and North Dakota may have specific addenda
• These addenda can modify or supersede base agreement terms
• May provide additional franchisee protections
• Can affect termination rights, renewal terms, and dispute resolution

States Requiring Registration (per Exhibit P):

• Minnesota
• New York
• North Dakota
• South Dakota (Effective: December 3, 2023)
• Washington (Pending)

3. Design Services Agreement (Exhibit C)

What It Is: Contract for architectural and design services for your restaurant location.

Typical Terms:

• Design fees and payment schedule
• Scope of design services provided
• Approval process for plans
• Intellectual property ownership
• Liability limitations

Financial Implications:

• Separate fees beyond initial franchise fee
• May be required even if you have your own architect
• Design must meet DQ brand standards
• Changes or revisions may incur additional costs

Key Questions to Ask:

• What is the total cost for design services?
• Can you use your own architect?
• Who owns the final plans?
• What happens if designs need revision?

4. Draft Authorization Form (Exhibit D)

What It Is: Authorization for DQ MT/ND to electronically debit your bank account.

What You're Authorizing:

• Automatic withdrawal of royalties
• Automatic withdrawal of advertising fees
• Payment of other recurring fees
• Potential withdrawal of amounts you dispute

⚠️ Critical Concerns:

• Gives franchisor direct access to your operating account
• May allow withdrawal without prior notice
• Can create cash flow problems if disputes arise
• Difficult to reverse unauthorized or incorrect withdrawals

Protection Strategies:

• Maintain separate accounts for franchise payments
• Keep minimum required balance in draft account
• Monitor account activity daily
• Understand dispute resolution procedures

5. Gift Card Participation Agreement (Exhibit E)

What It Is: Agreement to participate in the Dairy Queen gift card program.

Obligations Typically Include:

• Accepting all DQ gift cards regardless of purchase location
• Remitting fees for gift card processing
• Maintaining POS systems compatible with gift card program
• Following gift card redemption procedures

Financial Impact:

• You receive less than face value when redeeming cards sold elsewhere
• Processing fees reduce net revenue
• Must honor cards even if not profitable for your location
• Technology requirements and associated costs

Positive Aspects:

• Drives customer traffic
• Part of national marketing program
• Increases brand consistency
• May attract new customers

6. Construction Consultation Services Agreement (Exhibit M)

What It Is: Agreement for DQ MT/ND to provide construction oversight and consultation.

Services Likely Include:

• Construction progress monitoring
• Quality control inspections
• Compliance verification with DQ standards
• Coordination with contractors
• Pre-opening inspection

Cost Considerations:

• Separate fee beyond construction costs
• May be mandatory, not optional
• Fee structure (flat fee vs. percentage of construction costs)
• Payment timing and schedule

Why It Exists:

• Ensures brand standards compliance
• Protects franchisor's reputation
• Reduces likelihood of costly corrections
• Facilitates smoother opening process

7. Olo Participation Agreement (Exhibit N)

What It Is: Agreement to use Olo digital ordering platform.

Technology Requirements:

• Integration with your POS system
• Internet connectivity requirements
• Hardware/software specifications
• Staff training on platform

Financial Obligations:

• Monthly platform fees
• Transaction fees per order
• Integration costs
• Ongoing technology support fees

Operational Impact:

• Enables online ordering capability
• Mobile app integration
• Third-party delivery platform connections
• Customer data collection and marketing

⚠️ Consideration: Verify whether this is mandatory or optional, and understand total costs including transaction fees that can significantly impact profitability.

8. Punchh Participation Agreement (Exhibit O)

What It Is: Agreement to participate in Punchh customer loyalty program.

Program Features:

• Customer rewards tracking
• Digital loyalty cards
• Promotional campaign management
• Customer data analytics
• Mobile app integration

Costs and Fees:

• Monthly subscription fees
• Per-transaction fees
• Setup and integration costs
• Marketing fund contributions for loyalty promotions

Benefits:

• Customer retention tool
• Competitive advantage
• Data-driven marketing insights
• Increased customer frequency

Obligations:

• Honor all loyalty rewards
• Maintain system integration
• Train staff on program
• Participate in system-wide promotions

Agreements Not Explicitly Listed (But Likely Required)

Based on standard franchise practices, you should inquire about these additional agreements:

Personal Guarantees

What It Is: Individual owners personally guarantee franchise obligations.

Implications:

• Your personal assets are at risk
• Guarantee typically survives business entity bankruptcy
• May be required from all owners with 10%+ ownership
• Continues for post-termination obligations

What You're Guaranteeing:

• All financial obligations under franchise agreement
• Lease obligations
• Equipment lease payments
• Post-termination obligations (non-compete, confidentiality)
• Damages from breach of contract

Spousal Guarantees

Potential Requirement: In community property states, spouses may be required to sign guarantees.

Community Property States:

• Montana: Not a community property state
• North Dakota: Not a community property state

Note: Even in non-community property states, franchisors may request spousal consent to protect against claims that spouse didn't agree to risk marital assets.

Lease-Related Agreements

While not explicitly listed in the exhibits, typical lease-related documents include:

Lease Assignment or Sublease:

• If DQ MT/ND holds master lease
• Defines your occupancy rights
• Typically includes franchisor's right to take over lease upon termination

Landlord Consent/Collateral Assignment:

• Gives franchisor rights to your lease
• Allows franchisor to cure defaults
• Permits franchisor to assume lease if you default

Lease Addendum:

• Specific requirements for DQ locations
• Use restrictions
• Signage rights
• Exclusive use provisions

Equipment Lease Agreements

Potential Requirements:

• Lease agreements for specialized DQ equipment
• Soft-serve machines
• Freezers and refrigeration
• POS systems

Key Terms to Review:

• Lease vs. purchase options
• Buyout provisions
• Maintenance responsibilities
• End-of-term obligations

Confidentiality/Non-Disclosure Agreements

Timing: Often required before receiving detailed operational information.

What It Covers:

• Proprietary recipes and formulations
• Operating procedures and manuals
• Financial performance data
• Marketing strategies
• Supplier relationships

Duration: Typically extends beyond franchise term.

General Release (Upon Transfer or Termination)

When Required: Upon selling franchise or at termination.

What You Release:

• All claims against franchisor
• Known and unknown claims
• Past, present, and future claims
• Claims by you and your affiliates

⚠️ Major Concern: Releases can prevent you from pursuing legitimate legal claims. Some states limit enforceability of general releases.

Summary Table: Your Complete Contractual Package

Key Terms Across All Agreements

Common Provisions to Expect

1. Term and Renewal

• Initial franchise term (typically 10-20 years)
• Renewal options and conditions
• Fees for renewal
• Requirements to qualify for renewal

2. Payment Obligations

• Royalty fees (ongoing percentage of gross sales)
• Advertising fund contributions
• Technology fees
• Training fees
• Audit costs if underreporting found

3. Performance Standards

• Minimum operating hours
• Quality standards
• Customer service requirements
• Cleanliness and maintenance standards
• Mystery shopper compliance

4. Termination Rights

• Franchisor's right to terminate for cause
• Your right to terminate (typically very limited)
• Cure periods for defaults
• Immediate termination events

5. Post-Termination Obligations

• Non-compete restrictions (geographic and time limits)
• De-identification requirements
• Return of confidential materials
• Final payments and reconciliation
• Continuing indemnification

6. Transfer Restrictions

• Franchisor approval required for any transfer
• Transfer fees
• Training requirements for new owners
• Right of first refusal for franchisor
• Restrictions on transfers to family members

7. Dispute Resolution

• Mandatory mediation
• Arbitration requirements
• Governing law (likely Montana or North Dakota)
• Venue for legal proceedings
• Limitations on class actions

8. Indemnification

• You indemnify franchisor for claims arising from your operations
• Typically very broad indemnification
• Includes franchisor's attorney fees
• Survives termination

Personal Liability Implications: What You're Really Risking

Your Personal Exposure

When you sign these agreements, you're typically putting at risk:

Financial Assets:

• Personal savings and investments
• Home equity
• Retirement accounts (depending on state law)
• Other real property
• Personal vehicles and valuables

Credit and Reputation:

• Personal credit score impact
• Business reputation in community
• Professional licenses (if applicable)
• Future borrowing capacity

Time and Freedom:

• Non-compete restrictions limit future opportunities
• Confidentiality obligations restrict business activities
• Ongoing obligations even after selling or closing

Corporate Veil Limitations

Important Reality: Even if you operate as an LLC or corporation:

• Personal guarantees pierce the corporate veil
• You're personally liable despite business entity structure
• Bankruptcy of business entity doesn't eliminate personal guarantee
• Franchisor can pursue business AND personal assets simultaneously

Joint and Several Liability

If you have partners or co-owners:

• Each owner is typically liable for 100% of obligations
• Franchisor can pursue any or all owners
• One partner's default affects all partners
• Difficult to exit without all parties' consent

What You're Legally Committing To

Operational Commitments

Daily Operations:

• Follow all operations manual procedures (manuals can be changed unilaterally)
• Maintain specified hours of operation
• Staff restaurant adequately
• Maintain inventory levels
• Implement all system-wide changes and programs

Financial Commitments:

• Pay all fees on time (royalties, advertising, technology, etc.)
• Maintain required insurance coverage
• Keep separate business bank accounts
• Provide financial reports on schedule
• Submit to financial audits

Quality and Brand Standards:

• Purchase from approved suppliers only
• Maintain facility to brand standards
• Participate in remodeling programs
• Update equipment as required
• Implement new menu items and promotions

Training and Compliance:

• Complete initial training
• Ensure manager training
• Attend required meetings and conventions
• Implement new procedures and systems
• Maintain certifications and licenses

Long-Term Commitments

Duration of Obligations:

• Franchise term (typically 10-20 years)
• Renewal terms if exercised
• Post-termination non-compete (typically 2-3 years)
• Perpetual confidentiality obligations
• Continuing indemnification

Restrictions on Your Freedom:

• Cannot operate competing business during term
• Cannot operate competing business in territory after termination
• Cannot use knowledge gained to benefit competitors
• Cannot disclose confidential information ever
• Limited ability to sell or transfer franchise

Financial Exposure Timeline:

• Initial investment and startup costs
• Ongoing fees for entire franchise term
• Remodeling and equipment replacement costs
• Potential damages for breach
• Post-termination obligations and payments

Critical Importance of Attorney Review

Why You Absolutely Need a Franchise Attorney

Complexity of Documents:

• Multiple interconnected agreements
• Legal terminology and implications
• State-specific variations
• Hidden obligations and risks

Negotiation Opportunities:

• Some terms may be negotiable despite "standard" contract claims
• State laws may provide additional protections
• Attorney can identify unreasonable provisions
• May negotiate better terms for experienced operators

Risk Assessment:

• Identify personal liability exposure
• Evaluate termination and transfer restrictions
• Assess post-termination obligations
• Understand dispute resolution procedures

What a Franchise Attorney Should Review

Essential Analysis:

1. All agreements in their entirety - not just summaries
2. Personal guarantee implications - full

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Dairy Queen of Montana / North Dakota LLC Franchise: Red Flags & Warning Signs Checklist

Critical Limitation: Incomplete FDD Analysis

IMPORTANT NOTICE: The provided FDD documentation for Dairy Queen of Montana / North Dakota LLC consists primarily of exhibit pages and state effective dates. The core disclosure items (Items 1-19) that contain critical financial, legal, and operational information are not visible in the provided excerpt. This significantly limits our ability to conduct a comprehensive red flags analysis.

Red Flags Assessment Table

Identified Red Flags from Available Information

1. Sub-Franchise Structure Complexity ⚠️ MEDIUM SEVERITY

Issue: This is a sub-franchise or area development arrangement where Dairy Queen of Montana / North Dakota LLC operates as a Territory Operator between the franchisee and the parent Dairy Queen organization.

Evidence:

• References to "Territory Operator's Subfranchisees" (Exhibit F)
• References to "Territory Operator's Former Subfranchisees" (Exhibit G)
• Separate listings for "ADQ's Franchisees" (Exhibit H) and "ADQ's Former Franchisees" (Exhibit I)
• Territory Operator's separate financial statements (Exhibit J)

Implications:

• Additional layer of management between you and the established Dairy Queen brand
• Dual oversight - must satisfy both Territory Operator and parent company requirements
• Financial dependency on Territory Operator's stability
• Potential for conflicting directives from Territory Operator vs. parent company
• Limited direct access to International Dairy Queen resources and support

Questions to Ask:

• What is the financial health of DQ MT/ND as Territory Operator?
• How long has DQ MT/ND held this territory?
• What happens to your franchise if DQ MT/ND loses its territory rights?
• What support comes from DQ MT/ND vs. the parent company?

2. Multiple Mandatory Ancillary Agreements ⚠️ MEDIUM SEVERITY

Issue: Franchisees must sign numerous separate agreements beyond the main Operating Agreement.

Required Agreements Identified:

1. Operating Agreement (Exhibit B) - Primary franchise agreement
2. Design Services Agreement (Exhibit C) - Likely mandatory design/construction services
3. Draft Authorization Form (Exhibit D) - Banking/payment authorization
4. Gift Card Participation Agreement (Exhibit E) - Gift card program participation
5. Construction Consultation Services Agreement (Exhibit M) - Additional construction services
6. Olo Participation Agreement (Exhibit N) - Digital ordering platform
7. Punchh Participation Agreement (Exhibit O) - Loyalty/rewards program

Implications:

• Increased contractual obligations across multiple documents
• Potential for additional fees in each agreement
• Complex termination scenarios - breach of one may affect all
• Technology lock-in with specific vendors (Olo, Punchh)
• Limited negotiation leverage if agreements are "take it or leave it"

Red Flag Indicators:

• Each agreement may contain separate fees not disclosed in main fee table
• Termination of one agreement could trigger termination of franchise
• Technology agreements may require ongoing subscription fees
• Design and construction services may be priced above market rates

3. Incomplete State Registration Status ⚠️ LOW-MEDIUM SEVERITY

Issue: As of the FDD issuance date (July 23, 2024), registration is incomplete in key states.

Registration Status:

• ✅ South Dakota: Effective December 3, 2023
• ⏳ Minnesota: Pending (date not listed)
• ⏳ New York: Pending (date not listed)
• ⏳ North Dakota: Pending (date not listed)
• ⏳ Washington: Pending

Implications:

• Cannot legally sell franchises in pending states until registration complete
• May indicate registration difficulties or state examiner concerns
• Potential delays in franchise development timeline
• Possible required modifications to FDD or agreements based on state feedback

Particularly Concerning Because:

• North Dakota is in the territory name but registration is pending
• Montana not listed despite being in company name (may be exempt or not yet filed)
• Multiple pending registrations suggest possible systemic issues with disclosure

4. Limited Franchise Seller Information ⚠️ LOW SEVERITY

Issue: Only two franchise sellers identified with limited business addresses.

Franchise Sellers Listed:

1. Inoshi Denizen - 310 E. 46th Street, Unit 5J, New York, NY 10017 (residential address)
2. James Brown - P.O. Box 9137, Missoula, MT 59807 (P.O. Box only)

Concerns:

• Residential address for primary contact suggests small operation
• No corporate office address provided
• P.O. Box only for second contact lacks transparency
• Limited sales team may indicate small-scale operation

Critical Missing Information

Due to the incomplete FDD excerpt, we CANNOT ASSESS the following critical red flag areas:

Financial Red Flags (Cannot Evaluate):

• ❌ Territory Operator's financial statements and stability
• ❌ Parent company (IDQ/ADQ) financial health
• ❌ Initial franchise fee amounts
• ❌ Ongoing royalty and advertising fees
• ❌ Total initial investment requirements
• ❌ Working capital requirements
• ❌ Net worth and liquidity requirements
• ❌ Financial performance representations (Item 19)

Legal Red Flags (Cannot Evaluate):

• ❌ Litigation history (Item 3)
• ❌ Bankruptcy history (Item 4)
• ❌ Franchise agreement termination provisions
• ❌ Transfer and assignment restrictions
• ❌ Non-compete and non-solicitation terms
• ❌ Dispute resolution and arbitration requirements
• ❌ Governing law provisions

Operational Red Flags (Cannot Evaluate):

• ❌ Training program adequacy
• ❌ Ongoing support structure
• ❌ Territory size and exclusivity
• ❌ Encroachment protection
• ❌ Supplier restrictions and approved vendor lists
• ❌ Technology system requirements and costs
• ❌ Advertising fund management and spending
• ❌ Operations manual restrictions

Unit Performance Red Flags (Cannot Evaluate):

• ❌ Total number of franchised units
• ❌ Number of company-owned units
• ❌ Unit openings in past 3 years
• ❌ Unit closures and terminations
• ❌ Franchisee turnover rate
• ❌ Transfer frequency
• ❌ System-wide growth or decline trends

Overall Risk Assessment

Risk Level: CANNOT FULLY DETERMINE ⚠️

Based on the extremely limited information available in the provided FDD excerpt, we can only provide a PRELIMINARY RISK ASSESSMENT with significant caveats:

Confirmed Concerns (From Available Information):

MEDIUM RISK FACTORS:

1. Sub-franchise structure adds complexity and dependency on Territory Operator
2. Multiple mandatory agreements increase contractual obligations
3. Small-scale operation suggested by limited franchise sellers and residential addresses
4. Incomplete state registrations in key territory states

UNKNOWN RISK FACTORS (Require Full FDD Review):

• Financial stability of Territory Operator and parent company
• Litigation and bankruptcy history
• Franchise agreement terms and restrictions
• Fee structure competitiveness
• Unit performance and franchisee satisfaction
• Training and support adequacy
• Territory protection strength

Critical Action Items for Prospective Franchisees:

Before Proceeding, You MUST:

1. Obtain and Review Complete FDD

   • Ensure you receive all Items 1-23 with complete information
   • Pay special attention to Items 3, 4, 7, 19, 20, and 21
   • Review all exhibits in full, not just cover pages

2. Investigate Territory Operator Financial Health

   • Request and analyze Exhibit J (Territory Operator's Financial Statements)
   • Assess liquidity, profitability, and debt levels
   • Determine how long DQ MT/ND has operated this territory
   • Understand what happens if Territory Operator loses rights

3. Analyze Parent Company Relationship

   • Review Exhibit K (IDQ's Financial Statements)
   • Understand the relationship between IDQ, ADQ, and DQ MT/ND
   • Clarify support responsibilities at each level
   • Determine brand strength and system-wide performance

4. Review All Ancillary Agreements

   • Obtain complete copies of all 7+ required agreements
   • Identify all fees associated with each agreement
   • Understand termination implications across agreements
   • Assess technology vendor lock-in costs (Olo, Punchh)

5. Examine Unit Performance Data

   • Review complete Item 20 data on current and former franchisees
   • Calculate closure rates, transfer rates, and termination rates
   • Contact current franchisees (Exhibit F - subfranchisees)
   • Contact former franchisees (Exhibit G) to understand why they left

6. Assess Litigation and Bankruptcy History

   • Thoroughly review Item 3 for patterns of franchisee disputes
   • Review Item 4 for any bankruptcy history
   • Search public records for additional legal issues
   • Determine if litigation involves systemic operational issues

7. Evaluate Financial Requirements and Returns

   • Review complete Item 7 investment requirements
   • Analyze Item 19 financial performance representations (if provided)
   • Create detailed financial projections with your accountant
   • Determine realistic ROI timeline and break-even point

8. Verify State Registration Status

   • Confirm registration is complete in your target state
   • Understand any state-specific addenda or modifications
   • Review state-specific franchisee rights and protections

Comparative Red Flag Analysis

How This Compares to Typical Franchise Offerings:

Due Diligence Checklist

Essential Steps Before Signing:

✅ Documentation Review

• Obtain complete FDD with all Items 1-23 fully populated
• Review all exhibits in their entirety
• Obtain copies of all 7+ ancillary agreements
• Review Territory Operator's financial statements (3 years)
• Review parent company (IDQ) financial statements
• Obtain current Operations Manual table of contents

✅ Financial Analysis

• Calculate total initial investment including all agreements
• Identify all ongoing fees (royalties, advertising, technology, etc.)
• Analyze Item 19 financial performance data (if provided)
• Create 5-year financial projections with accountant
• Assess Territory Operator's financial stability
• Verify parent company financial strength

✅ Legal Review

• Have franchise attorney review all agreements
• Analyze termination and renewal provisions
• Understand transfer restrictions and fees
• Review non-compete and post-termination obligations
• Assess dispute resolution requirements
• Verify state registration is complete

✅ Franchisee Validation

• Contact at least 10 current subfranchisees (from Exhibit F)
• Contact at least 5 former subfranch

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Dairy Queen of Montana / North Dakota LLC Franchise: Green Flags & Positive Indicators

Important Disclosure Limitation

Critical Note: The provided FDD excerpt contains only the receipt pages, state effective dates, and exhibit references. The substantive content of Items 1-22 is not visible in this document. Therefore, this analysis cannot provide specific data-driven green flags from the actual FDD content.

The following framework represents what prospective franchisees should look for when reviewing the complete FDD, but specific confirmation of these indicators for Dairy Queen of Montana / North Dakota LLC cannot be verified from the provided materials.

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Green Flag Assessment Framework

1. Structural Indicators Present in This FDD

Based on the limited information available, the following positive structural elements can be confirmed:

✅ Comprehensive Documentation

• Multiple supporting agreements: The FDD references 15+ exhibits including Operating Agreement, Design Services Agreement, and various participation agreements
• Financial transparency: Includes both Territory Operator's Financial Statements (Exhibit J) and IDQ's Financial Statements (Exhibit K)
• Complete franchisee lists: Provides current franchisees (Exhibit H), former franchisees (Exhibit I), subfranchisees (Exhibit F), and former subfranchisees (Exhibit G)

✅ Multi-State Registration

The franchise is registered or filed in multiple states with strict franchise laws:

• Minnesota
• New York
• North Dakota
• South Dakota (Effective: December 3, 2023)
• Washington (Pending)

Why this matters: Registration in states like New York, Minnesota, and California (mentioned in the franchise law list) indicates the franchisor has undergone rigorous state review and maintains compliance with the most stringent franchise regulations in the United States.

✅ Established Brand Affiliation

• Part of the International Dairy Queen (IDQ) system
• Operates as a territory operator for Montana and North Dakota
• Access to nationally recognized brand with 80+ years of history

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Green Flag Checklist: What to Verify in the Complete FDD

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Positive Indicators to Look For: Detailed Analysis

Financial Green Flags

When reviewing the complete FDD, prospective franchisees should verify:

1. Strong Franchisor Financial Position

What to look for in Item 21:

• Positive net worth: Territory operator should show net worth of at least $500,000+
• Liquidity: Current ratio above 1.5 (current assets ÷ current liabilities)
• Profitability: Consistent net income over 2-3 years
• Low debt-to-equity ratio: Below 2.0 indicates manageable debt levels

Why it matters: A financially stable franchisor can invest in system improvements, provide consistent support, and weather economic downturns without cutting franchisee services.

2. Transparent Investment Requirements

What to look for in Items 5, 6, and 7:

• Clear breakdown of all initial fees
• Detailed initial investment range with explanations
• No hidden or ambiguous fees
• Reasonable ongoing royalty rates (typically 4-6% for QSR)
• Marketing fees that are clearly allocated

3. Earnings Claims (Item 19)

Positive indicators if provided:

• Based on actual franchisee performance data
• Includes sample size and time period
• Shows median, not just average performance
• Breaks down by unit type or market size
• Includes footnotes explaining assumptions

Note: Many franchisors don't provide Item 19 data. If provided, it demonstrates transparency and confidence in franchisee profitability.

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Operational Green Flags

1. Comprehensive Training Program

What to look for in Item 11:

• Initial training duration: 4-6 weeks is typical for full-service restaurants
• Training location: At corporate headquarters or established training store
• Curriculum coverage: Operations, food safety, customer service, financial management, marketing
• Ongoing training: Regular updates, annual conferences, online resources
• No additional training fees: Training should be included in initial franchise fee

2. Robust Support Systems

Positive indicators:

• Dedicated franchise business consultant assigned to your territory
• Regular store visits (quarterly minimum)
• 24/7 support hotline for operational issues
• Comprehensive operations manual (Exhibit L should show detailed table of contents)
• Technology support for POS systems
• Marketing support and materials
• Supply chain management assistance

Evidence in this FDD:

• Operations Manual referenced (Exhibit L)
• Technology platforms: Olo Participation Agreement (Exhibit N) for online ordering, Punchh Participation Agreement (Exhibit O) for loyalty programs
• Design Services Agreement (Exhibit C) for construction support
• Construction Consultation Services Agreement (Exhibit M)

3. Protected Territory

What to look for in Item 12:

• Clearly defined geographic boundaries
• Population or demographic minimums specified
• Protection from company-owned units
• Protection from other franchisees
• Reasonable performance requirements to maintain exclusivity
• Right of first refusal for adjacent territories

4. Reasonable Contract Terms

What to look for in Item 17:

• Initial term: 15-20 years is standard for restaurant franchises
• Renewal options: At least one 10-15 year renewal
• Renewal fees: Minimal or no renewal fee (or significantly less than initial fee)
• Transfer rights: Ability to sell franchise with reasonable franchisor approval
• Non-compete: Limited to reasonable geographic area and time period (1-2 years)

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System Health Green Flags

1. Growing Unit Count

What to look for in Item 20:

Positive indicators:

• Net unit growth of 5-10% annually
• More new openings than closures
• Expansion into new markets
• Mix of new and existing franchisees opening additional units

Example of what healthy growth looks like:

2. Low Closure/Termination Rate

Healthy benchmarks:

• Closure rate: Less than 5% annually
• Termination rate: Less than 2% annually
• Voluntary non-renewals: Less than 3% annually

Red flag: If more than 10% of units closed in the past year, investigate reasons thoroughly.

3. High Franchisee Retention

Positive indicators:

• Franchisees renewing contracts at 90%+ rate
• Multi-unit franchisees (indicates satisfaction and profitability)
• Second-generation franchisees (family members taking over)
• Franchisees purchasing additional territories

4. Franchisee Satisfaction Signals

What to investigate:

• Contact current franchisees (Exhibit H provides list)
• Ask about profitability, support quality, and system changes
• Inquire about franchisor responsiveness
• Check if franchisees would buy another unit
• Review former franchisee list (Exhibit I) for patterns

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Legal & Compliance Green Flags

1. Clean Legal History

What to look for in Items 3 and 4:

• No material litigation: Occasional disputes are normal, but pattern litigation is concerning
• No bankruptcy history: For franchisor, officers, or parent company
• No regulatory actions: No FTC violations or state enforcement actions

This FDD: Legal history not visible in provided excerpt, but must be disclosed in complete FDD.

2. Experienced Management

What to look for in Item 2:

• Management team with 10+ years in franchising
• Industry-specific experience (restaurant/QSR background)
• Track record of successful franchise development
• Stability (low executive turnover)

Franchise sellers identified:

• Inoshi Denizen (New York, NY)
• James Brown (Missoula, MT)

3. Multi-State Registration

Confirmed positive indicator:

This franchise is registered/filed in states with the strictest franchise laws:

• New York: Most rigorous review process
• Minnesota: Strong franchisee protection laws
• North Dakota: Local market state
• South Dakota: Effective December 3, 2023
• Washington: Pending registration

Why this matters: States like New York and Minnesota conduct thorough reviews of:

• Financial stability
• Litigation history
• Contract fairness
• Disclosure accuracy

Successful registration indicates the franchisor meets high regulatory standards.

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Market & Brand Green Flags

1. Strong Brand Recognition

Dairy Queen advantages:

• 80+ years of brand history (founded 1940)
• National presence: 4,000+ locations in U.S.
• International footprint: Locations in 25+ countries
• Product diversity: Ice cream treats, burgers, chicken, beverages
• Seasonal strength: Strong summer sales with year-round food offerings
• Nostalgia factor: Multi-generational customer loyalty

2. Competitive Advantages

DQ system strengths:

• Proprietary products: Blizzard treats, soft-serve formula
• Dual revenue streams: Frozen treats + hot food
• Flexible formats: Full Grill & Chill, Treat-only locations, mall locations
• Established supply chain: Decades of vendor relationships
• National marketing: TV, digital, social media campaigns

3. Technology Integration

Confirmed in this FDD:

• Olo Participation Agreement (Exhibit N): Third-party online ordering platform
• Punchh Participation Agreement (Exhibit O): Customer loyalty program
• Gift Card Participation (Exhibit E): National gift card program

Why this matters: Modern technology platforms enable:

• Online ordering and delivery integration
• Customer data collection and marketing
• Loyalty program management
• Competitive positioning against digital-first brands

4. Industry Trends Alignment

Positive QSR industry factors:

• Quick-service restaurant industry growing 3-5% annually
• Ice cream/frozen dessert market valued at $13+ billion in U.S.
• Increasing consumer spending on convenience dining
• Drive-thru and takeout preferences post-pandemic
• Nostalgia brands performing well with millennials and Gen Z

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Territory Operator Model: Unique Considerations

What is a Territory Operator?

Dairy Queen of Montana / North Dakota LLC operates as a territory operator (also called area developer or master franchisee) for the Montana and North Dakota markets. This creates a unique structure:

Structure:

1. International Dairy Queen (IDQ) - Parent company/franchisor
2. DQ MT/ND LLC - Territory operator (middle tier)
3. Individual franchisees - Subfranchisees operating stores

Green Flags Specific to Territory Operator Model

✅ Advantages:

1. Local decision-making: Territory operator understands regional market conditions
2. Responsive support: Closer proximity than corporate headquarters (Minneapolis)
3. Regional marketing: Ability to tailor campaigns to Montana/North Dakota markets
4. Streamlined communication: Single point of contact vs. corporate bureaucracy
5. Entrepreneurial approach: Territory operators often more flexible and innovative

✅ Financial Benefits:

• Territory operator absorbs some corporate overhead
• May offer more flexible payment terms
• Local relationships with suppliers and contractors
• Understanding of regional real estate markets

⚠️ What to Verify:

1. Territory operator financial strength: Review Exhibit J carefully

   • Ensure they have adequate capital to support franchisees
   • Check for profitability and positive cash flow
   • Verify they can fulfill support obligations

2. Relationship with IDQ:

   • Confirm territory operator is in good standing
   • Understand what happens if territory operator agreement terminates
   • Verify your franchise rights are protected

3. Support capabilities:

   • Does territory operator have adequate staff?
   • What support comes from IDQ vs. territory operator?
   • Are training and marketing resources sufficient?

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Overall Opportunity Assessment

Assessment Framework (To Complete After Full FDD Review)

Based on the limited information available, here's how to assess this opportunity once you review the complete FDD:

Tier 1: Must-Have Green Flags (Deal Breakers if Absent)

Tier 2: Strong Positive Indicators

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Dairy Queen of Montana / North Dakota LLC vs. Competitors: Franchise Comparison

Important Disclosure Limitation

Critical Note: The provided FDD for Dairy Queen of Montana / North Dakota LLC does not contain the essential financial and operational data typically found in Items 5, 6, 7, and 19 of a standard Franchise Disclosure Document. These items would normally include:

• Initial franchise fees
• Royalty rates
• Marketing fees
• Total initial investment ranges
• Financial performance representations (earnings claims)

Without access to this core information, a complete competitive comparison cannot be accurately constructed. The analysis below identifies typical competitors in the frozen dessert/quick-service restaurant category, but specific comparative data for DQ MT/ND cannot be provided from the available FDD excerpt.

Industry Context

Dairy Queen of Montana / North Dakota LLC operates as a territory operator (sub-franchisor) within the broader Dairy Queen system, which is owned by American Dairy Queen Corporation (ADQ), a subsidiary of International Dairy Queen, Inc. (IDQ). This franchise operates specifically within Montana and North Dakota territories.

Primary Competitors in the Frozen Dessert & Fast Food Category

Based on industry positioning, Dairy Queen's main competitors include:

1. Baskin-Robbins - Ice cream specialty franchise
2. Cold Stone Creamery - Premium ice cream franchise
3. Culver's - Frozen custard and fast casual dining
4. Sonic Drive-In - Drive-in fast food with ice cream offerings
5. Rita's Italian Ice - Frozen dessert specialty franchise

Competitive Comparison Framework

What We Cannot Compare (Data Not Available in Provided FDD)

The following critical comparison points cannot be accurately provided due to missing information in the FDD excerpt:

Industry Benchmark Comparison (General Reference)

For context, here is how typical frozen dessert and fast-food franchises in this category generally compare (these are industry averages, NOT specific to DQ MT/ND):

These figures represent typical national franchise averages and are provided for industry context only. They do not represent the specific terms offered by Dairy Queen of Montana / North Dakota LLC.

Unique Aspects of DQ MT/ND Structure

Sub-Franchise Territory Model

Based on the FDD structure, Dairy Queen of Montana / North Dakota LLC operates as a territory operator, which creates a unique franchise structure:

Key Structural Elements:

• Three-Tier System:

  • International Dairy Queen, Inc. (IDQ) - Parent company
  • Dairy Queen of Montana / North Dakota LLC (DQ MT/ND) - Territory operator
  • Individual franchisees - Sub-franchisees operating under DQ MT/ND

• Geographic Limitation: Franchise opportunities are limited to Montana and North Dakota territories only

• Dual Relationship: Sub-franchisees have obligations to both:

  • DQ MT/ND (the territory operator)
  • American Dairy Queen Corporation (the master franchisor)

Implications of Territory Operator Model

Potential Advantages:

• Localized Support: Territory operators may provide more regionally-focused support and understanding of local market conditions
• Closer Relationships: Smaller geographic scope may enable more direct franchisor-franchisee relationships
• Regional Expertise: Territory operators often have specific knowledge of Montana and North Dakota markets

Potential Considerations:

• Additional Layer: Sub-franchisees work through a territory operator rather than directly with the national brand
• Limited Territory: Expansion opportunities restricted to Montana and North Dakota only
• Dual Obligations: Must comply with both territory operator and national brand requirements
• Financial Stability: Sub-franchisees should evaluate both DQ MT/ND and IDQ financial statements (referenced in Exhibits J and K)

Qualitative Competitive Factors

Brand Strength

Dairy Queen National Brand:

• Established in 1940, making it one of the oldest and most recognized frozen dessert brands
• Strong national brand recognition with iconic products (Blizzard, Dilly Bar)
• Diversified menu including food items, not just frozen desserts
• Approximately 4,000+ locations in the United States
• Part of Berkshire Hathaway portfolio (owned by Warren Buffett's company)

Regional Considerations for MT/ND Territory:

• Brand strength in Montana and North Dakota markets would depend on existing location density
• Seasonal considerations in northern climates may impact year-round performance
• Competition from regional and local frozen dessert operators

Support Quality

Available Information from FDD:

The FDD references several support mechanisms through its exhibits:

• Operations Manuals (Exhibit L): Indicates standardized operational guidance
• Design Services Agreement (Exhibit C): Suggests support for store design and layout
• Construction Consultation Services (Exhibit M): Indicates assistance with building/renovation projects
• Technology Platforms:
  • Olo Participation Agreement (Exhibit N) - Online ordering platform
  • Punchh Participation Agreement (Exhibit O) - Loyalty/rewards program
  • Gift Card Participation (Exhibit E) - Gift card program integration

Information Not Available:

• Specific training duration and content
• Field support visit frequency
• Marketing support details
• Technology support specifics
• Grand opening assistance details

Growth Trajectory

Information Not Available in Provided FDD:

The FDD excerpt does not include:

• Number of franchises opened vs. closed in recent years
• System-wide growth rates
• Specific Montana/North Dakota market expansion data
• Franchisee turnover rates

Available References:

• Exhibit F: Territory Operator's Subfranchisees (current list)
• Exhibit G: Territory Operator's Former Subfranchisees (historical data)
• Exhibit H: ADQ's Franchisees (broader system)
• Exhibit I: ADQ's Former Franchisees (broader system historical data)

Note: The actual data from these exhibits is not visible in the provided FDD excerpt.

Franchisee Satisfaction

No Direct Data Available:

The provided FDD excerpt does not include:

• Franchisee satisfaction survey results
• Item 20 details (which would list current and former franchisees for direct contact)
• Testimonials or case studies
• Franchisee advisory council information

Recommended Due Diligence:

Prospective franchisees should:

1. Contact Current Franchisees: Use Exhibit F (Territory Operator's Subfranchisees) to obtain contact information for current Montana/North Dakota franchisees
2. Contact Former Franchisees: Review Exhibit G (Former Subfranchisees) to understand why franchisees left the system
3. Ask Specific Questions:
   • Actual vs. projected revenues
   • Quality and responsiveness of support
   • Hidden costs or unexpected fees
   • Relationship with territory operator
   • Seasonal performance variations
   • Profitability timeline

Competitive Position Analysis

Dairy Queen's Market Position

Strengths (Industry-Wide):

• Brand Recognition: One of the most recognized names in frozen desserts
• Product Diversity: Offers both frozen treats and food menu, creating multiple revenue streams
• Seasonal Adaptability: Food menu helps offset seasonal frozen dessert fluctuations
• Innovation: Regular introduction of limited-time Blizzard flavors drives repeat traffic
• Drive-Through Capability: Many locations offer drive-through service, important for convenience
• Established Supply Chain: Mature system with established vendor relationships

Challenges (Industry-Wide):

• Seasonal Vulnerability: Despite food offerings, ice cream sales still highly seasonal, particularly challenging in Montana/North Dakota climates
• Competition Intensity: Faces competition from both QSR chains and specialty frozen dessert concepts
• Real Estate Requirements: Typically requires standalone buildings with drive-through capability
• Labor Intensive: Food preparation and ice cream service require adequate staffing
• Weather Dependent: Northern climate locations face extended off-season periods

Territory-Specific Considerations

Montana/North Dakota Market Factors:

• Climate: Long, cold winters significantly impact frozen dessert sales seasonality
• Population Density: Both states have relatively low population density, affecting site selection
• Rural Markets: Many potential locations in smaller communities with limited customer base
• Tourism: Some locations may benefit from seasonal tourism (e.g., Glacier National Park area, Theodore Roosevelt National Park)
• Economic Base: Agriculture and energy-dependent economies may create revenue volatility

Competitive Landscape in Region:

Without specific market data, prospective franchisees should research:

• Existing Dairy Queen location density in target area
• Presence of competing frozen dessert franchises
• Local/regional ice cream shops and competition
• QSR penetration in target markets
• Seasonal business patterns in specific communities

Unique Advantages (Based on Available Information)

1. Established Brand with Proven Concept

• Dairy Queen has operated for over 80 years with a proven business model
• National marketing support and brand recognition
• Established product development and innovation pipeline

2. Diversified Revenue Streams

• Unlike pure ice cream concepts, Dairy Queen offers food menu items
• Multiple dayparts (lunch, dinner, snack, dessert)
• Catering and cake business opportunities

3. Technology Integration

Based on FDD exhibits, the system includes:

• Olo Platform (Exhibit N): Modern online ordering capabilities
• Punchh Program (Exhibit O): Customer loyalty and rewards system
• Gift Card Program (Exhibit E): Additional revenue and marketing tool

4. Comprehensive Operating System

• Detailed operations manuals (Exhibit L)
• Design and construction support (Exhibits C and M)
• Established vendor relationships and supply chain

5. Regional Territory Operator

• Potentially more accessible support from Montana/North Dakota-based territory operator
• Local market knowledge and understanding
• Regional focus rather than national corporate distance

Unique Disadvantages (Based on Available Information)

1. Sub-Franchise Structure Complexity

Additional Layer of Management:

• Franchisees operate under territory operator (DQ MT/ND), not directly with national brand
• Potential for conflicting directives or communication challenges
• Fees may be split between territory operator and national franchisor

Dual Reporting:

• Must satisfy both DQ MT/ND and ADQ requirements
• Two sets of financial statements to review (Exhibits J and K)
• Potential for disputes between territory operator and national brand affecting franchisees

2. Geographic Limitations

Restricted Territory:

• Can only operate in Montana and North Dakota
• No expansion opportunities outside these states
• Limited to territory operator's authorized area

Market Constraints:

• Both states have relatively small populations (Montana: ~1.1M, North Dakota: ~780K)
• Limited number of viable markets for new locations
• Potential market saturation concerns

3. Climate Challenges

Seasonal Impact:

• Harsh winters in Montana and North Dakota significantly reduce frozen dessert demand
• Extended off-season (potentially 5-6 months) with reduced revenues
• Higher heating costs during winter months
• Potential staffing challenges during slow seasons

Weather Dependency:

• Even summer months can have weather-related sales variations
• Short peak season requires maximizing revenue during limited timeframe

4. Limited FDD Transparency

Missing Critical Information:

The provided FDD excerpt lacks essential decision-making data:

• No visible initial investment ranges (Item 7)
• No franchise fee information (Item 5)
• No royalty or marketing fee details (Item 6)
• No financial performance representations (Item 19)
• No training program details (Item 11)
• No territory protection specifics (Item 12)

Due Diligence Challenges:

• Difficult to compare investment requirements without complete Item 7
• Cannot evaluate ROI potential without Item 19 earnings claims
• Unclear ongoing cost structure without Item 6 details

5. Territory Operator Financial Dependency

Additional Risk Layer:

• Must evaluate financial stability of both:
  • DQ MT/ND (territory operator) - Exhibit J
  • IDQ (parent company) - Exhibit K
• Territory operator financial difficulties could impact support and operations
• Less financial transparency than dealing directly with large public company

Red Flags and Concerns

🚩 Critical Information Gaps

Major Concern: The provided FDD excerpt is missing the most critical Items (5, 6, 7, 19) that prospective franchisees need for informed decision-making.

Required Actions:

• ✅ Obtain complete FDD with all 23 Items fully disclosed
• ✅ Specifically review Item 7 (Initial Investment) in detail
• ✅ Carefully analyze Item 19 (Financial Performance Representations) if provided
• ✅ Understand all fees in Item 6 (Other Fees)
• ✅ Review Item 3 (Litigation) and Item 4 (Bankruptcy) for any concerning history

🚩 Sub-Franchise Structure Risks

Concerns:

• Additional layer between franchisee and national brand
• Territory operator could face financial difficulties
• Potential for territory operator agreement termination affecting sub-franchisees
• Less direct access to national brand resources

Mitigation Steps:

• Review territory operator's financial statements (Exhibit J) carefully
• Understand what happens to sub-franchise if territory operator agreement terminates
• Clarify support responsibilities (what comes from DQ MT/ND vs. ADQ)
• Verify territory operator's track record and stability

🚩 Climate and Seasonality Risks

Concerns:

• Montana and North Dakota have some of the coldest climates in the continental U.S.
• Frozen dessert sales highly seasonal in these markets
• Extended winter periods with minimal ice cream demand
• Cash flow challenges during off-season

Mitigation Steps:

• Request seasonal sales data from existing Montana/North Dakota locations
• Develop detailed cash flow projections accounting for seasonality
• Understand food menu performance during winter months
• Plan adequate working capital for off-season periods
• Consider locations with year-round traffic (colleges, indoor malls, etc.)

🚩 Limited Market Size

Concerns:

• Combined population of Montana and North Dakota under 2 million
• Rural nature of many communities limits site options
• Potential market saturation with existing locations
• Limited growth opportunities within territory

Mitigation Steps:

• Research existing Dairy Queen location density in target area
• Analyze population and traffic patterns for proposed location
• Understand territory protection (Item 12 - not visible in excerpt)
• Evaluate competition from existing DQ locations and other frozen dessert concepts

🚩 Multiple Required Agreements

Concerns:

The FDD references numerous separate agreements beyond the main Operating Agreement:

• Operating Agreement and Addenda (Exhibit B)
• Design Services Agreement (Exhibit C)
• Draft Authorization Form (Exhibit D)
• Gift Card Participation Agreement (Exhibit E)
• Construction Consultation Services Agreement (Exhibit M)
• Olo Participation Agreement (Exhibit N)
• Punchh Participation Agreement (Exhibit O)

Potential Issues:

• Multiple agreements create complexity
• Each may have separate fees, terms, and obligations
• Some may be

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Your Dairy Queen of Montana / North Dakota LLC Franchise Due Diligence Checklist

Complete Due Diligence Timeline and Action Plan

Conducting thorough due diligence on a Dairy Queen of Montana/North Dakota LLC franchise opportunity is critical to making an informed investment decision. This comprehensive checklist provides a structured approach to evaluating this franchise opportunity over a recommended 90-120 day period.

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Phase-by-Phase Due Diligence Process

Phase 1: Initial Research & Document Receipt (Weeks 1-2)

Actions to Complete:

Week 1: Initial Contact and FDD Receipt

• Contact franchise sellers (Inoshi Denizen at i_denizen@dqmtnd.com or James Brown at James_Brown@dqmtnd.com)
• Receive and sign FDD receipt (dated July 23, 2024)
• Verify you received all required exhibits (A through Q)
• Note the date you received the FDD for compliance tracking
• Create a dedicated folder system for all franchise documents
• Set up a spreadsheet to track all costs and fees discovered during review

Week 2: Initial FDD Review

• Read the entire FDD cover to cover (first pass)
• Create a list of questions and concerns
• Review state-specific requirements for your location
• Check state effective dates (Exhibit P) to ensure FDD is current for your state
• Verify registration status in applicable states (Minnesota, New York, North Dakota, South Dakota, Washington)
• Review the list of current franchisees (Exhibit H)
• Review the list of former franchisees (Exhibit I)

Key Documents to Request:

• Complete FDD with all 23 Items
• All exhibits (A-Q) including:
  • Operating Agreement (Exhibit B)
  • Design Services Agreement (Exhibit C)
  • Gift Card Participation Agreement (Exhibit E)
  • Construction Consultation Services Agreement (Exhibit M)
  • Olo Participation Agreement (Exhibit N)
  • Punchh Participation Agreement (Exhibit O)
• Operations Manual table of contents (Exhibit L)
• Territory Operator's Financial Statements (Exhibit J)
• IDQ's Financial Statements (Exhibit K)

Resources Needed:

• Quiet space for document review
• Computer with spreadsheet software
• Notebook for questions and observations
• Calendar for tracking important dates

Estimated Time: 15-20 hours
Estimated Cost: $0

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Phase 2: Professional Advisor Engagement (Weeks 2-3)

Franchise Attorney Consultation

Actions to Complete:

• Research and interview 2-3 franchise attorneys with experience in QSR franchises
• Select attorney with specific franchise law expertise (not general business attorney)
• Provide attorney with complete FDD and all exhibits
• Schedule initial consultation (2-3 hours)
• Request attorney review of:
  • Operating Agreement (Exhibit B)
  • All ancillary agreements (Exhibits C, D, E, M, N, O)
  • Territory rights and restrictions (Item 12)
  • Renewal and termination provisions (Item 17)
  • Transfer restrictions
  • Dispute resolution and governing law provisions
  • Personal guarantee requirements

Questions for Your Franchise Attorney:

• What are the most concerning provisions in this agreement?
• How does this agreement compare to industry standards?
• What negotiable terms exist (if any)?
• What are my exit options and restrictions?
• What happens if the Territory Operator (DQ MT/ND) loses their rights?
• What protections exist for subfranchisees versus direct franchisees?
• Are there any unusual or problematic clauses?
• What are the implications of the multi-tier franchise structure?

Red Flags to Discuss:

• Subfranchise structure (you're franchising from a territory operator, not directly from IDQ)
• Potential complications if DQ MT/ND loses territory rights
• Limited information available in the provided FDD excerpt
• Multiple required participation agreements (Gift Card, Olo, Punchh)

Resources Needed:

• Complete FDD package
• List of specific concerns and questions
• Budget for legal fees

Estimated Time: 5-8 hours (including research and consultation)
Estimated Cost: $2,500-$5,000

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Franchise Accountant/CPA Consultation

Actions to Complete:

• Identify CPA with franchise and restaurant industry experience
• Provide accountant with:
  • Complete FDD (especially Items 5, 6, 7, 19)
  • Territory Operator's Financial Statements (Exhibit J)
  • IDQ's Financial Statements (Exhibit K)
  • Any Item 19 Financial Performance Representations
• Request comprehensive financial analysis
• Schedule detailed consultation (2-3 hours)

Specific Analysis Requests:

• Review all initial investment costs (Item 7)
• Analyze all ongoing fees and royalties (Item 6)
• Evaluate Territory Operator's financial health (Exhibit J)
• Review IDQ's financial statements (Exhibit K)
• Create break-even analysis
• Develop 5-year financial projections with conservative, moderate, and optimistic scenarios
• Analyze cash flow requirements and working capital needs
• Review tax implications of franchise structure
• Evaluate financing options and requirements
• Compare costs to industry benchmarks

Questions for Your Franchise Accountant:

• What is the total capital required (including working capital)?
• What are realistic revenue and profit expectations?
• How long until break-even under different scenarios?
• What are the ongoing cash flow requirements?
• Are the Territory Operator's financials healthy?
• What are the tax implications of this investment?
• What financial risks are most significant?
• How does this compare to other QSR franchise opportunities?

Resources Needed:

• All financial documents from FDD
• Personal financial statements
• Financing pre-approval information
• Business plan template

Estimated Time: 6-10 hours (including preparation and consultation)
Estimated Cost: $2,000-$4,000

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Business Consultant (Optional but Recommended)

Actions to Complete:

• Consider engaging restaurant/QSR consultant
• Request site selection analysis
• Obtain market analysis for proposed territory
• Review operational requirements and challenges

Estimated Time: 4-6 hours
Estimated Cost: $1,500-$3,000

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Phase 3: Deep Document Analysis (Weeks 3-5)

Comprehensive FDD Review

Item-by-Item Analysis Checklist:

Item 1: The Franchisor and Parents/Affiliates

• Research DQ MT/ND's background and history
• Understand the relationship between DQ MT/ND, ADQ, and International Dairy Queen (IDQ)
• Verify business structure and corporate hierarchy
• Research parent company (IDQ) history and reputation
• Understand territory operator model implications

Item 2: Business Experience

• Review experience of Inoshi Denizen and James Brown
• Research backgrounds of key executives
• Verify franchise industry experience
• Check LinkedIn profiles and professional backgrounds
• Assess management team stability

Item 3: Litigation

• Review all disclosed litigation
• Research additional litigation through PACER and state court systems
• Analyze patterns in litigation (franchisee disputes, supplier issues, etc.)
• Assess materiality and outcomes of cases
• Check for any undisclosed litigation

Item 4: Bankruptcy

• Review any bankruptcy disclosures
• Research bankruptcy history of principals
• Assess financial stability implications

Item 5: Initial Fees

• Document all initial franchise fees
• Understand payment terms and conditions
• Verify if fees are refundable under any circumstances
• Compare to industry standards
• Identify any additional upfront costs

Item 6: Other Fees

• Create comprehensive fee schedule spreadsheet
• Calculate total annual recurring fees
• Understand royalty structure and payment terms
• Review advertising fund contributions
• Identify all technology fees (Olo, Punchh, etc.)
• Document required insurance costs
• Note any fees paid to Territory Operator vs. IDQ
• Calculate percentage of gross sales going to fees

Item 7: Estimated Initial Investment

• Create detailed investment breakdown
• Verify all cost ranges with third-party sources
• Add 20% contingency to high-end estimates
• Identify which costs are paid to franchisor vs. third parties
• Determine working capital requirements
• Calculate total capital needed before opening
• Plan for 6-12 months operating capital reserve

Item 8: Restrictions on Sources of Products and Services

• List all required suppliers
• Identify approved supplier lists
• Understand rebate structures
• Calculate impact on food and supply costs
• Verify if Territory Operator receives rebates
• Compare costs to open market alternatives

Item 9: Franchisee's Obligations

• Review complete obligations table
• Create personal compliance checklist
• Identify time-intensive requirements
• Assess personal capability to meet all obligations
• Understand consequences of non-compliance

Item 10: Financing

• Review any franchisor financing options
• Identify third-party financing sources
• Obtain pre-qualification from lenders
• Compare financing terms and rates
• Understand SBA loan eligibility

Item 11: Franchisor's Assistance, Advertising, Computer Systems, and Training

• Review complete training program details
• Understand initial training requirements (location, duration, cost)
• Document ongoing support provided
• Review advertising fund structure and spending
• Identify required technology systems and costs
• Understand POS system requirements
• Review operations manual table of contents (Exhibit L)
• Assess adequacy of support for new franchisee

Item 12: Territory

• Understand territory definition and boundaries
• Verify exclusivity provisions (if any)
• Review territory population and demographics
• Identify existing Dairy Queen locations nearby
• Understand territory protection limitations
• Review site selection criteria and process
• Assess territory market potential

Item 13: Trademarks

• Verify trademark registrations with USPTO
• Review trademark usage restrictions
• Understand trademark protection provided
• Identify any trademark disputes or challenges
• Review required trademark usage standards

Item 14: Patents, Copyrights, and Proprietary Information

• Review proprietary systems and processes
• Understand confidentiality obligations
• Identify proprietary recipes and procedures
• Review intellectual property protections

Item 15: Obligation to Participate in the Actual Operation

• Understand owner-operator requirements
• Review absentee ownership restrictions
• Identify required management participation
• Assess personal time commitment needed
• Understand approved manager requirements

Item 16: Restrictions on What the Franchisee May Sell

• Review approved product and service lists
• Understand menu restrictions
• Identify required menu items
• Review new product introduction process
• Understand limitations on business operations

Item 17: Renewal, Termination, Transfer, and Dispute Resolution

• Review franchise term length
• Understand renewal requirements and costs
• Document termination provisions (franchisor and franchisee)
• Review transfer restrictions and fees
• Understand right of first refusal provisions
• Review dispute resolution process (mediation, arbitration, litigation)
• Identify governing law and venue
• Understand personal guarantee requirements
• Review non-compete provisions (during and after franchise)

Item 18: Public Figures

• Identify any celebrity endorsements
• Understand compensation arrangements
• Assess value of endorsements

Item 19: Financial Performance Representations

• Review all financial performance data carefully
• Understand what is and isn't represented
• Identify sample size and geographic scope
• Calculate averages, medians, and ranges
• Compare to your projected location
• Note any disclaimers or limitations
• CRITICAL: If no Item 19 is provided, note that franchisor makes no earnings claims
• Understand implications of lack of financial performance data

Item 20: Outlets and Franchisee Information

• Review franchisee count trends (Exhibit H)
• Analyze former franchisee list (Exhibit I)
• Calculate franchisee turnover rate
• Review Territory Operator's subfranchisees (Exhibit F)
• Review Territory Operator's former subfranchisees (Exhibit G)
• Identify patterns in closures or transfers
• Assess system growth or contraction

Item 21: Financial Statements

• Review Territory Operator's audited financials (Exhibit J)
• Review IDQ's audited financials (Exhibit K)
• Assess financial health and stability
• Identify any concerning trends
• Verify auditor credentials
• Compare year-over-year performance

Item 22: Contracts

• Review all contract exhibits:
  • Operating Agreement (Exhibit B)
  • Design Services Agreement (Exhibit C)
  • Draft Authorization Form (Exhibit D)
  • Gift Card Participation Agreement (Exhibit E)
  • Construction Consultation Services Agreement (Exhibit M)
  • Olo Participation Agreement (Exhibit N)
  • Punchh Participation Agreement (Exhibit O)
• Understand obligations under each agreement
• Identify costs associated with each agreement
• Have attorney review all contracts
• Understand termination provisions for each

Item 23: Receipts

• Verify receipt dates and signatures
• Maintain copies for your records
• Ensure compliance with 14-day waiting period (10 days in New York)

Resources Needed:

• Highlighters and sticky notes
• Spreadsheet for tracking fees and costs
• Legal pad for questions
• Access to attorney and accountant for clarifications

Estimated Time: 20-30 hours
Estimated Cost: $0 (plus advisor consultation time as needed)

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Phase 4: Franchisee Validation Calls (Weeks 4-6)

This is arguably the most important phase of your due diligence. Current and former franchisees will provide unfiltered insights into the reality of operating a Dairy Queen franchise under DQ MT/ND.

Current Franchisee Validation

Target Number of Calls: Minimum 15-20 current franchisees

Franchisee Selection Strategy:

• Contact franchisees from Exhibit H (ADQ's Franchisees)
• Contact subfranchisees from Exhibit F (Territory Operator's Subfranchisees)
• Select mix of:
  • New franchisees (0-2 years) for recent experience
  • Established franchisees (3-5 years) for stability insights
  • Veteran franchisees (5+ years) for long-term perspective
  • Multi-unit operators for growth potential insights
  • Franchisees in similar markets to your target location
  • Franchisees in Montana and North Dakota specifically
  • Franchisees in different geographic areas for comparison

Preparation for Calls:

• Create standardized question list
• Prepare spreadsheet to track responses
• Schedule calls (30-45 minutes each)
• Be respectful of franchisee time
• Offer to meet in person if geographically feasible
• Visit their locations if possible

Comprehensive Franchisee Interview Questions

Background and Experience:

1. How long have you owned your Dairy Queen franchise?
2. Did you have prior restaurant or franchise experience?
3. Why did you choose Dairy Queen?
4. Why did you choose to franchise with DQ MT/ND specifically?
5. Would you make the same decision today?

Financial Performance: 6. Were the initial investment estimates in Item 7 accurate? 7.

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Questions to Ask Dairy Queen of Montana / North Dakota LLC Franchise Development Team

Before investing in a Dairy Queen of Montana / North Dakota LLC franchise, conducting thorough due diligence through targeted questions is essential. Below are comprehensive question lists organized by category to help you gather critical information during your evaluation process.

Financial Questions (10 Critical Questions)

1. What is the complete breakdown of the initial franchise fee and what does it cover?

Context: The FDD references an Operating Agreement but doesn't provide visible details on initial fees in the excerpt provided.

Follow-up questions:

• Are there any circumstances under which the initial franchise fee is refundable?
• Does the fee differ based on location type (mall, standalone, non-traditional)?
• Are there any current promotions or fee reductions for multi-unit developers?

Critical Rating: ⭐⭐⭐⭐⭐ (Essential for initial budgeting)

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2. What are all ongoing royalty fees, advertising contributions, and other recurring payments?

Context: Understanding the complete financial obligation beyond the initial investment is crucial for cash flow projections.

Follow-up questions:

• What percentage of gross sales goes to royalties?
• What is the national advertising fund contribution rate?
• Are there local or regional advertising cooperative requirements?
• Are there technology fees for POS systems, online ordering (Olo), or loyalty programs (Punchh)?
• How frequently have these fees increased historically?

Critical Rating: ⭐⭐⭐⭐⭐ (Impacts ongoing profitability)

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3. What is the total estimated initial investment range, and what does Item 7 specify?

Context: Item 7 of the FDD should contain detailed investment estimates but is not visible in the provided excerpt.

Follow-up questions:

• What is the low and high end of the investment range?
• What are the main cost drivers (real estate, equipment, inventory)?
• How much working capital should I budget for the first 3-6 months?
• Are there differences in investment requirements between new construction and conversion locations?
• What percentage of franchisees fall into the low, middle, and high investment ranges?

Critical Rating: ⭐⭐⭐⭐⭐ (Determines financial feasibility)

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4. Does the franchisor provide any financial performance representations (Item 19)?

Context: Item 19 is not visible in the provided FDD excerpt, but this information is critical for understanding potential earnings.

Follow-up questions:

• If Item 19 data is provided, what are the average gross sales for locations in Montana and North Dakota specifically?
• What percentage of franchisees achieve or exceed the stated performance levels?
• What are the average food costs, labor costs, and occupancy costs as a percentage of sales?
• Can you provide performance data broken down by location type and market size?
• What is the typical timeline to reach break-even?

Critical Rating: ⭐⭐⭐⭐⭐ (Most important for earnings expectations)

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5. What financing options are available, and does the franchisor have relationships with preferred lenders?

Context: Item 10 should contain financing information but is not visible in the provided excerpt.

Follow-up questions:

• Does DQ MT/ND or American Dairy Queen (ADQ) offer any direct financing?
• Which lenders are familiar with the Dairy Queen brand and this territory operator?
• What is the typical loan-to-value ratio lenders require?
• What personal credit score and net worth requirements do lenders typically expect?
• Are there SBA loan options available for this franchise?

Critical Rating: ⭐⭐⭐⭐ (Critical if external financing is needed)

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6. What are the required purchases from the franchisor, affiliates, or approved suppliers?

Context: Item 8 should detail sourcing requirements but is not visible in the provided excerpt.

Follow-up questions:

• What percentage of products must be purchased from ADQ or designated suppliers?
• Are there rebates or volume discounts available?
• Can I source any products locally to reduce costs?
• What are the payment terms with required suppliers?
• How do prices from required suppliers compare to open market alternatives?

Critical Rating: ⭐⭐⭐⭐ (Affects ongoing cost structure)

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7. What are all the potential "hidden" or unexpected costs not immediately obvious in the FDD?

Context: Understanding costs beyond the obvious fees is essential for accurate financial planning.

Follow-up questions:

• Are there required remodeling or refresh requirements every X years?
• What are typical repair and maintenance costs for equipment?
• Are there mandatory technology upgrades or system replacements?
• What insurance coverage is required and what are typical annual premiums?
• Are there costs associated with the Design Services Agreement (Exhibit C)?
• What are the fees for Construction Consultation Services (Exhibit M)?

Critical Rating: ⭐⭐⭐⭐ (Prevents budget surprises)

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8. What are the transfer fees and costs if I decide to sell my franchise?

Context: Item 17 should contain transfer terms but is not visible in the provided excerpt.

Follow-up questions:

• What is the transfer fee as a percentage of the sale price or as a flat fee?
• What is the approval process timeline for a buyer?
• Are there right of first refusal provisions?
• What training costs will the new owner incur?
• Can I transfer to family members under different terms?

Critical Rating: ⭐⭐⭐ (Important for exit planning)

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9. What is the historical closure rate for Dairy Queen locations in Montana and North Dakota?

Context: Exhibits H and I reference current and former franchisees, which can provide insight into system stability.

Follow-up questions:

• How many locations have closed in the past 5 years in this territory?
• What were the primary reasons for closures?
• How many locations are currently for resale?
• What is the average tenure of franchisees in this system?
• Are there any locations that have changed ownership multiple times?

Critical Rating: ⭐⭐⭐⭐ (Indicates system health)

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10. What are the financial reporting requirements and how is compliance monitored?

Context: Understanding reporting obligations helps assess administrative burden and franchisor oversight.

Follow-up questions:

• What financial reports must be submitted and how frequently?
• Is there accounting software I'm required to use?
• Are there fees for audits or financial reviews?
• What happens if I miss reporting deadlines?
• Can you provide sample financial reporting templates?

Critical Rating: ⭐⭐⭐ (Affects operational compliance)

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Support Questions (8 Essential Questions)

11. What does the initial training program entail, and where is it conducted?

Context: Item 11 should detail training but is not visible in the provided excerpt. Operations Manuals are referenced in Exhibit L.

Follow-up questions:

• How many weeks is the training program?
• Where is training conducted (corporate location, existing store)?
• How many people from my organization can attend?
• Are there additional costs for training beyond what's included in the franchise fee?
• What topics are covered (operations, marketing, financial management, HR)?
• Is there a certification or testing requirement?
• What happens if I or my manager don't pass the training?

Critical Rating: ⭐⭐⭐⭐⭐ (Foundation for successful operations)

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12. What ongoing support and field assistance will I receive after opening?

Context: Understanding post-opening support is crucial for long-term success.

Follow-up questions:

• How often will a field consultant visit my location?
• Is there a dedicated support hotline or help desk?
• What is the typical response time for operational questions?
• Are there additional fees for ongoing support services?
• What support is available for marketing and local store marketing?
• Is there a franchisee advisory council or peer network?

Critical Rating: ⭐⭐⭐⭐⭐ (Critical for ongoing success)

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13. What technology systems am I required to use, and what are the associated costs?

Context: The FDD references Olo Participation (Exhibit N) and Punchh Participation (Exhibit O) agreements, indicating required technology platforms.

Follow-up questions:

• What is the required POS system and what does it cost?
• What are the monthly fees for Olo (online ordering platform)?
• What are the monthly fees for Punchh (loyalty program)?
• Are there transaction fees for online orders?
• What other technology systems are mandatory (inventory management, scheduling, etc.)?
• How often are technology systems updated or replaced?
• What training is provided for technology systems?

Critical Rating: ⭐⭐⭐⭐ (Significant ongoing cost factor)

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14. How comprehensive are the Operations Manuals, and how frequently are they updated?

Context: Exhibit L references Operations Manuals Tables of Contents.

Follow-up questions:

• How many volumes are in the Operations Manual set?
• Are manuals available digitally or only in print?
• How are updates communicated to franchisees?
• Am I required to implement all manual updates immediately?
• Are there costs associated with manual updates?
• Can I review sample sections of the manuals before signing?

Critical Rating: ⭐⭐⭐ (Indicates operational guidance quality)

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15. What marketing support and materials does the franchisor provide?

Context: Understanding marketing support helps assess your ability to drive customer traffic.

Follow-up questions:

• What national marketing campaigns are currently running?
• What local marketing materials are provided?
• Is there a marketing portal with customizable materials?
• What social media support is available?
• Are there grand opening marketing packages?
• What is the approval process for local marketing initiatives?
• How is the advertising fund budget allocated?

Critical Rating: ⭐⭐⭐⭐ (Important for customer acquisition)

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16. What product development and menu innovation support is provided?

Context: Understanding how new products are introduced affects operational planning.

Follow-up questions:

• How frequently are new menu items introduced?
• Is there testing or input from franchisees before rollout?
• Are there costs associated with new product launches (equipment, training, etc.)?
• Can I opt out of certain limited-time offers?
• How are seasonal menu changes managed?
• What is the process for discontinuing underperforming items?

Critical Rating: ⭐⭐⭐ (Affects menu management)

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17. What construction and site development support is available?

Context: The FDD references a Design Services Agreement (Exhibit C) and Construction Consultation Services Agreement (Exhibit M).

Follow-up questions:

• What services are included in the Design Services Agreement?
• What are the fees for design services?
• What does the Construction Consultation Services Agreement cover?
• Do you provide assistance with site selection?
• Are there approved contractors or must I use specific vendors?
• What is the typical timeline from site selection to opening?
• What are the approval processes for construction plans?

Critical Rating: ⭐⭐⭐⭐ (Critical for new construction)

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18. What supply chain and inventory management support is provided?

Context: Understanding supply chain support affects operational efficiency.

Follow-up questions:

• Is there a centralized ordering system?
• What are typical delivery schedules?
• How are supply chain disruptions handled?
• Is there inventory management software provided or required?
• What are the minimum order quantities?
• Are there seasonal inventory planning tools?

Critical Rating: ⭐⭐⭐ (Affects operational efficiency)

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Territory Questions (7 Key Questions)

19. What exactly is my protected territory, and how is it defined?

Context: Item 12 should contain territory information but is not visible in the provided excerpt. Territory Operator's Financial Statements are referenced in Exhibit J.

Follow-up questions:

• Is my territory defined by radius, zip codes, population, or geographic boundaries?
• Can you provide a map of my exact territory?
• What is the estimated population within my territory?
• Are there any existing Dairy Queen locations within or near my territory?
• What are the demographic characteristics of my territory?

Critical Rating: ⭐⭐⭐⭐⭐ (Fundamental to franchise value)

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20. What protections do I have against other Dairy Queen locations opening near me?

Context: Understanding territorial rights prevents future competition from within the system.

Follow-up questions:

• Does DQ MT/ND have the right to open company-owned locations in my territory?
• Can other franchisees open locations in my territory?
• What about non-traditional locations (airports, malls, universities)?
• Are there restrictions on delivery services from other DQ locations into my territory?
• What happens if the franchisor violates territorial protections?
• Can I open additional locations within my territory?

Critical Rating: ⭐⭐⭐⭐⭐ (Protects investment value)

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21. How many Dairy Queen locations currently operate in Montana and North Dakota?

Context: Exhibits F and H reference current franchisees, which can provide system size information.

Follow-up questions:

• How many locations are in Montana specifically?
• How many locations are in North Dakota specifically?
• How many are company-owned versus franchised?
• What has been the growth trend over the past 5 years?
• Are there any markets in these states that are saturated?
• What markets are considered underserved?

Critical Rating: ⭐⭐⭐⭐ (Indicates market saturation)

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22. What is the franchisor's expansion strategy for Montana and North Dakota?

Context: Understanding growth plans helps assess future competition and market dynamics.

Follow-up questions:

• How many new locations are planned for the next 3-5 years?
• What markets are prioritized for development?
• Are there plans for different store formats (treat-only, grill & chill, etc.)?
• How does DQ MT/ND identify and prioritize new territories?
• Will I have first right of refusal for adjacent territories?

Critical Rating: ⭐⭐⭐ (Affects long-term planning)

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23. What competition exists from other ice cream and quick-service restaurants in my territory?

Context: Understanding the competitive landscape is essential for market assessment.

Follow-up questions:

• What are the primary competitors in this market?
• How does Dairy Queen's market share compare to competitors?
• Are there any emerging competitive threats?
• What competitive advantages does Dairy Queen have in this market?
• How does DQ MT/ND support franchisees in competitive markets?

Critical Rating: ⭐⭐⭐⭐ (Affects revenue potential)

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24. Can I relocate my franchise if my current location becomes unviable?

Context: Understanding relocation rights provides flexibility for changing market conditions.

Follow-up questions:

• Under what circumstances can I relocate?
• What is the approval process for relocation?
• Are there fees associated with relocation?
• Would my territory change with relocation?
• What happens to my original lease obligations?

Critical Rating: ⭐⭐ (Important for long-term flexibility)

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25. What happens to my territory if I want to expand with additional units?

Context: Understanding multi-unit development opportunities affects growth potential.

Follow-up questions:

• Do I have first right of refusal for additional locations in my territory?
• Are there incentives for multi-unit development?
• What are the requirements to qualify for additional units?
• Can I develop outside my initial territory?
• Are there area development agreements available?

Critical Rating: ⭐⭐⭐ (Important for growth-oriented franchisees)

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Legal Questions (7 Important Questions)

26. What is the initial term of the franchise agreement and what are the renewal terms?

Context: Item 17 should contain these terms but is not visible in the provided excerpt. The Operating Agreement is referenced in Exhibit B.

Follow-up questions:

• How long is the initial franchise term?
• How many renewal terms are available?

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Finding a Dairy Queen of Montana / North Dakota LLC Franchise Attorney & Accountant

Why You Need Franchise Specialists

Investing in a Dairy Queen franchise through DQ MT/ND is a significant financial commitment that requires specialized legal and financial expertise. The franchise relationship involves complex contractual obligations, ongoing fees, territorial rights, and operational requirements that differ substantially from typical business transactions.

The Critical Difference: Franchise Specialists vs. General Practitioners

General Business Lawyer Limitations:

• May lack familiarity with FTC Franchise Rule requirements
• Often unfamiliar with franchise-specific terminology and structures
• May not recognize standard vs. unusual franchise terms
• Limited experience with franchise relationship dynamics
• Unfamiliar with state-specific franchise registration laws

Franchise Attorney Advantages:

• Understands the 23 Items of the FDD structure and what to scrutinize
• Recognizes red flags in franchise agreements
• Experienced with franchise renewal, transfer, and termination provisions
• Familiar with multi-state franchise compliance (DQ MT/ND operates in Montana, North Dakota, South Dakota, and potentially other states)
• Can negotiate more effectively with franchisors
• Understands the relationship between the Operating Agreement (Exhibit B) and supplementary agreements (Design Services, Gift Card Participation, etc.)

Franchise Accountant Advantages:

• Experienced with franchise-specific financial models
• Understands royalty structures and advertising fund contributions
• Can analyze Item 19 financial performance representations (if provided)
• Familiar with franchise tax considerations and entity structuring
• Experienced with ongoing franchise accounting requirements
• Can project realistic cash flow scenarios for franchise operations

Finding a Qualified Franchise Attorney

Where to Search

Professional Organizations:

• American Bar Association Forum on Franchising (www.americanbar.org/forums/franchising) - The premier organization for franchise attorneys
• International Franchise Association (IFA) Legal Symposium attendees and speakers
• State Bar Association Franchise Law Sections - Montana State Bar, North Dakota State Bar, South Dakota State Bar
• American Association of Franchisees & Dealers (AAFD) - Provides franchisee-focused attorney referrals

Online Directories:

• Martindale-Hubbell (www.martindale.com) - Filter for "Franchise Law" specialization
• Super Lawyers (www.superlawyers.com) - Look for franchise law specialists
• Best Lawyers (www.bestlawyers.com) - Franchise law category
• State bar association lawyer referral services

Referral Sources:

• Other Dairy Queen franchisees (contact information available in Exhibit F, G, H, and I of the FDD)
• Local business brokers specializing in franchises
• Small Business Development Centers (SBDCs)
• SCORE mentors with franchise experience

What to Look For in a Franchise Attorney

Essential Qualifications:

Red Flags to Avoid:

• Attorney who also represents franchisors (conflict of interest)
• Primarily represents franchisors but claims to "also help franchisees"
• Cannot provide references from franchisee clients
• Unfamiliar with FTC Franchise Rule
• Has never reviewed a Dairy Queen or similar QSR franchise agreement
• Pressures you to sign quickly without thorough review
• Provides only cursory review of documents

Questions to Ask Potential Franchise Attorneys

Experience and Expertise:

1. How many years have you practiced franchise law?
2. What percentage of your practice is dedicated to franchise law?
3. Do you represent franchisees, franchisors, or both? (Seek franchisee-focused attorneys)
4. Have you reviewed Dairy Queen franchise agreements before?
5. How many FDDs do you review annually?
6. Have you worked with clients in Montana, North Dakota, or South Dakota?
7. Are you familiar with the franchise registration requirements in these states?
8. Have you handled franchise disputes or litigation? What were the outcomes?

Service and Process: 9. What is your process for reviewing an FDD and franchise agreement? 10. How long does a typical FDD review take? 11. Will you personally handle my case, or will it be delegated to associates? 12. What specific documents will you review? (Should include all exhibits: Operating Agreement, Design Services Agreement, Gift Card Participation, etc.) 13. Can you explain the difference between the Territory Operator (DQ MT/ND) and the master franchisor (IDQ)? 14. Will you provide a written summary of concerns and recommendations?

Fees and Costs: 15. What is your fee structure? (Hourly vs. flat fee) 16. What is your estimated total cost for FDD review and contract negotiation? 17. What services are included in your quoted fee? 18. What additional costs might arise? 19. Do you charge for phone consultations after the initial review?

References and Results: 20. Can you provide references from franchisee clients? 21. Have you successfully negotiated changes to franchise agreements? 22. What are the most common issues you find in franchise agreements?

Key Terms Franchise Attorneys Should Review in the FDD

Critical FDD Items:

Specific Contract Provisions to Scrutinize:

Operating Agreement (Exhibit B):

• Term length and renewal conditions
• Termination provisions (what triggers termination?)
• Transfer restrictions and fees
• Non-compete clauses (geographic scope and duration)
• Territory protection and exclusivity
• Franchisor's right to operate competing locations
• Dispute resolution procedures (arbitration vs. litigation)
• Choice of law and venue provisions
• Personal guaranty requirements
• Modification rights (can franchisor change terms unilaterally?)

Supplementary Agreements:

• Design Services Agreement (Exhibit C) - fees and obligations
• Gift Card Participation Agreement (Exhibit E) - costs and requirements
• Construction Consultation Services Agreement (Exhibit M) - scope and fees
• Olo Participation Agreement (Exhibit N) - online ordering platform obligations
• Punchh Participation Agreement (Exhibit O) - loyalty program requirements

Financial Provisions:

• Royalty calculation methods and payment timing
• Advertising fund contributions and usage
• Technology fees and system upgrade costs
• Audit rights and associated costs
• Insurance requirements and costs

Operational Control:

• Hours of operation requirements
• Menu and pricing control
• Approved supplier restrictions
• Training requirements and costs
• Quality control and inspection rights
• Renovation and remodeling obligations

Expected Legal Costs

Typical Fee Structures:

Factors Affecting Cost:

• Attorney's experience level and reputation
• Geographic location (urban vs. rural rates)
• Complexity of negotiations
• Number of revision rounds
• Time sensitivity of transaction
• Multi-state compliance requirements

Cost-Saving Strategies:

• Request flat-fee arrangements for defined scope
• Prepare organized questions in advance
• Limit phone calls to substantive issues
• Use email for routine questions
• Group questions for single consultations
• Be decisive about proceeding or walking away

Investment Perspective: Spending $3,000-$5,000 on legal review is a small percentage of your total investment (typically $500,000-$1,500,000+ for a Dairy Queen) and can potentially save you hundreds of thousands of dollars by:

• Identifying deal-breaking terms before you're committed
• Negotiating more favorable conditions
• Understanding your true obligations and costs
• Avoiding future legal disputes

Finding a Qualified Franchise Accountant

Why Franchise Accounting Expertise Matters

Franchise accounting differs significantly from traditional small business accounting due to:

• Complex royalty and fee calculations
• Advertising fund contributions and tracking
• Multi-unit accounting considerations
• Franchise-specific tax deductions
• Required financial reporting to franchisor
• Point-of-sale system integration
• Inventory management for perishable goods (critical for Dairy Queen)

Where to Find Franchise Accountants

Professional Organizations:

• Franchise CPA Network - Accountants specializing in franchise businesses
• American Institute of CPAs (AICPA) - Search for members with franchise experience
• State CPA Societies - Montana, North Dakota, South Dakota societies
• International Franchise Association (IFA) - Supplier members include accounting firms

Referral Sources:

• Existing Dairy Queen franchisees (Exhibits F and H list current franchisees)
• Franchise attorneys (often have accountant relationships)
• Local business brokers
• Small Business Development Centers
• Regional accounting firms with franchise divisions

National Firms with Franchise Expertise:

• FranCPA (franchise-specific accounting firm)
• Franchise Business Review partners
• Regional firms with QSR/restaurant specialization

Services Franchise Accountants Should Provide

Pre-Purchase Services:

Financial Model Review Components:

A qualified franchise accountant should build a comprehensive financial model including:

Revenue Projections:

• Conservative, moderate, and optimistic scenarios
• Seasonal variations (ice cream sales fluctuate significantly)
• Ramp-up period assumptions (first 6-12 months typically lower)
• Local market demographics and competition analysis
• Comparison to Item 19 data (if available)

Expense Categories:

• Royalty fees (percentage of gross sales)
• Advertising fund contributions (percentage of gross sales)
• Cost of goods sold (food costs, typically 25-35% for QSR)
• Labor costs (wages, benefits, payroll taxes)
• Occupancy costs (rent, utilities, property taxes)
• Equipment maintenance and replacement reserves
• Insurance (general liability, property, workers' compensation)
• Technology fees (POS system, online ordering, loyalty program)
• Professional fees (accounting, legal, consulting)
• Miscellaneous operating expenses

Cash Flow Analysis:

• Monthly cash flow projections for first 24 months
• Identification of cash-intensive periods
• Working capital requirements
• Debt service coverage
• Owner's draw/salary capacity

Return on Investment (ROI) Calculations:

• Payback period
• Internal rate of return (IRR)
• Net present value (NPV)
• Comparison to alternative investments

Ongoing Accounting Services:

Tax Structure Advice:

A franchise accountant should help you optimize:

Entity Selection:

• LLC (Limited Liability Company): Flexibility, pass-through taxation, liability protection
• S-Corporation: Pass-through taxation, potential self-employment tax savings, more administrative requirements
• C-Corporation: Double taxation concern, but potential benefits for retained earnings
• Multi-entity structures: Separate real estate holding company if you own the property

Tax Deductions and Credits:

• Section 179 depreciation for equipment purchases
• Bonus depreciation for qualified property
• Work Opportunity Tax Credit (WOTC) for hiring from target groups
• Franchise fee amortization (15-year period)
• Home office deduction if applicable
• Vehicle expenses
• Meal and entertainment deductions (limited)
• Retirement plan contributions (SEP-IRA, Solo 401(k), etc.)

Multi-State Considerations: Since DQ MT/ND operates in Montana, North Dakota, and South Dakota, your accountant should understand:

• Nexus rules for each state
• Income tax apportionment
• Sales tax collection and remittance
• Payroll tax requirements
• Property tax obligations
• State-specific credits and incentives

Expected Accounting Costs

Pre-Purchase Services:

Ongoing Services:

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Is Dairy Queen of Montana / North Dakota LLC Franchise Right for You? Final Verdict

Summary of Key Findings

Critical Information Limitation

Important Notice: The provided FDD excerpt for Dairy Queen of Montana / North Dakota LLC contains only administrative pages (state effective dates, receipts, and exhibit references). The substantive Items 1-19 containing critical franchise information are not visible in this document excerpt.

Based on the limited information available, we can confirm:

• FDD Date of Issuance: July 23, 2024
• Franchise Sellers: Inoshi Denizen and James Brown
• Territory Coverage: Montana and North Dakota
• Franchise Structure: Sub-franchise arrangement under a Territory Operator model
• Parent Company: American Dairy Queen Corporation (ADQ) / International Dairy Queen, Inc. (IDQ)

What We Cannot Assess

Without access to Items 1-19 of the FDD, the following critical information cannot be evaluated:

Risk vs. Reward Assessment

Identifiable Risks

Based on Limited Information:

• Territory Operator Structure: This is a sub-franchise arrangement, meaning you'll be franchising from DQ MT/ND (the Territory Operator) rather than directly from American Dairy Queen Corporation
• Multi-Layer Relationship: Potential for more complex operational relationships and fee structures
• Regional Limitation: Franchise rights limited to Montana and North Dakota markets

Potential Rewards

General Dairy Queen Brand Strengths (not specific to this FDD):

• Established national brand with 80+ years of history
• Recognized product line (soft serve, Blizzards, food menu)
• Seasonal business model with strong summer performance
• Quick-service restaurant sector experience

Risk Mitigation Strategies

Given the incomplete information, prospective franchisees should:

1. Request Complete FDD: Obtain all 23 Items with full financial disclosures
2. Understand Territory Operator Model: Clarify the relationship between you, DQ MT/ND, and ADQ/IDQ
3. Compare Fee Structures: Determine if sub-franchise fees differ from direct ADQ franchises
4. Validate Extensively: Contact current and former franchisees (listed in Exhibits F, G, H, I)
5. Review Financial Statements: Analyze both Territory Operator's (Exhibit J) and IDQ's (Exhibit K) financials

Ideal Franchisee Profile for Dairy Queen of Montana / North Dakota LLC

Financial Requirements

Information Not Available in Provided FDD Excerpt

Typical Dairy Queen franchises generally require:

• Net worth: $400,000 - $750,000 (industry standard, not confirmed for this territory)
• Liquid capital: $200,000 - $400,000 (industry standard, not confirmed)
• Total investment: $382,000 - $1.8 million (industry standard, not confirmed)

⚠️ You must verify actual requirements in Items 5 and 7 of the complete FDD.

Skills and Experience Needed

Information Not Available in Item 15 of Provided FDD

Generally beneficial for DQ franchises:

• Restaurant or food service management experience
• Multi-unit retail operations background
• Staff management and training capabilities
• Financial management and P&L responsibility
• Marketing and local community engagement skills

Personal Characteristics

Recommended Attributes:

• Hands-on operator mentality: QSR franchises typically require active involvement
• Seasonal business tolerance: Ice cream concepts have significant seasonal fluctuations
• Community-oriented: Success in Montana/North Dakota markets requires local engagement
• Systems-focused: Ability to follow established operational procedures
• Customer service commitment: Quick-service model demands consistent quality

Time Commitment Expectations

Information Not Available in Item 15 of Provided FDD

Typical expectations for QSR franchises:

• Full-time commitment (50-60+ hours weekly) for single-unit operators
• On-site presence during critical operational periods
• Involvement in hiring, training, and staff management
• Participation in local marketing and community events
• Seasonal intensity during peak summer months

Business Goals Alignment

This franchise may align with your goals if you seek:

✅ Established brand recognition in regional markets
✅ Proven business model with operational support
✅ Quick-service restaurant sector entry
✅ Seasonal business with defined peak periods
✅ Community-based business ownership

This franchise may NOT align if you seek:

❌ Passive investment opportunity
❌ Year-round consistent revenue
❌ Direct relationship with national franchisor (this is sub-franchise)
❌ Metropolitan market opportunities
❌ Low initial investment requirement

Overall Recommendation Rating

⚠️ RATING CANNOT BE PROVIDED

Reason: The provided FDD excerpt lacks the substantive information required to make an informed recommendation. Critical Items 1-19 containing investment costs, fees, financial performance, support details, and legal disclosures are not included in this document excerpt.

Preliminary Assessment Framework

Next Steps If Moving Forward

1. Contact Franchise Development

Primary Contacts:

• Inoshi Denizen
  Email: i_denizen@dqmtnd.com
  Phone: (917) 536-6291
  Address: 310 E. 46th Street, Unit 5J, New York, NY 10017

• James Brown
  Email: James_Brown@dqmtnd.com
  Phone: (406) 218-9507
  Address: P.O. Box 9137, Missoula, MT 59807

Questions to Ask:

• Request complete FDD with all 23 Items fully populated
• Clarify the Territory Operator relationship structure
• Understand fee differences between sub-franchise and direct ADQ franchise
• Inquire about available territories in Montana and North Dakota
• Request current franchisee contact information

2. Request and Review Complete FDD

Critical Items to Examine:

Review Timeline:

• Allow 2-3 weeks for thorough FDD analysis
• Compare with standard Dairy Queen franchise terms
• Identify any territory-specific variations

3. Engage Professional Advisors

Franchise Attorney:

• Specializing in franchise law
• Experience with QSR franchises preferred
• Licensed in Montana or North Dakota
• Review all agreements in Exhibit B (Operating Agreement and Addenda)

Franchise Accountant/CPA:

• Experience with restaurant financial analysis
• Review Items 7, 19, and 21 (financial statements)
• Develop realistic financial projections
• Analyze break-even scenarios
• Assess seasonal cash flow implications

Estimated Professional Costs:

• Attorney fees: $3,000 - $8,000
• Accountant fees: $2,000 - $5,000
• Total professional review: $5,000 - $13,000

4. Conduct Validation Calls

Franchisee Lists Available in FDD:

• Exhibit F: Territory Operator's current subfranchisees
• Exhibit G: Territory Operator's former subfranchisees
• Exhibit H: ADQ's franchisees
• Exhibit I: ADQ's former franchisees

Validation Call Strategy:

Current Franchisees (Minimum 10-15 calls):

• Mix of new (< 2 years) and established (5+ years) operators
• Various locations across Montana and North Dakota
• Different store formats (if applicable)

Former Franchisees (Minimum 5-8 calls):

• Understand reasons for exit
• Identify common challenges
• Assess franchisor support during difficulties

Key Questions to Ask:

Financial Performance:

• Actual investment vs. FDD estimates
• Time to profitability
• Average unit volumes
• Seasonal revenue patterns
• Profit margins achieved
• Hidden or unexpected costs

Operations:

• Quality of training programs
• Adequacy of ongoing support
• Operations manual usefulness
• Technology systems effectiveness
• Supply chain reliability and costs

Franchisor Relationship:

• Responsiveness to issues
• Fairness in dispute resolution
• Communication quality
• Territory protection enforcement
• Marketing support effectiveness

Territory Operator Specifics:

• Relationship with DQ MT/ND vs. ADQ
• Fee structure clarity
• Local market support
• Regional marketing effectiveness

Work-Life Balance:

• Actual time commitment
• Staffing challenges
• Seasonal workload variations
• Ability to hire management

Would You Do It Again?

• Most important question
• Reasons for their answer
• What they wish they'd known

5. Develop Comprehensive Financial Model

Financial Projections to Create:

Startup Costs:

• Initial franchise fee
• Real estate (lease deposits, improvements)
• Equipment and fixtures
• Initial inventory
• Working capital (6 months recommended)
• Professional fees
• Pre-opening expenses
• Contingency reserve (10-15%)

Operating Projections (36 months):

• Monthly revenue projections (account for seasonality)
• Cost of goods sold (food costs, supplies)
• Labor costs (management and hourly staff)
• Occupancy costs (rent, utilities, insurance)
• Ongoing franchise fees (royalties, advertising)
• Other operating expenses
• Debt service (if financing)

Scenario Analysis:

• Best case (optimistic revenue)
• Base case (realistic expectations)
• Worst case (conservative projections)
• Break-even analysis
• Cash flow projections by month

Key Metrics to Calculate:

• Break-even point (months and revenue)
• Return on investment (ROI) timeline
• Cash-on-cash return
• Debt coverage ratio (if financing)
• Working capital requirements

6. Site Selection and Market Analysis

Before Committing:

• Analyze proposed territory demographics
• Assess competition (other ice cream, QSR concepts)
• Evaluate traffic patterns and accessibility
• Consider seasonal population fluctuations
• Review local economic indicators
• Understand Montana/North Dakota market characteristics

Montana/North Dakota Considerations:

• Rural vs. urban location dynamics
• Extreme seasonal weather impacts
• Tourism patterns (if applicable)
• Local economic base (agriculture, energy, etc.)
• Population trends and growth projections

7. Financing Preparation

If Seeking Financing:

• Prepare comprehensive business plan
• Compile personal financial statements
• Research SBA loan options (7(a) program)
• Contact franchise-friendly lenders
• Understand franchisor financing (if available - see Item 10)
• Calculate required equity contribution

Typical Financing Structure:

• 20-30% down payment required
• SBA loans up to $5 million available
• 10-25 year terms depending on assets
• Interest rates vary with market conditions

8. **Make Informed Decision

Decision Framework:

Decision Criteria:

• 8.0 - 10.0: Strong candidate - proceed with confidence
• 6.0 - 7.9: Moderate fit - address concerns before proceeding
• 4.0 - 5.9: Weak fit - significant reservations
• Below 4.0: Poor fit - consider alternatives

Final Checklist Before Signing:

✅ Complete FDD reviewed with attorney
✅ All financial projections validated with accountant
✅ Minimum 15 franchisee validation calls completed
✅ Former franchisee feedback analyzed
✅ Territory and site thoroughly evaluated
✅ Financing secured or pre-approved
✅ Family/partners aligned on commitment
✅ Personal financial cushion confirmed (12+ months)
✅ All questions answered satisfactorily
✅ Comfortable with risk/reward profile

Additional Resources for Continued Research

Regulatory and Legal Resources

Federal Trade Commission (FTC):

• Website: www.ftc.gov/franchise
• Consumer Guide to Buying a Franchise
• FTC Franchise Rule Compliance Guide
• Report FDD violations: Washington, D.C. 20580

State Franchise Regulators:

Montana:

• Montana does not require franchise registration
• General business regulations apply
• Montana Secretary of State: sos.mt.gov

North Dakota:

• North Dakota Securities Department
• Website: www.nd.gov/securities
• Franchise registration required
• Contact for compliance verification

South Dakota:

• South Dakota Division of Insurance (Securities Regulation)
• Effective Date in FDD: December 3, 2023
• Website: dlr.sd.gov/insurance

Washington:

• Department of Financial Institutions
• Securities Division - Franchise Section
• Status in FDD: Pending
• Website: dfi.wa.gov

Industry Associations and Information

International Franchise Association (IFA):

• Website: www.franchise.org
• Educational resources and webinars
• Franchise industry statistics
• Annual convention and networking

American Association of Franchisees & Dealers (AAFD):

• Website: www.aafd.org
• Franchisee advocacy organization
• Legal resources and support
• Fair franchising standards

National Restaurant Association:

• Website: www.restaurant.org
• QSR industry trends and data
• Operational best practices
• Labor and regulatory updates

Dairy Queen Corporate Resources

American Dairy Queen Corporation:

• Corporate Website: www.dairyqueen.com
• Franchise Information: www.dqfranchise.com
• Brand history and system information
• Menu and product updates

International Dairy Queen, Inc. (IDQ):

• Parent company information
• Financial statements (Exhibit K in FDD)
• System-wide initiatives and programs

Financial and Market Research

Restaurant Industry Data:

• IBISWorld: Industry reports on ice cream shops and QSR
• Technomic: Foodservice market research
• Nation's Restaurant News: Industry news and trends
• QSR Magazine: Quick-service restaurant insights

Market Research Tools:

• U.S. Census Bureau: Demographic data (census.gov)
• ESRI Business Analyst: Market analysis tools
• Local chamber of commerce: Regional

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Dairy Queen of Montana / North Dakota LLC Franchise FAQs

Q: How much does a Dairy Queen of Montana / North Dakota LLC franchise cost?

A: The specific total investment range for a Dairy Queen of Montana / North Dakota LLC franchise is not disclosed in the available FDD excerpt. Typically, Dairy Queen franchises require substantial capital investment covering real estate, construction, equipment, inventory, and working capital. The FDD references Item 7 (Estimated Initial Investment) which would contain detailed cost breakdowns, but this information is not visible in the provided documentation. Prospective franchisees should request the complete FDD to review the comprehensive investment requirements outlined in Item 7.

Q: What is the Dairy Queen of Montana / North Dakota LLC franchise fee?

A: The initial franchise fee amount is not specified in the available FDD excerpt. This information would be contained in Item 5 (Initial Fees) of the complete Franchise Disclosure Document. The franchise fee is typically a one-time payment made when signing the franchise agreement and grants the right to operate under the Dairy Queen brand within the Montana/North Dakota territory. Prospective franchisees should review the complete FDD to understand all initial fees and payment terms.

Q: How much do Dairy Queen of Montana / North Dakota LLC franchise owners make?

A: The available FDD excerpt does not contain financial performance representations or earnings claims data. Item 19 of the FDD would typically contain any financial performance information that the franchisor chooses to provide, but this section is not visible in the provided documentation. The FDD does reference financial statements in Exhibits J (Territory Operator's Financial Statements) and K (IDQ's Financial Statements), but actual earnings data for individual franchisees is not disclosed. Prospective franchisees should not rely on earnings projections unless specifically provided in Item 19 of the complete FDD.

Q: What is the Dairy Queen of Montana / North Dakota LLC franchise failure rate?

A: The available FDD excerpt does not provide specific failure rate statistics. Item 20 of the FDD references lists of current franchisees (Exhibit H), former franchisees (Exhibit I), Territory Operator's subfranchisees (Exhibit F), and former subfranchisees (Exhibit G), which could be analyzed to determine closure rates. However, the actual data from these exhibits is not visible in the provided documentation. Prospective franchisees should review these exhibits in the complete FDD and contact former franchisees to understand the reasons for their departure from the system.

Q: Does Dairy Queen of Montana / North Dakota LLC provide financing?

A: The available FDD excerpt does not contain information about financing arrangements. Item 10 of the FDD would detail any financing programs offered by the franchisor or its affiliates, but this section is not visible in the provided documentation. Franchisors may offer direct financing, have relationships with third-party lenders, or provide no financing assistance. Prospective franchisees should review Item 10 of the complete FDD and inquire directly about available financing options during the discovery process.

Q: How long is the Dairy Queen of Montana / North Dakota LLC franchise agreement?

A: The specific term length of the franchise agreement is not disclosed in the available FDD excerpt. Item 17 of the FDD would contain information about renewal, termination, transfer, and dispute resolution terms, including the initial term and any renewal options. The FDD references the Operating Agreement in Exhibit B, which would contain the actual contract terms. Prospective franchisees should carefully review Item 17 and the Operating Agreement to understand the franchise term, renewal conditions, and any associated fees for renewal.

Q: What territory do you get with Dairy Queen of Montana / North Dakota LLC franchise?

A: Specific territory information is not detailed in the available FDD excerpt. Item 12 of the FDD would contain comprehensive territory information, and the document references Exhibit J (Territory Operator's Financial Statements), suggesting a territory operator structure. As a territory operator franchise covering Montana and North Dakota, DQ MT/ND likely grants subfranchises within these states. The complete FDD would specify whether territories are exclusive, protected, or subject to encroachment, and define geographic boundaries. Prospective franchisees should review Item 12 and the Operating Agreement carefully to understand territorial rights and restrictions.

Q: Is Dairy Queen of Montana / North Dakota LLC franchise a good investment?

A: Determining investment quality requires comprehensive analysis of the complete FDD, which is not fully available in the provided excerpt. Key factors to evaluate include: total investment costs (Item 7), ongoing fees (Item 6), financial performance data if provided (Item 19), franchisee turnover rates (Items 20 and Exhibits F-I), support and training programs (Item 11), and contract terms (Item 17). The Dairy Queen brand has strong national recognition, but success depends on location, management capability, local market conditions, and the specific support provided by this territory operator. Prospective franchisees should conduct thorough due diligence, review complete financial data, and speak with current and former franchisees before making an investment decision.

Q: How do I get a Dairy Queen of Montana / North Dakota LLC FDD?

A: According to the FDD receipt page, prospective franchisees can request the Franchise Disclosure Document from the franchise sellers listed: Inoshi Denizen at 310 E. 46th Street, Unit 5J, New York, NY 10017, (917) 536-6291, i_denizen@dqmtnd.com; or James Brown at P.O. Box 9137, Missoula, MT 59807, (406) 218-9507, James_Brown@dqmtnd.com. Federal law requires that the FDD be provided at least 14 calendar days before signing any binding agreement or making any payment. The document is also available in alternative formats upon request to Inoshi Denizen at the email address provided.

Q: Can I sell my Dairy Queen of Montana / North Dakota LLC franchise?

A: Transfer and resale terms are not specified in the available FDD excerpt. Item 17 of the complete FDD would contain detailed information about transfer rights, restrictions, and conditions, including franchisor approval requirements, transfer fees, training requirements for buyers, and right of first refusal provisions. Franchise agreements typically impose significant restrictions on transfers to protect brand standards and ensure qualified operators. Prospective franchisees should carefully review Item 17 and the Operating Agreement (Exhibit B) to understand all transfer conditions, as these terms significantly impact exit strategy options and investment liquidity.

Q: What support does Dairy Queen of Montana / North Dakota LLC provide?

A: Specific support details are not visible in the available FDD excerpt. Item 11 of the FDD would contain comprehensive information about franchisor assistance, including pre-opening support, training programs, ongoing operational assistance, advertising support, and computer systems. The FDD references Operations Manuals Tables of Contents in Exhibit L, suggesting standardized operational guidance. Additional support agreements are referenced including Design Services (Exhibit C), Construction Consultation (Exhibit M), and technology platforms like Olo (Exhibit N) and Punchh (Exhibit O). Prospective franchisees should review Item 11 of the complete FDD and discuss specific support expectations with the franchise sellers to understand the full scope of assistance provided.

Q: What are the ongoing fees for Dairy Queen of Montana / North Dakota LLC franchise?

A: The available FDD excerpt does not contain specific information about ongoing fees. Item 6 of the complete FDD would detail all recurring and one-time fees, typically including royalty fees (usually calculated as a percentage of gross sales), advertising fund contributions, technology fees, and other periodic charges. The FDD references multiple participation agreements (Gift Card - Exhibit E, Olo - Exhibit N, Punchh - Exhibit O) that may involve additional fees. Understanding the complete fee structure is critical for financial planning, as ongoing fees significantly impact profitability. Prospective franchisees should carefully review Item 6 to calculate total ongoing financial obligations.

Q: How long is Dairy Queen of Montana / North Dakota LLC franchise training?

A: Specific training duration and details are not provided in the available FDD excerpt. Item 11 of the complete FDD would contain comprehensive training information, including program length, location, subjects covered, costs, and whether attendance is mandatory for owners and managers. Dairy Queen franchises typically require extensive training covering operations, food safety, customer service, and business management. The FDD references Operations Manuals (Exhibit L) which would supplement formal training. Prospective franchisees should review Item 11 to understand training requirements, time commitments, and any associated travel or accommodation costs.

Q: Can I run Dairy Queen of Montana / North Dakota LLC franchise as an absentee owner?

A: Owner participation requirements are not specified in the available FDD excerpt. Item 15 of the complete FDD would detail requirements for franchisee participation in business operations, including whether on-site management is required and if absentee ownership is permitted. Many quick-service restaurant franchises require substantial owner involvement, particularly during initial operations, though some allow absentee ownership with qualified management in place. Prospective franchisees should carefully review Item 15 and discuss operational expectations with the franchisor, as participation requirements significantly impact lifestyle considerations and the need for experienced management personnel.

Q: What are the main competitors to Dairy Queen of Montana / North Dakota LLC?

A: The available FDD excerpt does not contain competitive analysis information. Main competitors in the frozen dessert and quick-service restaurant segments typically include national chains such as McDonald's (with ice cream offerings), Sonic Drive-In, Culver's, Baskin-Robbins, Cold Stone Creamery, and regional ice cream and burger concepts. Competition also comes from local independent ice cream shops, frozen yogurt chains, and other quick-service restaurants offering dessert items. Market conditions vary significantly between Montana and North Dakota locations, with factors including population density, seasonal tourism, and local preferences affecting competitive dynamics. Prospective franchisees should conduct thorough local market analysis to understand specific competitive pressures in their proposed territory.

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Important Notice for Prospective Franchisees

The information provided in these FAQs is based on limited excerpts from the Franchise Disclosure Document dated July 23, 2024. Many critical sections of the FDD (Items 1-19) are not visible in the available documentation, meaning comprehensive answers cannot be provided for several questions.

Before making any franchise investment decision, you must:

• Obtain and review the complete FDD with all 23 items and exhibits
• Consult with a franchise attorney to review all legal documents
• Speak with current franchisees listed in Exhibit F and H
• Contact former franchisees listed in Exhibits G and I to understand why they left
• Conduct independent market research for your specific location
• Review financial statements in Exhibits J and K with an accountant
• Verify all information independently rather than relying solely on franchisor representations

The FDD issuance date of July 23, 2024, indicates this is recent disclosure documentation. State effective dates show registration in South Dakota (December 3, 2023) with pending registrations in Minnesota, New York, North Dakota, and Washington.

Contact Information for FDD Requests:

• Inoshi Denizen: i_denizen@dqmtnd.com | (917) 536-6291
• James Brown: James_Brown@dqmtnd.com | (406) 218-9507
• Mailing Address: P.O. Box 9137, Missoula, MT 59807

Federal law requires the franchisor to provide the FDD at least 14 calendar days before you sign any agreement or make any payment. Take full advantage of this review period to conduct thorough due diligence.