Sunday, July 14, 2002

Dairy Queen trying improved restaurants

Grill & Chill: new concept, new markets

By Karren Mills
The Associated Press

        MINNEAPOLIS — On her 63rd birthday, the Queen is getting a face lift. She'll be spending more of her time uptown, too.

        International Dairy Queen, which introduced Americans to “the cone with the curl on top” in 1940, is cautiously rolling out a new restaurant format with more food choices and warm, earth-toned dining rooms where customers can enjoy lingering.

        The new restaurants, called DQ Grill & Chill, are a departure from Dairy Queen's image as an ice cream place, and aim at expanding the chain's presence in metropolitan areas. The ultimate goal is a bigger piece of the $115 billion fast-food industry.

        “We're moving into larger areas,” spokesman Dean Peters said. “Smaller towns (are) where Dairy Queen has and continues to have our roots. But we have opportunities in these other markets and see an opportunity for growth there.”

        The company, owned by Warren Buffett's Berkshire Hathaway Inc. since 1998, has opened its first two DQ Grill & Chills in Chattanooga, Tenn., and plans to open another in the Rockford, Ill., area in August. Others are planned for the Rio Grande Valley in Texas; Atlanta; Baltimore; Seattle; Kansas City, Mo.; Tampa, Fla.; and Minneapolis-St. Paul by the end of next year.

        Dairy Queen, which changed the ice cream business with its soft frozen dessert dispensed directly from the freezer, has long had a limited sandwich selection at its Brazier stores.

        But with its Grill & Chills, Dairy Queen is out to steal market share from McDonald's and Burger King and sit-down restaurants like Chili's, Applebee's and TGI Friday's, Mr. Peters said.

        It's a bit like a minnow nibbling on a shark.

        Dairy Queen has 5,737 stores, including 4,914 in the United States. McDonald's, the world's biggest restaurant company, will have more than 30,000 outlets worldwide by the end of this year.

        Dairy Queen had total revenues of $420 million when Berkshire Hathaway bought it. That figure has grown about 2 percent annually since then — on par or slightly ahead of the industry average — to about $450 million last year.

        Offerings at the new concept stores include made-to-order flame-grilled hamburgers with a choice of toppings; grilled turkey and Philly steak sandwiches; vegetable quesadillas; and breakfast items such as hash browns, eggs, sausage and pancakes.

        At one of the new Grill & Chills in Chattanooga, ice cream was still the bait for Jeffrey Smith, 14, and Jeffrey Mattheiss, 17. But they said they noticed the decor: wooden partitions separating sections of booths and tables that seat a total of about 80 customers and textured tile floors.

        The Miller family — Janice and Dale and 4-year-old twins Brad and Brianna — began eating at the Grill & Chill when the new format was introduced. The kids like the children's menu and the parents like the expanded main menu, Janice Miller said.

        Ms. Miller said her children “love McDonald's because they get toys. They demanded to eat here tonight because they get ice cream.”

        Howard Waxman, editor and publisher of New York-based Ice Cream Reporter magazine, said the new restaurants might attract customers who want both an upscale sandwich and a good ice cream dessert.

        “They're giving people what they want,” Mr. Waxman said. “They would be limiting themselves if they didn't grow in this direction.”


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