$286

Business Description

ADQ is a Delaware corporation incorporated in 1962. ADQ’s principal business address is 7505 Metro Boulevard, Minneapolis, Minnesota 55439. ADQ has not had any predecessors during the 10-year period immediately before the close of its most recent fiscal year. ADQ does business under its corporate name and the trade names “Dairy Queen” and “DQ.” ADQ is a wholly-owned subsidiary of its parent corporation, International Dairy Queen, Inc. (“IDQ”), whose principal business address is the same as ADQ’s. IDQ is a wholly-owned subsidiary of its parent corporation, Berkshire Hathaway, Inc., whose principal business address is 1440 Kiewit Plaza, Omaha, Nebraska 68131. ADQ’s affiliates that offer franchises in any line of business or provide products or services to franchisees are: Unified Supply Chain, Inc. (“USCI”); Orange Julius of America (“OJA”); Karmelkorn Shoppes, Inc. (“KSI”); DQF, Inc. (“DQF”); DQGC, Inc. (“DQGC”) and federal Canadian corporations Dairy Queen Canada Inc. (“DQC”) and Orange Julius Canada Limited (“OJC”). In addition, the following ADQ affiliate owns and operates DQ Grill & Chill® restaurants: DQ Training Restaurants, LLC (“DQTR”). The principal business address for USCI, OJA, KSI, DQF, DQGC and DQTR is the same as ADQ. The principal business address for DQC and OJC is 1111 International Boulevard, Suite 601, Burlington, Ontario, Canada L7L 6W1.

Prior Experience

In the past ADQ issued standard and urban territory franchises in the United States, which are territory franchises that allow the territory operator to develop the Dairy Queen®/Brazier® (and now DQ Grill & Chill®) and Dairy Queen®/Limited Brazier® businesses within a defined geographical area (“territory”) through subfranchising to third parties. ADQ occasionally acquires a territory operator’s interest in various restaurant and store franchise agreements through negotiated acquisitions of territorial subfranchising rights. Also in the past, ADQ issued Dairy Queen® soft-serve-only franchises (a store featuring approved Dairy Queen® soft-serve treat products which may or may not sell non-system food), Dairy Queen®/Limited Brazier® franchises (a store featuring approved Dairy Queen® soft-serve treat products and a limited number of approved food items), Dairy Queen®/Brazier® franchises (a restaurant featuring approved Dairy Queen® soft-serve treat products and a full menu of Brazier® food items), and Dairy Queen®/Fuel Center franchises (a franchise specifically offered for locations operated in conjunction with or adjacent to a fuel dispensing or travel business). For these franchises that ADQ no longer offers, there may be existing franchisees that were granted licenses under these franchise programs (including territory operators who continue to subfranchise).

Business Offered

ADQ’s business includes administering its franchise system, establishing and conducting sales promotion programs for DQ® products, and providing various services to its franchisees (see Items 8 and 11). In addition, since ADQ’s incorporation, ADQ has operated DQ® restaurants and stores on an interim basis. ADQ does not operate any company-owned DQ Grill & Chill® restaurants as of the date of this disclosure document, although, as explained further below, ADQ’s affiliate, DQTR, owns and operates two DQ Grill & Chill® restaurants. In addition to the franchise offered under this franchise disclosure document, ADQ offers franchises for other concepts through separate franchise disclosure documents: • DQ® Treat. ADQ offers single unit franchises for the operation of DQ® Treat locations under the trade name DQ®/Dairy Queen® in Street locations and DQ®/Orange Julius® in Captive-venue locations. DQ® Treat locations sell Dairy Queen® soft-serve treat and beverage products and a limited number of approved food items. • Texas DQ® Restaurant. Due to historical factors unique to Texas, ADQ offers single and multiple unit franchises in Texasfor DQ® restaurants with a food menu different than the DQ Grill & Chill® food menu, which is called “Texas Country Food.” The DQ® restaurant multiple unit franchises permit a franchisee to establish and operate a specific number of DQ® restaurants at authorized locations in Texas within a specific geographic or trade area under separate franchise agreements for each restaurant.

Initial Fees

You must pay ADQ a $35,000 initial franchise fee for a single franchise. The franchise fee is due when you submit a franchise application, which is included in this disclosure document as Exhibit E. You do not pay an initial franchise fee if you are a conversion franchisee or an existing franchisee relocating a restaurant under ADQ’s relocation policy. In addition, you must pay ADQ an initial franchise fee when you sign a franchise agreement for each DQ Grill & Chill® restaurant you develop under a MultiTRA. The amount of the initial franchise fee will vary depending upon the number of restaurants you are granted the right to develop within your trade areas, your restaurant or retail management experience, the services ADQ and its affiliates will provide to you, and other factors like the market for DQ® products and the local economic conditions within your development or trade area. ADQ estimates that you will pay an initial franchise fee of up to $30,000 per restaurant, although the initial franchise fee could vary depending on the factors described above. The initial franchise fee is refundable in full without interest only if ADQ does not approve your application or you submit written notification to ADQ to cancel your application prior to ADQ’s final approval. The initial franchise fee is refundable in the following instances, minus a cancellation fee of the greater of $5,000 or ADQ’s expenses: (1) if you withdraw your application after ADQ has approved it; (2) if your required training attendees fail to successfully complete the training program and your approval is cancelled (see Item 11 for information on required training attendees); (3) if your site is not designated and ADQ does not consent to the site within 90 days after the date ADQ approves your application; or (4) if you have not commenced construction within 180 days from the franchise agreement effective date. In these instances, ADQ has the right to cancel any agreements that have been signed with ADQ without opportunity to cure. ADQ may charge a reduced, non-refundable initial franchise fee in certain situations, including: (1) when a franchisee is opening a franchise in a previously closed location; (2) certain Captivevenue locations, including those in airports, colleges and universities, and with certain national food service operators specializing in providing food service in these types of locations; and (3) for operators with multiple DQ® locations who have developed one or more new franchises with ADQ in the past five years, who have an ADQ certified multi-unit operator training program, and have a full time construction supervisor on staff. Neither ADQ nor its affiliates finance any part of an initial franchise fee. Multiple Unit Franchise Fees MultiTRA Franchisee If you are a MultiTRA franchisee, in addition to the initial franchise fee due for each restaurant developed under the MultiTRA, you must pay ADQ an initial franchise fee deposit of $5,000 per restaurant you are granted the right to develop, which is due when you sign the MultiTRA. The MultiTRA initial franchise fee deposit will vary depending upon the number of restaurants you are granted the right to develop. Once ADQ signs the MultiTRA, the initial franchise fee deposit is nonrefundable. ADQ will credit $5,000 of the MultiTRA initial franchise fee deposit against the initial franchise fee to be paid under each franchise agreement. Other Fees and Payments Made to ADQ or Its Affiliates Prior to Opening You must pay ADQ a fee of $175 for each training attendee to take the management training readiness assessment (“MTRA”). Therefore, the amount ADQ receives from the MTRA your required training attendees attend is $525, or more depending on how many additional people attend the MTRA. See Items 7 and 11 for details on the MTRA. In certain circumstances, you may be required to pay other fees or amounts to ADQ or its affiliates prior to opening. If you pay a reduced or no initial franchise fee, you may be required to pay ADQ fees that otherwise are included in the initial franchise fee, such as training fees, a prototype design fee, a construction consultation fee and opening services fees. See Item 7 for details.

Financing

Although they may have done so in the past, ADQ and its affiliates generally do not offer financing arrangements or similar assistance to franchisees. Neither ADQ nor its affiliates finance any part of the initial franchise fee, or the MultiTRA initial franchise fee deposit. Neither ADQ nor its affiliates will offer site acquisition, equipment or leasehold financing services to you for the establishment of your franchised business. You must obtain necessary financing through third parties. ADQ periodically arranges with third party finance companies or banks to make financing programs available to franchisees. These arrangements ordinarily involve no more than arranging to put franchisees in contact with sources of financing available. There is no assurance that financing will be offered in any particular instance. If financing is offered, the financial institution independently establishes the amount, terms, interest rate and duration. Neither ADQ nor any of its affiliates receive any payments in exchange for referrals or the placement of any financing. It is solely your responsibility to locate and obtain, on whatever terms you can arrange, any required financing for the establishment of your franchised business.

Franchisee Revenue and Profit

Written substantiation for the FPR will be made available to you at ADQ’s office in Minneapolis, Minnesota upon reasonable request. Warning: Some Restaurants have earned the amounts reflected in this FPR. Your individual results will differ. There is no assurance that you will earn as much. Additional Information Regarding this FPR: A. ADQ has made this FPR available to you for informational purposes only. Many factors, including the location of the restaurant, the maturity of the trade area in which the restaurant is located, management experience and capabilities, local market conditions, the scope of investment, and other factors, are unique to each restaurant and may significantly impact the financial performance of the restaurant. The most important factors in the success of any DQ Grill & Chill® restaurant are personal business, marketing, management, judgment and other skills, and a willingness to work hard and follow the DQ® system. B. The actual results included in this FPR relate to results for the restaurants described in the schedules. Prior to submitting an application for a franchise, ADQ strongly recommends that you contact several existing franchisees of your own choosing for information concerning a DQ Grill & Chill® restaurant. The financial results of a new DQ Grill & Chill® restaurant may vary considerably from older locations, which may have been originally developed as a Dairy Queen®/Brazier® restaurant. Neither ADQ nor any of its affiliates make any promises or representations of any kind that you will achieve any particular results or level of sales or profitability or even achieve break-even results in connection with the development of a new restaurant. C. You are responsible for developing your own business plan for your restaurant, including capital budgets, financial statements, projections and other elements appropriate to your particular circumstances. ADQ encourages you to consult with your own accounting, business, and legal advisors in doing so. In developing the business plan, you are cautioned to make necessary allowance for changes in financial results to income, expenses, or both, that may result from the operation of your restaurant in different geographic areas or new market areas, or during periods of, or in areas suffering from, economic downturns, inflation, unemployment, labor shortages or other negative economic influences. D. Historical costs do not necessarily correspond to future costs because of factors such as inflation, changes in minimum wage laws, location, financing, real estate-related costs and other variables. All information should be evaluated in light of current market conditions including cost and price information as may then be available. Prospective franchisees must bear in mind that a newly opened business generally cannot be expected to achieve sales volumes or maintain expenses similar to those of an established business. E. This FPR does not include all start-up expenses and development costs for a new DQ Grill & Chill® restaurant. See Items 5, 6 and 7 of the disclosure document for estimates and other information pertaining to the fees and initial investment required for the development of a new restaurant. Similarly, the expenses identified in this FPR are not the only expenses that you will incur in connection with the operation of a DQ Grill & Chill® restaurant. You may incur other additional expenses including, but not limited to, insurance, legal and accounting, interest on debt service, rent, depreciation/amortization, property taxes, and other taxes and licenses. You should conduct an independent investigation of the costs and expenses you will incur in operating your franchise. You should contact an accountant or other financial advisor to fully understand these matters and the impact they may have on your DQ Grill & Chill® restaurant. SCHEDULES A, B and C Schedules A, B and C disclose information about DQ Grill & Chill® restaurants that: • were newly constructed freestanding restaurants; • were developed and first opened for business between January 1, 2014 and December 31, 2015; • were operated for the full year 2016; and • are franchisee owned and operated. This FPR does not include: (1) new DQ® restaurants developed in Texas (which have the “Texas Country Foods” cooked food menu and are offered under a separate disclosure document); (2) existing DQ® restaurants that have converted to the DQ Grill & Chill® restaurant’s facility design, menu and trademark by remodeling an existing DQ® restaurant or replacing an existing DQ® restaurant with a new DQ Grill & Chill® restaurant design facility either at the same site or at a new location; (3) new DQ Grill & Chill® restaurants that involved a conversion of a closed location of a different quick service restaurant brand; (4) new DQ Grill & Chill® restaurants that were opened in a fuel center or other non-traditional location inside a host building such as a ferry terminal or mall; or (5) new DQ Grill & Chill® restaurants that were opened under a developmental rights contract. Schedule A presents Gross Sales (as defined later in this Item and in the Operating Agreement) for all locations that meet the criteria above for inclusion in this FPR. Schedule B includes the following information for a subset of the locations listed in schedule A, based on the usable profit and loss statements (“P&Ls”) these locations submitted to ADQ: • Weighted average and straight average Gross Sales; • Certain expenses and manageable profit percentages; and • Best, worst, weighted average, and standard average restaurant results by category, and the number and percentage of restaurants in each category that outperformed the weighted average and the standard average results for that category. Schedule B has two tables, one for DQ Grill & Chill® locations developed using the GC Core72 prototypical freestanding building model, and one for DQ Grill & Chill® locations developed using the GC Core47 prototypical freestanding building model. See Item 7 for information on these prototypical freestanding building models. Definitions and Notes to Schedules 1. Gross Sales. Gross sales, as used in this Item 19 and in the Operating Agreement, means the total revenues and receipts from the sale of all products sold by the Restaurant, whether paid for by cash, credit (not adjusted for credit card fees) or gift card, barter, or otherwise, including sales of all products under any of the Trademarks as well as sales of other products, services and merchandise, whether or not identified by other brand names, and excluding sales taxes and revenues and receipts arising directly from Licensee’s sale of gift cards. 2. Product Cost. The cost of the food products that are sold to consumers and the associated paper purchases (based on beginning inventory plus purchases less ending inventory). The food products include ingredients, beverages, and condiments. The associated paper purchases include bags, product wraps and containers, other paper products, cups and lids, straws, and eating utensils. Note that the food cost portion of discounts given and employee meals is reflected in local advertising. Local advertising is a restaurant controllable expense. 3. Labor. The sum of crew labor wages, manager’s wages and salary and other compensation, and related taxes and benefits. Labor does include payments that may be made to a franchisee or its owners in the form of a manager’s salary or wages. Labor does not include payments that may be made to a franchisee or its owners in the form of an owner’s draw, a dividend, or similar distributions. Because of the many forms through which franchisees may be compensated for their work in a store, not all stores paid a manager’s salary and benefits. The Labor numbers used for purposes of this FPR were those included in the Profit and Loss reports received from franchisees without any adjustments for the manner in which the franchisees handle owner compensation. 4. Restaurant Controllables. The sum of utilities, telephone, local advertising (includes product costs for discount sales and employee meals), repairs and maintenance, service contractors, laundry and uniforms, operating supplies (other than inventory), trash and recycling, and bank charges (other than debt service). 5. Miscellaneous Expenses. All miscellaneous expenses are rolled up into the total Restaurant Controllables percentage. 6. Manageable Profit. Profit remaining after deduction of sales taxes, discounts, Product Cost, Labor Cost and Restaurant Controllables, but before the deduction of occupancy costs, insurance (non-employment), continuing license fees, sales promotion program fees, legal fees, accounting fees and other administrative costs. 7. Weighted Average. A method of valuation that considers the sales of all restaurants included in the applicable schedule in relation to the total sales of the group of restaurants that is included. This determines the weighting that is applied to the sales, expense or manageable profit percentage of each category. For example, assume that during calendar year, the first restaurant had $850,000 in sales, the second restaurant had $1,000,000, and the third restaurant had $1,100,000. The combined total for the 3 restaurants is $2,950,000. The first restaurant makes up 29%, the second restaurant makes up 34%, and the third restaurant makes up 37% of the total sales between the three locations. To determine the weighted average, these percentages are applied to each sales, expense or manageable profit percentage for each restaurant and then added together to come up with a weighted valuation within each category. The weighted average of total sales for the 3 restaurants in the above example is $993,500. 8. Adjustments. Any financial statement preparation includes certain estimates, accruals and reclassifications as common accounting period adjustments. These accounting adjustments generally are made to the most current accounting period included in the statement, unless they are deemed to be a material adjustment to a prior accounting period. If an adjustment is considered material, the prior accounting periods are restated to reflect the adjustment in the applicable period(s). ADQ does not know if any franchisee made any accounting period adjustments for their financial results. Other than the preceding financial performance representation, ADQ does not make any financial performance representations. ADQ also does not authorize its employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, ADQ 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 Shelly H. O’Callaghan at 7505 Metro Boulevard, Minneapolis, MN 55439 or by telephone at (952) 830-0308, the Federal Trade Commission, and the appropriate state regulatory agencies.