MKTG 19439 In-Class SWOT Assignment

Do you remember the first time you had soft serve ice cream? Soft serve is a type of ice cream that is softer and less dense than regular ice creams as a result of air being introduced during freezing. It's a popular treat in Canada and one with a long history. In fact, Dairy Queen celebrated its 75^th anniversary in 2015.

History

Soft serve ice cream's popularity dates back to Aug. 4, 1938 when John Fremont McCullough and his son Alex had been experimenting with a soft frozen dairy product. They contacted a good friend, Sherb Noble, who agreed to offer the treat at his walk-in ice cream store. Within two hours, Noble had dished out more than 1,600 servings of the new dessert.

Today, International Dairy Queen, Inc. (IDQ) has over 6,000 restaurants in the U.S., Canada and 20 other countries. The company has over 12,000 employees. IDQ is part of the Berkshire Hathaway family, a company owned by legendary investor and CEO Warren Buffett.

In Canada, there are 700 locations. The first Dairy Queen opened in 1953. From soft serve ice cream, the menu has evolved to include Blizzard treats, DQ cakes, fruit smoothies, burgers, wraps, fries and cold soft drinks. Locations in Canada are called DQ Grill & Chill restaurants. All locations are franchises.

Franchising is a business relationship where a franchisor (Dairy Queen) grants a licence to a franchisee (a company or person who contracts to use the franchise system) the right to use the DQ trademark, brand and operating system for an initial fee (initial franchise fee). In return, Dairy Queen collects a share of the income (a royalty). Dairy Queen faced multiple lawsuits in the U.S. from franchisees in the 1990s over disputes about advertising, menus and supply chain management.

DQ Grill & Chill Restaurants

Dairy Queen's Vision Statement is to be the world's favorite quick service restaurant.

One-third of Canadians eat at a fast food or quick service restaurant 1 to 3 times per week. There are many choices if you want quick service: McDonald's, Tim Hortons, Subway, A&W Restaurants, KFC, or Wendy's. In a 2018 survey of which fast food restaurants Canadians go to, Dairy Queen ranked 7^th in the list with 33% while McDonald's ranked 1^st with 67%.

Dairy Queen is a major sponsor of Children's Miracle Network (CMN), and DQ franchisees have raised more than $100 million to this charity since 1984. 2014 marked the 30th anniversary of the partnership. The company promotes community partnerships, offering restaurant tours to school groups as well as student discounts. Product donations can be arranged for schools and colleges by contacting local franchises.

The most popular item on the menu is the Blizzard, which is soft-serve ice cream blended with mix-in ingredients such as sundae toppings and/or pieces of cookies, brownies, or candy. It has been a menu staple since its introduction in 1985, a year in which Dairy Queen sold more than 100 million Blizzards.

Flavours include the Oreo Cookie Blizzard, Smarties Blizzard, and seasonal favourites such as Pumpkin Spice Blizzard. Each month, Dairy Queen features a new Blizzard flavour. There's even a Blizzard Fan Club, in which members receive emailed special offers, discounts, and news. The club has 2.8 million members.

Other popular menu items include burgers and chicken strips.

Dairy Queen promotes through Facebook, Twitter and YouTube. Over 11 million people follow the Facebook page, but only 13,000 follow the Twitter account, and 11,000 subscribe to the YouTube channel. On YouTube, the last video was uploaded 4 months ago. The playlist consists of Dairy Queen television commercials. With social media consumption continuing to grow in Canada, Dairy Queen is also using social media to handle customer service.

Dairy Queen relies heavily on sales promotions such as coupons, and specials through its mobile app. However, there issues with the mobile app. Users rate it 2.3 out of 5 (based on over 400 reviews). There's been an influx of devices in Canada which has increased expectations that people should be able to seamlessly move from one device to another.

Fast Food Industry

Canadians like fast food. The industry had revenues of $26.4 billion in 2018 with an annual growth rate of 3.4%. Analysts predict that the industry will experience annual growth of 1.6% from 2019 through to 2024.

Over the past five years, eating habits have changed. Canadians have become increasingly health conscious, demanding alternatives to traditional fast food options. Many fast food restaurant menus now include healthier options such as salads, fruit and smoothies.

In the same period, Canada has experienced rising levels of per capita disposable income and consistent growth in the Canadian population. About 5% of disposable income is spent on away-from-home dining occasions. A greater number of Canadians are eating out at industry restaurants. Labour is the fastest-rising cost for Dairy Queen, especially with rising minimum wages in many provinces.

Frozen Dessert Industry

Since ice cream represents 50% of Dairy Queen revenues, the company also competes in the frozen dessert industry. Dairy Queen is the most dominant ice cream and frozen dessert retailer in Canada:

82% of Canadians heard of Dairy Queen

54% recognize Baskin Robbins

34% were familiar with Yogen Fruz

Consumer awareness is stronger for brands like Dairy Queen and Baskin Robbins among older age consumers, while Yogin Fruz, Cold Stone Creamery and Munches were more widely known among millennials. This suggests that established brands like Dairy Queen and Baskin Robbins could lose customers in the long term if they don't begin appealing to younger consumers.

A 2017 research study found that Canadians prefer eating ice cream over frozen yogurt. Just under half (47%) of those who participated in the survey visited Dairy Queen in the past year.No other frozen dessert restaurant chain was visited as often. In fact, only 9% of Canadians visited Baskin Robbins and Menchies in the past year, followed by Yogen Fruz (6%), Cold Stone Creamery (4%) and Yogurtys (3%). Dairy Queen was most popular in Western and Atlantic Canada.

The Issues

Dairy Queen has a long history. It's a challenge to ensure that traditional customers keep ordering their Blizzards and chicken strips, without turning off customers seeking newer products or with specific dietary needs. The company is considering desserts for people who avoid dairy, but is not contemplating any moves into non-meat menu items. Another issue is the weather; Canadians don't consume as much ice cream in colder temperatures.

Sources: Canadian Cattlemen. Dairy Queen CEO tries to find new tastes, keep franchisees happy. Retrieved from https://www.canadiancattlemen.ca/daily/dairy-queen-ceo-tries-to-find-new-tastes-keep-franchisees-happy/. And Global Data. International Dairy Queen, Inc.

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