After hitting record sales in pandemic, Dairy Queen updates its burger lineup

As the pandemic unfolded, Dairy Queen flourished as consumers turned to treats like Blizzards and Peanut Buster Parfaits for comfort, pushing sales to new records.

The question now for the Bloomington-based company, formally called International Dairy Queen Inc., is how to build on its good fortune.

"Will it be as easy? No," Troy Bader, the company's chief executive, said in an interview this week.

The immediate answer is a new lineup of burgers, along with updated digital and delivery capabilities.

"You have to continue to modernize a brand as iconic as Dairy Queen," Bader said.

The company is a small but highly visible unit of Warren Buffett's Berkshire Hathaway conglomerate. It derives revenue from single-digit royalties paid by franchisees of its 7,000 restaurants, and it has an operating margin of around 50%.

As a system, the restaurants had sales of $5.5 billion last year. That led to revenue at International Dairy Queen of about $225 million, up 18% from 2020. Net income was $84 million, up nearly 17%, according to documents made available to franchisees.

Sales at comparable locations rose 10.5% last year, and they were up nearly 18% in the combined 2020 and 2021 years versus 2019. Sales are split 50/50 between food and treats.

"Dairy Queen is a brand that has an amazing emotional connection with our fans," Bader said.

That connection drove customers to Dairy Queen, many of which operated drive-throughs and could maintain social distancing during the pandemic. Families visited more often, and spent more on average by buying larger-sized items.

"What did we do as parents when kids didn't have all the activities they normally had? We wanted to treat them," he said.

Dairy Queen is now launching an advertising blitz for its new Stackburgers. One called the FlameThrower is loaded with a fiery sauce, melted Pepper Jack, jalapeno bacon, tomato and lettuce. Another is the Loaded A.1., which features A.1. Steak Sauce, peppercorn sauce, thick-cut bacon, melted American cheese and onion rings.

"We want craveable products," Bader said. "We want to create and provide to our guests products that they can't wait to come back and get again."

The company has been testing the new burger lineup at about 100 locations for nearly a year.

DQ also rolled out a second-generation mobile app and delivery options.

Chief executive since January 2018, Bader joined Dairy Queen in June 2001 after a career as an attorney at Gray Plant Mooty. He served in a number of executive roles, including chief operating officer, before rising to the top job.

These days Bader navigates business challenges, including rising prices, supply chain challenges, and the workforce shortage, while gauging customers' willingness to buy a Blizzard or burger.

He pays attention to unemployment data and gas prices, aware that a segment of his customers hit by inflation might curb their DQ purchases.

"No guest is obligated to visit us even one time in any given year, so you have to earn every transaction that we get every single year," he said.