In October of 2016, after three years of running Dickey’s Barbecue Pit restaurants, Anthony Falbo contacted the managers at his two locations in Wisconsin and told them some bad news: The restaurants were closing, for good. That day.
“We’re shut,” Falbo recalled himself saying. “We’re done. You guys don’t know, but we haven’t paid any money to ourselves in nine months.”
It’s a story that’s been playing out repeatedly within the system of the Dallas-based barbecue chain, which has seen a growing number of closures over the past year.
According to the company’s most recent franchise disclosure document (FDD), Dickey’s has closed a total of 113 locations in the 2018 fiscal year ended May 31. That includes 89 “terminations” and another 24 that simply “ceased operations.”
In other words: One out of every five Dickey’s locations that was open at the start of the chain’s last fiscal year was closed by the end of it.
The fast-casual barbecue chain opened 72 restaurants over that same time frame, giving the company 526 restaurants nationwide—a 41-unit reduction in unit count over that year, according to the company’s franchise document. All but five of Dickey’s restaurants are franchisee-owned.
The reduced unit count comes as the chain’s sales appear to have stumbled. Sales at the chain are down 10.6% this year through July, according to data from Technomic’s Transaction Insights. Total traffic year to date is down 13.3%.
Laura Dickey, the chain’s CEO, said in an email that the company has terminated franchisees “when absolutely required.”
“We have a long track record of success and upholding our standards is part of the promise I’ve made to our owners as CEO,” Dickey said. “That includes terminating franchisees when absolutely required.”
Dickey acknowledged that the company has faced challenges the past two years. “I look at the challenges from the past two years—whether it’s more guests wanting to dine at home, rising labor costs or the unprecedented saturation of competition—the same way I look at guest complaints, the second chance to do better,” she said.
“I have been to six town halls this year talking directly with our owner-operators about our initiatives to keep our brand improving and strengthening without changing the core of who we are as Dickey’s Barbecue,” Dickey added.
She said the brand is same-store sales positive this year and is working on numerous programs to improve sales, including delivery, marketing and television advertising.
Dickey's growth comes to a halt
Source: Dickey's Franchise Disclosure Documents
Dickey’s traces its history back to 1941 when Travis Dickey opened a barbecue restaurant in Dallas. The company began franchising in the 1990s, but its growth took off out of the recession as the system signed up operators around the country.
The company was one of the fastest-growing restaurant chains in the U.S. between 2010 and 2015, when it skyrocketed from 115 locations to more than 500, giving it restaurants throughout the country.
That made Dickey’s the country’s largest barbecue chain.
Dickey’s has kept adding locations since then: 74 new restaurants in 2016, 88 in 2017 and 72 in 2018.
But closures have increased, too. According to the FDD, 28 restaurants ceased operations in 2016 and 70 closed the next year. In 2018, however, the vast majority of restaurant closures were listed as terminations, meaning the franchisor terminated the operator’s franchise agreement.
The 89 terminations, up from 0 each of the past two years, is remarkably high, representing 17% of the company’s franchisee base from the start of the year.
Falbo was one of the operators who opened a Dickey’s location during the concept’s heyday. He’d been a barbecue aficionado, doing catering on the side on weekends before deciding to open his own barbecue restaurant.
But then he saw Dickey’s. “I thought, if the system is already built for you here, I can do barbecue,” Falbo said. “I can do it every day instead of when my work time permits me to.”
Falbo opened a Dickey’s in Appleton, Wis., in 2013. “Things went amazingly well,” he said. “The first few months, they were crazy. It was amazing.”
Falbo said he was offered the opportunity to take over a struggling location nearby in Green Bay the next year and he and his wife Jessica jumped at the chance. He later formed a partnership with another operator, with plans to take over more struggling locations. At one point that partnership operated a total of six stores.
But health problems sidelined Falbo for several months. He and his wife Jessica then noticed that the business was struggling financially. They ended the six-unit partnership in 2015 to focus on the two original locations, and then got loans and other assistance in a bid to keep the restaurants open.
“We went on this cycle every three months,” Falbo said. “It would be OK, it would not be OK.”
He talked about selling and contacted the company, and says he was told that, at most, his restaurants would get $10,000 to $15,000. Falbo instead walked away.
“I’m spending so much money in advertising to try to get people to come in and it doesn’t pay off,” Falbo said. “We pound the pavement and it doesn’t pay off. We had too much money coming out, and no money coming in.”
Despite the closures, Falbo’s story isn’t done. He says he faces judgements from both Dickey’s and one of his landlords over closing the restaurants before the end of the contract.
“My business didn’t fail on me,” he said, “it ran out of money.”