Welcome the Chopping It Up. I'm your host, Mike Hamon, the senior Restaurant and Food Service analyst at Bloomberg Intelligence. Our research and that of bi's five hundred analysts across the globe can be found exclusively on the Bloomberg terminal. Today we're joined by Nicholas Boudet, the Chief Operating Officer of International for Dairy Queen. Thanks for doing us, Nicholas.
Thank you, Michael, it's great to be on your podcast.
Yeah, I've been looking forward to this. You've worked for some great brands. Please tell me a little bit about your career journey and what attracted you to Dairy Queen.
Oh. Yeah, Look, I started in the food space back in two thousand and eight. I joined Young Brands as the chief development officer for KFC Pizza, Taco Bell and Long Good Silvers and ANW Filatin America and the Caribbean.
And then that took me to Taco Bell domestically as the VP of Development and head a franchising, which later turned into the Chief Development Officer for Taco Bell, And after that joined a privately held company called Focus Brands owned by war Capital as the president of International for brands such as Cinnabon, Annie and Mos the licensee of
Seattle's Best Coffee company and see others. Then joined Wingstop based in Dallas, and then from Wingstop, I have the pleasure to have joined Dairy Queen back in September twenty twenty two. So that's the background in a nutshell. And prior to joining the food space, I was in the hospitality world, working with brands such as A Club met but also star with hotels and resorts. So that's my background in a nutshell.
Michael, what was it about Dairy Queen that drew.
Yeah, Darry Queen is an iconic brand. It's been in the business for you know this year, for eighty five years, so there's a huge raw being part of such a se brand. But also the fact that Dairy Queen is very well and solid established biness around the world. So those are the I would say, the prime primary driver as to why I joined the company.
Yeah, I was surprised to find out how big Dairy Queen is overseas, how big is the international footprint and how many countries do you operate in.
Yeah, now your surprise was like mine as well before I join. So look dairy Queen is exclosed to a six point eight billion dollar brand measured by system sales. We have close tour's not more than seven seven hundred stores operating in twenty one market, twenty of which are international. So we have performed exceptionally well globally, you know, during
the last years, during and since COVID. In fact, our market chair outside of the US has consistently growth as we have on an average grown our net international football close to six percent year of a year over the last five years. So you know what's remarking about about Derrick Quein. It's his legacy as I was saying before, but also the logevity of the brand. As I said, we are about to turn a massive milestone in June this year or eighty five year, which is pretty impressive.
But going back to international, so look, we have been doing business internationally over the last seventy two years. In fact, we first launched out out of the US in Canada in nineteen fifty three. So there's a lot there's a lot of market and institutional knowledge that the brand has
been leveraging and continue to leverage across the globe. Our second international market, which is still operating today is Panama and Panama we've been in operation there for the last sixty six years, and then Mexico for fifty four years, so a really strong presence in an actually and then very early owned as a pioneer. The other thing, which I know we're going to talk about a little bit more,
is our China business. It's been a you know, uh impressive that we've been there close to thirty three years and we Insact studied in nineteen ninety two, which is slightly more than six years after Kiffy started there as well, So pretty impressive footprint. Yeah, very very impressive.
That's a it's been a long time to be operating internationally. Is Dry Queen one hundred percent franchise?
Overseas it is insict tiah. Our international business is hundred percent franchise. The only caveat to that is that we have two corporate stores there are based in Minneapolis next to our quarters. But yeah, overall, the the Insact ninety nine point nine percent is a franchise.
Gotcha. So internationally, does the brand have different store layouts based on you know, the countries that they operate in and the particular sites that they occupy.
Yeah, that's a good question. So look from a brand recognition standpoint, you will unmistakably recognize our iconics world logo wherever you go, and as well as our as our you know, key product, which is our self serve. Either. What we do is we adapt our restaurant design to the marketplace. And we do this because we want to keep the brand fresh and we want to keep the brand relevant to the consumer and in the marketplace that
we find ourselves in. And I think China is a great example of that where we flex more there in terms of innovative and cuttage, cutting edge design to make sure that our brand is top of mind with our consumers, who uh we do. We give a lot of attention and credit to brand that stay current with with the trends. So we have a slightly different expression outside of the
country when it comes to design but also layout. So another distation that we do as well is that we also to be more urban in terms of the development strategy versus the US, which which makes our asset base a little bit more of a destination versus what you would find to be more of a functional suburban type of design. So and then a good example of that is our adaptation of our newly launched the air Queen Blizzard and Burgers in China, which is our version of
Derrek Derek Quin Grill and Shield in the US. A local partner there, one big, exactly one big in choosing a location in Shanghai that is the equivalent of or Times Square in New York with a beautiful brand building assets. And I also made a big statement about the brand itself, its origin, the minor maniacal focus on our product quality, and frankly the overall placeableness of the brand with fun
and color, colorful seating package and urals. So yeah, so we do differ, but you will, as I said at the beginning, uh not be confused to recognize there Queen wherever you go?
Got it? What percentage of your international stores offer food?
So almost all of our state outside of the US is uh is and Canada Street, what I call treat is our you know, soft served venu and we have a few exceptions with few markets. As I say, Canada is clearly a grevalential market as well as Street, but also Bahrain, Catar and Kuwait and now China, and I'll expand more on China specifically which is a pretty recent news as well as far as the restaurant launch is concerned.
So you know, depending on the provinces of the market that we're in, the mix between treat and food very but directionally is well bounced between between the two. In China, for example, of Blizzard and Burger, which is only based on three units so far, and we have, you know, fifty five percent food forty five percent treat.
Got it. What are your largest international markets and which markets are growing the fastest for you?
Yeah? Yeah, So largest by far is China is close to seventeen NDRED stores as of January, and it's also one of the I would say the fact that growing market in some ways, we do derive a lot of growth from that market specifically, and not only that, but also consistently over the last few years that I've been with the company. Is still a pretty impressive growth specifically based on the side, but when you look at the macros,
obviously you could expect significant growth from that market. It tel great.
Are you opening any new markets this year?
So yes, potentially yes, And I say potentially because a lot of a lot of injuries on supply chain and as you know, there are a lot of movements these days around trade, and we're carefully monitoring the you know, the US China relationship, which which obviously influenced us and frankly see for our ability extend beyond mainline China, such as you know, places like Hong Kong and Macau's so those type of destination and market would be possible for
us to enter in the very near future. But I can tell you that we've made significant progress also an our new market entry pipeline, and we have set sits on different markets such as you know India as an example of Saudi on which I'm going to go there and this weekend, but also UK, Frances, Spain and a few others in between. So a pretty robust pipeline in an act for the next eight years.
Great, can you walk me through the process of deciding which new market you're going to open next?
Yes, our process. Look, it really helps us turn our attention to markets where a few things where we believe we can grow the market share relatively rapidly, which implies a sizeable urban concentration, So we do pay attention to the organization of the market were getting get into. The second one is where there's a decent purchasing power parity from a consumer based in other words, can the consumerl
for us? And then the third one is there a sizeable intermited service rest market, So do we have in some ways in other words, do we have to educate the market or the consumers or not? And ultimately the ability to find like minded franchises what we we see as potentially good brand builders, good operators, good developers, but
also well capitalized. So when you run through these filters and from seventy countries that we're currently not in, the fuel eventually gives us, you know, a sixteen to twenty market which will racket stack depending on the attractiveness, the size, and whether they are concentric to an existing market or not, which is a big consideration for us on the supply chain standpoint, but also finding whether or not there are consumer similarities perspective which will be probably easier to get into.
So without disclosing too much, I think you know I aliated earlier, but western Southern Europe our priority for US, North Asia as well, Central Asia, the GCC yet larger, the greater GO countries and our few markets to South America are also coloring our attention, but I would say much further down the pipeline.
Yeah, very well thought out a strategy which I love to hear. Yeah, I love to hear. It's not just accepting whoever whoever wants.
No, no, no, no, no no. We try to stay away from that and another look. I mean I personally, you know, have been exposed to that type of a development strategy, which you know, it's great when you sign a deal, but probably painful to support and grow in scale. So no, we're very disciplined when it comes to deciding where and when and with w we are deciding to put Dere a queen on any given.
Market, it's fantastic. I'd imagine some markets like the GCC, where it's hot pretty much year round, would help ice cream sales.
Now, yeah, I mean you the common wisdom is you would think that weather influences ice cream consumption as all, and it does to something type, but not as much as one would think. So weather does play a role, but I think it's really about, you know, the the affordability of the product, the brand, uh you know, uh, you know, relative strength and anticipation from the consumer standpoint. So yeah, there's a plenty of other factors which I
think are probably quite significant. Over the weather, it's help, but yeah, it does play a role.
Nonetheless, Uh do you have any well known franchised partners that are operating maybe other brands, other US brand we do.
I don't know if they're well known, but they're pretty large and sophisticated and extremely well capitalized. And above all, and this is an important poet for US, is that they are extremely dedicated to the brand and and what I call them brand builder is not just necessarily by building restaurant, but but contributing to make the brand what it is today. So a couple of a couple of
franchise group comes into mind. One is CFB CHINAUS with business in In in China, is all master franchise in uh In, a part of China and backed by a large private withion called Fountain Investors. Very good people, super long term, perspective minded individuals and very very a real pleasure to work with. The second one, which is probably known uh in In in Southeast Asia and and pretty much across the world because they're well diversified from a
from a franchise group standpoint. It's the minor group based out of Talent also a very large publicly traded company, well diversified in a way where they they do have multiple other brands. They do own some brands, but also not just in the food space, and as well in the hospitality. They've just recently acquired actually at the very onset of Covid, a huge hotel chain called n H and so, yeah, very very sophisticated, super super dedicated to the brand and insactly being with us for a very
long time. So we have very privileged and a good relationship with with those two.
Yeah, it's so important to have good franchise partners.
Absolutely.
How do your sales shake out based on time? In the time of day?
Yeah, so look from a treat perspective, we do most of our trade in the afternoon, uh, in the evening and late evening our restaurants, you know, except those who are doing breakfast. I mean, we have a quarter of ourselves or at lunch, you know, in the afternoon and and and and then in the evening. The any of the balance between the two uh, the to the to, these two day parts are split evenly. So yeah, so those are those are you know, day parts. The way they are being distributed.
And you mentioned late evening. You're open pretty late in some in some markets.
In some instances, yeah, sometimes we're actually nearing midnight or in some instances, depending on the location, you know, you could actually push.
Up to to am Okay, col, I'm not sure you know. The Dairy Queen I frequent is at the Jersey Shore. I'm not sure what time they're I don't know sure what time they're open, so I'm trying not to eat ice cream too late.
So I'm good to you.
But yeah, we visit every summer. Man, It's great. My mom loves Dairy Queen. So does your menu vary by country?
Yes and no. It is consistently built around our iconic suff serve and our cold and a blizzard and our cakes on the street side, but it does take on a localized approach when it comes to flavors and combination of flavors or even Brent tie in with regional conflictionary brands. So from a food standpoint, our categories are very similar, but some of the bills, as an example of our burgers, are slightly different. So yeah, but I would say it does vary from a flavor standpoint.
And you know, in the fourth quarter, you know, we had expected better results in the Middle East as we were lapping the start of the Israel Maas war. But I think, you know, we were kind of like pleasantly surprised, I guess at the rate of improvement for some of the companies we cover, McDonald's being one. Can you talk a little bit about how sales.
Are doing in the Middle East, Well, you know, ourselves have been pretty consistent up until you know the vess that you mentioned the October seventh last year, and then, like many other brands, were affected by the overall region turnmoil. But we still the course and frankly ourselves have been growing as well as our footprint. In fact, as I was saying earlier, I think I'm flying to Saudi to this week to to meet potential interesting parties, which is
pretty exciting. So we do have a lot of hope and a lot of expectation in that region, and I hope to see more dairy Queen good stuff.
And are you seeing any improvement in China?
So the market, you know, has had its challenges from a domestic demand standpoint. We fell the consumer at large less optimistic over the last few months of the last twelve months I would say in general, which was you know, somehow reflected in their in their spending. So we didn't ever react by by leaning heavily on our value offering to keep our transactions flowing and then growing. But so yeah,
so it's it's okay. I think the consumer overall is expected to be resilient and I'm hopeful that they will feel better about their country economic prospect. I know, franchise in the and bankers are so so we are too as well.
All right, good stuff, So what's your go to water?
Well, I really like the mango sticky rice, which is usually coming from Thailand, but it's been adopted in China. Uh, the mango STICKI rise is a pretty interesting uh you know flavor which I really I really like color wise as well. There's one fault not for the faint arts, called the Durian, which is Southeast Asian fruit, which has a very uh I would say, special taste and smell, but it's more than a quiet taste. But I think it's worth trying.
I have very cool you know, in the States. I'm more of a blizzard kind of guy that you know. I'll change the flavors based on my mood. But I love mango and sticky rice. Man, there's a very good mom and pop Thai restaurant. Oh yeah, and they have fantastic mango and sticky rice. I'm there when mango's in season. I'm there more frequently for sure.
Yeah. It's a big, big fruit in the in that part of the world, and it's usually seasonal fruits. So when when the season is up, I mean, you know, we go, we go again bus stars.
Before very good. All right, thanks again, Nick, this is awesome. Where can our listeners go find their closest to us, Dairy Queen and what social media channel should we be following the chain on?
Well, derekqueen dot com to begin with, but also or any any social media such as Instagram, Facebook, and and the and the likes. But yeah, I would say check us out. We'd love to have you o our restaurants.
Good stuff. And I want to thank the audience for tuning in. If you like the discussion, please leave us a review. It'll help us expand the podcast reach. Check back soon for another episode of Chopping It Up.