Dickey’s has lost an effort to overturn an arbitration award in a franchise dispute. | Photo: Shutterstock.
A federal court judge has refused to overturn an arbitrator award in favor of a franchisee in a dispute with Dickey’s, saying that the arbitrator did not overstep his authority in awarding the operator $700,000 in damages.
The case arises out of a dispute between Dickey’s, the fast-casual barbecue franchise, and G Six Consulting.
The franchisee, who owned one location in Illinois that ultimately closed, filed a complaint with an arbitrator, something that is commonly required in disputes between franchisors and franchisees.
G Six closed its Illinois location after just three months after the cost of opening the store overran Dickey’s projections in its franchise disclosure document.
During the arbitration proceeding, the franchisee sought to get testimony from top Dickey’s executives. After multiple, failed attempts to schedule the deposition in the case, the franchisor ultimately refused to produce executives, including company Chairman Roland Dickey, Jr., for testimony, arguing that they were not parties to the arbitration agreement.
The arbitrator eventually sanctioned Dickey’s, preventing witness testimony and dismissing the franchisor’s counterclaims against the franchisee while requiring it to pay attorney’s fees.
Dickey’s tried and failed to get a restraining order against the sanctions. After requiring the franchisee to present evidence, the arbitrator ruled partially in favor of G Six, saying that Dickey’s violated Illinois franchise law in selling a franchise to the company. But the arbitrator did not rule in favor of all the franchisee’s claims.
The arbitrator awarded the franchisee $700,000.
Dickey’s then filed a lawsuit, seeking to overturn the award, a rare step that made public an otherwise private dispute between the company and one of its franchisees. Dickey’s argued that the arbitrator overstepped his authority with its sanctions and accused the arbitrator of misconduct.
The judge, however, affirmed the arbitrator’s ruling, saying that he neither overstepped his bounds nor engaged in misconduct.
Dickey’s has struggled for years, declining from a peak of well over 500 locations to about 290 today.
The chain has come under fire for its franchising practices.
Restaurant Business in 2024 detailed challenges franchisees in the Dickey’s system have had in recent years with cost overruns on new store openings, high costs for food and supplies, frequent discounts and pricing limits. Multiple other publications have since detailed similar accounts, including the New York Times last year.
The company has allowed its franchise registration to expire in several states that require them, which means it cannot sell franchises in those states, including Minnesota, Wisconsin, California, Indiana, Illinois and Delaware.
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