A Dickey’s Barbecue Pit franchisee in western Michigan filed for bankruptcy protection September 9 and pointed to actions by the franchisor as the cause for the business’s financial difficulties.
Smokin’ Dutchman, a four-unit Dickey’s operator based in Kalamazoo, Michigan, filed its petition under Subchapter V with the U.S. Bankruptcy Court for the Western District of Michigan. Going into effect in 2020 under the Small Business Reorganization Act, Subchapter V is a faster and less expensive path to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Businesses are eligible if they have $7.5 million or under in liabilities.
Smokin’ Dutchman is owned by Krage Fox and Michael Kakabeeke in a 50-50 partnership, according to court filings, and listed total debt of approximately $2.1 million.
Fox, the company’s president and CEO, said in the filing that Smokin’ Dutchman’s annual revenues from 2022 through 2023 ranged from $3.3 million to $3.7 million, while so far this year it’s generated approximately $2 million.
“The Debtor’s financial difficulties have been caused by the actions of Dickey’s which have imposed extreme and unreasonable demands upon the financial resources of the Debtor and the time of the Debtor’s employees,” Fox said in court filings.
Additional detail regarding the franchisor’s role in Smokin’ Dutchman’s financial problems was not provided in the filing. Perry Pastula, an attorney at Dunn, Schouten & Snoap representing Smokin’ Dutchman, did not respond to a request for comment.
Crain’s Grand Rapids Business reported Pastula, in an email to the publication, said he “anticipates litigation with the franchisor.”
Dickey’s in a statement to Franchise Times said it “goes above and beyond to support our franchisees.”
“For anyone to state we imposed ‘extreme and unreasonable demands’ is simply inaccurate. We have provided and will continue to provide Smokin’ Dutchman with excellent support, the same support we have provided them over the last six years,” said Jeff Gruber, Dickey’s senior vice president of franchise relations. “Additionally, when Smokin’ Dutchman communicated its individual difficulties roughly 18 months ago, Dickey’s responded by providing extensive supplemental operational support and corporate resources in an effort to stabilize Smokin’ Dutchman’s business operations.”
Dickey’s charges a royalty fee of 6 percent, and its marketing fund fee is 3 percent, as noted in the brand’s franchise disclosure document. Those fees are similar to rates charged by other restaurant franchisors. The company does not provide average unit volume or other financial performance information in its FDD.
Gruber noted Dickey’s is in the midst of a capital improvement reinvestment campaign and is partnering with franchisees on restaurant upgrades, such as new exterior signs, store interior refreshes, technology hardware upgrades and local advertising across the brand.
“As with all our franchisees, we will continue to support Smokin’ Dutchman and look forward to them following Dickey’s brand standards and continuing to serve the Michigan community quality Texas-style barbecue,” said Gruber.
Dickey’s charges a royalty fee of 6 percent, and its marketing fund fee is 3 percent, as noted in the brand’s franchise disclosure document. Those fees are similar to rates charged by other restaurant franchisors. The company does not provide average unit volume or other financial performance information in its FDD.
Fox in the filing asked the court to reject its franchise agreements “to alleviate the Debtor from the burden imposed upon it by Dickey’s.”
Smokin’ Dutchman opened its first Dickey’s in Kalamazoo in 2018. It acquired the Dickey’s restaurants in Rockford and Jenison in 2020, and opened a location in Holland in 2022. That year, Dickey’s announced it signed an area development agreement with Fox and said he planned to open four more units in Michigan.
“Krage is one of our highest performing owner-operators nationwide, and we couldn’t be happier to be opening another location in Michigan with him,” Dickey’s said in its March 2022 announcement of the agreement. “We look forward to seeing the impact he makes on the Holland community as he introduces Dickey’s tastes of Texas to more of the Great Lakes region.”
In its bankruptcy filing, Smokin’ Dutchman listed several debts, including $560,000 owed to the U.S. Small Business Administration, $448,000 to Kalsee Credit Union and $273,000 to Dahl BQ Loan.
Based in Plano, Texas, Dickey’s Barbecue Pit finished 2023 with 442 restaurants in the United States. It opened 27 units and closed 50 last year, as noted in its FDD. It also has 18 international locations, including seven in Canada and three in the United Arab Emirates.
Fox and Kakabeeke in 2021 signed an area development agreement to open two Dog Haus restaurants in Grand Rapids and Kalamazoo, the first of which was expected to open in 2022. The business partners, under their Smokin’ Dutchmen entity, are listed in the most recent FDD from Dog Haus as being franchisees who signed agreements but whose restaurants weren’t open as of December 31, 2023.
This story has been updated to include comments from Jeff Gruber, the senior vice president of franchise relations at Dickey’s Barbecue Pit.