Dairy Queen launches Stackburger line as chain sees record sales in 2021 – CNBC

Dairy Queen is expanding its burger offerings as the fast-food chain looks beyond Blizzards and other desserts.

The new Stackburger line is Dairy Queen’s biggest menu expansion in two decades, with five burger flavors for U.S. customers: Flamethrower, Loaded A1, Bacon Two Cheese Deluxe, Two Cheese Deluxe and the Original Cheeseburger. They’re available as one-third pound double burgers or one-half pound triple burgers — hence the Stackburger name.

The burgers will be a permanent addition to menus at the company’s DQ Grill & Chill locations, which account for 72% of Dairy Queen’s more than 3,300 U.S. restaurants. The Stackburger line is also launching in Canada.

Dairy Queen is far from the only restaurant chain to widen its offerings to attract more customers. Panera Bread has been pushing for more dinner orders by adding items such as flatbread pizza to its menu, while Dine Brands’ IHOP made waves several years ago by briefly changing its name to IHOB to promote its burgers.

Warren Buffett’s holding company Berkshire Hathaway has owned Dairy Queen for 25 years. With a net income of $84.3 million in 2021, the fast-food chain is a relatively small component of Buffett’s empire, which reported net income attributable to shareholders of $89.8 billion for last year. Last year, Dairy Queen’s annual revenue rose 18% to $224.7 million, according to franchise disclosure documents.

The official launch on Tuesday is a long time coming. International Dairy Queen CEO Troy Bader said in an interview that the chain started looking at its menu critically nearly five years ago, around the time that he took the reins of the company. The company knew that it couldn’t “be everything to everyone,” so it tried to figure out what its customers wanted, according to Bader.

Dairy Queen landed on two foods: chicken strips and burgers. The chain revamped its chicken strip offerings first before it tackled burgers.

“I would say it’s one of the first true menu strategies that we’ve had within the Dairy Queen system in a very, very long time,” Bader said.

In markets such as the the Southeast, its food offerings already accounted for the majority of sales, topping its sweet treats offerings. And customers who bought their lunch or dinner there tended to still buy a Blizzard or ice cream cone, too.

Improving its burgers took several years, kicking off in earnest in 2019. Dairy Queen created a new bun that was airy yet sturdy enough to handle the weight of three burger patties. It swapped out its cheese options for white cheddar and a sharper American cheese.

“We were proud of our burgers, but we knew that we could do better with them,” Bader said.

Then the chain put the Stackburgers to the test. For almost 10 months, Dairy Queen tested the new menu items in Birmingham, Alabama; Sioux Falls, South Dakota; and South Bend, Indiana. Restaurants in the Canadian provinces of Ontario and Alberta were also included in the test. In total, nearly 100 locations were involved, making it the largest test for the chain in more than two decades.

The pandemic also caused some delays. A nationwide labor crunch exacerbated supply chain issues, so Dairy Queen opted to postpone the launch, which was originally slated for late fall in 2021. Bader said the chain wanted to make sure its vendors had enough employees to ensure that franchisees weren’t left in a lurch.

But the chain wasn’t concerned about customers staying home. Bader said Dairy Queen sales fell significantly for six weeks in the spring of 2020, as the pandemic led to lockdowns and fear about even visiting drive-thru lanes. After that month and a half, however, its business rebounded quickly.

“From period forward, we’ve had nothing but record sales,” he said.

In the two-year period from 2020 through 2021, the chain’s U.S. same-store sales climbed 17% compared with 2019 levels.

Bader is confident that the burgers will further fuel sales. Dairy Queen soft-launched the Stackburgers on Feb. 7 and has so far seen double-digit increases in units sold, without any advertising.

While fast-food competitors such as McDonald’s are testing or adding plant-based burgers, Dairy Queen is sitting out for now.

“There’s so much new news with our Stackburgers and with the labor situation with our franchisees, we didn’t want to introduce too many new items for them,” Bader said. “When we think about plant-based proteins it’s something that we’re continuing to monitor, to watch and see what role it can play within the Dairy Queen system.”

Berkshire Hathaway is preparing to hold an in-person annual shareholders meeting on April 30, its first since the pandemic began. Bader said Dairy Queen will forego Blizzards and instead highlight pre-packaged items, such as its nondairy Dilly bars, for investors’ safety and comfort.