LI franchisees of popular BBQ chain roast company for money woes in scathing lawsuit: ‘Worst financial decision I ever made’
What was pitched as a profitable opportunity has turned into a financial nightmare for numerous former franchisees of Dickey’s Barbecue Pit, a national barbecue chain now facing lawsuits and regulatory scrutiny. Several New York-based investors claim they were misled by overly optimistic projections, with some losing their life savings in the process.
“It was the worst financial decision I ever made,” said Scott Raifer, who opened a Dickey’s franchise in Freeport, Long Island, in December 2020 during the COVID-19 pandemic. Less than two years later, the store shuttered, leaving him $500,000 in debt and on the brink of foreclosure.
“I assumed we were in business together — that if I did well, they did well,” said Raifer, 58, of Plainview. “Instead, I learned that if they did well, it was often at the franchisee’s expense.”
Raifer, who is not part of the lawsuits but has spoken out publicly, claims he was pressured to launch quickly and was quoted exorbitant construction costs by a Dickey’s-preferred vendor. He ultimately used his own contractors at a lower price but still spent over half a million dollars setting up the business.
He also reported issues with a $16,000 smoker purchased through an approved vendor, which he says repeatedly malfunctioned. When he reached out for help in early 2021 and copied senior company leaders, he says he was reprimanded.
Things worsened when Dickey’s headquarters allegedly took control of his online menu, keeping items listed that he had sold out of — a move that created confusion for customers and delivery drivers. Dickey’s denies this claim. Eventually, Raifer closed the store and walked away. “Now I owe all this money and I’m losing my house,” he said.
Jerry Stephan, another former franchisee on Long Island, opened a Dickey’s in Centereach in September 2020. He had signed on to bring 21 locations to New York, according to a 2018 corporate announcement. But Stephan said Dickey’s later pulled out of that development agreement, citing legal limitations. “They got amnesia,” he said. “I was counting on that for retirement.”
Stephan said mandatory purchases from approved vendors and high marketing fees eroded profits. “I could buy the same stuff cheaper elsewhere,” he said. Facing mounting costs and an “ironclad” franchise agreement, Stephan opted to sell the business — for half of what he believed it was worth.
Keith Miller, a franchise advocate, said the cost structure for Dickey’s puts franchisees at a disadvantage. “If someone budgets $500,000 and ends up spending $800,000, they’re opening the doors already buried in debt.”
Dozens of Dickey’s franchisees have now filed lawsuits or complaints with the Federal Trade Commission, accusing the company of making false or misleading claims — including in official disclosure documents.
Some franchisees reported closing within a year, while others claim to owe as much as $1 million. In July, the Securities Commissioner in Maryland ruled that Dickey’s had improperly omitted past franchisee contact information in disclosure filings — a violation in 80 instances. The ruling is separate from ongoing litigation.
Franchisees were required to pay 5% royalties and 4% marketing fees — rates industry experts say are on the high end. Dickey’s contends its standard is 6% for royalties and 3% for marketing.
“These fees can eat up a significant chunk of your profit,” said Jason Kaplan, CEO of JK Consulting. “You need to make up that margin somewhere, or the model doesn’t work.”
Dickey’s CEO Laura Rea Dickey defended the company’s practices, saying Stephan was released from his deal after failing to meet benchmarks, and that Raifer’s store had received low customer ratings and poor audit scores. She also emphasized that the company doesn’t collect commissions from equipment or supply sales.
Not all franchisees are dissatisfied. Gary Mulligan, who owns a location in Whiting, New Jersey, said he invested $700,000 and is happy with the business. “Dickey’s is very responsive to me,” he said. “I feel like they’re family.”
Still, Raifer, Stephan, and others say they’re speaking out in hopes of exposing what they see as systemic flaws in the franchise model.
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