In honor of National Ice Cream Day (July 20), here is a brief celebration of Dairy Queen, an institution of American culture—entrepreneurial, legal, literary, and familial—that helped put this cold concoction on the national calendar. I developed these reflections when researching my upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values (Columbia U. Press 2014), which provides deep looks at the corporate culture of Berkshire Hathaway’s fifty-plus subsidiaries, including Dairy Queen.
While full treatment must await publication of the book (which can be pre-ordered now), here are a few passages along with many outtakes—i.e., sections that did not make it into the final book because they are too technical, but may appeal to readers of this blog interested in the history of franchising businesses and intellectual property rights.
Dairy Queen’s roots date to 1927’s founding of Homemade Ice Cream Company by John F. (“Grandpa”) McCullough (1871‒1963) and his son Alex near the Iowa-Illinois border. Innovative ice cream makers, they experimented with temperatures and textures and eventually pioneered soft ice creams. One discovery: ice cream was frozen for the convenience of manufacturers and merchants, not for the delight of consumers.
At first, the McCulloughs were unable to interest any manufacturer in building the necessary freezers and dispensers to serve soft ice cream. Luckily, however, Grandpa happened to see a newspaper ad in the Chicago Tribune describing a newly-patented continuous freezer that could dispense soft ice cream. Grandpa answered the inventor/manufacturer, Harry M. Oltz, and the two made a deal in the summer of 1939.
The McCullough-Oltz agreement entitled Oltz to patent royalties equal to two cents per gallon of soft ice cream run through the freezer; the agreement also granted the McCulloughs patent licensing rights in the Western U.S., while Oltz retained them for the Eastern part of the country. The agreements that McCullough and Oltz made with licensees seemed to cover only the patent, rather than the DQ trademark, and contained few quality controls.
After World War II, DQ stores hit their stride, drawing lengthy lines of increasingly loyal customers enjoying the cooling effects of soft ice cream all sultry-summer long. The customer throngs at one store in Moline, Illinois caught the attention of Harry Axene. An entrepreneurial farm equipment salesman for Allis-Chalmers, Axene wanted to invest in the business. He contacted the McCulloughs and acquired both the rights to sell the ice cream in Illinois and Iowa as well as an interest in the McCullough’s ice cream manufacturing facility. Read More