There may be only one thing harder than creating a winning brand from scratch: reinventing an aging one on the brink of obsolescence.

This was the daunting challenge facing Chuck Mooty in 2001 when he took the helm of Dairy Queen, one of America’s oldest quick-service restaurant franchises. Though its frozen treats still had plenty of fans, it was suffering, like other fast-food and treat-based chains, from consumers’ infatuation with low-carb diets. A long-static menu offered little in the way of healthy food options, and public-health watchdogs cited DQ and its fast-food brethren for contributing to obesity in the United States. As demand for sugary carbs waned and new, healthier quick-service establishments entered the market, growth slowed across the industry; DQ had seen only a slight uptick over the previous five years.

The chain had other troubles as well. The already tense relations between the company and its franchisees curdled following a class-action antitrust suit in which franchise owners claimed DQ was preventing them from purchasing food products and supplies from alternative sources (unsanctioned by DQ). “That created great divide and friction within the system,” Mooty recalls. The system itself was showing its age, from outdated training materials to an underwhelming Web presence, and it had not received the kind of capital reinvestment needed to fuel growth. Worse still, despite having more than half of its approximately 6,000 locations focused primarily on food, consumers stubbornly refused to associate the DQ brand with anything more than soft-serve ice cream and Blizzards.

Turning around a ship the size of Dairy Queen posed a formidable task for the new CEO. But Mooty, a second-generation DQ veteran, could not have been better prepared. The Midwestern native’s father, John Mooty, purchased the company with a group of investors in 1970, so Chuck grew up in the DQ franchise. The elder Mooty sat on the board for over two decades before convincing his partners to sell to Berkshire Hathaway, the conglomerate owned by financier Warren Buffett, in 1998. Chuck Mooty had joined DQ as special projects administrator in 1987, three years after earning an MBA in finance from the University of Minnesota. He went on to hold numerous positions within the organization, including director of franchise coordination, director of mall development, and then CFO and treasurer. After 14 years at DQ, Mooty was offered the top job by Buffett.

Mooty’s resume immediately earned him the confidence of franchisees, who felt he understood the full scope of the business. “Chuck also brought honesty and integrity to that position,” says Wendell Bradley, a DQ franchisee for 31 years, who now owns four stores in Illinois. Mooty was careful not to play heavy-handed with store operators when he began implementing changes, and franchisees felt he was listening to them, Bradley says. “There’s always disagreement in a franchisor-franchisee situation, but even when people disagree with Chuck, they still really respect him.”

That respect and trust earned Mooty some room to make significant changes without creating ill will. He began implementing what he calls his 3-D approach to growth: developing people, developing brand, and developing presence. Toward his first goal, the CEO immediately began bringing in seasoned talent to reinvigorate the senior ranks. Mooty then focused on improving the quality of training for franchisees, with updated materials, DVDs, and Web-based components. Training, he believes, cannot be a one-shot deal, but must be integrated into the culture and routine so that owners and staff are constantly learning and fine-tuning that knowledge. “That whole component of developing our people is vitally important,” says Mooty, noting that the customer-facing front line is as critical to the future success of the company as the talent in the executive suite.

At the same time, Mooty has been tackling DQ’s brand-image challenge, attempting to reposition it as an umbrella across two distinct businesses: food-based restaurants and treats-based locations. To that end, he launched the DQ Grill & Chill, a new restaurant with an expanded food menu and a fresh new look. The company recently unveiled a new logo and store signage. “Obviously, you want to capitalize on the wonderful brand awareness and nostalgic components that our brand has as its assets,” says Mooty. “But it also has to be a brand that’s relevant, a brand of tomorrow, not yesteryear.”

Of course, not everyone loves change. And with so many of Dairy Queen’s stores in business for 30 years or more, more than a few veterans have resisted new ideas. When Mooty introduced the concept of a national television advertising campaign to raise brand awareness — and explained that franchisees would be allocating a portion of their ad dollars to that campaign — many were outraged. Operators in more rural areas could buy more for their money locally than they could in urban cities halfway across the country. “But they worked out a good compromise with us,” says Bradley. The company developed a fund allocation model to return a portion to those franchisees who did not benefit fully from the national campaign. “The good and the bad of a franchisor/franchisee relationship is that you’re just never totally at a point of equilibrium. There’s always something keeping you a little at odds with one another,” says Mooty. “What we’ve been able to do is have that inequity be helpful in getting us somewhere versus getting us into more friction.”

Mooty has also dealt with the saturated U.S. market by growing the company’s international presence significantly, opening 81 new locations abroad last year alone. In 2007, same store sales increased 11.4 percent, with China up more than 20 percent. And Mooty expects to add more than 100 new units globally this year. DQ recently opened its 200th location in Thailand and its 100th in China. He notes that despite the geographical and cultural differences that exist among its various far-flung markets, some of DQ’s products — the Oreo Blizzard, for one — are universally cherished. “On the other hand, you also have to modify some,” he says. Green Tea Blizzard might play huge in Asia, but it might not excite taste buds in Wichita.

Though Mooty says the company is still only part way through its turnaround, his strategic plan seems to be working. International Dairy Queen has seen six consecutive years of profitability, having nearly doubled total revenues, from $241 million in 2000 to $468 million in 2006; that’s thanks in large part to seven straight years of same-store sales growth. New store growth has remained relatively flat, but raising the profile of the food side of the business will allow Dairy Queen to more effectively compete for dining real estate in a crowded market.

Mooty hopes that national advertising and the changes he’s made will help do just that. But he adds that he isn’t overly focused on publicity. And as CEO of a private company, Mooty needn’t worry about pleasing public shareholders or Wall Street analysts, so he can afford a slow and steady approach. “Too many in our industry are motivated by the splash, and ultimately that kind of falls away,” he says. “We are on a journey. As long as everybody understands that and is comfortable with that, we’re in a good spot.”