Franchisees in funk, slam Dunkin’ for deal

“Pounds of coffee are a very big part of the sales mix at these locations,” he said. “How would you like to be the franchise owner of one of these locations … and have your franchiser make a deal that allows direct competition with you perhaps 100 feet away?”

The Boston Herald
March 7, 2007

Franchisees in funk, slam Dunkin’ for deal
Donna Goodison

Dunkin’ Donuts franchise owners are worried that a company deal to have Procter & Gamble distribute packaged Dunkin’ coffee to thousands of supermarkets and other stores nationwide will cut into their own businesses.

Mark Dubinsky, president of Dunkin’ Donuts Independent Franchise Owners Inc., says his phone has been “ringing off the hook” since franchisees were alerted to the deal, which was announced publicly last Wednesday. “Many … members feel Dunkin’ Brands should be in the business of supporting franchisees and selling franchises, not competing directly with franchisees, many of whom who have the vast majority of their family’s wealth and lifelong efforts tied up in Dunkin’ Donuts franchises,” said Dubinsky, whose Bellingham group represents 200 owners of 1,500 Dunkin’ stores. “People are ripping mad. They’re wondering what’s next?”

Franchisees also are concerned that the supermarkets and other stores will undercut them on prices. That’s of particular concern to owners of Dunkin’ units inside stores such as Stop & Shop and Wal-Mart, Dubinsky said. “Pounds of coffee are a very big part of the sales mix at these locations,” he said. “How would you like to be the franchise owner of one of these locations … and have your franchiser make a deal that allows direct competition with you perhaps 100 feet away?”

Dunkin’ sees the distribution deal as a way to build its brand as it moves into new markets under a national expansion plan.

It’s also aimed at customer convenience.

More than half of all coffee purchases are consumed at home, said Will Kussell, chief operating officer of Dunkin’ Brands. The intent is to position Dunkin’ coffee as a full-priced, premium brand on store shelves, not a discounted, price-promotional brand, he said.

“P&G is going to spend a significant amount of marketing funds, and we think that will have some residual benefit to our traditional (stores),” Kussell said.

In addition, Dunkin’ developed an “equity-sharing” agreement for franchisees to benefit from grocery sales. As the business grows, some proceeds will go to a pool they can tap for store remodeling and new equipment. “Our intent is to continue to communicate with and educate our franchisees so they can understand how the program works in detail,” Kussell said.


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