Dunkin' Donuts Accused of Churning Franchises for Profit

Chain Accused of Reselling Minority-Owned Shops at Discount to Largely Caucasian Multi-Unit Operators

WHITE PLAINS, N.Y. (Blue MauMau) - In a counterclaim filed last Friday in federal court against Dunkin' Donuts, franchisees allege that the franchisor and its related entities are engaging in racial discrimination against their minority franchisees. The filing states that Dunkin' has embarked on a campaign of pushing certain franchisees from the system by terminating their franchises. It then resells the franchises to the franchise company or a third party Caucasian multi-unit operator, arranged by Dunkin', for a price less than the fair market value of the franchise. Because Dunkin' is in the midst of an aggressive plan to expand and triple its size to more than 15,000 outlets by 2020, franchisees claim Dunkin' is using the practice of churning stores by improper tactics, threats and harassing policies to intimidate primarily brown skin, first generation American entrepreneurs.

Gerald A. Marks, Marks & Klein, attorney for Indian franchisees Mahendra Patel and wife Nita Patel, also states that the company violated certain sections of the Civil Rights Act against his clients, the owners of four Dunkin' Donut/Baskin Robbins shops in New York. He feels the Patels are typical of the "mom and pop" immigrant franchisee owners who formed the backbone of the Dunkin' system, and whose exceptional service to their customers is responsible for the success of the Dunkin' brand within the past fifteen to twenty years.

"Unfortunately, Dunkin' now seeks to take advantage of the success these brown-skinned franchisees have created and seeks to take from them the equity, financial success and value they have worked so hard to build and to which they are justly entitled," Marks said.

Claim of Gestapo-like Raids through Specially Created Loss Prevention Units

As a further part of this scheme, Dunkin' Donuts, according to the Counterclaim, utilizes a so-called "Loss Prevention" unit which engages in Gestapo-like raids on franchise locations in a threatening and intimidating manner designed to strike fear into these minority franchisees and their employees, and embarrass the franchisees in their communities. It states, "Astonishingly, such raids often involve Dunkin's loss prevention personnel impersonating government agents, including without limitation, FBI agents and/or immigration officials. (Certifications of two franchisee employees are part of the attached Counterclaim [pdf])

Marks said they were now looking for additional evidence of discrimination within the Dunkin' Donuts systems.

Dunkin' Says Not Racial

Although Dunkin' Donuts refused to be interviewed for this article, a spokesperson for the company sent the following statement:

"Dunkin’ Donuts restaurants are owned and operated by more than 1,200 independent business men and women, who represent a variety of racial, religious and ethnic backgrounds. Dunkin’ Donuts only pursues legal action with respect to franchisees who do not adhere to federal and state laws or fail to meet the obligations as required by their franchise contract. With regards to this specific case, we feel confident that the legal action taken against this particular franchisee is appropriate, and we are confident the Court will find in favor of Dunkin' Donuts."