Lottery Plots Expansion through Dunkin' Donuts

Discussions with State Presents Unanswered Questions for Operators

CANTON, Massachusetts (Blue MauMau) - Massachusetts, like most states, is in search of new revenue sources and it is again attempting to use gambling as the vehicle. In a Boston Herald article this week, it was reported that lottery officials were approaching mega-chains such as Dunkin' Donuts, Home Depot and CVS to allow them to install scratch ticket vending machines in stores, hoping it would help reduce its $1 billion budget deficit. In the past, Gov. Deval Patrick has pushed to legalize casino gambling.

But according to one attorney who mainly represents franchisees there are a lot of unanswered questions regarding Dunkin' possibly being involved with the state lottery programs. Kevin McCarthy, who practices in Massachusetts, thinks most informed citizens will see it as Dunkin' associating itself with a declining lottery concept, which is a negative association and bad for the brand image. He said, "It’s unfortunate to see equity investors buy an excellent brand name like Dunkin’, claiming they intend to improve the business and brand equity and then turn around and cheapen the image in an effort to show short term profits intended to bolster the bottom line in preparation for a public offering." He feels such dubious business strategies will then have to be dealt with by new buyers which often further depreciate the brand through cost cutting and disinvestment in order to make profits themselves in what becomes a declining spiral, with hapless franchisees ultimately “holding the bag”.

McCarthy said if the company goes forward with the program the most interesting question will be, will management try to make installation of the lottery mandatory on franchisees?. "I doubt if they could do so if challenged legally, or if they meet immediate and forceful opposition by the franchisees through the DDIFO (DD Independent Franchise Owners, Inc.) He emphatically says franchisees should demand answers now from management. "Franchisees should get straight answers to their questions such as: What is the status of the negotiations? What are the relevant and major terms being discussed? Will the program be mandatory? Will franchisees be able to see and read the negotiated contract? and finally, Will franchisees be involved and participate in the negotiations?

McCarthy feels that Dunkin' should not be leaving franchisees out when entering discussions with outsiders that could affect the entire franchise system. He said, "Franchising is in a period now where leadership in this industry is making a big mistake in not communicating properly with franchise operators. It's going to hurt franchising in general."

Response from Dunkin' System

Although Blue MauMau was unable to get an interview with a company official, Stephen J. Caldeira, Chief Public Affairs Officer for Dunkin’ Brands, issued this statement:

“While as a matter of policy, Dunkin’ Donuts does not comment on speculation regarding its business discussions, it is our understanding that Massachusetts Lottery officials were speaking in general about their own plans to potentially approach a number of retailers.”

Mark Dubinsky, President of the DDIFO issued this statement:

We were greatly surprised by yesterday's Massachusetts Lottery news story depicting a potential deal in the works to sell scratch ticket at Dunkin' Donuts shops. In fact, we learned about it from a Boston Herald story, as well as subsequent subsequent reports on other local media channels.

"The DD Independent Franchise Owners, Inc. (DDIFO) has neither the details on how this program would work, nor have we had the opportunity to consider fully all the ramification thereof for our franchisee / members. Accordingly, we have no official position today on this issue and reserve judgement for a later date."