Attorney Blasts Dunkin' on Latest 2008 Agreement

COHASSET, Mass. (Blue MauMau) - Attorney Kevin R. McCarthy pulled no punches in giving his two cents worth on the new Dunkin' Brand 2008 franchise agreement. "During the worst economic downturn in memory, with unemployment now over 5% and growing, bank financing drying up and customer counts along with shop profits under stress, you would think a responsible franchisor would be developing programs to help and strengthen their franchisees." McCarthy feels that If they acted responsibly the entire system could safely survive this present severe downturn and prosper in the long term.  

But he says, "No, Dunkin’ Brands management continues to come out with new programs, policies and a revised franchise agreement which will feed the shorter monetary avarice of the principal Equity Owners (Thomas H. Lee Partners LP, Bain Capital Partners and the Carlyle Group ) at the short and long term expense of the Dunkin’ Donuts franchisee."  But then again, he states, the principal Equity Owners don’t worry about the long term because they plan to sell and move onto their next prey, leaving the next buyer holding the proverbial bag. This is an industry which directly involves over 50 percent of our national economy."  McCarthy said there may be a need for federal and perhaps state regulation and  intervention before such dubious practices destroy entire segments of the economy, as we have just experienced with the banking and finance industry.  

Other specific comments McCarthy has on the proposed new franchise agreement are stated below:

• Advertising Fund management is always controversial in any franchise system. This is a complete takeover of the Ad Fund by the franchisor, with little or no input or control left to franchisees. The proposed 20% of the Ad Fund to be funneled into administration and other brand expenditures, along with the removal of adequate audit accountability, is simply outrageous.
• Dunkin' Brands can continue to force operators to buy expensive new equipment, at the franchisee’s sole expense and with no contribution from Dunkin Brands, at the will and whim of the franchisor.
• If the franchisor merely “believes” the franchisee is underreporting they can demand personal tax returns. Dunkin’ can then use these tax returns to intimidate or threaten franchisees to sell their shops or comply with other franchisor demands.
• Forcing expensive remodels in Rhode Island and Massachusetts (as examples) at the total expense of the franchisee in the midst of the worst economic downturn in memory and in dense saturated markets is unconscionable.
• Imposition of unlimited costs and fees for training is simply dumping more franchisor expenses on the hapless franchisees. This builds Dunkin’ Brands profits at the expense of franchisees.

He concludes, "It seems Dunkin’ Brands comes out with a revised franchise agreement each year with the purpose of squeezing more and more out of the Dunkin’ system for themselves at the expense of their franchisees."