Dunkin' Explains CEO and Management Changes to Franchisees

Jon Luther explained why the new CEO announcement (pdf) was rushed out so quickly last night. In his opening remarks, Luther stated, “This succession planning process had been put in place for some time. We were prepared to go out live today [Wednesday] with the information, press releases and all these calls. However, last evening [at roughly 8 pm EST Tuesday] the Boston Globe picked up the story and published something on their web site. So I thought it was important to immediately inform all of our employees and franchisees in the best way we could. The Boston Globe article did preempt this conversation.”

Luther told the group, “I began to interview [Nigel Travis] in September.” In explaining why he looked outside of Dunkin' Brands for a new CEO, he stated, “We needed a proven, tested CEO in place.” He explained that he will still help lead the company. “I am still here," he declared. "I will be the executive chairman, a full-time position. I will step into more of a public affairs role, where I am looking out on your behalf at the federal level at some of the regulations that may come along that affect your businesses.” Luther stated that he will be providing occasional strategic consulting to Dunkin' Brands. “This [new position] does give me more balance in my life to spend time with my children, my spouse and my five grandchildren,” he said.

Immediate Focus

Will Kussell explained that Dunkin' will continue cost reduction work for the corporation, while driving convenience and value to consumers. On the other side, Srini Kumar said that Baskin-Robbins will focus on the core market of California. He explained, “As most of you know, California's economy has suffered the most within the country.” He continued that Florida is the other area of major effort in raising franchisee profitability.

Although California and Florida's economic growth have been especially hard hit by the mortgage crisis, it should be noted that the Bureau of Economic Analysis has declared Michigan, Delaware and New Hampshire as the hardest hit states, each with a shrinking economy.

In the conference call, a Baskin-Robbins franchise owner asked how their franchisor "could begin creating a relationship with its franchisees and have the stores become profitable."

Luther responded, “Srini [Chief Brand Officer for Baskin-Robbins] has come to me in the past couple of months and has introduced the concept of working with our partnerships to see how we can improve both our [franchisor and franchisee] profitability.”

No Changes in Strategic Direction

Luther answered a franchise owner asking in what direction the company will now go when the new CEO steps in. “What I'm telling you right now is the truth,” he said, acknowledging that there is probably considerable speculation in the chain about the future. “There are no basic policy changes. There will not be any strategic direction changes. There are not going to be any role changes when it comes to brand leadership.”

It remains to be seen whether incoming chief executive officer Nigel Travis shares this view.

Jeffery Sonnenfeld, one of the world's leaders on CEO succession and corporate governance, is senior associate dean at Yale University's School of Management and chief executive officer of the Yale Chief Executive Leadership Institute. He states that such guarantees of no change cannot be given when an outside CEO comes into a company.

Observes Sonnenfeld, “No exiting incumbent can preordain the strategic directions of a company after they pass on the reins of power! The strategic context, competitive landscape, internal conditions and core technologies change dramatically in all industries – especially one as dynamic as quick service restaurants.” He also observes, “This was probably clumsy language to reassure franchisees who nervously watch uncertain private equity partners and changing top leadership that the firm's core values will be reinforced with their excellent new leader.”

Management Changes

Luther discussed changes in Dunkin' Brands management. “These moves that we put together in the past six months are designed to realign the company generally," Luther said. "There are some folks that have left the company voluntarily and are moving on to the next chapter in their lives. Generally, the moves are designed to realign against the Dunkin Wins and 31 Wins plan. They are designed to look at our five-year strategic initiatives and align against those initiatives to drive the business.”

In contrast to the staff “moves” of the past few months that Luther discussed, Steve Caldeira, chief global communications officer, emphasized yesterday, “The Blue MauMau article [about rumors of management change and layoffs at the firm] is completely inaccurate as there have been no major layoffs at Dunkin' Brands.”

Despite possible future cuts in staffing, Luther mentioned that the franchise owners and the new CEO will have the continued support of chief legal officer Steve Horn, Steve Caldeira, Kussell, Kumar and others.

For now, Luther said, launching an initial public offering for the chain was off the plate and was “something in the distance now with this economy.” He added, “Everything we do is to build value not only for the enterprise, but also the franchisee system as well.”

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Related reading:

• Luther Emails Franchisees about New CEO
• Dunkin' Brands Insists No Major Layoffs, Organizational Changes Only
• Travis departure no mystery, Papa John's official says Papa
• Major Layoffs at Dunkin' Donuts as Owner Carlyle Group Downsizes
• Dunkin' Brands Insists No Major Layoffs, Organizational Changes Only