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Dunkin’s Asset-Light Model Gives Control to Franchisee Entrepreneurs, Pushes It Past Competitors on Wall Street

Dunkin' is developing a business model in which it owns no stores but then realizes that it needs to put its franchise owner-operators in charge of national functions because with no skin in the store game, it has operational blind-spots. So its franchisees own, lead and manage the national supply chain. It's a franchisee cooperative called the National DCP, LLC out of Bellingham, Massachusetts.

This is what CEO Nigel Travis told reporter Augustino Fontevecchia of Forbes about the pioneering franchise model:

DNKN Chart

Dunkin' stock price as a percentage of change is the blue line on top. DNKN data by YCharts

Dunkin' Brands has developed an interesting business model: an asset-light platform for entrepreneurial franchisees to build their network of stores in a context that transcends the general economic environment.  And it seems to be working, as shares in Dunkin' have outperformed every major rival over the past 12 months… "[We've] created a model for entrepreneurs to succeed," Nigel Travis said enthusiastically, "it's our competitive advantage."  Since returning to public markets in mid-2011, shares in Dunkin' have surged nearly 30%, pretty much doubling the returns for the S&P 500.  At the root of this success has been Dunkin's strategy to empower its franchisees by streamlining store operations, expand the brand's marketing strategy, while tackling unit economics.

...Travis explained that Dunkin', as an organization, focuses on offering a starting point for franchisees by attacking certain basic problems.  From healthcare plans to marketing, Dunkin' works closely to develop strong franchisee relationships, which forms the base of its asset-light model.

The results of Dunkin' franchisees taking charge have been impressive on Wall Street (see chart above).

It differs from major competitors like McDonald's and Starbucks, which run both wholly-owned stores and franchises.  And investors seemed pleased, over the past 12 months, Dunkin' has outperformed the aforementioned names and other major competitors including Yum! Brands, Chipotle, and Panera Bread.

Dunkin', nicely done.

Do you want even better results that better stick through thick and thin? Then this journal suggests putting your franchisee entrepreneurs in charge of even more Dunkin' national brand functions. Second, begin to engage and work closely with their self-ruling entrepreneur association and incorporate its strategic and tactical suggestions. Culturally, engaging the more independent arms of your entrepreneurs is no doubt scary to the company, but their knowledge will send your stock flying. Hey, if you have built structures that better tap into the latent talent of your franchisee entrepreneurs, then flaunt it, right? It will take your competitors years to figure out how to develop and align these complex franchisee structures so that the result is not chaos.

At this point in time, your competitors will read this and won't know what I'm talking about. But you do.

Run with it! As fast as you can!

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