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Dunkin’ Donuts, Togo’s, Baskin-Robbins and their combination or trombination was going to change the world, at least that’s what the franchisor's pitch was.
My book, Dunk’d – My Odyssey through Franchise Hell, will detail the myriad of franchise abuses I experienced after paying $1,500,000 for five Dunkin’ Donuts franchises in Rhode Island in 2001. In this blog I will highlight on an ongoing basis the key episodes of my “stranger than fiction” struggle with this company. I am uniquely qualified to write this book because I have been in litigation with Dunkin’ Donuts since 2005 and have assembled a treasure trove of evidence from depositions and emails (pdf), which show how a franchisor runs its business at the expense of its franchisees.
Like many franchisees, my issues with Dunkin’ Donuts took seed during our “courtship” and would later germinate into a metastasizing weed after I executed the franchise agreements. Their representatives made important “promises” to me that were critical to my decision-making process and determination to move forward with this opportunity. However, much to my detriment they did not keep their “promises” but, as we all know, once I signed the franchise agreement – it didn’t matter.
My deal with Dunkin’ Donuts called for me to acquire four existing and underperforming stores in downtown Providence that I would either remodel or relocate. I knew this would be hard work but was willing to take this on because Dunkin’ Donuts would also deliver to me a brand new and shiny Dunkin’ Donuts – Togo’s combination store in the best location in Providence. This store would provide the bulk of my cash flow and without it my business plan would not break even.
Yes, there was once a time when Togo’s and it’s combination or trombination with the other two Allied Domecq brands, Dunkin’ Donuts and Baskin-Robbins, was going to change the world – at least that’s what the pitch was.
But before I detail this sordid affair about a business concept that cost me and many other Dunkin’ Donuts franchisees millions of dollars, let me illuminate you about the underhanded franchise sales process I experienced. I’m sure my experience is similar to what many other franchisees have witnessed. By the way, I would only find out the real facts of what information was not disclosed to me through court-ordered depositions and conversations with long-standing franchisees long after I had paid for my franchises and signed all the agreements.
Little did I know but that Dunkin' Donuts had tried repeatedly and unsuccessfully to sell “my deal” to its existing franchise base and that nobody had been willing to bite. The first “sell-in” attempt came at a meeting titled ”Candidates for Acquiring the Shops and a Territory in Downtown Providence, RI” on December 20, 2000 . That sales effort merited not a single response and then four months later on May 4, 2001 a sweetener was added as a further inducement to Dunkin' Donuts franchisees :
“We would like to update you on the progress ADQSR has had on selling the shops as a territory….we have modified the offer to better our prospects of attracting the optimum candidate…we have reduced the price… The new proposal is…to lower the price from $1,500,000 with the incremental Initial Franchise Fee to an all inclusive price of $1,250,000. The timeline remains unchanged with the intent of having a network…with 2 Dunkin Donuts/Togo’s combo shops….”
The sales pitch enticed the “internal candidates’ with a thinly veiled reference to “external candidates” possibly entering the system but still there were no takers. I was one of the external candidates the memo referred to and I was totally unaware of what the existing franchise community thought about the Providence network that I was contemplating. (pdf)
Their extensive and unsuccessful campaign to sell the network to its own franchisees was never revealed to me by my Dunkin’ Donuts sales representatives. I later learned that the franchisee community knew all about the distressing realities of Togo’s and combination stores – it wasn’t working the way Dunkin’ Donuts said it was supposed to work. But this kernel of insight never reached me from the franchise sales team.
Instead I continuously received the “company line” which was that ADQSR’s purchase of an unknown 60-store brand from California called Togo’s Eateries would transform Dunkin Donuts from a 6 AM to 11 AM menu of coffee and breakfast sandwiches, into QSR ‘OZ’. When all three brands were combined within one building —the Trombo – loyal brand customers would come all day long for breakfast, coffee, sandwiches, hot meals and finally ice cream or deserts. This all day-part destination restaurant would leverage three solid revenue(and royalty) streams from one real estate investment. What could possibly be wrong with this picture?
So let’s review the salient facts of the initial steps of my involvement with Dunkin’ Donuts, what I will call my “courtship” and “engagement” and after which I would invest millions of dollars in their business system and, in effect, become their partner. First, they decided not to disclose to me their aborted efforts to sell the Providence network to its own franchisees and then they were able to convince me to pay considerably more than the last price offered to the ‘internal’ franchisees -- the same people who would not take the bait back in December, 2000.
Yes, I know this may be completely legal but it should give you a taste for the business ethics of people running Dunkin Donuts. As for the viability of their combination store scheme – I am convinced beyond a doubt they knew it was not working but refused to share this information with me until months later and after I had joined the system. By then it was too late; the bloodbath had begun.
However, my involvement with Dunkin’ Donuts and day-parting was about to go from bad to worse. I’ll tell you about this in my next column, Part 2 of Combo-Trombo=Dumbo’d. Here’s a hint, I never served one of the infamous Togo’s “classic” sandwiches for any of my customers that my business plan, supported by Dunkin’ Donuts, completely hinged on.
Pre-publication excerpts and the documents supporting our claims are posted on our website: www.Dunk-D.com
|Documents 5-21-2010 Blog .pdf||1.01 MB|