Dunkin Donuts Franchisees Angry about Corporate Surveillance and Hardball Tactics
At least one court felt that Dunkin's spying efforts to ensure franchisees paid fully on what they earned and to keep shops clean went too far.
"A jury in federal court in Pittsburgh found in June that Dunkin' Donuts had gone too far in its crusade against underreporting. Chris Romanias, who runs a store in Bridgeville, Pennsylvania, won his challenge to the company's reliance on private investigators, hidden cameras and retail sales analyses to prove hidden sales."
"In a statement Dunkin' Donuts issued after the Romanias ruling, the company said its case -- the first it has ever lost and only the third underreporting case since the 1980s to advance to trial -- was strong. ``We feel very confident that every franchisee who left the system as a result of an accusation by us was committing fraud,'' Horn says.
The franchisor of good 'ol fashion mom & pop donut shops is known in the industry for its hardball tactics.
"Dunkin' Donuts is known for taking a very hard line with its franchisees,'' says Robin Day Glenn, former chairwoman of the California Bar Association's Franchise Law Committee, adding that it's unusual for a company to sue so many of its operators."
Some franchisees complained that such surveillance and was designed to force them to sell wanted stores.
"Shop owners say Allied Domecq exaggerates allegations to pressure them to sell their stores back to the company or pay settlements. Some franchisees say inspections and lawsuits are designed to force them to adopt company-touted strategies, such as combining two or three brands under one roof.
Others complained that Dunkin' nosed itself into affairs that had nothing to do with business.
"They have been harassing the heck out of me,'' says Juan Gutierrez, a Homestead, Florida, Dunkin' Donuts owner who's facing charges he underreported sales. "They have gone into my personal affairs -- even my love life,'' says Gutierrez.
According to Miami franchisee attorney Robert Zarco, it's difficult to fight such stalking tactics of a franchisor. Take the example of Chris Romanis who fought his franchisor and won.
Zarco says... "Many store owners can't afford to fight, and they quietly pay what the company asks or leave, he says. Romanias says his triumph will cost him more than the $35,000 the company had demanded."
This article of the 2002 October Bloomberg Market's magazine is not available online.
