Dunkin' Franchisees Oppose New Coffee Distribution
DDIFO Critical. Coffee Deal Leaves a Bitter Taste in Dunkin' Franchisees' Mouths.
Writers note: I asked fellow New England Franchise Association member Mark Dubinsky of DDIFO his take on the recently announced coffee distribution deal between Dunkin Brands and Proctor & Gamble. Here is his reaction:
Mark A. Dubinsky, President of the Dunkin' Donuts Independent Franchises Owners, Inc. (DDIFO) stated in an email that the DDIFO is diametrically opposed to Dunkin' Brands' announced program in its current form to distribute packaged Dunkin coffee in retail outlets. DDIFO firmly believes that this program will harm countless franchisees who enjoy the sales of pounds of coffee in their restaurants today.
Notwithstanding DDIFO's objections, Dunkin' Brands has opted to contract with Proctor & Gamble to sell Dunkin' Donuts coffee in mass distribution channels, bypassing standard (franchisee) outlets in the process. This distribution program was created in the name of "increased brand awareness."
DDIFO believes if the brand wanted to better expose Dunkin' Donuts coffee in unrepresented or underdeveloped markets, this strategy could make considerable sense. DDIFO also feels to do so in New England, Dunkin' Donuts' oldest and most mature market (with franchised restaurants approaching one retail site for every 6,000 in population), to be disingenuous, at best, or sheer lunacy, at worst.
The following are comments to this program from three DDIFO members:
"It’s my opinion that Dunkin’ is trying to emulate Starbucks whose coffee is offered for sale in supermarkets, the big difference being that Starbucks is corporately owned and Dunkin' is 100% franchisees. It appears as if Dunkin’ wants to operate as a 100% company store (scenario) to the detriment of their franchisees."
"I am shocked though not surprised that Dunkin’ Brands would consummate this deal with P&G. I understand the need to make consumers aware of the brand but I feel that this move will further damage the relationship between the franchisee / franchisor and erode the profitability in each and every restaurant. Dunkin’ Brands should always remember that the franchisees are the ones that made and continue to make this brand the success that it is." "The DDIFO should continue to communicate to its members the happenings of this deal and any changes and/ or updates that may arise. Also, I see no problem with going to the media to put our voice and reaction to the public."
DDIFO urges Dunkin' Brands to reconsider and correct this ill-conceived marketing strategy.
- Franchise topic:
Same as;
UPS and the UPS Stores, Snap on and their distributors, Quizones etc. It's BIG business making as much money as they can while causing the small franchisee to bleed to death.They could care less and that will be the down fall of business in this country. They forgot this is a country of laws and most executives thinks they are above that.Most of these "executives" skipped the ethics and integrity classes in college - it didn't apply to them - well except the Rigas'boys just got a wake up call and are spending their first night in the iron hotel in North Carolina.
If I were a DD franchisee I'd make plans to start to bail out while you still can.
Same as going to a McDonalds with a prepurchased burger and telling them " I have my burger - I just need you to cook it for me and give me some mustard.
Never thought Dunkin Donuts would turn on their own franchisees - thats the beginning of the end for that franchise.
I can understand why they
I can understand why they would be upset. It seems like Dunkin Donut's primary advertising focus has been on coffee recently...but at the same time, it could work in their favor, couldn't it?
Michael
Franchise Bits.com
More Money for Bain Capital
What next will Dunkin Brands start selling Baskin Robbins Ice Cream in Supermarkets in the same strip center as franchised stores? It is clear this action is to generate more revenue for the corporation at the detriment of loyal franchisees.
Reservation of Alternative Channels of Distribution
Jim,
Good story, do you know what the franchise agreement says about the Alternative Channels of Distribution? Do any franchisees have right to block this move into their territory?
Michael Webster PhD LLB
Franchise News
dunkin Donuts Poctor and Gamble Agreement
Any agreement that will allow potential customers to purchase products at non franchisee owned locations can only reduce their profitability at the store level. Unlike Starbuck's Dunkins are indiviually owned an operated. The profits from these sales will go to Corporate and Corporate will , in essence be competing with its franchisees....Whats next bottled iced coffee ???
DDIFO response to your question
Dear Michael--
I am no attorney, but to the best of my understanding, the current version Dunkin' Donuts Franchise allows for the franchisor to enter into such an agreement with P & G.
Accordingly, we have little recourse except appealing to the media and class action litigation.
--MAD
THE INEVITABLE
Whenever a franchisor discovers a way to expand sales, it will be done unless there is a contractual limitation that forbids it.
Although DD is an old line frnachisor, it's contracts are probably up to date at least as of five years ago.
Five years ago every franchise agreement that was competently drafted provided that the franchisee was granted a license to operate a franchised business at the franchised location/at locations approved by the franchisor within the licensed territory, and that all other uses of the brand/name were reserved.
That opened up Internet selling, super market selling, other concept franchising cheek by jowl next to the franchised locations and every other permutation of alternative trade channel.
The issue has been litigated to death twenty years ago. Without specific contract limitations, there will be no liability for doing that.
That doesn't mean that there aren't guerilla tactics available to the franchisees if they have the gumption to be cohesive and execute a carefully thought out guerilla action plan.
One thing is for certain. DD will not back off because "it's wrong"/immoral/unethical.
The question is whether the assumption of negative impact will be true.
I wouldn't go near a doughnut myself, so I can't rationally speculate what doughnut eatin folks might do if they can git DD coffee in the super market.
I would guess that the police are a good test market, as they are the reputed doughnut eatin champs. Around here, when you take your kids out for a car ride, you have 'em play games to keep 'em from gittin bored, and one of the really popular games is to guess how many police cars will be parked outside the next doughnut shop you pass. Did they do polls/surveys amongst the fuzz? The pro poll folks in here could probably come up with survey results going any which way you might want, long as you're payin for it - kinda like them impact "surveys"/"studies" that franchisors have done when they wanna encroach on yo turf.
When I look at the doughnut eaters, it seems to me they would drink anything so long as they can git their sugar fix. If that's a reliable observation, then it aint the coffee that brings 'em into the store.
Richard Solomon
www.FranchiseRemedies.com
Advertising and Kickbacks
I would have your attorney carefully review the advertising terms in your contracts.
You don't want the advertising fund to used to secure, via rebates or kickbacks, shelf space in the grocer stories for DD's coffee.
If the franchisor wants to try this new scheme, let them pay for it. The franchise network's advertising funds should not be used to promote, assist, and help your competitor.
Don't be fooled by "brand awareness" crap - the advertising fund is for franchise network awareness.
You also need to talk with someone about how to best take advantage of the fact that coffee and donuts are complementary goods -this is not the same situation as Carvels, about 15 years ago. Carvel sold ice cream and not complementary goods.
Good luck to the Association - maybe you should contact the AAFD and see if some of the other large franchisee associations have some ideas, also.
Michael Webster PhD LLB
Franchise News
NOPE
If the contract permits it, there can't be a class or any other kind of action.
Richard Solomon
www.FranchiseRemedies.com
THEY DON NEED NO AAFD
The franchisees who might have standing are represented by Dady & Garner. It don't get no better'n that, and only a couple other firms do it as well.
Richard Solomon
www.FranchiseRemedies.com
Agree with Legal Counsel
Since the Dady & Garner are members of the AAFD, then I suspect that they will already be talking with some of the other big franchisee associations to get a business perspective on what to do.
Michael Webster PhD LLB
Franchise News