Big Things at Dunkin' Franchisee Conference

WORCESTER, Mass. - Dunkin' Donuts franchise owners wound up their twentieth conference late Tuesday afternoon. They have gathered each year to protect their interests. This year there is some big news. The franchisee association, DDIFO, announced that a large group of Chicago and MidWest franchisees have joined, giving the organization a national presence. The association said it had healthy revenues, and it has plans to gather even more to help fund its sizable initiatives. Things sound promising.

Jim Coen, president of DDIFO, has big goals for 2010. Coen said, “I have a vision of the future, a future where there will be a more fair and balanced franchisee agreement. I believe this is ground zero of the franchise relationship. We want a fair and balanced franchise agreement that protects the brand, but allows parties to share in their equity."

"I see a future where the brand will seek to coach and educate instead of intimidate, demand or retaliate," Coen said. "I see a future where DDIFO will be funded more from sponsor revenue than from membership dues. I see a future where Dunkin' Donuts will be a national company with shops across the country. I hear you say, 'Maybe Jim, but not in my lifetime.' Well, today DDIFO is already well on its way to a transformation. You can feel it. You can see it, and hopefully you are hearing it. Four thousand membership shops are 12, maybe 18 months away, maybe sooner."

It is an inspiring vision. But it begs the question of why does the association need to grow? In fact, why does it even exist? What is the purpose of these association goals?

Some of the guest speakers and social gatherings between meetings give a peek at the answers.

Many Dunkin' franchisees are not pleased with their franchisor. Franchisee pain stems from years of franchisor abuse through lawsuits—most recently, 350 plus. That makes it the most litigious franchise chain in the world of franchising. The displeasure also stems from the many stories of the firm spying on franchisees and their employees, prying into franchise owners' private lives, to intimidate and entrap the owners. Robert Zarco, a leading franchise lawyer and an afternoon speaker at the conference, thinks that Dunkin' Brands' in-house attorneys have found a continuous source of revenue and employment. Their efforts in their "Loss Prevention Department" have created tremendous ill will.

Dunkin' franchisees have quietly longed for a collaborative relationship with their franchisor, but there are several roadblocks.

"As long as Steve Horn (Dunkin's Chief Legal Officer) is with the company, and as long as Loss Prevention [Dunkin's legal department] extorts money from its franchisees through connived and frequent lawsuits, we will have no trust in Corporate," whispers one franchise owner. "There's just too much baggage from years of abuse."

The franchisee whispers and asks that I do not report his name or take his photo because he fears that if the franchisor hears such grumbling, it would immediately terminate his franchises. That would leave him with millions in debt and no way to pay it off.

Dunkin' Brands has been fortunate in that franchisees want to just keep their noses to the grindstone. They don't like thinking about a franchisor engaging in espionage, coercion and litigation to increase its revenues. It is the owners, not the franchisor, that are the investors and operators in Dunkin' Donuts brick and mortar units.  According to Coen, franchisees have invested over $8 billion in store locations, huge national distribution centers and other supply chain management functions. In contrast to these, franchisor Dunkin' Brands owns no company stores, no company distribution centers nor any part of the bakery business—it simply owns the franchise agreements and the rights to the brand trademarks.

The franchisor's legal department may have awakened a sleeping giant. It may also have dried up a potential source of revenue growth with the animosity it has generated through its gestapo-like tactics. After all, thousands of happy Dunkin' franchisees could easily help the franchisor expand nationally, a goal near and dear to it.

The franchise relationship between franchisor and franchisee now runs raw, very raw. It is one of the key issues that the franchisee association surely must be striving to resolve. Franchisees, almost to a person, express how they would love to be able to work collaboratively with their  franchisor. But the franchisor is unresponsive—it didn't even think to attend yesterday's 20th anniversary of its franchisees' association.

Dunkin' Donuts spokesperson Karen Raskopf emphatically rebukes such concerns from Dunkin' franchisees on today's Marketplace on National Public Radio, "We have never pursued litigation against a franchisee WITHOUT CLEAR CAUSE, nor will we."

Amid such rigid posturing and alarming franchise tales, is there really anyone out there who still wants to invest in a Dunkin' business?

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Related Reading:

• Franchisees Say Dunkin's Brewing Trouble, Boston Globe
• Dunkin' Brands Growth Plan Has Holes, NY Post news summary