Franchisees See Problems With Dunkin's New Model of Growth

Several new multiunit franchisees outside of Dunkin’s home base in the Northeast and Mid-Atlantic United States have filed bankruptcy this summer. These are firms such as 56 unit Kainos, 18 unit AlphaRock, and 7 unit Current River. It's franchisees say the problem may be Dunkin's new franchise development model.

In the last few months, several multiunit Dunkin’ Donuts franchisees have declared bankruptcy, possibly signaling problems with the company’s rapid-growth strategy launched several years ago. But a representative of many long-time franchisees says that the bankruptcies of those three franchisees do not suggest that the brand is in trouble. “It’s important to put the bankruptcies in context,” said Jim Coen, President of the Dunkin’ Donuts Independent Franchise Owners Association (“DDIFO”). “They represented the new growth of the franchise. The established franchise owners, the ones who built their units with sweat equity, store-by-store, are weathering the recession reasonably well. That’s an oversimplification — maybe — but it reflects how the established franchises see it.” [As reported in the website of its franchisee association]

And then there was jewelry tycoon Donald Zale, who walked away (but didn't file bankruptcy) from his aggressive area development agreement to dot northern Texas with Dunkin' Donuts stores after building just  a few. He cited the franchise failure on the inability to find financing. Dunkin' Donuts chain has a special relationship with troubled CIT for franchise financing.