Major Layoffs at Dunkin' Donuts as Owner Carlyle Group Downsizes

HEARD ON THE STREET — Dunkin' Donuts Corporation has laid off a number of vice presidents and others, all significant members of the company's management team. The Officious Owl has not been able to verify the number or names, but he did receive an internal communications memo sent to Dunkin' Donuts and Baskin Robbins franchisees dated December 1, 2008, making an announcement on behalf of Paul Leech, Chief Administrative Officer, who is resigning as of December 31. Although Leech has been with Dunkin' Brands for 12 years and a total of 30 years including his time with previous owner Allied Domecq, he stated that Dunkin' needs a strong leader for Human Resources, and as the CAO he would never profess to be that person, although that has been one of his primary duties for a number of years.

According to an anonymous source close to the situation, "Dunkin' has indeed laid off a ton of people."  He said Dunkin's Chief Operating Officer Will Kussell has been making personal visits to some of the largest franchisees to outline what is going on with the company. "According to Kussell, they are pulling in their development and expansion reins to concentrate on making the most for their current franchisees and for Dunkin'," he revealed. The source mentioned that raising unit operational performance would impose tremendous change on particularly its largest multi-unit franchise owners, since their emphasis in the past had been an entirely different strategy —expansion. 

The Overhearing Hooter learned that McDonald's efforts over the last two or three years has eroded Dunkin' Brands and cut into Dunkin’s coffee and breakfast sandwiches efforts. "It’s got to be particularly hard in any new markets that Dunkin' is trying to crack into, finding out that McDonald's is already there," the source said.

In an interview with Kevin R. McCarthy, chairman of the Dunkin' Donuts Independent Franchise Owners association, he said he heard of the layoffs but did not have any details. He said, "While downsizing and reorganizations are an unfortunate characteristic of today’s troubled economic climate, Dunkin’ Brands seems to be engaged in a multi-year ongoing pattern of reshufflings, refocusings and reorganizations.  It’s increasingly difficult for franchisees to know where or who to turn to for advice or assistance when titles, job functions and personnel so frequently change."

McCarthy also showed concern over the company making major changes without giving franchisees advance notice or getting their input. He said, “We don’t want to see franchisee support suffer because they don’t have a voice in corporate reorganizations even though such reorganizations directly impact their sales, profits and ultimately the customer experience.  A more enlightened and modern management practice would be to collaborate and consult with franchisee leaders in advance of corporate reorganizations and not spring corporate reorganizations on the franchise community by surprise.  Management should never forget that, in the end, it's franchisees that pay all the bills and serve all the customers every day of the year.”

Carlyle Group Announces Major Layoffs, Closes California Office

In another surprise announcement made yesterday, the Carlyle Group, one of three private equity firms that owns Dunkin' Brands, stated that it would lay off 100 people, which is 10 percent of their entire staff. It has also closed its California office.  According to a Wall Street Journal article, this is the Carlyle Group's first downsizing in its 20-year history, and it is the first U.S. private equity firm to announce cuts as the industry braces for leaner times.

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Related reading:

• Dunkin’ CAO Announces Departure
• Deal Journal - WSJ.com - The Bell Tolls for Private Equity
• peHUB » Carlyle Group Laying Off 10%, Closing Menlo Park Office