The Franchise Owner's most trusted news source


Log In / Register | Oct 22, 2017

Comments regarding this article:

Add new comment


35 Comments

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Dunkin IPO

Anyone know when this. Is happenning?

I'd love to get me a piece of the Dunk!

Re: DNKN IPO

It should be happening within the next week. Franchisees have already made their commitments as of this past Sunday 07/17.

DNKN is highly leveraged. So, there's plenty of risk holding this pig. However, given your level of excitement, you may want to consider liquidating everything you own and putting all of your assets into DNKN. Like they say on Wall Street, "higher the risk, higher the return."

What do I know? I'm just a Guest.

Dunkin supply chain about to be blown apart

Word on the street is that Dunkin franchisees and their coop have ripped up their contract with Dunkin' Brands and are about to strike a major public stance because Dunkin Brands isn't holding to it's word on franchisee control of the supply chain.

Wonder what that will do the IPO?

Dunkin supply chain

OK what's up with this?

If it's next week this has to be fixed up right?

Dunkin's Supply Chain

The franchisees are collaborating with their franchisor to get a better deal. Franchisees seek participation in the fruits of the vendor contracts. They are free to seek whatever they want but it doesn't necessarily mean they'll get what they are seeking.

The Dunkin' franchisor controls the negotiation of vendor contracts and there is nothing that would prohibit Dunkin' from executing on their IPO plans. Now, if the franchisees had some sort of testicular fortitude, they would tear up their NDCP contract and allow all hell to break loose. This would certainly screw things up. However, the franchisees are collaborating; therefore, this is not an issue that is time sensitive to Dunkin's IPO plans.

Dunkin' Franchisee Supply Chain Control

Once again, franchisee control of the supply chain means, DD franchisees must be involved in the supplier contract negotiations. DBI must disclose the accounting of the negotiated rebates. Does DBI need a National DCP merger to go through prior to their upcoming IPO?

Although a merger would be nice to conclude prior to their IPO, it is not necessary and will not hold up DBI's IPO plans. To answer your wondering question: A National DCP merger or non-merger does not matter to DBI.

If I'm missing something, then please communicate how the IPO is impacted by a National DCP merger event.

Dunkin supply chain blowup

Is not about about any merger. Merger is nearly irrelevant to the largest franchisees.
It is about control over the vendor contracts and not being divested of that in the short term.

And the inability to grow if ot doesn't happen.

National DCP Merger

We are under the impression, by Dunkin', that a National DCP merger was finalized. This was already disclosed. Are there components that still need to come together?

Btw: Great discussion!

Dunkin supply chain

Is this done or not?

Dunkin Vendor Contracts

You mention something that could make it work - the largest franchisees. There needs to be participation of at least 10% of the total domestic system - approximately 600 stores. This is important because DBI's ability to service the debt has a built in 10%-15% cushion before hitting a default trigger.

Now, the DCP's should be working with alternative suppliers in order to feed the system if the franchisees were to cut-off the existing vendors. This is a serious choke point to get DBI to bend.

This needs to happen now as Mr. Ryan points out DBI is currently marketing their IPO with their roadshow this week.

Richard makes a point by staying that this not something for DDIFO. Rather, it is a DCP action. However, DDIFO can be instrumental in communicating the franchisee's position to the investor community.

RichardSolomon's picture

DDIFO should never make any statement to any investor

community. DDIFO's mission is limited tio matters other than influencing the market value of securities issued by anyone, and it will only make trouble that it does not need if it gets itself involved in any such projects.

Any statements made to anyone - think investors, regulatory agencies, the press - need to come from sources other than DDIFO.

michael webster's picture

The Franchisee Association and Securities Markets

RIchard uncharacteristically suggests that "DDIFO's mission is limited tio matters other than influencing the market value of securities issued by anyone, and it will only make trouble that it does not need if it gets itself involved in any such projects."

I have never known Richard to advocate based on the premise that one should stay out of trouble, so I find these remarks surprising.

John Gordon has made the point that the SEC public filings for many restaurantant franchisors are opaque because they don't include enough of the P/L of the franchisees.

To the extent that if further a franchisee association's interest, it may be a valuable addition to services to have its own investor relations department.  It would be unwise to rely upon, without verifying, the franchisor's investment relations press releases.  The franchisor is one; the franchisees are many.  Crowd sourced franchisees have the advantage here, and could provide -for a price- valuable information to the investment community.

Plus, as a bonus for you, it is likely to stir up trouble.

Edward Ryan's picture

Franchisee's DDIFO & DCP

Michael comments:

"Crowd sourced franchisees have the advantage here, and could provide -for a price- valuable information to the investment community."

Almost like having a rating agency for the franchise industry. However, the only element lacking is DDIFO's ability to rate the system with Buy, Hold, or Sell recommendations. That doesn't mean they can't talk to the restaurant industry analyst(s) covering the issuance. Being able to influence a market opinion with reliable data would really encourage the Dunkin' franchisor to work with its franchisees.

Franchisees in large numbers can get pretty scary for a Franchisor trying to go public nowadays.

Dunkin Doer says:

"It's happening and it's a lot more than 600 shops doing it and in all of the regions. There is nom dividing regions on this. It is wrasslin time and the franchisees weigh more."

If it's happening, then all franchisees should be able to understand what's going on. In our discussions with franchisees, not all franchisees are "getting it".

DD Franchisee says:

"Now, the DCP's should be working with alternative suppliers in order to feed the system if the franchisees were to cut-off the existing vendors. This is a serious choke point to get DBI to bend."

I enjoy watching franchisees strategize. The DCP's act as the franchisees 800lbs Gorilla. What would Dunkin' do if the DCP board decided to bring in a new supplier with similar standards - terminate the DCP's license agreement? Would Dunkin' Brands ever think of terminating the JM Smuckers deal? - the same logic would apply to the DCP.....simply, Too Big Too Fail!

Webster vs Solomon vs Dunkin

Mr. Webster, you assume that Mr. Solomon is on the franchisee association's side. He may well not be. He has publicly sung the praises of Jon Luther on this very website. Many franchisees seriously disagree with his assessment of Mr. Luther, and Mr. Luther has never made his displeasure with DDIFO a secret.

DDIFO can make Mr Luther and others getting an IPO payday much more difficult. I assume that Mr. Solomon knows this. Mr. Luther certainly does. DDIFO has the resources and contacts to make thing very interesting and I assume that Mr. Solomon knows this..

michael webster's picture

RIchard Goes Both Ways

Guest asks: "Mr. Webster, you assume that Mr. Solomon is on the franchisee association's side. He may well not be. He has publicly sung the praises of Jon Luther on this very website. Many franchisees seriously disagree with his assessment of Mr. Luther, and Mr. Luther has never made his displeasure with DDIFO a secret."

No, Richard is quite open about his promiscuous professional life styel.  He is a true advocate, completely devoted to situational ethics, and quite able to argue for one proposistion in the morning, and the opposite in the afternoon.

RichardSolomon's picture

I thrive on trouble, but some kinds of trouble are not for every

organization. DDIFO doesn't need to take securities charges risks when the IPO destroying activity can with equal ease be done without DDIFO fingerprints on it.

I don't yet represent either Luther or DD. As you know, I am promiscuous in the sense that I will represent anyone with a real dispute and a budget.

I knew Luther when I represented Popeye's franchisees, and he always dealt straight up with me. The way to get me to treat you like a real person is to be straight up. With me you get what you give. I can play the game by any rules I choose. I never play by your rules, but I have several sets of my own rules to fit every pistol. 

DDIFO & SEC

How would DDIFO be putting themselves in a position of securities fraud by communicating to the market? Basically, DDIFO would be providing their forward looking opinions based on their reliable assessment on the current state of the franchise system from the franchisee's perspective. Publicly traded companies do this all the time under SEC Safe Harbor guidelines.

The only thing straight up about Jon L. Luther are the private equity puppet strings that controlled his actions. They are the same straight up strings that control Nigel Travis today.

I agree with John Gordon's view that there are issues with the reporting of publicly traded franchise systems, which are nearly 100% franchised, such as Dunkin' Donuts, being that real system wide performance data to understand the health of the system is essentially "off the books".

A major Texas utility thought they were the smartest guys in the room until their senior management team started blowing their own heads off after getting nailed for their "off the books" treatment of trading losses. Perhaps, some of the others ended up drinking their sorrows away at Maldoon's.

There is nothing Dunkin' can do if DDIFO chooses to challenge the integrity of the data they report to the Street publicly. DDiFO must be certain of their position for credibility purposes.

RichardSolomon's picture

While most of the major defendants in the Enron scandal drank

at Muldoon's, those who lost everything did not. Muldoon's does not offer house accounts, and mopers are asked to leave.

Muldoon's remains to this day an excellent place to conspire against the public interest or against any other interest for that matter. Our conspirators tend to be rather cash rich, which is the only way any conspirator should ever be.

Franchisors whose senior management drink at Muldoon's sometimes get free legal pointers about franchising, but they have to provide their own dates and pay for their own drinks.

The ladies at Muldoon's are usually all accounted for already when it comes to romantic interests, so it would behoove you to acquire your relationships prior to coming to Muldoon's. We rarely have a lot of "strays".

If your group intends to have a gathering at Muldoon's and you would like me to be there to celebrate with you, please make the arrangements in advance so I can plan for it.

We don't do a lot of fru fru drinks. If you want a chocolate martini, stay away from Muldoon's. The wine, alas, is not really that good, but we will lay in your favorites if you give us a heads up about it.

Enron and Dunkin No Comparison

Enron created Special Purpose Entities (SPE) that were affiliates owned in part or whole by Enron and its executives and that is simply not the case with Dunkin. Dunkin also does not have control of the donut market in California or anywhere else where it could drive the price to excessive levels.

Why do Dunkin franchisees write such insane things? You don't own the franchisor the shareholders do and if they want to use securitazation financing and sell through an IPO it is their business to do what they will absent your permission or input.

I recommend franchisees focus on selling more coffee and donuts, work with Dunkin operations and marketing people to increase traffic and profitability and on franchise contractual relationship matters act in a responsible and productive manner to protect your end of the deal. If you can't do it then sell your franchises and become the benevolent franchisor that you know you can be in your own company.

michael webster's picture

Rumors and Guests

I break my policy of not responding to mere Guests.

Guest asks: "How would DDIFO be putting themselves in a position of securities fraud by communicating to the market?"

By circulating false rumors materially impacting the stock, up or down,  which can be traced by via IP addresses to DDIFO members or supporters.

Dunkin Vendor Contracts

It's happening and it's a lot more than 600 shops doing it and in all of the regions. There is nom dividing regions on this. It is wrasslin time and the franchisees weigh more.

A Divided Dunkin' Group Again?

If it's happening now and a lot more than 600 shops doing it, then I guess the movement doesn't include my 11 stores. Otherwise, I wouldn't be out here trying to figure out what's being planned. Of course, I'm hearing of the frustration the franchisees are communicating; however, I don't see a plan of action.

I don't expect it to be communicated here at BMM but this type of massive counter - you are speaking of - would need to be a coordinated effort. Not just a group of Northeast franchisees who happen to own shops in the Southeast and the Mid-West.

A group of franchisees tried bidding on Dunkin', in 2005, they failed because they thought they could do it on their own. Two thirds (2/3's) of the entire system needs to be on board to pull it off. The DCP is the starting ground.

Richard - I disagree with the DDIFO's position. They're already the point of contact for the Wall Street analyst. I do agree that they must be sensitive in their communications. Any street analyst doing their homework will simply use a search similar in phrase to "Dunkin' Independent Franchisee Association" - Google results pop-up with - www.ddifo.org

I've read quite a bit on this

I've read quite a bit on this site about Dunkin's recent behaviour, particularly towards their very own franchisees and it is clear that any involvement with this company should be avoided. Franchisees should be making more noise (from the safety of the DDIFO), but unfortunately Coen and his board don't take a hard line on anything. The company is in decline. The Dunkin of 2011 will not be in my portfolio.

RichardSolomon's picture

The moment before an IPO is a choke point.

Choke points offer up opportunities to strike. They are strategic moments that last for only a very short time. Then the window closes and the opportunity is lost.

If you won't do what is needed, when it is needed and where it is needed, why should anyone mistake you for something or someone significant?

FuwaFuwaUsagi's picture

You know Solomon, if you were

You know Solomon, if you were committed in your heart to the mission, you would have made one hell of a soldier.  You get it; you get it very well.  My hat is off to you on that.   You are one scary SOB   : )     

 

RichardSolomon's picture

I was, long ago.

And what I preach is exactly what my mos was.

FuwaFuwaUsagi's picture

It shows.  Salute...

It shows.  Salute...

Dunkin' Choke Point

Richard,

DD Franchisee ask, "Does DBI need a National DCP merger to go through prior to their upcoming IPO?"

Based on your experience, do you believe a a merger of Dunkin's regional distribution centers are critical for a successful DNKN IPO?

My view is inline with DD Franchisee who believes the IPO does not present an opportunity for the franchisees to create a choke point here.

The franchisees own the supply chain infrastructure but do not totally control the supply chain. The franchisor is independent of the franchisees. What obstacle does the supply create for Dunkin'?

RichardSolomon's picture

The choke point is there. The franchisees didn't put it there.

The issue is whether the franchisees - probably not acting as DDIFO - will take advantage of the opportunity that lies before them.

Dunkin supply chokepoint

Mr. Solomon, please see above mr Dunkin Investor's points.

DDIFO doesn't need to be the action group. DDIFO has long acted for franchisees without taking credit for it. That may have hurt it's PR but DDIFO is about supporting franchisees and not taking credit where it interferes with franchisee efforts.

Edward Ryan's picture

Dunkin's IPO Roadshow This Week

Various Wall Street related blogs are reporting that Dunkin' Brands Inc is on their roadshow this week preparing for their upcoming IPO.

PE groups continue to follow a trend of purchasing businesses under leveraged buyouts, reorganizing internally, then selling them back to public shareholders through IPOs after the dust is settled. Dunkin will look to raise close to $400 million through its sale of shares to public investors, trading under the ticker DNKN. The IPO will be led by banks JP Morgan (NYSE:JPM), Barclays (NYSE:BCS), and several others.

Guest's comment provides some insight into what investors are currently seeking in DBI's marketing prospectus:

We requested to review an inter-period transaction history account between the corporate GL and the ad fund GL - let's just say, there was an incredibly long period of hesitation in response to our simple due diligence point.

The private equity sponsors are beginning to exit their investment in Dunkin' Donuts. They are coming to market with a plan to release a small amount of shares to institutional and retail investors. Bain Capital hopes DNKN will replicate the performance of their investment in Burger King (BKC). The small float will hopefully trade up the share price to allow Bain Capital to offer a secondary subscription into the market at the inflated price levels within a year or so after the IPO.

Dunkin' Brands is strapped with an enormous debt load that will impact their future profitability.

In spite of internal changes that have boosted sales, Dunkin Brands is still stricken with debt, accounting for $1.8 billion in long-term expenses on corporate balance sheets. The company plans to use its IPO money to repay some of its outstanding loans, though may still struggle to regain profitability, having posted a net loss of $1.72 million in the first quarter this year.

Wall Street equity strategist, Chuck Neul, observes the challenges of private equity companies offering their shares to public shareholders.

All you have to do is look at the long, 40-year experience of former Wall Street partnerships gone public. Generally, owners cashed in at the top, took excessive risks with new shareholders' money, and took formerly-nimble, lean firms, turned them into slower, overly-manned and -regulated public entities, and diluted their performance.

The public isn't buying into or getting what the former private owners enjoyed.

Further, if private equity firms go public to attract more capital, that means the barriers to entry of the sector are falling, more capital will chase the same amount of deals, and profit margins will fall as risk rises.

Which is pretty much happened with the old Wall Street partnerships. Many went out of business or were acquired. In short, this phase is suggestive of a move of the sector to maturity, not a more profitable era.

Perhaps larger in scale and gross profit dollars, but on lower margins and with higher risks.

One can extrapolate from Mr. Neul's observation that private equity companies mirror the performance of their underlying portfolio holdings. Thus, the private equity sponsors have enjoyed and reaped the benefits from their holding period in Dunkin' Donuts and have matured it's return potential.

For investors considering to add DNKN to their portfolio holdings they should understand the murky accounting practices endured by Dunkin' under the ownership of their private equity sponsors and the fact that "the public isn't buying into or getting what the former private owners enjoyed."

Flip Flopping On The Issues @Dunkin?

Isn't this the same Robert Branca promoting the CFA Universal Bill of Rights on behalf of the Dunkin' Donuts franchisees?

Given the fair franchising issues he's lobby for, which are based on his experience in the Dunkin' Donuts system, I don't understand why he is out in the media promoting Dunkin' Donuts upcoming IPO.

Apparently, he is taking after his owner, Mitt Romney, by lobbying his political agendas and flip flopping on the issues concerning the American people. Does Branca give a damn about the franchisees or is he just in it for his own self interest?

Re: Flip Flopping On The Issues @Dunkin?

Although I don't agree that much has changed at Dunkin', your comments are not very fair to Mr. Branca. As a franchisee, he walks a tight rope while other franchisees watch in his shadow.

Mr. Coen, on the other hand, is not a franchisee and is free to be more critical of Dunkin'. His should have commented on the issues concerning the National DCP merger, franchisee profitability, and DDIFO's commitment to the Universal Franchisee Bill of Rights - rather than saying, "franchisees breathed a sigh of relief to see that Nigel Travis, who became the company’s president and CEO in 2009, has signed on for five more years on the job."

If corporate felt a franchisee was crossing the line, they could get into some serious doo-doo. Franchisees must be friendly to corporate while expressing their opinions publicly.

It's a sad state of affairs, but it goes way beyond Dunkin'.

Dunkin Shake-Up & Supply Chain

Mr. Ryan's brief highlights:
"Franchisee Robert Branca said, "franchisees aren’t worried about any big shake-ups." and added, "another source of security for franchise owners is that they — rather than Dunkin’ itself — control the brand’s supply chain."

Franchisees have always been worried about corporate shake-ups. When Luther announced Travis as the new CEO in 2008, he told the franchisee community not to worry "he's not going anywhere." Immediately thereafter, the entire senior executive management team changed.

In 1989, DD was being acquired by Allied Lyons. Franchisees were in fear of increased encroachment and additional channels of distribution. In response, the franchisees formed DDIFO to have their voices heard through a single independent organization. To this day, Dunkin has not formerly recognized the DDIFO as the independent franchisee organization.

In 2007, Dunkin screwed the franchisees by cutting a deal with P&G (now J.M. Smuckers) to distribute coffee through retail grocery channels. This deal cut out the franchisee owned DCP - could have created a huge cost reduction by consolidating the coffee roasting business through a single supplier. How long is the K-Cup exclusivity? SBUX is mass market - DNKN is next to go mass distribution - I trust Travis as much as I trusted Luther.

I suggest Mr. Branca should review the relationship history of the franchisees and Dunkin' Donuts before declaring to the local media, "franchisees aren’t worried about any big shake-ups."

Franchisees do not control the supply chain. Franchisees are merely responsible for the day-to-day management of the supply chain. Control of the supply chain includes control over the supplier contract negotiations. We already discussed that franchisees will never gain a seat at the supplier contract negotiation table here on BMM last week - link is below.

http://www.bluemaumau.org/node/10472/talk

Financial Engineering

Why would anyone buy Dunkin's stock; especially, the franchisees they are milking? Dunkin' is marketing their IPO this week. The senior managers can't comment on their franchisee's performance. When questioned about the performance of their 16 corporately owned stores, it's like nobody knows about them. We requested to review an inter-period transaction history account between the corporate GL and the ad fund GL - let's just say, there was an incredibly long period of hesitation in response to our simple due diligence point. Supposedly, they will get back to us; however, we don't expect a legitimate follow-up.....any time soon.