Independent Joe Magazine Issue #6 September 2010

September 2010 • Issue 6

New Yorkers Run on Dunkin’

Times Square Billboard Marks Expansion

We Communicate, We Educate, We Advocate!

also in this issue

2010 CFA Day Forum Profit Building with Perry

DDIFO’s National Members Meeting September 21, 2010 at Mohegan Sun

United Now…More Than Ever!

www.lisasousa.com

Lisa & Sousa Ltd. is a firm with over 50 years of collective experience representing multi generational Dunkin Donuts franchisees in the acquisition, financing, development, structuring, transitions and transfer of franchised and other businesses.

Specific examples include: transfer of ownership of 100 franchise locations in Northeast, Southeast and other parts of the United States; sale of 48 locations in NY; purchase of 15 stores in the Northeast; acquisition of multi-shop networks in Florida (18), Vermont (20) and Cape Cod, MA (20); Store Development Agreements (SDA’s) throughout the country; and formation of cooperative Central Production Locations (CPL’s).

Lisa & Sousa Ltd. is general counsel for the Dunkin Donuts Independent Franchise Organization (DDIFO) with a membership of approximately 1500 Dunkin Donuts franchise units nationwide.

Our clients have chosen to have an on-going relationship with Lisa & Sousa Ltd. because of experience, proficiency, determination and attention to detail.

United Now... More Than Ever!

by Jim Coen

03

President, DDIFO, Inc.

Jim Coen, President

05

I am pleased to present to you the sixth issue of Independent Joe magazine.

Four times a year, DDIFO publishes Independent Joe (IJ) magazine to celebrate Dunkin’ Donuts franchise ownership. IJ is full of articles and information regarding the proud ownership of one of the world’s great iconic brands.

As an independent association, one of the foremost missions of DDIFO is to utilize all the resources it can to make sure Dunkin Donuts Franchise Owners have the opportunity to grow, prosper and reap the rewards of their hard work and substantial investment. We act as a trade association and watchdog group for our members paying special attention to the franchisor, industry research, and government relations.

Contrary to what some may believe, Dunkin’ Donuts franchise owners have every right to join an independent association. In the 2010 Franchise Disclosure Document (FDD) issued by Dunkin’ Brands, DDIFO is listed as a qualifying franchisee association according to Federal Trade Commission standards and guidelines.

The strength of DDIFO lies in the organization’s independence and its membership. There is strength in numbers and the resources those numbers generate. We are all stronger together.

That concept will be evident on September 21st when DDIFO will hold its first National Members Meeting at Mohegan Sun in Uncasville, CT. The theme of the meeting is “United Now… More Than Ever!” Response to the meeting’s announcement has been robust. We are looking forward to providing DDIFO members top quality content, sponsor exhibitions and significant member participation from within Dunkin’ Donuts franchise development triangle (Boston-to-Chicago–to-Florida).

United Now...

More Than Ever!

Senator Scott Brown Headlines 2010 CFA Day Forum Matt Ellis

07 “DDIFO is a powerful force that is stronger with you than it is without you!”

Dunkin’ Donuts franchise owners have over $10 billion dollars invested in the Dunkin’ Donuts brands, from real estate, food service equipment, leasehold improvements, production and distribution. Dunkin’ Donuts franchisees own 100% of the retail locations and work hard to provide loyal consumers the freshest and highest quality products available in the marketplace today.

DDIFO is proud of the hard work and community involvement Dunkin’ franchise owners exhibit every day.

I’d like to thank all the people that helped put this publication together including Amy Levine, DDIFO Sponsorship Director for coordinating our Sponsorship Advertising program whose financial support is critical in making this publication possible.

DDIFO has a fine team of writers that worked diligently to produce quality journalism, and valuable content, special thanks to Matt Ellis, Sue Minichiello and Brooke McDonough. DDIFO is fortunate to have Sue Petersen as our graphics designer, Sue not only creates appealing graphics but she is a wonderful illustrator.

08 10 19

How to Build Profits During a Recession Perry Ludy

DDIFO Directory of Sponsors New Yorkers Run on Dunkin’ Brooke McDonough

Index of Advertisers

communicate and share great stories with us all.

We invite you to visit our website www. ddifo.org, for regular news that affects Dunkin’ Donuts franchise owners is breaking and changing all the time.

I look forward to seeing you at the DDIFO National Members Meeting “United Now… More Than Ever!” September 21st, at Mohegan Sun, it promises to be the biggest and best meeting DDIFO has ever put together.

Please don’t ever hesitate to contact me with any comments, questions or suggestions.

Jim Coen President, DDIFO, Inc jim@ddifo.org • 800-732-2706

Last but not least, thank you to the franchise owners for taking the time to SEPTEMBER 2010 • INDEPENDENT JOE

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INDEPENDENT JOE • SEPTEMBER 2010

Senator Scott Brown Headlines

by Matt Ellis 2010 CFA Day Forum If there’s one thing all Dunkin’ Donuts franchise owners have in common, it’s the connection to their local communities and, by extension, their connection to the United States Congressman or Senator who represents that community. Even before the legendary Speaker of the House, Thomas P. (Tip) O’Neill Jr. said, “All politics is local,” business owners knew that when a local politician recognizes them, good things can happen.

That concept is behind the efforts of the Coalition of Franchisee Associations (CFA), of which the DDIFO is a charter member. This summer, franchise owners representing Dunkin’ Donuts and other well-known brands gathered in Washington, D.C. for the second annual CFA Day Forum on Capitol Hill.

DDIFO President Jim Coen has attended the CFA Day Forum for two years in a row. He says it is a tremendously valuable experience, not just for franchise owners, but also for members of Congress who may not be aware of the issues small businesses face within their districts.

“This is a valuable exercise,” said Coen. “You sit in a room with franchise owners from Dunkin’ Donuts, Subway and Pizza Hut and Congressmen say, ‘I have one of these in my district,’ so it relates directly to them. They understand that franchise owners invest in their communities, create jobs and support local charities. And, we can remind them that in the Dunkin’ Donuts system, 100 percent of the stores are owned and operated by franchisees.”

According to Dave Glodowski, Chairman of the CFA and a member of the Board of Directors for the Independent Hardee’s Franchisee Association, Inc. (IHFA), “When you’re in a Congressman’s office and you represent jobs in his district he’ll listen.” The CFA, he says, helps members of Congress understand the local issues as told by the franchise owners.

of the projects we have in development in the inner city,” said Branca. “McGovern was very interested in the views of small business owners and we were able to share specific instances of the unintended consequences of otherwise well-intended legislation that makes franchise owners crazy.”

As an example, Branca highlighted the red tape, expenses and penalties associated with the Massachusetts health care law. “We told Congressman McGovern how we wanted the national legislation to avoid duplicating these problems.”

Branca says the Congressman was keenly interested and agreed to listen to the concerns of business owners when the new regulations are written.

DDIFO President Jim Coen, Dunkin’ Donuts Franchise Owner Rob Branca, and Congressman James McGovern (D-MA 3rd) discuss franchise owner issues in the Congressman’s Capital Hill office.

Dunkin’ franchise owner Rob Branca sees the value as well. Case in point: Branca spent an hour meeting with Massachusetts Congressman Jim McGovern, whose district includes the city of Worcester where Branca and his family own a number of Dunkin’ Donuts shops.

“He also got the chance to put a face on the Dunkin’ Donuts that he frequents when he is home in Worcester and offered to do the ribbon cuttings at two

“I was glad to have had the chance to meet with Rob and am grateful for his family’s continued investment in Worcester. As the son of two small CFA Day continued on page 6

Joe

Independent

The Quarterly Magazine of DD Independent Franchise Owners

Independent Joe TM is published quarterly by DD Independent Franchise OwnersSM Editors: Jim Coen, Matt Ellis Contributors: Perry Ludy, Brooke McDonough Advertising: Amy Levine • Graphic Design/Production: Susan Petersen

Direct all inquiries to:

DDIFO, Inc. • 150 Depot Street • Bellingham, MA 02019 508-422-1160 • 800-732-2706 • info@ddifo.org • www.ddifo.org DD Independent Franchise Owners, Inc. is an Association of Member Dunkin’ Donuts Franchise Owners.

INDEPENDENT JOE is a trademark of DD Independent Franchise Owners, Inc. DD INDEPENDENT FRANCHISE OWNERS, DDIFO, and INDY JOE are service marks of DD Independent Franchise Owners, Inc. Any reproduction, in whole or in part, of the contents of this publication is prohibited without prior written consent of DD Independent Franchise Owners, Inc. All Rights Reserved. Copyright © 2010 • Printed in the U.S.A. SEPTEMBER 2010 • INDEPENDENT JOE

5

CFA Day continued from page 5 business owners myself, I especially appreciated hearing his concerns about the challenges facing entrepreneurs in this struggling economy. I look forward to working with him to make sure those concerns are addressed as revisions are made to the health care reform effort and regulations are put in place,” said Congressman McGovern in a statement to DDIFO. Attendees at the CFA Day Forum not only have the opportunity to meet one-on-one with Congressmen who represent their district, they also are exposed to dynamic speeches from some of Washington’s most influential leaders, journalists and experts. This year, former White House correspondent Sam Donaldson and Pulitzer Prize winning columnist George Will spoke to the group.

But, the showstopper was definitely U.S. Senator Scott Brown.

According to Misty Chally, Deputy Executive Director for the CFA, the luncheon at which Senator Brown spoke was so packed, they needed extra chairs. She says the Senator was very interested in meeting CFA members. “He shook hands one by one. I think it was really helpful for the franchise owners,” she said.

“Senator Brown is perhaps the most important legislator in the United States right now,” said Branca. “His is the key swing vote on nearly every piece of big legislation that comes out of Congress. He literally gets to make the decision on what does or does not become law in many cases, and I, a Dunkin’ franchise owner, got to discuss our positions on each of the laws and coming bills that affect our bottom line.”

CFA Day continued on page 13

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INDEPENDENT JOE • SEPTEMBER 2010

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It was the best of times, it was the worst of times. These contrasting phrases were written by Charles Dickens in A Tale of Two Cities to describe the conditions leading up to the French Revolution and they remain true today. Just ask any business owner how current economic conditions are impacting their business. It could be the best of times for a computer repair business or a used car dealership and the worst of times for a health club or retail ice cream business.

Arguably, marketing a business effectively in any economic climate requires skill, but marketing a business a new car, computer, furniture, or new during a recession requires masterful shoes? Have you postponed a trip or skills. Some businesses thrive. Others struggle. But the fact remains that build- vacation? If you answered yes to any of the above you are like millions of other ing profits during a recession requires consumers who are responding to the finding better ways to grow revenue. current economic situation by changing Let’s take a look at what we have their buying behaviors. Many econolearned during the recent economic mists believe the changes are signifidownturn that can help us better understand and market to our Dunkin’ Donuts cant based on certain facts. As Dragnet’s Sgt. Joe Friday used to say, “Just customers. the facts ma’am…” Let’s consider a few First, let’s look at ourselves individually. facts from the National Coffee AssociaIn the last couple of years during your tion’s 2010 National Coffee Drinking visits to the grocery store, have you Trends study: stopped buying products that you oth• Coffee is the oldest and second largerwise would have purchased without est globally traded commodity (behind giving it a second thought? Have you petroleum). recently turned down the opportunity to purchase a special treat for yourself • The U.S. is the largest consumer of or your family? Have you put off buying coffee in the world with nearly 200

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Coffee is the oldest and second largest globally traded commodity.

• The number of people consuming coffee has not been significantly affected by the economic environment.

• Most consumers are consciously maintaining the coffee behaviors they had developed prior to the recession.

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Profits continued on page 14 SEPTEMBER 2010 • INDEPENDENT JOE

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2010

Absolut Contracting

William Lako 4346 Route 27 Princeton, NJ 08540 609-655-0800 blako@absolutlycan.com “A Member of Franchise Pros”

Access Rewards

Doug Jentzsch 1012 W Beardsley Place Salt Lake City, UT 84119 866-681-2427 dougj@accesscashrewards.com www.accesscashrewards.com

Access to Money, Inc.

Doug Falcone 628 Route 10 - Suite 8 Whippany, NJ 07981 973-599-0600 dougf@accesstomoney.com www.accesstomoney.com

Adrian A. Gaspar & Company, LLP

Robert Costello 1035 Cambridge Street, Suite 14 Cambridge, MA 02141 (617) 621-0500 cpas@gasparco.com www.gasparco.com

Aflac

Steven Ross 200 Atlantic Avenue Swampscott, MA 01907 781-592-3765 steven_ross@us.aflac.com www.voluntarybenefits4dunkin.com

Directory of Sponsors Bedford Cost Segregation Bill Cusato 60 State Street – Suite 700 Boston, MA 02109 978-263-5055 bcusato@bedfordcostseg.com www.bedfordcostseg.com/ who_we_serve/ddifo.asp

Belshaw Adamatic Bakery Group

Fran Kauth 814 44th Street NW Suite 103 Auburn, WA 98001 206-718-3573 fran_kauth@belshaw.com www.belshaw-adamatic.com

Brendon Pierson/PurePayroll Brendon Pierson, Jr. or Jeff Kotch PO Box 1750 Wall, NJ 07719 732-681-4800 bpierson@brendonpierson.com jeffkotch@purepayroll.net www.brendonpierson.com www.purepayroll.net

Carter Glass Insurance Agency Debbie Carrara 5901 Falls of Neuse Road Raleigh, NC 27609 919-781-1973 debbiec@cc-is.net www.carterglassinsurance.com

Caturano & Company

Jennifer Grossetti 80 City Square Boston, MA 02129 617-241-1412 jennifer.grossetti@caturano.com www.caturano.com

CeilSpray Ceiling Refinishing, Inc. Brian Nolen 18 Lamy Drive Goffstown, NH 03045 800-258-3096 Brian@CeilSpray.com www.CeilSpray.com

Comcast Business Services

Jamie Gersten 500 South Gravers Road Plymouth Meeting, PA 19462 610-405-4135 jamie_gersten@cable.comcast.com htp://business.comcast.com/internet/index.aspx

Direct Capital Franchise Group

Robyn Gault 155 Commerce Way Portsmouth, NH 03823 (603) 433-9476 rgault@directcapital.com www.directcapital.com/apply/dunkinbrands

DTT Surveillance

Mira Diza 1755 North Main Street Los Angeles, CA 90031 800-933-8388 mdiza@dttusa.com www.dttusa.com

Duro-Last Roofing Jim Schriber 525 Morley Drive Saginaw, MI 48601 800-248-0280 jschribe@duro-last.com www.duro-last.com

FireKing Security Group Rick Uren 101 Security Parkway New Albany, IN 47150 800-457-2424 ricku@fireking.com www.Fireking.com

Glacial Energy

Eric Nickulas 24 Route 6A Sandwich, MA 02563 Local: 508-833-3500 Eric.nickulas@glacialenergy.com www.glacialenergy.com 8

INDEPENDENT JOE • SEPTEMBER 2010

2010

Directory of Sponsors

Goldstein Law Group, PC

Jarrett Services ATM, Inc.

Lisa & Sousa Attorneys at Law

Hi-Tech Sound

Jera Concepts

Macdonald Restaurant Repair Service

Jeff Goldstein PO Box 1707 Leesburg, VA 20177 202-293-3947 jgoldstein@goldlawgroup.com www.goldlawgroup.com Gary Hanna 53 Brigham Street Unit 8 Marlborough, MA 01752 508-624-7479 gary@hitechsound.com www.hitechsound.com

HME Drive-Thru Headsets Lisa Jokinen 4110 Stowe Drive Poway, CA 92064 858-535-6085 ljokinen@hme.com www.hme.com

HS Brands International Michael Mershimer 500 Myles Standish Blvd Taunton, MA 02780 800-723-1150 mike@mershimer.com www.hsbrands.com

IKMS Group Inc.

Cliff Pratt PO Box 6221 Manchester, NH 03108 603-644-4683 ctp@ikmsgroup.com www.ikmsgroup.com

iTech Digital

Natalie Himmel 4287 W. 96th Street Indianapolis, IN 46268 317-704-0440 ext. 104 natalie@itechdigital.com www.itechdigital.com

James P. Ventriglia, CPA, Inc.

Eric Johnston 1315 Stelton Road, Piscataway, NJ 08832 732-572-0706 ej@jarrettforcash.com www.jarrettforcash.com

Wynne Barrett 17 Fruit Street Hopkinton, MA 01748 508-686-8786 wynne@jeraconcepts.com www.jeraconcepts.com

Joyal Capital Management Franchise Development Daniel Connelly 50 Resnik Road Plymouth, MA 02360 508-747-2237 dconnelly@joycapmgt.com www.jcmfranchise.com

Carl Lisa, Sr. 5 Benefit Street Providence, RI 02904 401-274-0600 clisa@lisasousa.com www.lisasousa.com

Mark & Debi Macdonald PO Box 61/ 83 Pond St Norfolk, MA 02056 508-384-9361 debi@macdonaldcompany.com www.macdonaldcompany.com

New England Acquisitions Jim Calash 7 Babcock Street Pawcatuck, CT 06379 860-235-1344 Papijoe2002@sbcglobal.net

New England Repair Service Jerry Brown 100 Charles Street Malden, MA 02148 781-873-1536 jerry.brown@necoffeeco.com www.NERepairService.com

KK Insurance Agency

Kiran Sondhi 541 Broadway Long Branch, NJ 07740 732-870-1500 info@kkinsuranceagency.com www.kkquote.com

Paris Ackerman & Schmierer LLP

Law Office of Carmen D. Caruso, P.C.

Carmen D. Caruso 77 West Wacker Drive, Suite 4800 Chicago, IL 60601 312-377-7761 cdc@cdcaruso.com www.cdcaruso.com

David Paris 101 Eisenhower Parkway Roseland, NJ 07068 973-228-6667 david@paslawfirm.com www.paslawfirm.com “A Member of Franchise Pros”

Sponsors continued on page 17

Zarco Einhorn SalkowSki & Brito, pa

Franchisee Attorneys

Jim Ventriglia 145 Phenix Avenue, 2nd Floor Cranston, RI 02920 401-942-0008 jimv@jpvcpa.com www.jpvcpa.com

100 SE Second Street 27th Floor Miami, FL 33131

www.zarcolaw.com CONTACT:

Robert Zarco, Esq. • Robert Salkowski, Esq.

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DDIFO does not endorse or recommend any commercial products, processes, or services. A sponsor on DDIFO’s Web site is paying to advertise, it is not to be considered a product or service endorsement by DDIFO. DDIFO does not endorse organizations and does not endorse products or services that such organizations may offer. Furthermore, DDIFO does not control or guarantee the currency, accuracy, relevance, or completeness of information provided by sponsors in their advertising.

SEPTEMBER 2010 • INDEPENDENT JOE

9

New Yorkers Run on Dunkin’ Times Square Billboard Marks Expansion by Brooke McDonough This summer, Dunkin’ Donuts unveiled a 50 x 48 foot billboard in the middle of Times Square, claiming a place of prominence in New York’s competitive landscape.

“Most of our customers are regulars,” says Colaitis. “They come back because we gave them a good experi-

the only thing that brings them back is the experience they had that day. If you don’t deliver, they won’t come back,”

It seems Dunkin’ - that every day, all day favorite stop from New England - has taken quite a bite out of the Big Apple.

As the coffee wars in New York continue to brew, Dunkin’ has been increasing its market share in the past decade.

Sources say that what was once approximately a $700 – $800 million business 10 years ago is now estimated to be at about $1.2 billion, bigger even than the popular New England territory.

The billboard went up with much fanfare, keeping New Yorkers guessing with teaser ads. The sign, designed

by New York renowned street artist Robb Buono and his team, is a marked contrast to the flashiness of other Times Square signs, reminding the city that never sleeps in a simple but stylish way that America runs on Dunkin’.

Reportedly, the billboard could attract 1.5 million impressions a day. “The sign has the potential to be iconic,” said Kevin McCarthy, DDIFO Board Chairman. “Think of what the CITGO sign means to Boston and Fenway Park.”

But, as any Boston Red Sox fan knows, winning anything in New York doesn’t happen easily.

New York is a tough market with clutter, competition, high rents, and expensive utilities according to franchise owner Dan Colaitis, who has opened 11 stores in the past seven years throughout Brooklyn. “You’re competing with the bigger brands like McDonalds, but there’s also a mom and pop bagel shop on every block in New York.”

So how does a company that started as a small donut shop in Quincy, Massachusetts, become a giant in New York?

Franchise owners in the area said it was done the old fashioned way: one customer at a time.

10

INDEPENDENT JOE • SEPTEMBER 2010

ence. We keep the stores clean, and we haven’t raised prices.

We’re trying to give them what they want and stay in touch with the economy. Knowing the customers is key.”

Tony Pellizzi and his son Anthony Jr. have developed 12 stores in Long Island in seven years. Anthony Jr. plans to open six more new units and acquire three more existing locations.

New Yorkers, the senior Pellizzi said, have plenty of options for their coffee and baked goods.

“The billboard and brand marketing might bring customers to the door, but

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New Yorkers from previous page said Pellizzi, who worked for Dunkin’ Brands before becoming a franchise owner.

The fierce competition in the New York market has an upside according to Scott Campbell whose company Metro Franchising has played a large role in the New York expansion with 40 stores in Queens, Brooklyn, and Long Island.

Competition, he said, makes you stronger.

“You need to have the competition to strive for your best. It pushes you to focus on your guest and on each occasion. Doing that, you’re drawn more into your community.”

Community relations is part of the recipe for success in New York and the growth comes from the franchise owners, often families, who work hard, develop a customer base by running a high quality-shop, and reinvest back into the business.

“It’s the franchisees who are the heroes of this story,” said McCarthy.

Colaitis has deep roots in Brooklyn.

He’s lived there all of his life, has owned several businesses, and before him his father was there for 55 years.

As a Dunkin’ Donuts franchise owner, he has sponsored Little League teams, donated to local hospital charity events, and has been involved in various school fund raisers. Folks in Brooklyn know his name and his reputation, and they trust him.

“The business has to have personality.

In a community where they know the owner and see the owner as someone that supports their needs, consumer loyalty comes easy,” says Pellizzi.

Campbell also attends neighborhood and charity events to chat with his customers. “Anytime you have a chance to bring your product out to the community you should,” he said. “People are passionate about their coffee habits, and they have strong opinions. I am happy to hear about that.”

Those conversations, Little League games, and charity functions in the New Yorkers continued on page 12

SEPTEMBER 2010 • INDEPENDENT JOE

11

Indy Joe...A Proud Franchise Owner.

2010

1950

A lot can happen in 60 years.

New Yorkers continued from page 11 boroughs are the right strategy for taking Manhattan. “The trick is to create a habit in the suburbs, and then it spreads in Manhattan as people take it to work,” Campbell explained.

throughout the Mid-Atlantic region has been a long-term goal for Dunkin’ Donuts and success in New York, a part of that plan. Dunkin’ has had a presence in those states since the 1960s but didn’t lead the coffee scene as it does in New England.

According to McCarthy, growing the brand from the New England territory

There’s room for that growth in the overall market according to Peter

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Brio, professor at Babson College in Waltham Massachusetts, and owner of multiple franchise concepts including Naked Pizza, and Five Guys Burgers.

“The coffee market is fragmented; no one has more than 4%. There is still a big opportunity in that space.”

New Yorkers continued on page 16

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SINCE 1989

CFA Day continued from page 6 In a statement to DDIFO, Senator Brown reiterated the importance of meeting with franchise owners. “Small businesses continue to be the drivers of our economy and hold the keys to our economic recovery. As a member of the Senate, I am committed to pushing policies that will create a more favorable environment for small businesses, allowing them to spur economic growth and create jobs.”

franchise owners from other systems. His pitch is that, regardless of what system you operate in, the issues are largely the same.

Brown also has a unique relationship with Dunkin’ Donuts, having worked at a shop in Wayland, Mass. when he was a teenager.

“No doubt, Senator Brown is the hot guy,” said Glodowski. “He has star power and we wanted to hear him speak on issues.

Plus, he is an advocate for small business owners and that is what the CFA is all about.”

Glodowski says one of the challenges with an event like the CFA Day Forum is convincing busy franchise owners, many of whom already have commitments to their individual franchise associations, to take time away from their businesses and families to spend a couple of days with

Dunkin’ Donuts franchise owner Rob Branca with U.S. Senator Scott Brown (R-MA) at the CFA Day Forum.

“We are talking about issues that face small business owners: government regulation, new mandates and changes to employment law. Those issues are all the same whether you own one store or 100 stores. We reach out to the various franchise associations and talk to their boards so we can share their best practices and

learn about the issues facing those various franchise owners and their brands.”

Glodowski cited an example from his home state of Minnesota where a Taco Bell franchise owner learned about a proposal before his city council to institute new menu labeling laws. He said the owner reached out to the CFA and they gathered franchise owners from six different systems to attend a city council meeting and explain the impact that such a statute would have on their businesses. Their aim was also to convince the council to hold off on passing a new menu labeling law until after the federal government completed its work on legislation addressing how calorie content and other nutrition information is listed on menu items across the country.

Glodowski and Chally are already planning the 2011 CFA Day Forum. The key, they say, is getting more franchise owners involved. “Everybody is reaching out to colleagues in other systems to tell them to be a part of this,” said Glodowski. “The bigger we are, the better and more powerful we can be.”

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Profits continued from page 7 On the wings of the NCA study, I did some research of my own and found a Harvard study that revealed some facts around consumer buying patterns in general (Harvard Business Review, April 2009). Based on this and other research, I created a matrix that could be useful in reaching out to Dunkin’ customers as it offers some legitimate reasons why coffee sales are up and donuts and ice cream sales have been impacted by the recession.

In the matrix, consumers are divided into four major segments based on actual behavior change during an economic downturn: 1. Rapid Stop: These are low income consumers, the most vulnerable and the hardest hit during an economic downturn.

2. Hurt-but-Tolerating: This is the largest segment of consumers and includes a great majority of households typically unscathed by unemployment, resilient, optimistic about the long term, but less confident about the near term.

3. Very-Well-Off: Secure about their ability to ride out the economic storm.

4. Live-for-Today: This segment of consumers carry on as usual. They may extend their timetable for major purchases, but will unlikely change their overall consumption behavior.

Donuts customers. Based on the matrix, we can determine the following: Rapid Stop consumers will likely seek lower cost coffee products and brand substitutes.

Next, consumables are divided into the following four product categories:

Hurt-but-Tolerating consumers will seek out their favorite products at lower price points, but settle for cheaper, less-preferred alternatives and or will stock up on good deals.

Profits continued on next page

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a. Essentials - necessary for survival or perceived as central to well-being.

Booth D5

b. Treats - indulgences whose immediate purchase is considered justifiable. c. Postponables - needed or desired items whose purchase can be reasonably put off.

Servicing coffee, espresso & specialty beverage equipment

d. Expendables - perceived as unnecessary.

Dedicated to providing the best service possible.

The product categories are rated high to low; and the consumer behavior change is rated low to high by segment. Thus, the matrix becomes a tool that you can use to determine the potential risk of a sales downturn on any given product.

Let’s assume that a cup of coffee is considered an essential product to Dunkin’ 14

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Profits from previous page Very-Well-Off consumers will continue to buy their favorite products at pre-recession levels.

Live-for-Today consumers will continue to buy their favorite products at pre-recession levels.

Therefore, depending on how your individual store’s customer base breaks down as a percentage within the consumer segments in the matrix, you can project a low risk of a sales downturn in coffee and also tailor your marketing tactics to blunt a negative impact on other products.

Now, let’s put donuts and ice cream through the matrix. Assuming most consumers will consider donuts and ice cream as a treat, the following would apply: Rapid Stop consumers will reduce or eliminate treats.

Hurt-but-Tolerating consumers will cut back on frequency.

Very-Well-Off consumers will be more selective.

Live-for Today consumers will continue to buy their favorites at pre-recession levels.

Depending on the consumer break down in your trading areas, donuts and ice cream are at a higher risk of a sales downturn, which would require the brand and franchisees to be more diligent in their marketing and preventative strategies.

A second matrix, Tailoring Your Tactics, suggests how to adjust marketing strate-

gies during an economic downturn. Again, using coffee as the example, let’s assume that our customer base is equally split into the four customer segments. Let’s also assume that most of those customers consider coffee as essential. Our marketing strategy would include the following elements sorted by consumer segments: Rapid Stop • Emphasize price and hit wallet-friendly price points

• Offer smaller pack sizes for less money • Promote low-cost value products Hurt-but-Tolerating • Offer a lower-priced option • Hit retail price points • Promote bonus packs to encourage stockpiling • Emphasize dependability of branded product and service (this is especially true with McDonalds, Wendy’s and Subway’s recent coffee advertising) Very Well-Off • Continue awareness advertising Live-for-Today • Continue awareness advertising • Emphasize “You can’t live without it” As Dunkin’ Donut franchisees, we are fortunate to have coffee products that consumers believe are essential to their lifestyle. We should make the most of this opportunity and encourage marketing strategies in our stores that will grow our revenues masterfully during times of economic recession.

Perry Ludy is a senior executive, business consultant, and author of business books. He is president of Carolina Restaurant Partners LLC d.b.a. Dunkin’ Donuts. Contact Perry at perryludy@earthlink.net.

SEPTEMBER 2010 • INDEPENDENT JOE

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New Yorkers continued from page 12 And, it’s not all about the coffee. New Yorkers like their treats as well. In fact, Pellizzi credits some of the success in New York to the combination Dunkin’ and Baskin-Robbins stores. New York was the first market to introduce that concept and it created an opportunity for more development.

lems with many of the stores and the relationship didn’t work out.

“The franchise system with hands-onoperators has always been the more successful formula,” said McCarthy.

The high-profile billboard in Manhattan is good news to McCarthy who admitted that the growth in the New York region didn’t just happen overnight. But, he said, the slow and steady pace is the right way to do it.

Campbell, who previously worked for the brand, knows the importance of that relationship, and as a franchise owner he’s taken on several elected leadership positions on advisory councils. “That ensured us as we grew we knew what was going on, so we could make appropriate investments.”

The company learned this lesson the hard way. In the 1990s large corporations, such as the Riese Organization, which had tremendous real estate assets, opened stores throughout Manhattan. Despite the significant investment, the company didn’t act as focused operators. There were prob-

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Franchise owners in New York take pride and ownership in their business and they know that it’s important to adhere to high-quality standards. “How another franchise owner runs his business can have an BAKERY effect on the customer’s view of my DISTRIBUTION store,” said Pellizzi.

Utilize Log In notes to alert Operational stancustomers to new items and dards were reimportant information. viewed and revised Production floor reports  Inventory by the brand Stock pull reports  Single level BOM several years ago Invoicing  Throwaway reporting and that has played and adjusting Customer a role in building  Order quantity communications franchisee netenforcement Shortage reporting works. “Operational New item auto add to PO’s  View order changes standard translate prior to production Sales analysis to more profits,”  Historical analysis Route delivery said Pellizzi. “If the instructions stores are run well, Visit us it draws custom9/21/10 at ers.”

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It’s a simple formula, said Brio, “and Dunkin’ Donuts does it well.”

According to Brio, the keys to growing

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INDEPENDENT JOE • SEPTEMBER 2010

The relationship with the franchisor is also important Brio said. Franchisors have to create a system where the franchise owners can make money.

And the profits will drive the growth.

“I don’t know too many Dunkin’ Donuts franchise owners who are skipping dinner. That’s a pretty good indicator for success in the long term,” said Brio.

“It’s a hands-on retail business. You have to be patient to grow. You have to know your market, and you have to run the business well. Then, there is potential to expand and make your fortune.”

CML

a franchise are to have a good concept, good locations, good marketing, and good people, “Dunkin’ Donuts,” he added, “picks smart franchise owners who work hard.”

Brio also said the timing of the “everyman” marketing strategy works well in the New York market, especially now. People are looking for value and Dunkin’ Donuts answers that nicely.

“The Hummer is out. The average Joe is in,” said Campbell who added that the America Runs on Dunkin’ campaign was the timeliest message in advertising.

New York Magazine writer Stephen Rodrick put it plainly in a 2005 article in response to the Starbuck’s luxury image culture in New York, “Maybe New Yorkers are yearning for a simpler time when they got their coffee, got the hell out of there, and got on with their lives.”

The straightforward message from Dunkin’ Donuts is here to stay according to Campbell. “The reset of the economic landscape has changed things, and it will probably be this way for the next 9 to 10 years.”

Another thing that the New York franchise owners got right it is choosing successful locations, which according to Brio, is the first step toward success.

When Colaitis first approached Dunkin’ Donuts with an idea for a location in Brooklyn, he was turned down.

New Yorkers continued on page 19

2010

continued from page 9

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index

New Yorkers continued from page 16 But, Colaitis was a neighborhood guy.

He owned a gas station nearby and he was familiar with the people and their traffic patterns. Eventually he convinced Dunkin’ Brands to let him try.

“I knew it would work and it did,” said Colaitis. It’s now one of the most successful stores in his network.

Understanding how New Yorkers work and play is certainly a factor. Colaitis has another store on Coney Island across from where the famous Nathan’s Hot Dog Contest is held each year. Although it’s a seasonal business, some weeks in the summer they see about 10,000 customers a week.

This July 4th they had 3,000 customers in one day.

Brio admitted that the New York market is a great place for Dunkin’ Donuts to be since there are so many more customers in that region. Even better, he said that the success in New York bodes well for the future, inspiring existing and potential franchise owners to invest and to continue to expand.

Its no secret that there’s a bit of rivalry between Boston and New York, so is there pride involved when a Boston area company has success in the Empire State? According to Boston born and bred McCarthy, there is, but it doesn’t stop there.

“I’m not only proud as a Bostonian,” said McCarthy, who at one time lived close to the location where William Rosenberg opened the first shop in 1950. “I’m also proud as an American entrepreneur. It’s an amazing success story all around and it continues to be.

What started as one donut and coffee shop is now a major corporation.”

That tradition of success continues as franchise owners “go the distance” and grow and expand, said McCarthy “And it is all done based on hard work, determination, and good business sense.”

Add to that a good dose of New York chutzpah, and the possibilities are endless.

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Join Mission Statement Dunkin’ Donuts Independent Franchise Owners, Inc. shall act in the best long-term interests of its membership, communicating, educating, and cultivating internal and external relationships. Dunkin’ Donuts Independent Franchise Owners, Inc. exists solely for the benefit of its members.

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