Page 68 - Entrepreneur - USA (January - February 2020)

THE FRANCHISE
Rosenberg claimed that
alongside Dunkin’ Donuts,
forming the IFA was his
proudest achievement. “In
1960, when franchising was in
its infancy, most people looked
upon it as an outcast or a mis-
fit, but I believed it was the
epitome of entrepreneurship
and free enterprise,” he wrote.
“When you share with others,
everyone benefits. That’s the
whole concept behind fran-
chising. If the franchisees do
well, I do well; we all do well.”
Perhaps for this reason,
Dunkin’ moved to embrace
franchising in a way that even
its famous franchise rivals
hadn’t. For most of its history,
Dunkin' has been 100 percent
franchised— meaning it's owned
zero corporate-owned stores.
That was way ahead of its time.
66 / ENTREPRENEUR.COM / January-February 2020
Other franchise giants ran a
mix of franchised and corporate
locations, though in the past few
years, many of them are actively
trying to sell their corporate
locations to franchisees, in part
as a way to take those financial
burdens off the parent compa-
ny’s bottom line. Pizza Hut, for
instance, had 649 corporate U.S.
locations in 2009; now it has
only 23. Many other competi-
tors, like McDonald’s, hover at
around 93 to 95 percent fran-
chise ownership.
Grant Benson, Dunkin’
Brands’ senior VP of franchis-
ing and business development
and 34-year company veteran,
believes this is what set up the
brand for its initial success.
It has 1,100 franchisees—and
“if you think about it,” he says,
“that’s really 1,100 volunteers
that are choosing every day
to invest and reinvest in your
brand based on their faith and
confidence in the concept.”
That puts a big onus on
the corporate company.
“Franchisees are only made
profitable when the brand is
relevant, innovative, and meet-
ing the needs and expectations
of the guests,” he says. So as
times changed, Dunkin’ had to
change as well.
DUNKIN’ HAS LONG been selective
about its franchise partners,
but the cost of entry can actu-
ally be less than that of other
well-known brands. While low-
end price tags for Krispy Kreme
and McDonald’s are $440,500
and $1.26 million, respectively,
motivated entrepreneurs can
buy into Dunkin’ starting at just
less than $100,000 for a kiosk-
type operation.
That value play was one of
many things that got David
Baumgartner’s attention. He’d
spent his career in print distri-
bution, but when the economy
crashed in 2008, he knew it
was time to find a new line of
employment. He didn’t know
much about franchising—or,
for that matter, about Dunkin’
Donuts (as it was still known
then). But he was aware of the
brand’s loyal following, and
after doing his homework, he
was impressed by the compa-
ny’s growth goals, especially
given the sputtering economy.
(A 2009 Entrepreneur article
called Dunkin’ a “recession-
resistant franchise.”)
Baumgartner opened his
first Dunkin’ in Chattanooga,
and business was brisk. But
“everybody thought we were
a doughnut store,” he says, so
coffee took a while to catch
on—especially cold coffee,
which was virtually nonexis-
tent in the South.
But that wasn’t unheard of.
Dunkin’ was big back then,
but it still wasn’t as nationally
known as today. The brand
was coming out of a few rocky
decades. It had a successful
IPO in 1968 but began suffer-
ing in the 1970s as founder
Bill Rosenberg began a long
fight with cancer and diabe-
tes. (Rosenberg’s doughnut
habit eventually landed him in
a weight-loss program.) Stock
plummeted. Franchisees sued
over an equipment- purchasing
dispute. Rosenberg retired in
1989, and the company sold
to British food conglomerate
Allied Domecq that same year.
(Allied also owned Baskin-
Robbins, which is how all
those Dunkin’-Baskin combo
locations came about.)
But there was also an