Dunkin’ Donuts Franchisees gets paid for Franchisor’s Failings

Perhaps one of the most recent and relevant cases to any coffee shop franchisee or franchisor is where the Dunkin’ Donuts franchisees of Quebec took on their franchisor claiming that they did nothing to block the round-house kick of Tim Horton’s.  As a personal aside, I think a kudos should be given to ol’ Timmy’s for being able to create this phenomenon and all you Timmy Ho franchisees should send a “Thanks, Mum!” card to your franchisor for doing something useful with your money!

But back to our Dunkin’ Donuts franchisees who apparently got smitten by the double-double upper cut to the solar plexus.

Here is the Canada.com article which nicely summarizes the situation.  Take also a minute or two to read this Globe and Mail article called “Should Franchisors be Obligated to Protect Strength of Brand?”

The key points are these:

  • The Franchisor promised spend  40 million buckeroonies and didn’t
  • The Franchisor forced expensive renovations on the franchisees with expectations of 15% sales increase (which didn’t happen)
  • The advertising campaign that was promised to work, didn’t

In the latter article, unless I missed it, I didn’t actually catch the author’s conclusion to the question in the title so let me answer it for him more clearly:




And there you have it.  No grey zones here.

Bloody right they should be obligated.  Why else under the sun would anyone hand over up to 8% of their bottom line?  This isn’t a charitable organization, folks. Thankfully in the case of the Dunkin’ Dudes they obtained tangible promises with failed results – they could successfully quantify their failings.  Regrettably, most coffee shop franchises roll the safe road and simply don’t make promises at all and operate with a very closed-book style of operations.

In the case of one currently popular specialty coffee franchise in Vancouver, it was told me by a franchisee (who wishes to remain unnamed) that they have never, in over four years of paying into the advertising pool (2% of their entire bottom line paid monthly) received a detailed report of where that money went or where it is going. When I asked this person what value they got for their money, they simply replied “I could use their name and they send out these posters once in a while.”  I then started thinking about marketing in the traditional sense of the word. This particular chain was absolutely not present on radio, TV, or other standard forms of media – yet their main competitor was.  I immediately thought about the Dunkin’ Dudes and recommended to this chap that he immediately sign up as a VCSFA member, read the articles and contact an expert for advice.

Not having a Marketing Pool Report is lamentable for so many reasons, but here are just a few that come to mind:

  • No report means that the franchisor could be using the marketing pool for whatever they deem as ‘marketing’ – zero accountability to the stakeholders (franchisees) – “Let’s meet at Gotham’s Steakhouse so I can explain the great drinks we have at our coffee chain, Bill.”
  • No written plans for the future spending of the pool means that the franchisor cannot be held liable for their failed results because, well, they didn’t promise anything that can be quantified. “Hey. We didn’t say your sales would grow when we spent your money on Girl Guide cookies!”

So, if you are a coffee shop franchisee and plan to learn from the Dunkin’ School of Hard Knocks (DSHK) it’s paramount that you commence at least the following action items:

  1. Get those marketing pool books open ASAP (form an FAC first)
  2. Make sure your franchisor puts into writing their plans for that hard-earned marketing $moola$
  3. When an expensive renovation is commanded, ask for justification in writing and make sure the books are open.
  4. Join the VCSFA to make sure you and your crew have access to the help you need in your particular franchise.


2012/08/02Permalink 2 Comments

2 thoughts on “Dunkin’ Donuts Franchisees gets paid for Franchisor’s Failings

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