Independent Joe Magazine Issue #5 June 2010

DD FRANCHISE OWNERS KINI DO IT TOGETHER!

June 2010 • Issue 5

DD Shops Improve Inner City Neighborhoods

by Stewart Lytle

...where the coffee pot’s on 24/7!

Matt Ellis:

also in this issue

RECIPES FOR SUCCESS

Perry Ludy:

LEGENDARY CUSTOMER SERVICE

HANDING DOWN THE FAMILY BUSINESS

by Brooke McDonough

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.

This is An Extrordinary Time For Franchise Owners!

by Jim Coen

05

Once again, as President of the DD Independent Franchise Owners (DDIFO), I am pleased to present to you the fifth issue of “Independent Joe” magazine.

One of the foremost missions of DDIFO is to provide Dunkin’ Donuts franchise owners, with valuable information to improve the day to day life of franchise owners. We act as a trade association and watchdog group for our members paying special attention to the brand, government affairs and legislation.

DDIFO also supports charitable causes with an annual contribution of 5% of our sponsor revenue.

In conjunction with our Board of Directors, the DDIFO is working hard to provide valuable support and representation to our members. We trust you will find “Independent Joe” to be informative and entertaining. We hope you will review the ads in this edition and consider supporting the sponsors that offer opportunities to Dunkin’ Donuts franchise owners.

This is an extraordinary time to be a Dunkin’ Donuts franchise owner. The relationship between franchisees and the franchisor has changed more in the last 9 months than in the previous 10 years.

One reason for that is DDIFO’s stepped up efforts to communicate franchisee concerns, helping to move Dunkin’ Brands to a more conciliatory position.

Attorney Robert Salkowski of Miamibased Zarco, Einhorn, Salkowski, & Brito P.A. was recently quoted on the restaurant industry website, BlueMauMau, as saying, “Just look at the Dunkin Donuts Independent Franchise Owners and Steve Horn.” Salkowski was refer-

This is An Extraordinary Time...

Jim Coen, President

President, DDIFO, Inc.

Four times a year “Independent Joe” (IJ) magazine celebrates Dunkin’ Donuts franchise ownership. IJ is full of articles and information regarding the proud ownership of one of the world’s great iconic brands.

03 07

The Business Case for Joining DDIFO Kevin McCarthy, Chairman

Legendary Customer Service, One Cup at A Time Perry Ludy

“DDIFO is a powerful force that is stronger with you than it is without you!” ring to the resignation of Dunkin’ Brands Chief Legal Officer and board member Steve Horn, after DDIFO alleged that the hundreds of lawsuits that he and his department spearheaded made Dunkin’ Brands the most litigious system in franchising. “I am convinced that DDIFO and its members, with the help of this [law] firm, was responsible in large part for him leaving, as a result of all of the negative publicity,” said Salkowski.

Dunkin’ Donuts franchise owners are fortunate to have not only a Brand Advisory Council that has direct communications with the Brand, but also the DDIFO, an independent association that is able to harness resources to protect and enhance the independent business interests of all franchise owners. As a testament to the importance of both organizations, a majority of the Brand Advisory Council are now also DDIFO members.

We are confident that the future will bring even more change. One of the more likely scenarios is yet another change in ownership – perhaps public or perhaps private. This will certainly impact all franchise owners. The uncertainty of our situation is reminiscent of 1989 when Dunkin’ Donuts brand leadership recommended that franchise owners create DDIFO in the first place.

08 10 12

DDIFO Directory of Sponsors Handing Down the Family Business Brooke McDonough

DD Shops Improve Inner City Neighborhoods Stewart Lytle

14 20 23

Recipes for Success Matt Ellis

CFA Day Forum Index of Advertisers

Today, DDIFO is a vitally different and new organization, run by a professional board of directors, a competent management team, and guided by a roundtable of highly engaged franchise owners. DDIFO’s management team provides the system value for its franchise owners through our ongoing efforts in research; communications; member meetings, public and government relations.

No matter what changes are on the horizon, there is tremendous strength in our collective and independent voice. The unity Jim continued on page 16 JUNE 2010 • INDEPENDENT JOE

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Don’t Replace It . . .

When We Can

BEFORE

CeilSpray It! AFTER

Last Year We Did More Than 25 Dunkin’ Donuts Ceilings!

Benefits of Acoustical Ceiling Refinishing

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INDEPENDENT JOE • JUNE 2010

Averaging Over 1 Million S/F of Ceilings Refinished per Year.

18 Lamy Drive Goffstown, NH 03045

800-258-3096

Brian@CeilSpray.com

www.CeilSpray.com

The Buisness Case for Joining DDIFO

by Kevin McCarthy

DDIFO Chairman

Putting emotions, current hot topics and sentiments aside what is the “bottom line” business case for you as a Dunkin’ Brands franchise owner to join DDIFO? I don’t mean the specific reasons or issues that are presently topical this year or in any given year. I am talking about the enduring long-term business rationale that makes joining a franchisee association such as DDIFO the right business decision for you over the long run, through the good times and bad times.

It’s helpful to look at the rationale for even joining a franchisee association as we reflect on the rationale for joining DDIFO. In making your business decision it’s imperative to survey your business environment and then decide if, in the context of that business environment, joining a franchisee association is justified. I believe strongly that it is justified for two major reasons: your need for “Exclusive Franchisee Protection” and your need for “Stability Amidst Ongoing Ownership Changes”.

1. EXCLUSIVE FRANCHISEE PROTECTION: It’s the stark reality of today’s business environment that there is no organized, fully independent, strong body or organization truly dedicated to your specific interests as a franchisee. Some look to state and federal regulators such as the Federal Trade Commission (FTC) or state commerce departments that supposedly enforce state franchisee statutes, but in reality these governmental regulators and watchdogs too often prove inadequate to the task of monitoring the franchise industry. Unfortunately they are not alone.

The present financial crisis, the BP oil spill mess and the Katrina fiasco all highlight the fact that franchisees should not place blind faith in governmental regulators to aggressively and effectively look after their interests. The courts are another possibility for franchisee protection but legal action is a long, arduous and expensive process with uncertain results. Lobbyists, legislators and the press can sometimes offer protection and support but they, too, are subject to many other forces and interests which can divert them from ardently focusing on your interests as a franchisee. But an independent franchisee association which, like DDIFO, is controlled exclusively by franchisees does act as your exclusive and dedicated watchdog over the actions of the franchisor or any other

entity that functions in the business environment of Dunkin’ Brands.

The independence of DDIFO means, for example, that it can call out management when litigation gets out of hand or when untested products or inadequately evaluated equipment are being pressed onto franchisees. No person or entity can prevent or unduly sway an independent franchisee association such as DDIFO from voicing and advocating your specific interests as a franchisee.

No contracts or other obligations exist that intimidate or prevent DDIFIO from protecting Dunkin’ franchisees by frankly representing your best and exclusive interests.

There is no stronger rationale for the existence of DDIFO than its exclusive focus on the welfare of its franchisee members. Forceful, exclusively

focused, well financed and independent strength is available to you as a Dunkin’ franchise owner through DDIFO. Again, unbridled by legal or financial concerns and obligations to others such as banks, transient equity owners or contractual procedures and obligations.

2. STABILTY AMIDST ONGOING OWNERSHIP CHANGES: No external formal business relationship is more significant to a franchisee than the relationship with her franchise owner.

The franchise owner controls the brand Joining 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, Stewart Lytle, Kevin McCarthy, 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. JUNE 2010 • INDEPENDENT JOE

5

Joining continued from page 5 name, its use, its marketing and inevitably its growth and profitability. This close and highly dependent relationship means Dunkin’ franchisees depend on the franchise owner to understand the business, to have compassion for the franchisee experience and to develop and execute programs and policies that lead to ever growing sales and profits.

Unfortunately, commencing in 1989 when the Dunkin’ chain was attacked by a corporate raider, there has been a succession of different owners—the latest of which, it appears, is seeking to sell the chain to the public through an IPO – probably sooner rather than later. Ongoing and fluctuating ownership changes are now a permanent reality in your business environment.

Accordingly, stability, effectiveness and continuity of franchisor management and corporate culture are serious issues for the Dunkin’ franchisee. However, even with more than several major ownership and management changes since 1989, DDIFO has persistently survived and

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INDEPENDENT JOE • JUNE 2010

now clearly prospers. DDIFO has been a continuous voice for the exclusive interests of Dunkin’ franchisees in an ever changing ownership/management environment. This has not always been easy or pleasant but the DDIFO voice or even the possibility of your DDIFO voice has had a stabilizing and restraining influence in your fluctuating business environment.

Additionally, effective and exclusive DDIFO instruments of communication such as the new website, regional conventions, Independent Joe magazine, the DDIFO Insider, growing connections with other national franchisee associations, proud promotion and publication of specific franchisee accomplishments all testify, and only in part, to the many benefits of a franchisee association in general and in your DDIFO in particular.

Reflecting on such business rationale and viewing such accomplishments as noted above is, I am sure, a considerable part of the reason that over 400 Chicago area shops who were members

of the Mid-West Dunkin’ Donuts Franchisee Association (MWDDFA) recently made the decision to join DDIFO. The MWDDFA now serves as a DDIFO Local Members Committee (LMC) for the Chicagoland area.

If you have not already done so, I hope and ask that you make the same decision to join DDIFO and form your own Local Members Committee, more importantly actively participate in DDIFO as we continue to grow and become much like your highly acclaimed BAC and DCP organizations are already - the very best the franchise industry has to offer.

Kevin McCarthy, Chairman DDIFO, Inc. Kevin is the Chairman of the DDIFO Board of Directors and a past Vice-President of Dunkin’ Brands. Kevin is also a franchise lawyer with Dunkin’ Brand clients throughout New England and the Mid-Atlantic.

Legendary Customer Service, One Cup at A Time By the author of Profit Building: Cutting Costs without Cutting People

What has happened to legendary customer service? I’m talking about the kind of service that used to set companies apart and gave them a competitive edge. Where have all those companies gone? How often do you hear about a business being praised for exceeding customers’ expectations? Why do we seldom hear stories about employees becoming legends by going above and beyond the call of duty to satisfy a customer? As I ask these questions, I can’t help but remember the times when I was a youngster and my mother would ask the “what-ever-happened-to” questions. I could tell in her voice that she had a longing for something that was lost or missing, something that was no doubt better ‘then’ or better ‘when’. It turns out that my mother was right when she said, “When you get older, you will see things more clearly,” because now that I am older, I can clearly see that the whole concept of customer service has changed.

There was a time when customer satisfaction was a strategic initiative, a tactic that nearly every organization strived to implement in order to gain a competitive advantage. In the not-so-distant past, we came to expect “fabled service” from companies like Nordstrom, for example.

And remember how McDonald’s earned its reputation for flawlessly serving customers across the United States and then around the world, while at the same time offering minimum wage teenagers an opportunity to grow with the business, making it well worth “service with a smile”.

Today as I reminisce about customer service, there is a coffee war brewing.

McDonalds has spent millions of dollars revamping its restaurants with coffee equipment and millions more in marketing to roll out their coffee concept. Starbucks was forced to step into the fray with new products to maintain its coffee share points. Burger King and Subway

have followed suit by introducing new breakfast concepts that include Seattle’s Best coffee, which is a Starbucks brand.

When the “coffee smoke” clears, interestingly, Burger King and Subway will realize that they are in fact competing against Starbucks for add-on sales while all along having purchased from Starbucks the “ammunition” for the fight.

Wendy’s, Taco Bell, and other QSR burger companies will soon have no choice but to step in and play the followthe-leader game, and coffee quickly will become one of the most advertised products across the country.

At Dunkin’ Donuts we make each cup of coffee special, the way the customer wants it, every time.

In the midst of all this, Dunkin’ Donuts has a unique opportunity. Coffee as a brand will rise rapidly and QSR heavyweights will hit with advertising punches that could sink battleships. Dunkin’ must carefully strategize and ride this advertising tsunami all the way to a place where core products grow and profits increase. After all, Dunkin’ has spent over sixty years developing coffee. This sets the Brand apart, and sets the stage for franchisees to turn a cup of coffee into the very definition of legendary customer service.

Already happening in many markets, Dunkin’ Donuts employees see a customer coming and before the customer gets to the counter, their cup of coffee is made just the way they like it. Burger King can’t do that. McDonald’s can’t

do that. McDonald’s coffee remodels look and feel like an afterthought. Why? Because their restaurants were built for cooking and serving hamburgers and French fries! Dunkin’ Donuts has a distinct advantage here: the aromas of freshly brewed coffee and made-toorder oven toasted sandwiches greet customers at the door, not just in the morning but all throughout the day.

Dunkin’s drive-thru employees can see or hear a certain car coming or recognize a customer’s voice or a particular dog barking inside the car and know that means an extra-large coffee, light cream and a Munchkin for Missy. Wendy’s and Subway can’t do that.

At Dunkin’ Donuts we make each cup of coffee special, the way the customer wants it, every time. No other QSR organization is able to do that.

Dunkin’ Donuts has the coffee concept figured out and franchisees must realize that the QSR coffee wars only mean more customers coming to Dunkin’. But Dunkin’ Brands and Dunkin’ franchisees must be ready. Franchisees must be flawless in executing coffee procedures and the Six Steps of Service; and corporate marketing must come up with consistent, creative messages that will cut through the clutter, even though the Brand may be substantially outspent in advertising dollars.

There are many tactics that franchisees and corporate can align their efforts to implement effective promotions. One Service continued on page 18 JUNE 2010 • INDEPENDENT JOE

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Directory of Sponsors

2010

Absolut Contracting William Lako 4346 Route 27 Princeton, NJ 08540 609-655-0800 blako@absolutlycan.com

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

Aflac

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

Air Ad Promotions, Inc. Crystal Shiller P.O. Box 202066 Arlington, TX 76006 682-518-7692 crystalsikora@sbcglobal.net www.airadpromotions.com

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

Roger Faw 814 44th Street NW Suite 103 Auburn, WA 98001 206-322-5474 roger_faw@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

Construction Art

Art Krebs 790 Keller Road Afton, TN 37616 888-930-2255 constructionart@constructionart.us www.constructionart.us

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

Servicing coffee, espresso & specialty beverage equipment

Dedicated to providing the best service possible.

Our highly trained & qualified technicians are authorized to repair all major coffee and brewing equipment manufacturers/suppliers.

Offering service throughout New England.

24 hours a day / 7 days a week.

100 Charles Street • Malden, MA 02148 P 781.873.1536 | F 781.324.5675

www.NERepairService.com IS A DIVISION OF 8

INDEPENDENT JOE • JUNE 2010

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

Goldstein Law Group, PC Jeff Goldstein PO Box 1707 Leesburg, VA 20177 202-293-3947 jgoldstein@goldlawgroup.com www.goldlawgroup.com

2010

Granite Telecommunications Charlie Pagliazzo 100 Newport Ave Ext. Quincy, MA 02171 617-933-7317 cpagliazzo@granitenet.com www.granitenet.com

Hi-Tech Sound

Gary Hanna 53 Brigham Street Unit 8 Marlborough, MA 01752 508-624-7479 gary@hitechsound.com www.hitechsound.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. Jim Ventriglia 145 Phenix Avenue, 2nd Floor Cranston, RI 02920 401-942-0008 jimv@jpvcpa.com www.jpvcpa.com

Jarrett Services ATM, Inc.

Directory of Sponsors JenCas Financial, Inc.

Eric Dyson 4 Country Club Circle - Suite 202 Maumelle, AR 72113 877-953-6227 ext. 114 eric@jencas.com www.jencas.com

Jera Concepts

Macdonald Restaurant Repair Service

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

New England Repair Service

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 508-747-2238 dconnelly@joycapmgt.com www.jcmfranchise.com

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

Paris-Kirwan Insurance John Mulcahy 1040 University Avenue Rochester, NY 14607 585-473-8000 johnm@paris-kirwan.com www.paris-kirwan.com

Paros Technologies

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

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

Chitra Mandi 2 Eastwick Drive-Suite 200B Gibbsboro, NJ 08026 856-627-2097 cmandi@parostechnologies.com www.parostechnologies.com

Payless Shoe Source

Larry Dunning 3231 SE 6th Avenue Topeka, KS 66607 785-295-2498 larry_dunning@payless.com www.payless.com

Sponsors continued on page 17

Zarco Einhorn SalkowSki & Brito, pa

Franchisee Attorneys

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

100 SE Second Street 27th Floor Miami, FL 33131

www.zarcolaw.com CONTACT:

Robert Zarco, Esq. • Robert Salkowski, Esq.

305-374-5418

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.

JUNE 2010 • INDEPENDENT JOE

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Handing Down the Family Business

by Brooke McDonough

The Next Generation Takes Charge It’s the sequel to the American dream.

And it’s a common theme found throughout the Dunkin’ Donuts franchise network.

The first generation of franchise owners, often immigrants, with grit, determination, and street smarts, builds the business starting with one store.

Then the second and third generation— kids who grew up watching their parents make the donuts—start running the show, and in many cases they’re equipped with college degrees, managerial experience, and lots of technical savvy to continue to grow and expand a business that looks very different now than it did twenty years ago.

“It’s an entrepreneurial success story,” said Dan Connelly, director of business development for Joyal Capital Management, a firm that represents many Dunkin’ franchise families.

“What these generations of owners have done collectively is unsurpassed in the restaurant franchise world. All of a sudden there are Dunkin’ Donuts stores at all the best locations. Now you can give directions based on the nearest Dunkin’s,” said Connelly who is also a DDIFO board member.

One chapter in this success story starts with Duke Carvalho, who came from Portugal at 17 with a dream of someday owning his own restaurant. After working in banking for a few years, the opportunity to buy a Dunkin’ franchise presented itself.

Carvalho, like many original owners, worked around the clock making the donuts and building the business. He raised a family and fulfilled a dream of sending his kids to college.

“Having my children come into the business is something that I wished for, but it was important that they wanted to do it on their own. What I wanted for them 10

INDEPENDENT JOE • JUNE 2010

the most was a college education—at all costs,” said Carvalho, who doesn’t have a formal higher education.

Today, the business Carvalho started is thriving, with 220 employees in 14 stores throughout Watertown, Cambridge, and Belmont, just north of Boston. But Duke’s days of working nonstop have slowed. His son, David is at the helm as chief financial officer and franchise owner, and his daughter, Jessica Moller, joined the business officially in 2004 as the vice president of operations.

“I was a bit apprehensive about the theoretical business models he brought from college, and in the beginning I was always reminding David that at the end of the day we’re selling coffee and donuts. I wanted to make that clear to him that the front of the house is the most important. Sales and customer service is key,” said Duke.

“Duke, as chairman of the David and Duke Carvalho own 14 stores just north of Boston. board, is now at But Duke also admitted that David’s the 30,000 foot level. He’s involved in business skills and technical knowledge the big picture, but less so on a daily have helped grow the business. While basis,” said David Carvalho. “But I don’t the younger Carvalho was learning think he’ll ever fully retire,” he added. his lessons about customer service, Success stories of second generation the elder found himself working with franchise owners like the Carvalhos organizational charts, job descriptions, abound in the Dunkin’ Donuts franchise and even long-term goals and mission community. But that doesn’t mean it’s statements for the first time. David even an easy transition. Often legal pitfalls created a management company to and emotional issues have to be adfacilitate the administrative work. dressed for a smooth changeover to the Also at that time, the company was next generation. switching to a more computer-based In fact, overall, the survival rate of famsystem. “I relied heavily on David to ily businesses to the next generation make that transition. He was a great is one in three businesses, and only help and had knowledge of how to one in 10 makes it to the third generaincorporate technology effectively,” said tion. The next generation usually has the senior Carvalho. management styles and ideas that can Succession planning expert Tom conflict with their parents’ ways of doing Davidow, founder and principal of things.

Thomas D. Davidow and Associates in Duke Carvalho remembers making a Brookline, Massachusetts, likens the point of instilling his own philosophy in succession experience to finally owning his son.

Family continued on next page

Family continued from previous page

“I saw it as a good experience to see what else was out there, how things were managed in other companies. I always knew I would come back, but gaining the expertise made the transition back much easier,” he said.

your expensive dream car. You love it and take care of it, and you waited all your life to have it. Then, one day, your kid comes home with a license and he wants to drive it.

Weiner’s advice for successful family business relationships is to not allow emotions to play a role. “Some disagreements are just not worth it. There are more important things. Family is the most important.”

“There is just no way to have a reasonable conversation about it. Kids are going to make mistakes and parents are going to be critical. It’s a dynamic fraught with problems. Families are complicated enough, put a business in the middle and you have issues.”

Davidow said that families can accomplish successful succession with proper planning and strategies, which include communication, training, and carefully constructed governance for the family and for the business.

“It’s never too early to start having conversations in the family about training and planning,” says Davidow.

Training can be formal, informal or both.

General manager and franchise owner Andy Weiner worked in his father’s stores on and off while he was growing up. He started by cleaning the store

That’s good advice, said Davidow, who warned that separating emotions from family businesses is often difficult to do.

Andy Weiner with his parents at the George Mandell Golf Tournament

and finishing donuts. As a teenager he would come in on weekends to make muffins.

After college, Weiner took a managerial job with another company before joining his father in the business.

To help, Davidow works with families to set up governance for the business, much like a corporate structure with a board of directors and shareholder meetings. The shareholders are family members, and they work together to decide the goals for the company and its mission statement. Then, major decisions can be based on that shared vision.

Family continued on page 19

JUNE 2010 • INDEPENDENT JOE

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DD Shops Improve Inner City Neighborhoods It was a typical night at the Dunkin’ Donuts shop near the Symphony Hall in Boston, a few blocks from Fenway Park, when a man jumped over the counter, intending to rob the opened cash drawer. Unbeknownst to the robber, an undercover police officer stood next in line waiting to order.

“In nine seconds -- we have it all on video -- the cop had the man on his stomach and under arrest.

It was great,” said Olga Pithis, one of the owners of the franchise.

Pithis told the story to illustrate the challenges many inner city Dunkin’ Donuts shops face and the positive impact shops like hers have as they help clean up the neighborhoods they serve. With a strong police and security presence, the Dunkin’ shops in inner city locations provide a safe, clean environment where local people come to work and eat. In many cases, the Dunkin’ shops attract other fast-food restaurants and retailers, transforming a much larger area.

In the ninth ward of Newark, NJ, Mo Khalid tells a similar story. He owns 11 stores in economic depressed neighborhoods of the city. Since opening in 2001, the shops have created strong economic improvement in the blocks around them, creating jobs and driving up area residential and commercial property values.

Copyright © Pittsburgh Post-Gazette, 2010, all rights reserved. Reprinted with permission.

ON A D.A.R.E. Pittsburgh police Officer Dwayne Ausbrooks, left, eats a donut while Robyn Frederick, center, of Heartland Restaurant Group, and Officer Mark Davis watch during a fund raising effort at Dunkin’ Donuts in Market Square, Downtown.

“Now that element is gone,” she said.

Although the shops still have to deal with panhandlers, she said the area now has about 12 other fast food restaurants that came to the neighborhood after Dunkin’.

Eight years later, she and her partners opened a second shop nearby.

“Once Dunkin’ moved in, the whole area started changing,” she said. “Many of INDEPENDENT JOE • JUNE 2010

Debbie Lawrence, the community relations manager for the First Church of Christ Scientists, near the shop, said the Dunkin’ shop on Massachusetts Avenue “has become a fixture” in the neighborhood, providing affordable meals, a great alternative to other higher-priced coffee shops.

there. “We used to have some older women working with us. Now they are gone. They probably couldn’t afford to live in the city anymore.”

“The shops are an oasis in the middle of nowhere,” Khalid said.

When Pithis and her partners in Berkeley Enterprises and Symphony Donuts opened the Dunkin’ shop on Massachusetts Avenue in 1985, “we were real pioneers,” she said. It was a crime-ridden neighborhood with pimps and prostitutes working the streets and drug addicts and homeless on every corner. In one block alone there were five liquor stores.

12

the other shops have come and gone, but we’re still here.”

by Stewart Lytle

“The shop is a real asset,” she said.

She attributes the shop’s positive impact on the neighborhood to a good working relationship with the police, plus security guards in the building where the shop is located. She said the staff was also trained to stop any unwanted people from loitering.

Over the years as the neighborhood improved, the nearby colleges and universities expanded, renovating buildings and gentrifying the neighborhood. Now some apartments are renting for $3,000 a month. And the tourists have replaced the pimps, prostitutes and drug addicts, she said.

She laments that with the neighborhood economic improvements, some types of people are no longer applying to work

The two biggest results of the shops are improved economics and safety, he said. “A lot of people are afraid to come into stores.

But not at Dunkin’ Donut shops. The shops feel good.

There are cops in there all the time,” he said.

Khalid, who has become involved with local residents and organizations, employs 14 students a year from a high school internship program. That program gives the students job training and money for the summer months. Out of the 14, he hires the best four students as permanent staffers.

Peter R. Velez, the CEO of the New Community Health Clinic, praised Khalid and Dunkin’ as “an anchor in the ninth ward, where there are few options for restaurants.”

Dunkin’ provides much needed jobs in the community, and its impact on “the psyche of the community is very positive,” Velez said.

The New Community Health Clinic provides medical care, often to those who cannot afford health insurance, for about 70,000 patient-visits a year.

Downtown continued on next page

Downtown continued from previous page Frederick said.

He invited Khalid to be on the clinic’s board because “As a businessman, he brings a wealth of talent and skills we can take advantage of.” Dunkin’ and New Community face the same issues: customer service, cleanliness, marketing and branding. “We need people like Mo,” Velez said.

Like many Dunkin’ franchises, the Newark shops support a variety of local organizations, the Little Leagues, churches, police and fire departments. “It helps the businesses by keeping the environments safe,” he said. “I enjoy what I do.

In the Pittsburgh area, the town of Verona presented a different challenge to a new Dunkin’ franchise. Verona is an economically depressed area. Although next to Oakmont, one of the wealthiest communities in the area, Verona had few retailers and those are “Mom and Pop-type stores,” said Robyn Frederick, vice president of the Heartland Restaurant Group.

“Dunkin’s arrival (in Verona) was compared to the opening of a Wal Mart,”

As a rare investment in the Verona community, the Heartland Restaurant partners renovated a dilapidated building that once housed a pizza shop.

The mayor came to cut the ribbon. A local florist brings flowers for the tables each week.

Now the group is staging events to A volunteer from Pittsburgh Playhouse helps children with persuade people from puppet making at Heartland Group’s Market Square store. throughout the Pittsburgh area that they chiefs of the police and fire departments should shop in Verona and particularly sat on a dunking booth for customers to at the year-old Dunkin’ shop. “There is a throw baseballs at them trying to knock lot of traffic going by the shop,” Fredthem into the water. For a dozen doerick said. “But people weren’t stopping.” nuts, customers got the chance to try to dunk the officials. All the proceeds went At Easter, the shop held an egg hunt for to support the police and fire departabout 100 young patrons, gave each ments.

Mom a dozen roses and had a police go-kart for children to ride. On a recent The shops are also giving away day Saturday the shop held a Dunk with passes to the U.S. Women’s Open golf Dunkin’ event where city officials and the Downtown continued on page 21

JUNE 2010 • INDEPENDENT JOE

13

Recipes for Success Malcolm Gladwell knows something about success. As the featured speaker at the recent Dunkin’ Brands convention in New Orleans, Gladwell recounted stories of success from his 2008 bestselling book, “Outliers”, illustrating how concepts like the 10,000 Hour Rule apply to Dunkin’ franchise owners.

In Outliers, Gladwell writes, “The idea that excellence at performing a complex task requires a critical minimum level of practice surfaces again and again in studies of expertise. In fact, researchers have settled on what they believe is the magic number for true expertise: ten thousand hours.”

Gladwell cites rock bands, chess players and computer programmers as examples of successful people who achieved that success because they achieved the magic number. In the case of Dunkin’ franchise owners, Gladwell says those who have been in the business long enough have achieved that level of expertise necessary to succeed.

At the convention, Gladwell spoke extensively about the band Fleetwood Mac. A British group, Fleetwood Mac became one of the biggest names in pop music with the release of their 1977 album Rumors.

It won the Grammy for Best Album and, to this day, is one of the best selling albums of all time. But, what most people don’t know is that Fleetwood Mac had formed a decade before Rumors was released. The band was largely unknown until 1975 when it released its tenth album, called Fleetwood Mac, and reached number one on the Billboard charts.

Gladwell cites Fleetwood Mac as a clear example of how time and perseverance are key ingredients to success.

The parallel to the DDIFO cannot be ignored. According to franchise owners familiar with the history and efforts of the DDIFO, it—like Fleetwood Mac—went through periods of turmoil and uncertainty only to emerge as a stronger, more influential presence this decade.

The DDIFO also parallels another Gladwell concept—those who are set up 14

INDEPENDENT JOE • JUNE 2010

by Matt Ellis

for success don’t always find it. In his 2008 interview on “The Charlie Rose” show, Gladwell said people with IQ’s over 120 have no greater chance of winning a Nobel Prize than those with a 120 IQ. The point is that at some level the abilities are all about equal.

It’s the perseverance that leads to success.

That concept is well illustrated among top NFL draft picks. Every year, journalists, former players and coaches predict which college player will emerge as a professional football star.

The highly touted athletes are set up for success but, as we all know, many of these prized picks fail to achieve success at the next level.

Compare Heisman Trophy winner and first round selection Tim Couch with Tom Brady of the New England Patriots. Both quarterbacks, Couch was taken as the #1 pick in 1999; Brady as the 199th pick in 2000. Couch became a rookie starter; Brady was an unknown backup. Their contrasting Recipes continued on next page

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Recipes from previous page career trajectories cannot be explained simply but, one explanation may be the time each spent in college. Couch entered the NFL draft after his junior year.

Brady played four years in college and had the benefit of the additional year to practice and learn at the college level.

Franchise owners interviewed for this article say DDIFO has occupied the position of underdog within the dynamic of the Dunkin’ Donuts system. Because it is the outlier—the one that lies outside the accepted system—DDIFO has had to work harder to demonstrate its relevance to the franchisee community.

Unlike Dunkin’s Brand Advisory Council (BAC), DDIFO does not have a defined role within the system.

But, in our interviews, franchise owners say DDIFO has emerged as a more relevant entity with its new by-laws, energized Board of Directors and dynamic President. “More effective,” is how franchisees describe today’s DDIFO. “Since 1989, DDIFO has gone through its period of trial and error. But through-

out, it has continued working for its members and trying new things,” one franchise owner said. “Now with its new leadership and stepped up efforts, DDIFO is succeeding.”

In a published interview about “Outliers”, Gladwell said, “No one—not rock stars, not professional athletes, not software billionaires, and not even geniuses— ever makes it alone.” His point is that to understand what makes Bill Gates or the Beatles, you have to understand the group (family, friends, colleagues) surrounding them.

“My wish with ‘Outliers’ is that it makes us understand how much of a group project success is. When outliers become outliers it is not just because of their own efforts. It’s because of the contributions of lots of different people and lots of different circumstances— and that means that we, as a society, have more control about who succeeds—and how many of us succeed— than we think. That’s an amazingly hopeful and uplifting idea,” he writes.

DDIFO President Jim Coen is fond of

saying, “DDIFO is a powerful force that is stronger with you than it is without you.” His statement is not just about the numbers inherent in strength but the experience that is shared when more people are part of the group.

Suffolk University business professor Michael Arthur says Gladwell’s book helps people understand that individuals are part of a larger phenomenon. “It is a common problem to attribute success individually and not recognize the importance of the group,” he said.

Even if a franchise owner has ten thousand hours under their belt, they can still benefit from the shared knowledge of their colleagues. But, when a franchise owner looks beyond his or her immediate circle, they are typically looking to a group system organized and guided by the franchisor. The result can be an opinion or position that is not truly independent.

Because DDIFO is aligned with groups like the Coalition of Franchisee Associations (CFA) and International Association of Franchisees and Dealers Recipes continued on page 23

JUNE 2010 • INDEPENDENT JOE

15

Jim continued from page 3 of franchise owners under the DDIFO umbrella is a uniquely powerful force that is much stronger with you than it is without you.

On June 3rd, we will hold our first DDIFO Members Meeting in Newark, New Jersey, On November 4th we will hold our first DDIFO Members Meeting in South Florida. These meetings offer informative content from top business leaders, exhibitions from our sponsors and significant member participation.

thanks to Matt Ellis, Sue Minichiello, Brooke McDonough and Stewart Lytle.

DDIFO is fortunate to have Sue Petersen as our graphics designer, Sue not only creates appealing graphics but she is a wonderful illustrator.

Last but not least, thank you to the franchise owners for taking the time to

communicate and share great stories with us all.

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

Jim Coen, President DDIFO, Inc

The strength of DDIFO lies in the organization’s independence and its membership. We are all stronger together.

Together We Kin’ Do It! 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

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Service continued from page 7 idea is to challenge consumers to bring to Dunkin’ Donuts an empty coffee cup from McDonald’s, Starbucks, Subway, or Burger King and Dunkin’ will give them a cup of coffee for free. Customers then would be asked to complete a taste test questionnaire. The customers completing the questionnaire would receive a bounce back coupon for another free cup of coffee on their next visit. Favorable results could be published appropriately.

The QSRs on the front line of the coffee wars will have spent millions of dollars to drive customers in for trial of their products, yet Dunkin’ would pull those same customers into Dunkin’ Donuts locations, with fewer advertising dollars spent, and each day customers would see the competitors’ empty coffee cups thrown into a trash bin for everyone to see. (Customers would discard the empty cups themselves to eliminate employees handling the used cups.) My guess is that there would be a considerable PR advantage with this type of promotion, Dunkin’ regulars would love it, and the buzz would help stretch advertising dollars to higher levels.

Well, as I come back to reality, perhaps this approach would be too aggressive for corporate, but the point here is that every Dunkin’ franchisee should use its Coffee Excellence expertise to win the day. If we sit on the sidelines and do nothing, we will be wondering why our coffee revenue is declining. If we attempt to go head-to-head with the QSRs we will be heavily outspent. But if we take on the competition one cup at a time, building legendary customer service, we cannot lose.

What is it about a cup of Dunkin’ Donuts coffee? Is it the alluring aroma? Is it the hot filtered water calibrated with just the right amount of cream and sugar? Is it the employee who greets customers by name and has their coffee ready when they get to the counter? Or is it the iconic cup itself? The truth is that it is a combination of all these things and more. At Dunkin’ Donuts, when we prepare coffee correctly, we have the best coffee... period! Yes, we could be faster at the counter and the drive-thru. We could be friendlier and smile more. When it really comes down to it, issues with customer service are best addressed by arming each individual employee with a good

product, good training, and the right attitude for serving customers.

As the coffee wars continue to heat up, there couldn’t be a better time for Dunkin’ franchisees to focus on three basics: • All aspects of Coffee Excellence.

• Speed of Service at the drive-thru and the front counter.

• A friendly smile, a positive attitude, and a thank you.

Daily execution of these three items alone would make it possible for Dunkin’ Donuts to be the company that brings back legendary customer service, one cup at a time.

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

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Family continued from page 11 A board of directors, or a board of advisors, made up of family members and some outsiders, can offer experience and perspective to the decision-making process.

David Carvalho said his relationship with his father works well because they are on the same page as far as their business philosophy goes. The Carvalhos share the same ideas about hard work and reinvesting in the business.

“There aren’t many disagreements between us,” said David Carvalho, “In fact, often we find ourselves finishing each other’s sentences.”

Franchise owners interested in passing the business down to their children also have some legal issues to keep in mind. Whenever there is a transfer of assets, there are legal implications, and those assets are exposed to creditors and taxes.

Gary Joyal, managing partner of Joyal Capital Management, advises clients to give careful consideration to estate planning, including choosing a succes-

sor for the business who is qualified to be a franchise owner in order to stay in compliance with the Dunkin’ Donut’s franchise agreement.

Once the estate planning is in place, family businesses need to plan care-

“Those who plan well can save the heartbreak of being forced to sell the business to satisfy the estate tax.” fully for the transfer of shares or stock and the transfer of authority to the next generation, making sure legal foundation is in place to uphold the succession plan. Beyond that, families need to ensure that the interest of the business remains in the family bloodline through marriages and or divorces.

“It’s a complicated subject, but those who plan well can save the heartbreak of having to be forced to sell the business to satisfy the estate tax,” says Joyal who also advises that it’s impor-

tant to review the plan design often in this ever changing federal tax system.

Then, you want to make sure the plan is flexible enough for any changes.

Haresh Patel didn’t plan on joining his father’s business. Amrit Patel opened his first store in 1974 at age 26. Today, he is one of the biggest Dunkin’ Donuts franchise owners in Chicago. He has been dubbed as the “accidental Pied Pier” in a Wall Street Journal article because he helped bring so many South Asian immigrants throughout the Chicago region to buy Dunkin’ Donuts stores.

Unlike Weiner, Haresh Patel didn’t work in the Dunkin’ stores growing up. He thought that his father would be too soft on him, and he wanted to make his own way. After working several other jobs and then graduating with a Master’s degree in IT consulting, Patel went to work in dot-com world.

When he finally joined the family business in 2001, his father “threw him into the fire,” according to Patel, and placed Family continued on page 21

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INDEPENDENT JOE • JUNE 2010

Family continued from page 19 him in the most troubled store in their network.

“I quickly developed an appreciation for how hard a manager’s job is and what it entails. I was impressed by how challenging a job it is,” said Patel.

Patel remembers that when he first started, he had plenty of ideas about how to improve business. His father would listen, but it took a few years of pushing ideas through to get to the point where his father would let him make the decisions Patel said he still has a lot to learn from his father. “My father is so even-keeled.

He doesn’t let anything upset him.

That’s a secret to his success. I’m trying to be more like that.”

The business Weiner, Patel, and Carvalho manage has changed considerably from their fathers’ early days. There is no longer the baking at all hours of the night. The demands of the stores are centered more around human resources, training, order processing, new products, and managing employees.

However different the business may look, the work ethic and the passion that the parents have passed down to their sons and daughters remains the same, and that is what keeps the dream alive.

“My father made his own donuts.” said Weiner. “He would stay at the store many nights and sleep on the bags of cake flour. Being a kid I saw that this is how it’s done.”

“There may be less sweat now, but the problems can be more complicated dealing with technology, competition, workforce issues,” said David Carvalho who also spends a lot of time in the stores to stay connected with the front line.

“These families made it look easy,” said Connelly about the Dunkin’ Donuts expansion in the past decades. “But it’s not. This is not an auto pilot business.

You can’t just show up and expect it to do well.”

Downtown continued from page 13 tournament, coming to Pittsburgh next year, and family packs of tickets for the Pittsburgh Playhouse, a children’s theater.

Frederick said the events seem to be working. Sales on Easter were up 45 percent and 40 percent for the Saturday of the Dunk with Dunkin’ event. And once people come to the events, they come back on non-event days. Weekly sales are rising, including a $1,500-increase recently, Frederick said.

Heartland is a major player in a group promoting progress in Verona. Frederick believes that the events and the success the shop is having will bring other retailers and restaurants to Verona.

As Newark’s Khalid said, having a Dunkin’ Donuts shop in the neighborhood “is a win-win for us, the neighborhood and the city.”

Or to put it another way, Dunkin’s runs on hard work and passion, no matter which generation is in charge.

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index

Recipes continued from page 15 (IAFD), it can offer a broader perspective of ideas and best practices to its members and a broader way of understanding what is in the best interest of customers.

Steve Ellerhorst is the Executive Director of the IAFD and a former Hardee’s franchise owner. He says for group dynamics to work you need to know the perspective of a lot of different people.

“One example is best practices. That is an expression of a group working together and may have nothing to do with the corporate parent. It can be about how one franchise owner creates incentives for his employees or positions his different marketing pieces. He may get advice from people outside his brand that lead him to the right decision,” said Ellerhorst.

Gladwell’s recipe for success includes deliberate practice plus having the desire to zero in on your failures and address them. The ability to work within your group to improve yourself and reach your potential is what guides the most successful people and groups.

It worked for Fleetwood Mac and it is working for DDIFO. That is not to say that Dunkin’ or another brand doesn’t have its fingers on the pulse of its business, its people or its customers. In a discussion of success, one can’t help but look at Dunkin’ and say “this is a successful business.” But, as Gladwell points out, understanding that more voices and more vision are necessary for success is an important step towards achieving that success.

In the introduction to Outliers, Gladwell tells the story of Dr. Stewart Wolf and his quest to understand why immigrants in a Pennsylvania town had lower heart disease than other Americans. Ultimately the answers lied in understanding Wolf and his colleagues gained about the culture of these particular immigrants.

“They had to look beyond the individual,” Gladwell wrote. “They had to understand the culture he or she was a part of, and who their friends and families were and what town their families came from. They had to appreciate the idea that the values of the world we

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Lisa & Sousa, Ltd. Attorneys at Law

inhabit and the people we surround ourselves with have a profound effect on who we are.”

Any successful person—including a Dunkin’ franchise owner—can probably identify the group that’s helped him or her make it in the world. Gladwell provides the insight to see what tools are necessary for success. The DDIFO provides the ability to be part of a group that is independent and has access to experience and perspective that can further tip the scales in your favor.

JUNE 2010 • INDEPENDENT JOE

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