September 2011 • Issue 10
We Communicate, We Educate, We Advocate!
Franchise Owners Banking on Citizens Combo Stores By Matt Ellis
Profit Building with Perry
Get With the (Social Media) Program
by Linda Formichelli
also isnue Rhode Island’s Fair Dealership Act Paves this is Way for Massachusetts Bill by Betsy Lawson
Rhode Island’s 2007 Fair Dealership Act 03 Paves Way for Massachusetts Bill by Betsy Lawson Advocates seeking to level the playing field between franchisees and franchisors in Massachusetts referenced Rhode Island’s 2007 Fair Dealership Act Rhode Island – and its 2008 amendment – as providing the much-needed statutory protection against unfair – even predatory – practices of corporate franchisors. The disparity of power becomes most evident, proponents of S1843 asserted during hearings at the Massachusetts State House on June 29, around issues of equity, contract renewal, areas of encroachment and the right to cure. The legislation is sponsored by State Senator Brian A. Joyce (D) who has an office in Canton where franchisor Dunkin’ Brands Inc. is headquartered. Massachusetts currently has legislation that protects franchise owners of automobile dealerships from unfair practices, but not for other types of franchising in the state such as restaurants, Joyce said. “The motivation for the Rhode Island legislation is exactly the same for filing a bill in Massachusetts – to protect the franchise owner from potentially arbitrary and capricious actions by the franchisor,” Joyce said. And just as none of the “doom and gloom” economic predictions made by the opponents of the Rhode Island Act have come to pass in the three years since it became law, Joyce anticipates no adverse impact on business here in Massachusetts. “It’s a simple matter of fairness,” he said, “...to protect the hardworking franchise owners who have invested in the state from losing everything.” Indeed the testimony offered by franchisees about exploitative practices
by franchisors was eye-opening for members of the Joint Committee on Community Development and Small Business. Like many in the general public, legislators spoke of misunderstanding the franchisor-franchisee relationship, assuming it is one of equal footing between two parties who freely enter a fair and even-handed contract. But as Jim Coen, president of Dunkin’ Donuts Independent Franchise Owners (DDIFO); Carl B. Lisa, general counsel for DDIFO; Robert Zarco, a Miami-based attorney who represents franchise owners across the country; and Eric H. Karp, partner at the Boston law firm of Witmer, Karp, Warner & Ryan LLP stressed during their testimony, state protections are necessary to prevent gross inequities between the two parties. Further hearings are not scheduled in Massachusetts until late October. In the interim, it may be helpful for those considering contacting their representative to support S1843 to understand the origins of the Fair Dealership Act and its impact on franchising in Rhode Island and elsewhere.
How we got here: a brief legal history Beginning in 1853 with Isaac Singer’s sewing machines, franchising has been a pathway to the American Dream for generations of self-starters in this country. It has also been the road to ruin for countless others taken advantage of by a disparity in power between the franchisor and the franchisee. The first legislation aimed at curbing abuses was California’s 1971 Franchise Investment Act. It mandated potential franchisees be fully informed about the risks and responsibilities they were undertaking.
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Rhode Island’s 2007 Fair Dealership Act Paves Way for Massachusetts Bill Betsy Lawson
Message from DDIFO Chairman Dan Connelly
Using Incentives to Improve Profits Perry Ludy
Get With the (Social Media) Program Linda Formichelli
DDIFO Directory of Sponsors Franchise Owners Banking on Citizens Combo Stores Matt Ellis
Index of Advertisers
Those defending the rights of franchisees, however, maintain that these disclosure laws have only served to strengthen the position of the franchisors as they control the content of the franchise agreement. Attorney Eric Karp, whose firm specializes in franchise litigation, calls these “contracts of adhesion.” He defined this term during the recent Massachusetts hearings as “take it or leave it” contracts that allow no room for negotiation. This results in procedural unfairness. Karp went on to describe how sophisticated sales people will tell prospective franchisees that any negotiation on their part could jeopardize the franchise agreements. These agreements, Karp noted, can run upwards of 700 pages of legalese—plenty of fine print in which to bury unfair conditions. RI Law continued on page 11 SEPTEMBER 2011 • INDEPENDENT JOE
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INDEPENDENT JOE • SEPTEMBER 2011
During Uncertain Times, DD Franchise Owners Maintain Focus and Dedication
by Dan Connelly
DDIFO Chairman
Welcome to the 10th edition of Independent Joe, DDIFO’s quarterly magazine. I am writing to you as the newly elected Chairman of DDIFO Board of Directors. As this magazine goes to print, Congress has passed a resolution to raise the debt ceiling, the nation’s credit rating has been downgraded, the stock market is on a roller-coaster ride, and Dunkin’ Brands (DNKN) is, once again, a publicly traded company. Uncertainty abounds, yet Dunkin’ Donuts franchise owners continue to open and operate their Dunkin’ Donuts restaurants as they always have– with hard work, relentless focus, and dedication to providing superior customer service. Now that Dunkin’ is publicly traded, the financial press is closely examining the company, trying to analyze Dunkin’ Brands’ earnings and growth prospects. Journalists are learning what our members already know – that nearly 100% of Dunkin shops are owned and operated by franchisees and that these franchisees are the ones investing their hard-earned money to grow the business. From Dunkin’s decision to sell the newly launched Dunkin branded K-Cup exclusively in Dunkin’ restaurants, to the disclosure in the DNKN prospectus that approximately 90% of 2010 restaurant openings came from existing franchisees, it is increasingly clear that our franchise owners are key stakeholders in the Dunkin’ Donuts business. Our goal at the DDIFO is to protect and enhance your stakeholder investment in the Dunkin’ system; it is the overriding focus of our regional meetings and external communications. I encourage you to attend our regional and
national meetings and bookmark our website to stay up to date with the news and information that directly affects your business. We have a great lineup of speakers and programs for our second annual National Members Meeting at Mohegan Sun in Uncasville, CT on September 19 and 20; I hope to see you there.
I wish you a great fall business season – one filled with sunny weather, increased guest counts, and lower commodity costs. Dan Connelly, Chairman DDIFO, Inc. Dan Connelly is Chairman of the DDIFO Board of Directors and the Director of Business Development for JCM Franchise Development, LLC
Independent Joe ® is published quarterly by DD Independent Franchise Owners, Inc. Editors: Jim Coen, Matt Ellis Contributors: Linda Formichelli, Betsy Lawson, Perry Ludy Advertising: Joan Gould • 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®, INDY JOE®, and DDIFO® are registered trademarks 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 © 2011 • Printed in the U.S.A. SEPTEMBER 2011 • INDEPENDENT JOE
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INDEPENDENT INDEPENDENT JOE JOE •• SEPTEMBER SEPTEMBER 2011 2011
Using Incentives to Improve Profits
By the author of Profit Building: Cutting Costs without Cutting People
In most situations, profit improvement is not as difficult as it may seem. Think about it. Profits improve when revenues increase, customer satisfaction improves, and costs decrease. If that is true, then why not develop an incentive program that encompasses all three of these measures? Recently, I had the opportunity to monitor and review a profit improvement incentive plan that was designed by QSR restaurant managers and implemented with their crews over a two-month period. Giving managers the task of hammering out the details and overseeing the implementation greatly contributed to the program’s success. The restaurant managers came up with a contest where all fifteen restaurants in the network could participate. The goal of each restaurant was to focus on four specific areas for improvement: customer satisfaction, add-on sales, guest check average, and labor cost control. They set it up as follows:
1. Customer Satisfaction Improvement Based on a receipt-driven customer survey program similar to Dunkin’s GSS, the managers set a goal to improve their current overall satisfaction rating by 2%--taking it from 68% to 70%. When a restaurant received a score of 70%, that location was entered into a drawing to receive a prize at the end of the contest. If the restaurant achieved a score of 71%, it was entered a second time; once for reaching 70% and once again for the additional percentage point. If the restaurant achieved 72%, it received three entries, and so on. The goal was not only to reach higher customer satisfaction levels, but also to create incentives for restaurant managers to motivate their crew members to help achieve higher scores.
2. Add-on Sales Through suggestive selling, managers aimed to increase addon sales by 20% within the two month timeframe. Cashiers were instructed to promote specific items and managers used POS to track the number of times each cashier was able to attach an additional product to a customer’s guest check. When a restaurant reached 20%, that location received one entry into the contest; at 21%, the restaurant received two entries, and so on. Managers learned that putting the right people at the cash registers was critical for the success of this initiative. They also learned that by giving cashiers a
Controlling labor costs is one of the toughest challenges. specific promotional item to suggestively sell helped the cashiers be more comfortable pushing that item.
3. Guest Check Average The managers set a goal to improve the current threshold run rate in Guest Check Averages by $0.05 per transaction. Based on the same contest entry method above, if a restaurant received a $0.05 improvement, that location received one entry into the drawing. At $0.10, the location received two entries, and so on. This activity would be the true indicator of whether the contest could be self-funded.
4. Labor Cost Control Any franchise owner will tell you that controlling labor costs is one of the toughest challenges of running a QSR. Some managers are more adept at it than others. The contest was an opportunity for underperforming managers to work harder at controlling labor. While every restaurant was allowed to par-
ticipate in the contest, only those that reached 100% of their labor goals were entered into the prize drawings.
Analysis In the final analysis, the contest was successful because restaurant managers created the terms, selected the prizes, and were solely responsible for motivating their teams. What’s more, the increased levels of improvement justified the cost of the program. Consider this: • Every restaurant in the franchise had a chance to participate on equal footing, operating within the framework of the four specific areas; • Employees were motivated to win meaningful prizes that were selected by their peers and managers; • Restaurants did not have to worry about being too far behind to win because any location was eligible to enter the drawings based on reaching a single goal; • Focusing on labor controls as a ticket to entry helped managers significantly reduce costs and, along with the other improvements, ensured that the contest would be self-funded; • The contest fostered team building because winning depended on each team member’s participation; and • By incrementally increasing a restaurant’s chances to win, team members were motivated to sell additional products and promote the customer satisfaction survey. It got them in the habit of improving customer service. Employees were enthusiastic because of the high quality of the prizes. First prize was a cruise to the Bahamas Profits continued on page 22 SEPTEMBER 2011 • INDEPENDENT JOE
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INDEPENDENT JOE • SEPTEMBER 2011
Get With the (Social Media) Program
by Linda Formichelli
How Dunkin’ Donuts Franchisees Are Using Social Media to Connect with Customers
The numbers are impressive: Consumers spent more than five and a half hours on social networking sites in December 2009 – an 82% increase from the same time the year before. Facebook boasts 750 million active users, with 50 percent of those logging on in any given day. And according to the microblogging platform Twitter, as of March 2011 users were sending 140 billion tweets per day. Dunkin’ Donuts franchise owners are starting to hop on the social media bandwagon to market to their customers. For example, you’ll find dozens or even hundreds of Dunkin’ Donut franchises on Facebook, LinkedIn, and Four-
square (more on each of these platforms below). Customer loyalty and positive word of mouth are two benefits of using social media; people trust what they see from their friends and directly from the businesses they frequent more than they trust commercials, and they enjoy having multiple avenues for connecting with the businesses they like. Dunkin’ Brands has established itself well on different social media platforms and is eager to help franchise owners maximize their opportunities while also keeping their brand message consistent. According to Jessica Gioglio, PR and Social Media Manager for Dunkin’ Brands, the company
has a number of social media best practices and a Franchisee and Field Marketing Social Media Policy which requires franchisees For additional information on this policy and how to register a Facebook account or Twitter page, go to the Contracts and Legal section of Franchisee Central. To learn more about Dunkin’s best practices for social media, call the Navigator at 877-800-2922. register their Twitter accounts and/or Facebook pages with the company. Social Media continued on page 19 SEPTEMBER 2011 • INDEPENDENT JOE
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INDEPENDENT JOE • SEPTEMBER 2011
RI Law continued from page 3
Wisconsin and Iowa Take a Stand The Wisconsin Fair Dealership Law (WFDL) was enacted in 1974. Originally designed to protect gasoline dealers from being dropped arbitrarily by oil companies, the WFDL now extends to other supplier and reseller relationships, including franchising. The WFDL prohibits a grantor of a dealership from terminating, or substantially changing the competitive circumstances of, the dealership agreement without good cause. The statute also requires at least 90 days written notice of termination, non-renewal, or substantial change in competitive circumstances, and a 60-day period to rectify any deficiency identified by the grantor (i.e. right to cure). In 1979, the federal government instituted the Franchise Rule that stipulated more than 20 areas of disclosure be required when selling a franchise. Despite these disclosures, however, franchise agreements could retain the right of the franchisor to expand, terminate, or non-renew upon its discretion, regardless of the performance of a franchisee. Franchisors say this is necessary to preserve their ability to sever relationships with those whose business practices may be negatively affecting the brand. Franchisees, on the other hand, claim this power is abused by unfair terminations and non-renewals. They argue that franchisors are able to demand one-sided contracts because of their enormous financial and legal resources.
ity of bargaining power in favor of the franchisor that results in one-sided franchise agreements that are offered and generally accepted on a take-itor-leave-it basis... inherent in practically every franchise agreement is the potential for significant abuse of the interests of franchisees.” In the wake of this report came the 1992 Iowa Franchise Act and its 1995 amendments. What started as a dispute over territorial rights between two Iowa businessmen who owned a combined total of 26 KFC stores
mination, nonrenewal, encroachment, jurisdiction and remedies – the same issues that would arise in the Rhode Island legislation introduced in 2007 by Rep. Stephen R. Ucci (D) and Sen. Christopher B. Maselli (D) – the Fair Dealership Act.
RI Law Recognizes Imbalance of Power While the legal language of a state statute can be difficult for the layperson to interpret, the explanation by the Rhode Island Legislative Council at the end of the Fair Dealership Act could not have been clearer:
“This act would provide protection for dealership owners within this state from the superior economic power of dealership grantors.” across Iowa, ended in a law that required significant changes in how franchisors were to conduct business in the state. Iowa is now widely considered the most wide-reaching franchising legislation in the country. Characteristic of the Iowa legislation that continues to make it so controversial is its attempt to regulate areas traditionally covered in a franchise contract, such as transfer rights, ter-
“This act would provide protection for dealership owners within this state from the superior economic power of dealership grantors.”
As the bill awaited the governor’s signature, Senator Maselli said in a released statement, “These large companies inherently have greater bargaining power and economic resources than dealers in the negotiation of dealerships.” The release goes on to say: “[The Act] ... would extend the 30-day period to 90 days in order to allow a business to reposition itself in the event that a contracted amount is not sold. The legislation also prohibits a corporation from terminating, cancelling, failing to renew or substantially changing the competitive circumstances of a dealership without good cause...” RI Law continued on page 25
The perceived one-sidedness of these franchising contracts again became a hot topic in the early 1990s at both the state and federal level. The Committee on Small Business of the U.S. House of Representatives released a report in 1990 titled “Franchising in the U.S. Economy: Prospects and Problems.” This report reflected the committee’s opinion that: “a serious imbalance of power exists between franchisors and franchisees after the franchise agreement is initiated and throughout the ongoing relationship. Advantages of financial strength, access to information and to legal advice creates a gross disparSEPTEMBER 2011 • INDEPENDENT JOE
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Directory of Sponsors Accounting
Adrian A. Gaspar & Company, LLP
Certified Public Accountants
Robert Costello 1035 Cambridge Street, Suite 14 Cambridge, MA 02141 617-621-0500 cpas@gasparco.com www.gasparco.com
Bederson & Company LLP CPAs and Consultants Steven Bortnick, CPA 405 Northfield Avenue West Orange, NJ 07052 973-736-3333 sbortnick@bederson.com www.bederson.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
Caturano & Company
Jennifer Grossetti 80 City Square Boston, MA 02129 617-241-1412 jennifer.grossetti@caturano.com www.caturano.com
Cynthia A. Capobianco, CPA
Cynthia Capobianco 60 Quaker Lane, Suite 61 Warwick, RI 02886-0114 401-822-1990 cynthia@capobianco.necoxmail.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
Gray, Gray & Gray, CPA Paul Gerry, CPA 34 Southwest Park Westwood, MA 02090 781-407-0300 pgerry@gggcpas.com www.gggcpas.com
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INDEPENDENT JOE • SEPTEMBER 2011
Performance Business Solutions, LLC Cost Segregation and Energy Management
Jeff Hiatt 87 Lafayette Road, Suite 11 Hampton Falls, NH 03844 508-878-4846 jdh@revenuebanking.com www.revenuebanking.com
Rubiano & Company, CPA’s Daniel J. Rubiano, CPA 5 Austin Avenue, Suite 1 Greenville, RI 02828 401-949-2600 dan@rubianocpa.com www.rubianocpa.com
Sansiveri, Kimball & Co., LLP Joseph Mansour 55 Dorrance Street Providence, RI 02903 401-331-0500 jmansour@sansiveri.com www.sansiveri.com
Thomas Colitsas and Associates, CPA
Tom Colitsas 103 Carnegie Center, Suite 309 Princeton, NJ 08540 609-452-0889 tcolitsas@tcacpa.com “A Member of Franchise Pros”
Advertising
Access Rewards
Doug Jentzsch 1012 W Beardsley Place Salt Lake City, UT 84119 866-681-2427 dougj@accesscashrewards.com www.accesscashrewards.com
Back Office
Caturano & Company
Jennifer Grossetti 80 City Square Boston, MA 02129 617-241-1412 jennifer.grossetti@caturano.com www.caturano.com
IKMS Group, Inc. Cliff Pratt PO Box 6221 Manchester, NH 03108 603-644-4683 ctp@ikmsgroup.com www.ikmsgroup.com
Building
Absolut Contracting
William Lako 4346 Route 27 Princeton, NJ 08540 609-655-0800 blako@absolutlycan.com “A Member of Franchise Pros”
Duro-Last Roofing Jim Schriber 525 Morley Drive Saginaw, MI 48601 800-248-0280 jschribe@duro-last.com www.duro-last.com
Royston, LLC
Cabinetry and Merchandising Bonnie Padgett One Pickroy Road Jasper, GA 30143 800-334-1766 bonnie.padgett@roystonllc.com www.roystonfordunkin.com
Secure Energy Solutions, LLC Mike Schmidt 12-14 Somers Road East Longmeadow, MA 01028 413-733-2571 ext. 223 mschmidt@sesenergy.org www.sesenergysolutions.org
ViewPoint Sign and Awning Bill Gavigan 35 Lyman Street Northboro, MA 01532 508-393-8200 billg@viewpointsign.com www.viewpointsign.com
Business Broker
Hirshon Associates, H & H Properties and Franchises Stephen Hirshon 425 Broadhollow Road Melville, NY 11747 Hirshonrep@aol.com www.hirshon.com “A Member of Franchise Pros”
Kensington Company & Affiliates
David Stein 185 Roslyn Road Roslyn Heights, NY 11577 516-626-2211 office 718-490-2218 cell kstein@kensingtoncompany.com www.kensingtoncompany.com
Directory of Sponsors Finance
Business Financial Services
Susquehanna Commercial Finance
Capital One Bank
Trust Capital Funding
Cashmaster Cash Solutions
Food Products
Scott Kantor 3111 N. University Drive, Suite 800 Coral Springs, FL 33065 954-509-8019 skantor@businessfinancialsservices.com www.businessfinancialservices.com George Ziminski 499 Thornall Street 11th Floor Edison, NJ 08837 732-767-4115 george.ziminski@capitalone.com www.capitalone.com Jayson Dunston 2108 Trving Blvd. Dallas, TX 75207 214-747-1982 ext. 2 jdunston@cashmaster-us.com www.cashmaster-us.com
Direct Capital Franchise Group Robyn Gault 155 Commerce Way Portsmouth, NH 03823 603-433-9476 rgault@directcapital.com www.franchise.lendedge.com
Fidelity Bank
Sally Buffum 465 Shrewsbury Street Worcester, MA 01604 508-762-3604 sbuffum@fidelitybankonline.com www.fidelitybankonline.com
GE Capital, Franchise Finance Ab Igram 201 Merritt 7, 2nd Floor Norwalk, CT 06851 203-229-1885 ab.igram@ge.com www.gefranchisefinance.com
Joyal Capital Management Franchise Development Daniel Connelly 50 Resnik Road Plymouth, MA 02360 508-747-2237 dconnelly@joycapmgt.com www.jcmfranchise.com
Merchant Cash & Capital
Seth Broman 450 Park Avenue South, 11th Floor New York, NY 10016 212-545-3185 sethb@merchantcashandcapital.com www.merchantcashandcapital.com
Brian Colburn 2 Country View Road, Suite 300 Malvern, PA 19355 443-996-1792 brian.colburn@susquehanna.net www.susquehanna.com
Mark Wesalowski 132 Adams Street, Suite 1 Newton, MA 02458 800-LENDER1 Mwesalowski@trustcapitalfunding.com www.trustcapitalfunding.com
CSM Bakery Products
Marla Cushing 1901 Montreal Road, Suite 121 Tucker, GA 30084 770-723-2083 marla.cushing@csmglobal.com www.csmbakeryproducts.com
PepsiCo
Bryan Gruttadauria 315 Norwood Park South Norwood, MA 02062 781-255-2663 bryan.gruttadauria@pepsi.com www.pepsico.com
Human Resources
Insurance
The Hill Agency
Rita Frailey 5 Washington Avenue Endicott, NY 13760 800-446-1775 rfrailey.hilla01@insuremail.net www.thehillagencyinc.org
KK Insurance Agency
Ashish Vadya 541 Broadway Long Branch, NJ 07740 866-554-6799 ashish@kkinsuranceagency.com www.kkquote.com
Paris-Kirwan Insurance John Mulcahy 1040 University Avenue Rochester, NY 14607 585-473-8000 johnm@paris-kirwan.com www.paris-kirwan.com
Sinclair Insurance Group Risk Management
Matt Ottaviano 4 Tower Drive Wallingford, CT 06492 203-284-3235 mottaviano@sinclair-insurance.com www.srfm.com
ADP
Starkweather & Shepley Insurance Brokerage, Inc.
CareerBuilder.Com
Legal
Kurt Salomon 225 Second Avenue Waltham, MA 02454 781-622-3159 kurt_salomon@adp.com www.adp.com Erica Basso 400 Crown Colony Drive, Suite 301 Quincy, MA 02169 781-453-3581 erica.basso@careerbuilder.com www.careerbuilder.com
Diversified Solutions, Inc.
Chrishelle Gavoni 412 Long Pond Road Plymouth, MA 02360 508-746-6995 jkerchgavoni@comcast.net www.diversified-solutions.com/dsi_dd.html
The PCI Group
Robert Boffa, Sr. 303 Molner Drive Elmwood Park, NJ 07407 201-797-8000 ext. 223 rgb@pcihr.com www.pcihr.com
Sabrina San Martino 60 Catamore Boulevard East Providence, RI 02914 800-854-4625 ext. 1121 ssanmartino@starshep.com www.starkweathershepley.com
Law Office of Carmen D. Caruson, PC
Carmen D. Caruso 77 West Wacker Drive, Suite 4800 Chicago, IL 60601 312-606-8640 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
Directory continued on page 23 SEPTEMBER 2011 • INDEPENDENT JOE
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Franchise Owners Banking on Citizens Combo Stores by Matt Ellis Second Dunkin’-Citizens Combo Opens in Massachusetts When Dave Carvalho and his partner, Brandon Woolkalis, were looking for a location in Cambridge, Mass. to open their latest store, Carvalho found a spot along the Charles River— in one of the few available commercial parcels along Memorial Drive. The location is close to a major highway interchange and between 35,000 and 40,000 vehicles drive by there every day. Set just 50 feet back from the busy two-lane thoroughfare, the shop could not handle a drive thru, but at 3,000 square feet, it was more than he needed for his Dunkin’.
chusetts. He says it is possible to generate enough revenue in the summer to cover the expense over a 12-month period but it depends a lot on the store’s location and customer count.
estate play and it’s a cross marketing play that can help bring new customers to each location. It allows them to reduce their occupancy percentage and develop business with another branded retail service.”
Banks offer a different paradigm. Jeremy Cyrier, founder and president of MANSARD, a market-
For Citizens, the Dunkin’ combo store is the bank’s latest foray into new retail space. In 1990, Citizens
“It made a lot of sense to find another business to use some of the extra space. It’s an urban setting and densely populated so we started thinking about what kind of business could be mutually beneficial,” said Carvalho. During their planning and analysis of the new Cambridge site, Carvalho gave a call to Neal Faulkner, who, two years ago, replaced the Baskin’ Robbins in his Bellingham, Mass. combo store with a Citizens Bank branch. “Dave was not the first franchisee who’s called asking about the bank combo,” said Faulkner. “I recommend it to every one. It’s worked out well.” Dunkin’s history with combo stores has been hit and miss. When Baskin’ Robbins came under the Dunkin’ Brands umbrella in the mid 1990s, it seemed like a great fit to locate an ice cream shop within the confines of a Dunkin’. But, because ice cream is a special-event purchase while coffee is more of a daily purchase, the synergy never quite worked to its expectation. Carvalho says he still has three Dunkin’Baskin’ combo stores in Massa14
INDEPENDENT JOE • SEPTEMBER 2011
Dunkin’ franchise owner owner Dave Carvalho with Citizens Bank Branch Manager Sudhir Seth in their Cambridge combo store.
research driven commercial real estate brokerage and advisory services firm in Lexington, Mass., works with franchise owners to upgrade locations in the greater Boston market. He says the idea of putting two complementary businesses inside the same four walls is similar to putting complementary consumer products on an end-cap in a retail store. It helps introduce customers to new products by pairing them with something about which they are familiar. In the case of a Citizens branch inside a Dunkin’ he says, “It’s a real
opened its first branch inside a supermarket; today the bank has supermarket branches in 12 states. These full-service branches are successful because they accommodate people’s busy schedules—enabling someone to make a deposit, cash a check or apply for a new mortgage at a place they are frequenting anyway. They also allow the bank to operate with lower overhead because they are not paying to rent a large commercial space. Partnering with Dunkin’ Donuts makes a lot of sense according to Combos continued on next page
Combos from previous page
Trevor Knott, Senior Vice President and Director of Partnerships & Marketing Operations for Citizens Financial Group, because it offers convenience to the consumer and aligns the bank with Dunkin’s great brand recognition.
we spend money on products. It’s worked well.” Faulkner says he was also impressed at Citizens’ use of social media to generate buzz about their location. “They have Facebook and Twitter accounts and will alert
“This is a natural extension of our successful in-store model where we offer extended hours and seven day banking. This is all about giving customers a choice and providing greater access to bank when and where it is convenient for them,” said Knott. The Citizens branch inside Carvalho’s Dunkin’ opens at 6:30am on weekdays and 9am on weekends; it stays open until 6pm on weekdays and 2pm on weekends.
Citizens Bank operates a full service branch inside the Dunkin’ locations.
The branch is “We’ll have the open 6:30am-6pm business in the morning. They will weekdays; 9am2pm weekends bring in business in the afternoon. That’s when their business peaks. So as a customer is waiting to open an account, or sign up for a new mortgage, they can get a coffee or a flatbread sandwich,” said Carvalho.
The synergies extend to marketing as well. In Faulkner’s case, he says Citizens was eager to promote their first Dunkin’ location. “They developed new initiatives and allocated resources—like sending out mailers to nearby residents announcing the new location. We’ve offered Dunkin’ Donuts gift cards for people who open new accounts or a free pound of coffee for people who come in for a financial review. They spend money on advertising and
customers about the location and any specials they’re offering. They’re aggressive in their use of social media as a marketing tool and it’s been valuable to grow the store. We’ve learned a lot from them.” Carvalho says his agreement with Citizens includes a shared marketing fund which is used to print co-branded collateral materials for special events. The bank is also buying products to use in promotional give-aways. “They bought coffee and mugs from us for gift baskets they are raffling off to customers who come in for a financial review or to open a new account,” he said.
Synergies aside, franchisees say the deal has to make sense from a bottom-line perspective. According to Faulkner, whose combo is now approaching its second anniversary, the numbers definitely add up. With the Dunkin’-Baskin’ combo in Bellingham, Faulkner says his store was about 15 percent below market average. When he first considered replacing the Baskin’, he needed a plan for how to use the existing space. The store already had a sitting area, with soft seating and conventional seating and there weren’t a lot of options for a business to share the space. “I basically had 800 square feet that I wouldn’t have been able to do anything else with,” he said. “Plus, having them pay for their electricity and air conditioning, plus rent, meant that I could reduce my costs. In our first year, the market was down 2 percent but our store was up 8 percent. In the second year, the store has been beating the market by 3 percentage points. We have seen a 5-10 point increase in sales just by having Citizens in there. Our growth has definitely been impacted by the bank branch,” said Faulkner. Cyrier says he wouldn’t be surprised if banks become the ones who go seeking in-store partners like Dunkin’ Donuts. “The retail bank branch is not what it used to be. People don’t come in to deposit cash into their passbook savings accounts anymore,” said Cyrier. “Banks have an ATM model and a financial products and service center model. Many that have large real estate portfolios may look at holding onto the properties and retrofitting them. That could involve Combo continued on page 17
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INDEPENDENT JOE • SEPTEMBER 2011
Combos continued from page 15
having a coffee shop or other complementary business inside.”
2011 Illustration by Susan S. Petersen for DDIFO
According to Carvalho, his new combo store is already showing promise. We talked to him right after the bank branch opened – just a month after the Dunkin’ debut – and he said traffic has been growing each week. “There has actually been more pedestrian traffic than I originally thought from people walking along the river or walking over from the nearby hotels and apartments. If we can maintain that business and increase the vehicular traffic, this will be a homerun,” he said. Carvalho is already looking forward to the annual Head of the Charles Regatta in October which brings over a quarter million spectators to the Charles River over the weekend. Next to the Boston Marathon, it is the single largest outdoor sporting event in Boston. He expects the outdoor seating area at his newest
shop – which he likes to call “waterfront seating” – to fill up on that busy weekend. So far, both Dunkin’ and Citizens are cautiously optimistic that cus-
tomer counts at this new combo store will grow and that each business will help feed the other. They know it could take a while before enough customers recognize the convenience of having their bank inside their favorite coffee shop.
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Social Media continued from page 9
“At present, Dunkin’ Donuts has nearly 30 local Twitter feeds at the DMA level which have been very successful in supporting a number of franchisees. It’s recommended that independent franchise owners check in with their field marketing team to determine if one of their DMAs is already supporting social media efforts locally,” said Gioglio.
Social Media 101
Users can post status updates, photos, videos, and more. “We use Facebook to do event planning,” says Robyn Frederick, VP of Human Resources and Marketing at Heartland Restaurant Group, which owns 16 Dunkin’ Donuts locations in Western Pennsylvania. “So if we do kids’ days or ‘decorate your own donut’ day or a ‘design your own Coolatta’ day, we’ll set that up on our Facebook page as an event, and
Social media refers to user-generated content and communities formed using free or inexpensive software. Here are some of the platforms Dunkin’ Donuts franchise owners are using to connect with their customers. LinkedIn (www.linkedin.com): LinkedIn is a professional networking site with 120 million members. Members post profiles that are similar to CVs with work history, skills, and education, and can also include a photo, short status updates, and links to their websites. LinkedIn is a “six degrees of separation” concept where members can find people who are connected to their own connections. Many Dunkin’ Donuts employees and franchise owners have LinkedIn profiles; however, because of the nature of the platform, these tend to be more static CVs than communication channels with customers – although Shabnam Panjwani, who owns two Dunkin’ Donuts stores in Atlanta, posts her Facebook and Twitter messages on her LinkedIn profile. Facebook (www.facebook.com): Facebook is a social networking site where you make connections with others by “friending” them, which allows you to see and comment on one another’s profiles.
easier to use and more interesting to explore. By ‘checking in’ through a smartphone app or SMS text service, users share their location with friends while collecting points and virtual badges. Merchants and brands leverage the foursquare platform by utilizing a wide set of tools to obtain, engage, and retain customers and audiences.” Foursquare has 10 million members. Panjwani uses Foursquare to offer special deals. “Basically, if your phone is GPS-enabled, you’re able to pick up what areas you’re in, and Foursquare will let you know what’s around you and if any of the businesses near you are running specials.” Google+ (https://plus. google.com/): The newest kid on the block, Google+ is somewhat similar to Facebook. It allows you to add people to different “circles” and to post updates to whichever circles you want, so you choose who sees what.
that invites others on Facebook. So for anybody who likes us, it will go into their Facebook.” Foursquare (https://foursquare. com/): According to its website, “Foursquare is a location-based mobile platform that makes cities
Search for Google+ members with “Dunkin’ Donuts” in their profiles and you’ll come up with 186,000 results; however, the vast majority of these are employees with personal accounts, not franchisees looking to communicate with their customer base. Twitter (www.twitter.com): Twitter is a “microblogging” platform where people post “tweets” comprised of 140 characters or less. Social Media continued on page 21 SEPTEMBER 2011 • INDEPENDENT JOE
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INDEPENDENT JOE • SEPTEMBER 2011
Social Media continued from page 19
When you tweet, your message appears on your followers’ Twitter home pages. In addition, if you tag your tweet with a “hashtag” (such as #dunkin’donuts), your tweet will appear in the stream when people search on that keyword. Many people tweet about both their personal lives and their businesses. There are dozens of Dunkin’ Donuts franchises on Twitter, including Panjwani and Frederick.
How Franchisees Are Getting It Done So how are savvy Dunkin’ Donuts franchise owners using social media? Here are just some of their tactics. • They’re holding contests. Contests are a great way to get customers excited and involved. “We sometimes do a scavenger hunt for coupons, where our Twitter followers need to find certain things in the store,” says Frederick. Another way to garner more followers is to host a Twitter contest where followers enter by “retweeting” a post you wrote; that way, your message is seen by people well beyond your immediate network of followers. • They’re using coupons and deals. Frederick posts JPEGs of coupons to Twitter so followers can print them out and bring them in. She also runs “show this Tweet” specials where she offers a deal on Twitter and her followers can show the tweet to the counterperson on their phone or in a printout to take advantage of the deal. This tactic has the advantage of letting store managers know how well Twitter is working for them, since social media ROI is hard to quantify. • They’re tooting their horns. There’s no point in being active in social media if no one knows you’re there. Savvy Dunkin’ Donuts franchisees are including their Twitter
tags on their Facebook pages, their Facebook addresses on their coupons, and so on. For example, some stores post signs encouraging customers to follow them on Facebook, and Panjwani includes the store’s Facebook page on coupons. • They’re listening. Christopher Carfi, a social media expert and president of Cerado, a company that offers software and services relating to marketing, customer relationships, and social media, suggests that franchisees listen to the conversations that are going on in social media before jumping in. He says, “When you walk into a party, you’re less likely to engage in meaningful conversation with folks if you immediately start spouting off about your business.”
• They’re sharing the spotlight. Social media marketing can take a lot of time and energy, so some business owners are recruiting their employees to help. These employees also help by adding their own unique personality to their store’s social media pages. “I’ve granted my two store managers administrative rights to the Facebook page,” says Panjwani. “Every once in a while, they come up with something witty and I tell them to have at it.” • They’re visible.
You need to keep active in social media so members don’t visit you and see tumbleweeds. Carfi suggests participating in social media like Twitter and Facebook at least every other day. “I do it twice a day,” says Frederick. “In the mornPanjwani makes it a point to reply to ing before I start, I send out all my tweets about social media followers’ questions. what’s going on for the day. Then, in the eve• They’re getting involved. ning I respond to all the questions. And twice a month I put out the new After you’ve lurked for a while and products because Dunkin’ Donuts’ have an idea of what’s going on marketing window always starts on in your area of the social media the first Monday of every month.” space, Carfi suggests contributing to people’s conversations. This will • They’re cross marketing. help you garner more followers. For You can use one form of social example, on Twitter, if someone media to drive people to other platresponds to one of your tweets, all forms, or even to your website or of that person’s followers will see blog. For example, Facebook has an the tweet and also see your Twitter application that allows your status name, which will let them follow you. updates to be automatically transIf you post a comment on somemitted to Twitter, and there are apone’s Facebook “Wall,” all of that plications that send your blog posts person’s friends will see your post. to various social media platforms all “We talk with customers all the time at once. “All our Facebook feeds go on Twitter,” says Frederick. “For exinto Twitter, and all the Twitter feeds ample, K-Cups just came out so the go into LinkedIn,” says Panjwani. last thing we sent out was, ‘Dunkin’ Social media offers franchisees a Donut K-Cups are exclusively at unique opportunity to connect with Dunkin’ Donuts stores.’ People customers to educate them, get wrote back asking what flavors we feedback, sell product, spread word have, how many come in a box, of mouth, and build community. where can they get them, are they Communicate with your customer available through the drive-thru, and base person-to-person instead, and so on.” Panjwani also makes it a your social media campaign will be point to reply to social media followsure to take off. “It’s an awesome ers who comment or ask questions. communication avenue,” Panjwani says. SEPTEMBER 2011 • INDEPENDENT JOE
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Profits continued from page 7 with paid time off for the Restaurant Manager and a companion plus a $500 prize for the crew to split based on the number of hours worked. Second Prize was an additional week of vacation for the Restaurant Manager and a $250 prize for the crew to split based on the number of hours worked.
through team participation can improve profitability, reduce costs, and keep your customers happy. The lesson for franchise owners is that engaging employees at every level in your organization will energize the business and deliver sustainable results.
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.
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Results Overall customer service on average for the fifteen locations during the twomonth contest period improved from 68% to 72%; add-on sales increased from 14.5% to 22%; guest check averages increased by $0.17; labor controls improved 1.5% as lower performing stores brought their numbers into line and other locations increased sales against tight controls. The contest shows how guiding your managers to create a conceptual framework for profit improvement
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Paris Ackerman & Schmierer LLP
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Zarco, Einhorn, Salkowski & Brito, PA
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Doug Falcone 628 Route 10 - Suite 8 Whippany, NJ 07981 973-599-0600 dougf@accesstomoney.com www.accesstomoney.com
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Bunn-O-Matic Corporation Frank McAdam 1400 Stevenson Drive Springfield, IL 62703 800-637-8606 Frank.McAdam@bunn.com www.bunn.com
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Energy Gateway, Inc. Christopher Tremblay 451 Worcester Road Charlton, MA 01507 508-207-9740 Chris@energygateway.org www.energygateway.com
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FireKing Security Group Rick Uren 101 Security Parkway New Albany, IN 47150 800-457-2424 ricku@fireking.com www.Fireking.com
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RI Law continued from page 11 These are all important provisions for franchisees in Rhode Island, noted Carl B. Lisa, who in addition to being general counsel for DDIFO is a principal in the Providence-based firm of Lisa & Sousa, Ltd. The firm specializes in franchise and business transaction law.
issues are not easily resolved and can result in legal action. The gross disparity in resources to undertake litigation, Lisa stressed, has been a severe disadvantage to franchisees. The Fair Dealership Act addresses this gap by awarding damages, injunctive relief, and recoupment of attorneys’ fees, provisions franchise agreements have traditionally disallowed.
Lisa said initially the Act “flew under For this and other protections, such the radar” of the franchise community as a reasonable length of time and had very little to cure certain defaults to publicity either positive or negative. Although originally intended to address a dispute with a productdistribution DDIFO General Counsel Carl franchise, the Lisa, DDIFO President Jim Coen new law soon and Attorney Eric Karp testify at drew defend- Fair Franchising Hearing at the Massachusetts State House. ers from avoid contract termination, advomany in the cates for franchisees championed to business-format franchise commupreserve the Act in its entirety. These nity, such as franchisees of Dunkin’ advocates—including the Coalition Brands, Burger King, and others for of Franchise Associations (CFA) leveling the playing field between and DDIFO—contended that the Act franchisor and franchisee. was, in fact, good for Rhode Island Some franchisors chose to halt or business. Not only did it protect the slow business activities for new investment of current franchisees who franchise outlets in the state, which paid payroll, property and other taxes; Lisa described as a “short-lived, it also encouraged others to consider knee jerk reaction.” By the next opening franchises of their own. legislative session, however, lobbyIn the end, an amendment sponsored ists for franchisors, most notably the by State Senator Daniel Connors (D) International Franchise Association and Representative Gordon D. Fox (IFA), proposed a comprehensive (D) was put forward that reduced the amendment, which if passed, would number of days required for “termihave virtually eliminated most provination, cancellation or non-renewal” sions of the Act. They argued that the from 90 to 60 while all other parts of legislation is bad for business and, the Act remained intact. It passed and in the end, would deprive the state has been in place for three years. of much needed tax revenues. They Has it had the negative impact on the also claimed that state invention in the Rhode Island economy predicted by form of legislation was also an outthe Act’s detractors? right violation of the contractual rights guaranteed under the U.S. Constitu“Everything has really been business tion, article 1 section 10: as usual in Rhode Island since the “no state shall... pass any... law impairing the obligation of contracts.” Historically, franchisors and franchisees have relied heavily on the right to contract to set the terms and conditions of their relationship, but these
law passed,” Lisa said.
Dennis R. Murray, Chief Securities Examiner for the State of Rhode Island Department of Business Regulation (DBR), agreed with this assessment. Among other responsibilities,
the DBR is charged with enforcing compliance with the state’s franchising laws, an area overseen by Joanne Sullivan, Principal Securities Examiner. Sullivan said there has not been a noticeable increase or decrease in filings for franchise registration or renewal, nor is her office aware of any court cases resulting from the Fair Dealership Act. “The impact has really been null,” Sullivan said. When the Act was first adopted, the DBR attached an addendum to franchising agreements that outlined the provisions of the new law. Since that time, however, Sullivan explained that most franchise agreements in the state now incorporate the language of the Act itself making the addendum redundant. The addendum has since been discontinued. Both franchisors and franchisees, Sullivan said, “are well aware of compliance.” “And that’s good news for proponents of the Massachusetts bill under consideration,” said DDIFO President Jim Coen in a recent phone interview. “What makes the Rhode Island law so significant,” Coen said, “is that franchisors have – in legal terms – come to recognize a franchise relationship statute that was previously thought bad for the franchisors.” “The Fair Dealership Act is a significant step toward leveling the playing field in neighboring Rhode Island,” Coen said, and lays the groundwork for similar legislation in Massachusetts and other states. Comparable bills have since been introduced in Kansas and Tennessee as well. While debates over the terms of franchise agreements continue, franchising continues to represent an important piece of the nation’s economy. In the year the Fair Dealership Act was passed, figures from the IFA showed franchised businesses producing goods and services worth $802.2 billion and providing 9.1 million jobs. Every year, tens of thousands of budding entrepreneurs seek new opportunities for the American Dream through franchising. And in growing numbers, franchisees are recognizing the inequities of their franchise agreements and are seeking solutions to remedy the playing field. SEPTEMBER 2011 • INDEPENDENT JOE
25
Directory of Sponsors continued from page 23
New England Acquisitions Jim Calash 7 Babcock Street Pawcatuck, CT 06379 860-235-1344 Papijoe2002@sbcglobal.net
New England Drive-Thru Communications Angela Bechard 12 Wildwood Road Auburn, NH 03032 888-966-6337 angela@nedrivethru.com www.nedrivethru.com
New England Repair Service a division of New England Coffee Company Jerry Brown 100 Charles Street Malden, MA 02148 781-873-1536 jerry.brown@necoffeeco.com www.nerepairservice.com
Partyka Isuzu
Craig Judge 200 Skiff Street Hamden, CT 06415 860-281-4117 cjudge@partykatrucks.com www.partykatrucks.com
Payless Shoe Source Matt Lemke 3231 SE 6th Avenue Topeka, KS 66607 785-368-7530 matt.lemke@payless.com www.payless.com
R.F. Technologies
Jennifer Morales 542 South Prairie Street Bethalto, IL 62010 618-377-4063 ext. 121 jenm@rftechno.com www.rftechno.com
DDIFO® does not endorse or recommend commercial products, processes, or services. A DDIFO® sponsor is paying to advertise, and it is not to be considered a product or service endorsement by DDIFO®. Furthermore DDIFO® does not control or guarantee the currency, accuracy, relevance or completeness of information provided by sponsors in their advertising. 26
INDEPENDENT JOE • SEPTEMBER 2011
SKAL East, Inc
Jim Zafirson PO Box 303, 31 Eastman Street Easton, MA 02334 800-966-0106 jim@skaleast.com www.skaleast.com/index. cfm?keyword=dunkin
Sprint
Caroline Fedele 3 Van De Graaff Drive Burlington, MA 01803 781-367-1057 caroline.fedele@sprint.com www.sprint.com/ddifomembers
Stera-Sheen Brands by Purdy Products Co. Cathy Morgan PO Box 456 Wauconda, IL 60084 800-726-4849 cathy@purdyproducts.com www.purdyproducts.com
SureShot Dispensing Systems
Deanna MacKinnon 100 Dispensing Way Lower Sackville, NS Canada B4C 4H2 902-865-9602 ext. 144 dmackinnon@sureshotdispensing.com www.sureshotdispensing.com
TredSafe/Wal-Mart
Ted Travis 450 West 33rd Street New York, NY 10001 909-949-0495 ttravis@esoriginals.com www.walmart.com
Waste Management JoAnn Bradbury 107 Silvia Street Ewing, NJ 08628 215-378-1417 jbradbury@wm.com www.wm.com
index
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www.PCIHR.com SEPTEMBER 2011 • INDEPENDENT JOE
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