Independent Joe Magazine Issue #11 December 2011

December 2011 • Issue 11

It’s Critical for All DCP Members to Cast their Vote!

Your Vote Counts!

We Communicate, We Educate, We Advocate!

Going for the Votes Behind the Scenes of the DCP’s Historic Merger Campaign

by Matt Ellis

Distribution. Commitment. Partnership.®

Profit Building Building Profit with with Perry Perry

Can Franchisees “Buy Back” the Brand?

by Betsy Lawson

by Linda Formichelli also isnue Profit Per Employee this is Is This the Metric That Will Save Franchise Owners?

DDIFO Hall of Fame

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Inductee Ceremony • September 19, 2011

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First Annual DDIFO Hall of Fame Inductee Ceremony was held in September at the Annual Conference at Mohegan Sun. Above: Jim Coen, DDIFO President, Maria Zsambok (daughter of Inductee, Jose Couto), Dan Connelly - DDIFO Chairman, and Joe Couto (son of Inductee, Jose Couto)

2011 Inductees John Boujoukos Ralph Gabellieri Antonio Couto John Henderson Jose Couto George Mandell William Rosenberg

Left: Mark Dubinsky, DDIFO Director and Mark Boujoukos (son of Inductee, John Boujoukos)

The Plaques are on Display at the Dunkin’ Donuts Franchise Owners Hall Of Fame on the second floor of the DCP in Bellingham, MA Left: Maryann Coletta (daughter of Inductee, Antonio Couto) and Maria Zsambok Right: Steve Gabellieri (son of Inductee, Ralph Gabellieri) and Dennis Gramm, Dunkin’ Donuts Franchise Owner

Left: Carl Lisa, DDIFO General Counsel (accepted the award for Inductee, John Henderson) Right: DDIFO Chairman, Dan Connelly and Carol Resnick (daughter of Inductee, George Mandell, and relative of William Rosenberg) Below: Steve Gabellieri, Jim Coen, Dan Connelly and Bob Gabellieri.

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INDEPENDENT JOE • DECEMBER 2011

Can Franchisees “Buy Back” the Brand?

by Betsy Lawson The question of banding together as franchise owners to buy the parent company came up for discussion more than once at September’s DDIFO National Members Meeting at Mohegan Sun in Connecticut.

And it’s no wonder.

The jury is still out on how the pressure of reporting quarterly earnings to Wall Street will impact franchise owners since Dunkin’ Brands went public on the New York Stock Exchange (DNKN) in July. Many franchise owners expressed concern then–and now–about how the ongoing pressure to accommodate stockholders’ profit expectations will impact their day-to-day business both in the short and long term.

One Boston-based franchisee said during the general session that it seems only common sense that individual franchisees would have a greater vested interest in channeling profits back into betterment of the brand for the long haul, than the average shareholder who is motivated more by short-term profit.

With long-term interests in mind, could franchisees come together and “buy back” the brand?

This question was put to National Members Meeting keynote speaker Josh Kosman, business reporter for the New York Post who covered the Dunkin’ IPO this past summer.

private equity trio of Bain, Carlyle, and Thomas H. Lee controlling ownership of Dunkin’ Brands.

Kosman’s years of experience investigating how private equity firms make their profits is recounted in his new book “The Buyout of America: How Private Equity Is Destroying Jobs and Killing the Economy” (see excerpt on page 17). The book details the case of Domino’s Pizza. Soon after being purchased by Bain Capital in 1998, Domino’s started collecting more fees from franchisees. It also sold more stores, leading to saturation in many areas. Short-turn profits were quickly realized, but they were not reinvested back into the brand. In time, the company lost market share.

Kosman pointed out that the three private equity firms were criticized in 2006 for purchasing Dunkin’ stock at about 13.5 times EBITDA, but today it’s trading above that multiple (EBITDA is earnings before interest, taxes, depreciation, and amortization). What this means in real terms for franchisees today is that the stock price is prohibitively expensive to consider buying majority shares.

Most of the

In his reporting and his remarks Josh Kosman, at the meeting, Kosman has Author and Journalist stressed that Dunkin’ Brands precedents of has made it clear that its strategy for franchisees buygrowth is expanding into territories being the brand come when the brand is yond the traditional development area in financial straits. This was the case that runs from New England to Chicago in February 2004 when the franchisor to Florida. for Ground Round filed for Chapter While this growth strategy has been in 11 bankruptcy and closed all 59 of its place for years, it is critical that francorporate-owned restaurants. Roughly chise owners understand exactly what the same number of franchise outlets they’re dealing with now that Dunkin’ is joined together in order to buy out the a publicly traded company and has the parent company and keep open their

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Can Franchisees “Buy Back” the Brand?

Betsy Lawson

05 07 08 10 19

Profit Per Employee Linda Formicelli

Engage Your Customers, Boost Your Profits Perry Ludy

DDIFO Directory of Sponsors Going for the Votes Matt Ellis

Index of Advertisers

existing restaurants. They launched Ground Round Independent Owners Cooperative, LLC (GR IOC) and continue to operate today.

Such a buyout is also on the table right now with franchise owners of A&W and Long John Silver’s (LJS). Purchased by Yum Brands in 2002 for $320 million, both chains are currently under the same corporate umbrella as KFC, Pizza Hut, and Taco Bell. LJS has roughly 1,000 U.S. restaurants; adding in the units that are co-branded with Taco Bell and KFC, the total is 1380. A&W, one of America’s earliest restaurant franchise chains, has 300 locations domestically and 300 abroad.

One issue that’s riled franchisees seems to be Yum’s corporate decision to expand heavily into China, a strategy that may work for its other core brands, but has not for A&W and LJS. During this period of overseas expansion, analysts from Goldman Sachs released a report detailing how Yum’s American franchises were closing at an alarming rate–down 20 percent since 2003.

In response, David C. Novak, Yum’s chairman and chief executive officer, said in a prepared statement, “As we Buy Back continued on page 16 DECEMBER 2011 • INDEPENDENT JOE

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INDEPENDENT JOE • DECEMBER 2011

Profit Per Employee

by Linda Formichelli

Is This the Metric That Will Save Franchise Owners?

Your franchise is a small business -- or is it?

If you go by the current metric, if you have more than 50 full-time equivalent employees (adding up part-time and full-time employees), you’re not considered a small business, meaning you don’t get any of the perks offered to small businesses by the government, and you’ll be expected to comply with health care reform and other government mandates -- a pricey proposition that could potentially put some franchise owners out of business.

The Profit Per Employee Coalition believes they have a better way. With the Profit Per Employee metric, businesses whose PPE falls under a certain amount will be considered a small business. This will likely benefit Dunkin’ Donuts franchises, as hospitality and other service businesses may average less than $1,000 in annual profit per employee, while finance and insurance firms enjoy nearly $10,000 per employee.

A government relations executive at the Burger King Corporation brought up the PPE metric to the Coalition of Franchisee Associations (CFA) last year. “I like to present that information as another way of thinking to our association members, and it did seem to go over very well when [the PPE Coalition] presented the new metrics,” says Misty Chally, Deputy Executive Director for the CFA. “I know that one of the CFA members, The National Franchisee Association, has been proactively supporting PPE in the last several months.”

“Nobody really knows where this 50 number came from...it seems to be pulled from the air,” Chally adds. “The PPE metric seems like a much more reasonable and thoughtful way to consider what really is a small business owner, and whether that small business owner can afford to comply with these mandates.”

Not everyone is in complete agreement.

“In the end, what’s more important is the [total] profit,” says Amit Mohindra,

the Director of Primary Research at the Institute for Corporate Productivity (i4cp) “Ultimately, it’s what accrues to shareholders at the end of the day. So that’s probably a better measure.”

Metrics continued on page 19

The chart above illustrates the huge range between annual Profit Per Employee in lowmargin vs. high-margin industries. While hospitality and other service businesses may average less than $1,000 in annual profit per employee, finance and insurance firms enjoy nearly $10,000 per employee.

Independent Joe ® is published 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. DECEMBER 2011 • INDEPENDENT JOE

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INDEPENDENT JOE • DECEMBER 2011

Engage Your Customers, Boost Your Profits

By the author of Profit Building: Cutting Costs without Cutting People

“To be, or not to be, that is the question: Whether ‘tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles, And by opposing end them…”

These familiar words are the opening lines of Hamlet, a play by William Shakespeare. They suggest a dilemma similar to what business owners today are facing when confronted with marketing decisions in a down economy. All of us are feeling the pain of the current recession.

As Dunkin’ Donuts franchisees, the rising cost of coffee beans and other products has been especially painful.

Many people are asking themselves whether it is better to eliminate the marketing budget, or get aggressive and try to build for the future.

To survive in today’s economic environment, we must face this pressing reality: We need customers walking through our doors every hour of every day. How do we do that? Keeping up our level of advertising is one way. History shows how companies that are aggressive during troubled times can reap the benefits. When Proctor & Gamble advertised Ivory Soap during the Great Depression, the company became the largest soap manufacturer in the world. And, during the automotive industry crisis of 2008-2010, American car companies slashed advertising spending, but Volvo increased the money it spent and quickly increased its market share.

We must do the right things to connect with our customers. It has been proven time and time again that Dunkin’ customers are loyal customers. How many of your regulars bypass a competitor to come to your shop? Now think about how you can leverage that loyalty to increase their visits and develop a new crop of loyal customers.

Incentive marketing helps strengthen your customer relationships. This approach involves competitions, games, premiums and special pricing. It engages customers and helps them recognize the value of our products. It also energizes and motivates employees by offering them incentives as well. Happier employees provide better service which builds customer loyalty.

Incentive marketing... engages customers and helps them recognize the value of our products.

To survive and thrive we must be the best operators we can. That means running the business efficiently, meeting payroll, controlling costs and relying on our experience to make the best possible choices.

• Invest in new media. The Internet makes it possible for anyone to create, modify, and share content using simple tools that are often free or inexpensive and its interactive nature allows your customers to interact with you. Here are a few suggestions: − Set up a Facebook page and a Twitter account, following the rules and guidelines that are posted on Franchisee Central. − Explore text message and email marketing. − Write a daily or monthly blog. − Create an Intranet to improve communication with your employees.

• Promote customer loyalty programs such as DD Perks • Promote frequency card distribution

Value-based marketing is also a powerful way to drive business. Unlike deep discounting (e.g., Buy one, get one free), value-based marketing highlights the benefit of your products.

Customers see Dunkin’ Donuts as a place for convenience and reliability as well as tasty, feel-good treats. So by advertising, “Buy 2 at x price” you can get people in the door with the promise of a good value and you won’t cut prices so much that you can’t return them to pre-recession levels when the economy improves.

• Execute a “Key Employer” program where you distribute cards that measure the size of business cards offering 10% off to Big Box employers within a 2-mile radius of your restaurant.

Here are some steps to get your new marketing plan going:

• Where possible, change your packaging and combo choices.

Variety and frequent changes help generate consumer interest.

• Change the size, look and feel of your advertising. Oversized designs, bold colors and unusual shapes help your materials stand out compared to others.

• Talk to your customers and find out if they come to your restaurant as a treat or consider it essential to their daily routine. If considered a treat, your marketing may be more aggressive toward that segment. Where it is regarded as an essential, the focus would be more on value.

Successfully engaging customers means really getting to know them. As Profits continued on page 18 DECEMBER 2011 • INDEPENDENT JOE

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Directory of Sponsors Accounting

Building

Adrian A. Gaspar & Company, LLP, CPAs 1035 Cambridge Street, Suite 14, Cambridge, MA 02141 Robert Costello • cpas@gasparco.com 617-621-0500 • www.gasparco.com

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

Bederson & Company LLP - CPAs and Consultants 405 Northfield Avenue, West Orange, NJ 07052 Steven Bortnick, CPA • sbortnick@bederson.com 973-736-3333 • www.bederson.com

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

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

Royston, LLC - Cabinetry and Merchandising One Pickroy Road, Jasper, GA 30143 Bonnie Padgett • bonnie.padgett@roystonllc.com 800-334-1766 • www.roystonfordunkin.com

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

Secure Energy Solutions, LLC 12-14 Somers Road, East Longmeadow, MA 01028 Mike Schmidt • mschmidt@sesenergy.org 413-733-2571 ext. 223 • www.sesenergysolutions.org

Cynthia A. Capobianco, CPA 60 Quaker Lane, Suite 61, Warwick, RI 02886-0114 Cynthia Capobianco • 401-822-1990 cynthia@capobianco.necoxmail.com

ViewPoint Sign and Awning 35 Lyman Street, Northboro, MA 01532 Bill Gavigan • billg@viewpointsign.com 508-393-8200 • www.viewpointsign.com

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

Business Broker

Gray, Gray & Gray, CPA 34 Southwest Park, Westwood, MA 02090 Paul Gerry, CPA • pgerry@gggcpas.com 781-407-0300 • www.gggcpas.com Performance Business Solutions, LLC 87 Lafayette Road, Suite 11, Hampton Falls, NH 03844 Jeff Hiatt • jdh@revenuebanking.com 508-878-4846 • www.revenuebanking.com Rubiano & Company, CPA’s 5 Austin Avenue, Suite 1, Greenville, RI 02828 Daniel J. Rubiano, CPA • dan@rubianocpa.com 401-949-2600 • www.rubianocpa.com Sansiveri, Kimball & Co., LLP 55 Dorrance Street, Providence, RI 02903 Joseph Mansour • jmansour@sansiveri.com 401-331-0500 • www.sansiveri.com Thomas Colitsas and Associates, CPA 103 Carnegie Center, Suite 309, Princeton, NJ 08540 Tom Colitsas • tcolitsas@tcacpa.com • 609-452-0889 “A Member of Franchise Pros”

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

Kensington Company & Affiliates 185 Roslyn Road, Roslyn Heights, NY 11577 David Stein • kstein@kensingtoncompany.com W: 516-626-2211 • M: 718-490-2218 • www.kensingtoncompany.com

Finance Business Financial Services 3111 N. University Drive, Suite 800, Coral Springs, FL 33065 Scott Kantor • skantor@businessfinancialsservices.com 954-509-8019 • www.businessfinancialservices.com Capital One Bank 499 Thornall Street, 11th Floor, Edison, NJ 08837 George Ziminski •george.ziminski@capitalone.com 732-767-4115 • www.capitalone.com Cashmaster Cash Solutions 2108 Trving Blvd., Dallas, TX 75207 Jayson Dunston • jdunston@cashmaster-us.com 214-747-1982 ext. 2 • www.cashmaster-us.com Direct Capital Franchise Group 155 Commerce Way, Portsmouth, NH 03823 Robyn Gault • rgault@directcapital.com 603-433-9476 • www.franchise.lendedge.com Fidelity Bank 465 Shrewsbury Street, Worcester, MA 01604 Sally Buffum • sbuffum@fidelitybankonline.com 508-762-3604 • www.fidelitybankonline.com

Back Office

GE Capital, Franchise Finance 201 Merritt 7, 2nd Floor, Norwalk, CT 06851 Ab Igram • ab.igram@ge.com 203-229-1885 • www.gefranchisefinance.com

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

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

IKMS Group, Inc. PO Box 6221, Manchester, NH 03108 Cliff Pratt • ctp@ikmsgroup.com 603-644-4683 • www.ikmsgroup.com 8

INDEPENDENT JOE • DECEMBER 2011

Thank You to Our Sponsors!

Directory of Sponsors Merchant Cash & Capital 450 Park Avenue South, 11th Floor, New York, NY 10016 Seth Broman • sethb@merchantcashandcapital.com 212-545-3185 • www.merchantcashandcapital.com Susquehanna Commercial Finance 2 Country View Road, Suite 300, Malvern, PA 19355 Brian Colburn • brian.colburn@susquehanna.net 443-996-1792 • www.susquehanna.com Trust Capital Funding 132 Adams Street, Suite 1, Newton, MA 02458 Mark Wesalowski • Mwesalowski@trustcapitalfunding.com 800-LENDER1 • www.trustcapitalfunding.com

Food Products CSM Bakery Products 1901 Montreal Road, Suite 121, Tucker, GA 30084 Marla Cushing • marla.cushing@csmglobal.com 770-723-2083 • www.csmbakeryproducts.com PepsiCo 315 Norwood Park South, Norwood, MA 02062 Bryan Gruttadauria • bryan.gruttadauria@pepsi.com 781-255-2663 • www.pepsico.com

Human Resources CareerBuilder.Com 400 Crown Colony Drive, Suite 301, Quincy, MA 02169 Erica Basso • erica.basso@careerbuilder.com 781-453-3581 • www.careerbuilder.com Diversified Solutions, Inc. 412 Long Pond Road, Plymouth, MA 02360 Chrishelle Gavoni • jkerchgavoni@comcast.net 508-746-6995 • www.diversified-solutions.com/dsi_dd.html The PCI Group 303 Molner Drive, Elmwood Park, NJ 07407 Robert Boffa, Sr. • rgb@pcihr.com 201-797-8000 ext. 223 • www.pcihr.com

Insurance

Legal Law Office of Carmen D. Caruson, PC 77 West Wacker Drive, Suite 4800, Chicago, IL 60601 Carmen D. Caruso • cdc@cdcaruso.com 312-606-8640 • www.cdcaruso.com Lisa & Sousa Attorneys at Law 5 Benefit Street, Providence, RI 02904 Carl Lisa, Sr. • clisa@lisasousa.com 401-274-0600 • www.lisasousa.com Paris Ackerman & Schmierer LLP 101 Eisenhower Parkway, Roseland, NJ 07068 David Paris • david@paslawfirm.com • 973-228-6667 www.paslawfirm.com “A Member of Franchise Pros” Zarco, Einhorn, Salkowski & Brito, PA 100 SE 2nd Street, 27th Floor, Miami, FL 33131 Robert Zarco, Esq. • rzarco@zarcolaw.com Robert Salkowski, Esq. • rsalkowski@zarcolaw.com 305-374-5418 • www.zarcolaw.com

Operations Access to Money, Inc. 628 Route 10 - Suite 8, Whippany, NJ 07981 Doug Falcone • dougf@accesstomoney.com 973-599-0600 • www.accesstomoney.com Belshaw Adamatic Bakery Group 814 44th Street NW, Suite 103, Auburn, WA 98001 Fran Kauth • fran_kauth@belshaw.com 206-718-3573 • www.belshaw-adamatic.com Bunn-O-Matic Corporation 1400 Stevenson Drive, Springfield, IL 62703 Todd Rouse • Todd.Rouse@bunn.com 800-637-8606 • www.bunn.com Comcast Business Services 500 South Gravers Road, Plymouth Meeting, PA 19462 Comcast National Sales • Dunkin_National_Sales@comcast.com 866-407-6338 • www.business.comcast.com/internet/index.aspx

The Hill Agency 5 Washington Avenue, Endicott, NY 13760 Rita Frailey • rfrailey.hilla01@insuremail.net 800-446-1775 • www.thehillagencyinc.org

Delphi/Fast Track 2+2 Drive-Thru Timer 3500 West Moore Avenue, Suite M, Santa Ana, CA 92704 Mike Pierce • mike@phaseresearch.com 714-850-1320 • www.fasttracktimer.com

KK Insurance Agency 541 Broadway, Long Branch, NJ 07740 Ashish Vadya • ashish@kkinsuranceagency.com 866-554-6799 • www.kkquote.com

DTT Surveillance 1755 North Main Street, Los Angeles, CA 90031 Mira Diza • mdiza@dttusa.com 800-933-8388 ext. 1441 • www.dttusa.com

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

Ecolab 8300 Capital Drive, Greensboro, NC 27409 Arliene Bird • arliene.bird@ecolab.com www.ecolab.com/Businesses/

Sinclair Insurance Group - Risk Management 4 Tower Drive, Wallingford, CT 06492 Matt Ottaviano • mottaviano@sinclair-insurance.com 203-284-3235 • www.srfm.com

eCube 5 Cold Hill Road, Building 20, Mendham, NJ 07945 Cardie Saunders • cardie.saunders@getecube.com 888-99-ECUBE • www.getecube.com

Starkweather & Shepley Insurance Brokerage, Inc. 60 Catamore Boulevard, East Providence, RI 02914 Sabrina San Martino • ssanmartino@starshep.com 800-854-4625 ext. 1121 • www.starkweathershepley.com

Energy Gateway, Inc. 451 Worcester Road, Charlton, MA 01507 Christopher Tremblay • Chris@energygateway.org 508-207-9740 • www.energygateway.com FireKing Security Group 101 Security Parkway, New Albany, IN 47150 Rick Uren • ricku@fireking.com 800-457-2424 • www.Fireking.com Sponsors continued on page 15 DECEMBER 2011 • INDEPENDENT JOE

9

Going for the Votes

by Matt Ellis

Behind the Scenes of the DCP’s Historic Merger Campaign It is a campaign.

Even as candidates for the office of President of the United States were holding debates and making campaign appearances this “other campaign” was taking shape. While discussions about debt ceilings and deficit plans were taking place at counters and customer tables inside Dunkin’ Donuts shops, the other campaign was creating its talking points and preparing to shift into fifth gear. Undoubtedly, the campaign for President in 2012 will go down in history as the most expensive, media saturated contest ever. The other campaign will likely be remembered as a watershed moment for Dunkin’ Donuts franchise owners. If successful, it could make Dunkin’ franchise owners the envy of the franchise world, according to franchisees close to the process.

note further that Dunkin’ franchisees will, for the first time in their history, have control over sourcing and procurement, as well as distribution.

For the last two and a half years, the National DCP has been involved in detailed and determined discussions with its regional boards and with Dunkin’ Brands to re-shape its structure and re-define its business model. As Bruce points out, if the merger is successful there will be no other entity quite like the DCP where its members—essentially every Dunkin’ franchise owner in the 6,200 store U.S. system—have

distributor for all Dunkin’ Donuts outlets in the 48 contiguous states for years to come is signed, but remains in escrow awaiting ratification. If it is not approved by the members, its terms would be rendered null and void.

“There is a compelling business and financial case to support this merger, said Bruce. “The contract offers many benefits to our members.”

At 8am on Halloween Day, three people sat down in the office of the former director of marketing for the DCP and began crafting the information cam-

The National DCP has launched its largest campaign ever—to describe the benefits of and encourage its members to vote for the merger of their four Regional DCPs into one new National DCP governed by a new Brand Relationship Agreement.

“This is the most important vote we are ever going to have,” according to Kevin Bruce, CEO of the non-profit cooperative. “The National DCP is the largest, dedicated, member-owned food service supply chain and distribution provider in the world and this merger vote is vital to determining our future.”

Franchisees involved with the relationship agreement and merger documentation echo Bruce’s assessment and 10

INDEPENDENT JOE • DECEMBER 2011

control over purchasing and distribution while receiving a dividend whenever the business runs a profit.

The Relationship Agreement between the National DCP and Dunkin Brands is contingent upon ratification of the national merger by a majority of DCP members. The contract that will establish the National DCP as both the exclusive supply chain provider and

paign. For the next two days—over pepper and onion pizza, coffee and Diet Pepsi— Melanie King, the Communications Manager for the National DCP; Leo Taylor, the DCP’s Chief Human Capital Officer; and Elaine Kramer, an outside expert consultant, sat around a conference table to plan the campaign.

“We looked at the calendar and realVotes continued on next page

Votes continued from previous page ized we had only about three weeks before our first road show. So we had to decide how we could be sure every member knew what was at stake,” said King. “Sure, we had done some major communications efforts in the past, but nothing like this. This was monumental.”

The campaign is focused in two areas: 1) clearly identifying for all franchisees the merger’s value proposition; and 2) encouraging them to vote—one way or the other.

“The vote is the most important message,” said King. “Our job is to convince every franchise owner from every region to attend one of their regional meetings, or take part in a webinar then fill out their ballots and mail them back. Our entire campaign was designed to inform the members that there is a vote coming up and it’s in their best interest to be part of it.”

With so much at stake, King and her team wanted to be sure they took advantage of every communications tool they had at their disposal. As they sat around the conference table, they realized the message had to be conveyed through multiple channels. That meant crafting emails that would be read be-

SINCE 1989

fore they were deleted; sending letters and postcards to every franchise owner; creating video messages from National DCP co-chairs Bill Donovan and Dipak Patel and Bruce; and something else, borrowed directly from the playbook of all successful politicians.

“Robocalls. They wanted me to find a company that we could bring in to make two thousand calls,” said Lisa Boisclair, who works with Melanie King in the communications office of the National DCP. “It was an eye-opening experience. We ultimately hired a California company that does robocalls for political candidates. It’s actually a lot simpler than I thought.”

Boisclair and King wrote the script that each DCP regional chairman would read for the pre-recorded message that is played back through the robocall. Each chairman had to read the script exactly right to be sure the message was clear and concise. The first to read was Michael Batista of the Northeast DCP. “Hello, this is Michael Batista, your Northeast DCP Regional Board Chairman. I am calling you to ask your support for the upcoming merger vote.

There will be 3 meetings for our Northeast DCP members to explain the new

contract with the Brand and the advantages of a merger. I encourage you to come to one of these meetings to find out more about the significant benefits of a merger to you and your operation.”

“Michael was a pro,” said King. “He got it right on the first take. Then we had to tell all the other guys, ‘Hey, no pressure but, Mike got it perfect the first time.’ We had some fun with that.”

After the robocalls, the team recorded video statements with Donovan, Patel and Bruce.

“We used a room at the Logan Airport Hilton to make the videos. The guys were loose and joking around. It went really well,” King said. The videos were sent as links in emails to members.

The multi-pronged communications approach was intentionally repetitive. All agreed the message had to be straightforward and consistent. The hope was that by reaching out to members through these different methods, they would realize what was at stake, why their vote mattered and how they could cast that vote.

“I hope what they take away is that it’s really in their hands. They have a Votes continued on page 13

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INDEPENDENT JOE • DECEMBER 2011

Votes continued from page 11 unique opportunity to secure the long term future of their supply chain system. We are unique to have a member owned coop that could own the purchasing and distribution,” said King.

“We knew we had to do an all out communications blitz so we could alert members that their votes really matter.

This has the very real potential to be a major game-changer for all of us,” said Bruce.

In preparation for their road show, the Taylor, King and Kramer team created 12 different collateral communications pieces. Copies of letters, postcards and notices about every meeting were compiled into binders.

“So far we’ve gone through one large box of heavy-weight printing paper and eight printer cartridges,” said King.

Thousands of letters and post cards were all mailed using the United States Postal Service first class service.

Envelopes were specially marked with the National DCP logo along with their specially designed “Merger Ahead” logo and a call to action, “Please Open Immediately!”

“I can’t say enough about the effort. The final results were tremendous,” said Boisclair.

Financing available for Franchisees.

“We did 40 books in two days,” said Boisclair. “It was an extensive process.

The sheets in the front were printed in landscape format and the ones in the back were printed in portrait format. We put all the sheets in separate plastic protectors so the hard part was making sure they were all facing the right way and were easy to read. Then I had to bind them all individually. My shoulder hurt when I was done.”

Distribution. Commitment. Partnership.®

King said the DCP typically does not use the mail to send materials to members but, in this case, they wanted to be sure the documents got into the hands of the members and didn’t get inadvertently tossed into the recycle bin.

The cards, letters and calls will soon be pouring in and the DCP is optimistic their message will be heard.

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9 Stores Currently Under Contract

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INDEPENDENT JOE • DECEMBER 2011

Directory of Sponsors Sponsors continued from page 9 Glacial Energy 24 Route 6A, Sandwich, MA 02563 Kristy Solt • kristy.solt@glacialenergy.com 340-201-4323 • www.glacialsales.com/dunkindonuts Hi-Tech Sound 53 Brigham Street, Unit 8, Marlborough, MA 01752 Gary Hanna • gary@hitechsound.com 508-624-7479 • www.hitechsound.com HME Drive-Thru Headsets 14110 Stowe Drive, Poway, CA 92064 Brady Campbell • bcampbell@hme.com 858-535-6034 • www.hme.com HS Brands International 500 Myles Standish Boulevard, Taunton, MA 02780 Michael Mershimer • mike@mershimer.com 800-723-1150 • www.hsbrands.com iTech Digital 4287 West 96th Street, Indianapolis, IN 46268 Natalie Himmel • natalie@itechdigital.com 317-704-0440 ext. 104 • www.itechdigital.com Jarrett Services ATM, Inc. 1315 Stelton Road, Piscataway, NJ 08832 Eric Johnston • ej@jarrettforcash.com 732-572-0706 • www.jarrettforcash.com Jera Concepts - Order and Production Management Software 17 Fruit Street, Hopkinton, MA 01748 Wynne Barrett • wynne@jeraconcepts.com 508-686-8786 • www.jeraconcepts.com

R.F. Technologies 542 South Prairie Street, Bethalto, IL 62010 Jennifer Morales • jenm@rftechno.com 618-377-4063 ext. 121 • www.rftechno.com SKAL East, Inc PO Box 303, 31 Eastman Street, Easton, MA 02334 Jim Zafirson • jim@skaleast.com 800-966-0106 • www.skaleast.com/index.cfm?keyword=dunkin Sprint 3 Van De Graaff Drive, Burlington, MA 01803 Caroline Fedele • caroline.fedele@sprint.com 781-367-1057 • www.sprint.com/ddifomembers SureShot Dispensing Systems 100 Dispensing Way, Lower Sackville, NS Canada B4C 4H2 Deanna MacKinnon • dmackinnon@sureshotdispensing.com 902-865-9602 ext. 144 • www.sureshotdispensing.com TredSafe/WalMart 450 West 33rd Street, New York, NY 10001 Ted Travis • ttravis@esoriginals.com 909-949-0495 • www.walmart.com Waste Management 107 Silvia Street, Ewing, NJ 08628 JoAnn Bradbury • jbradbury@wm.com 215-378-1417 • www.wm.com

Bedersob DD small.qxd:Layout 1

Macdonald Restaurant Repair Service, Inc. PO Box 61, 83 Pond Street, Norfolk, MA 02056 Mark & Debi Macdonald • debi@macdonaldcompany.com 508-384-9361 • www.macdonaldcompany.com

5/11/11

3:42 PM

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On the fast track, every decision counts.

Muzak 3318 Lakemont Boulevard, Fort Mill, SC 29708 Joanna Barrett • joanna_barrett@muzak.com 803-396-1656 • www.muzak.com New England Acquisitions 7 Babcock Street, Pawcatuck, CT 06379 Jim Calash • Papijoe2002@sbcglobal.net 860-235-1344 New England Drive-Thru Communications 12 Wildwood Road, Auburn, NH 03032 Angela Bechard • angela@nedrivethru.com 888-966-6337 • www.nedrivethru.com New England Repair Service - a div. of New England Coffee Co. 100 Charles Street, Malden, MA 02148 Jerry Brown • jerry.brown@necoffeeco.com 781-873-1536 • www.nerepairservice.com Payless Shoe Source 3231 SE 6th Avenue, Topeka, KS 66607 Matt Lemke • matt.lemke@payless.com 785-368-7530 • www.payless.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

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Buy Back continued from page 3 continue to sharpen our long-term growth focus on international expansion and improving our U.S. brand positions in KFC, Pizza Hut and Taco Bell, Long John Silver’s and A&W no longer fit our long-term growth strategy.” He announced that Long John Silver’s brand will be acquired by LJS Partners LLC, a consortium of prominent franchisee leaders and investors.

Whayne Hougland is Executive Director, General Counsel at LJS Franchisee Association and has been watching the developments closely. Hougland said approximately 30 percent of LJS franchisees have banded together to buy back the brand, and that the other 70 percent of franchisees are strongly in support of the move. The deal is slated to close in mid-December.

“We felt like if we were ever going to move this concept forward, we needed to have ownership change,” Hougland said of the vision and direction needed for the LJS brand.

Yum Brands is such a large corporation that the revenues of A&W and LJS, for example, were not separated out on the balance sheets. Further, Yum Brands had closed all corporate stores, similar to what Ground Round had done in New England eight years earlier.

When it came to steering the brand Hougland said, corporate “no longer had skin in the game.” He continued that most LJS franchisees want those at the top making the long-term strategy decisions to be, “people who understand the business and have a long history and will do a good job.”

Buy Back continued on page 17

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INDEPENDENT JOE • DECEMBER 2011

Buy Back continued from page 16

Excerpt from “The Buyout of America” by Josh Kosman:

Could Dunkin’ do the same?

Warner reduced the workforce in three and a half years [since 2004] by 28 percent to 3,800 from 5,300. This allowed Warner Music to borrow more money on top of the original loan that financed the buyout. Warner used the new loans to help pay its private equity owners $1.2 billion in dividends, about the same amount they had put down to buy the business. These job cuts also helped Warner come up with the money to pay the PE owners a $73 million management fee.

“It comes down to the math,” said restaurant economics researcher and consultant John Gordon of the San Diego-based Pacific Management Consulting Group. Gordon said the numbers worked in favor of the A&W and LJS. Both had been on the market since the start of the year and were not easy for the franchisor to sell. This resulted in prices low enough the A&W’s franchisee association and Long John Silver’s franchisees could afford to buy without assuming too great a debt to service.

THL Co-President Scott Sperling’s Boston office was in a tall glass tower at 100 Federal Street, near Amtrak’s South Station. His secretary greeted me at the firm’s thirty-fifth-floor entrance. She led me into his office and said I should wait there for Sperling, who would be back in a few minutes. I looked around.

Gordon’s background is centered in business operations and financial management. He said that urgency will be key in turning around the two brands and that franchisee leaders must put in place a strong, “turnaround CEO”.

Franchisee principals for the two brands have the expertise, he said, and should take over operational roles.

Gordon thinks that at this point, for franchisees anywhere to buy their brand, the math must work (debt service can’t be too high) and that franchisees must communicate, pool talents, and work together, to share those resources that only franchisees have.

Through the floor-to-ceiling windows, I could peer down at the planes flying into or out of Logan Airport. There were pictures of Sperling’s teenage children everywhere throughout the office: on his desk, on the walls, on a shelving unit that covered the bottom third of the glass window, and on an end table. Wherever I turned, I was looking at his kids. Almost hidden from view, just right of the entrance, was the framed front and back cover of what looked to be a 1970s-era record album. The front picture showed men wearing leather jackets and standing on a dirt road. The group had been renamed Hurdle Rate, the record was now called Cash on Cash. Sperling’s face and those of some of his partners had been superimposed on the bodies of some legendary band.

Song titles on the fake album cover’s back included “Leaving on a Private Jet Plane,” “Take These Bonds and Shove’ Em,” and “Edgar, Don’t Miss Those Numbers,” a reference to Warner Music CEO Edgar Bronfman, Jr. Sperling arrived and proceeded to spend the next hour saying things like, “Cost restructuring was not just to save costs. It was to make Warner a much more efficient and effective competitor.”

But his explanation was hard to believe. I kept thinking about how the private equity firms had taken more money out of the business than the company was saving through cost cuts. The faux album’s last track was “Money for Nothing.”

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Profits continued from page 7 business owners we tend to underestimate the value of customer information beyond the basic demographics of age, ethnicity, and income. We must understand why they keep coming through the door, and then leverage that information to boost profits. One way to accomplish this is to encourage your general managers to come out from behind the counter and talk to the customers on a more personal level.

Consider having them take a tray of product samples to a table of customers, describe the products, pass them around and ask the customers what they think or why they decided to come in today. What they tell you will help you determine appropriate marketing approaches to attract other customers like them. What’s more, by opening up the lines of communication with your customers, you may learn about an undiscovered problem, or hear what they wish you were still serving. You may even learn something about a competitor.

They say timing is everything, and I agree. Strategic discounting keeps your customers coming through the

doors during tough times, and builds long-term loyalties that will help you resume regular pricing when market conditions warrant. At that time you will be well positioned to reap the seeds you’ve sewn and improve your bottom line.

Perry Ludy is a senior executive, business consultant, and author of business books. He is president of LudyCo International. Contact Perry at perryludy@earthlink.net.

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May require up to a $36 activation fee/line, credit approval and deposit. Up to $200 early termination fee/line applies. Requires activation at time of purchase. Individual-Liable Discount: Available only to eligible employees of the company or organization participating in the discount program. May be subject to change according to the company’s agreement with Sprint. Available upon request on select plans and only for eligible lines. Discount applies to monthly service charges only. No discounts apply to secondary lines or add-ons $29.99 or below. Other Terms: Coverage not available everywhere. Nationwide Sprint and Nextel® National Networks reach over 278 and 279 million people, respectively. Offers not available in all markets/retail locations or for all phones/networks. Pricing, offer terms, fees and features may vary for existing customers not eligible for upgrade. Other restrictions apply. See store or sprint.com for details. ©2011 N065159 Sprint. Sprint and the logo are trademarks of Sprint. Other marks are the property of their respective owners.

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INDEPENDENT JOE • DECEMBER 2011

index

METRICS continued from page 5 Mohindra points out that under the PPE metric, IBM would look like a smaller business than, say, Cardinal Health because it has 10 times as many employees, even though its profit is higher than Cardinal’s. “That’s why you can’t use profit per employee as a threshold to define small business,” Mohindra adds. “You can measure a business in terms of size based on revenue or number of employees. But you can’t measure it based on a ratio of the two.”

But franchise owners are hoping that the PPE metric will come about to help them not only with the heath care reform mandates, but with other mandates that may come up in the future for larger businesses. “This will help franchisees in the future with other initiatives like the paid sick leave initiative,” says Chally. “It’s really saying, ‘Look, whenever you consider a small business, take a look at how you’re defining it. See if these people will go out of business because of it.’ I think the PPE metric could benefit franchise owners in the future indefinitely.”

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