Independent Joe #53 December 2018/January 2019

WHAT’S

BREWING

NEW MINIMUM WAGE PUSH

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ROBOTS

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SCHEDULING

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STRAW BANS

December 2018/January 2019

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for D D Independent Franchise Owners

DUNKIN’S

BEST SHOT Espresso-based Drinks are “The Future”

LABOR SHORTAGE

DRIVE-THRU

PROFILE

Innovative Ways to Attract Workers

Dunkin' leads the way

Three Decades as a Franchisee

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PUTTING COMMON INTERESTS ABOVE ALL ELSE Webster’s Dictionary defines loyal opposition as: “a minority party especially in a legislative body whose opposition to the party in power is constructive, responsible, and bounded by loyalty to fundamental interests and principles.”

Living in these days of hyper-partisanship, where our legislative bodies are controlled by different parties and our president has been a target of investigation and criticism since taking office, it’s hard to remember how effectively the American system of government had operated for 240 years. There has always been a difference of opinion about important policies and initiatives, but our differing parties, be they Federalist vs Whig or Democrat vs Republican, more often found ways to settle on common ground—recognizing that aligning around common interests was ultimately more beneficial for the nation and the nation was more important than their individual party.

We want to believe that Americans still believe in leaders who can balance their different perspectives so we can come together to make this nation its best, strongest and most successful. We will have to see how that goes…

Perhaps politicians can take a page from the book of successful businesses that have found ways to take a balanced approach to working for common goals.

In government, it’s supposed to be about creating a great country to best serve its citizenry. In business it’s about creating a great company to best meet the needs of its customers.

It is now Dunkin’ CEO Dave Hoffmann’s challenge to accomplish that very

objective and, toward that end, he has already introduced a new tone and a new vision of how to “Make Dunkin’ Great Again.” And, therein lies the common interest around which corporate and franchise owners can align.

At the corporate offices in Canton, Mass., Hoffmann has put his team in place to help him achieve those objectives, to do what is in the best interest of Dunkin’. Under his leadership, every brand employee has the same goal: to create great success and great prosperity for the brand.

At Dunkin’s franchised restaurants – from coast to coast – franchisees are motivated by the same mission and share the goal of creating success and prosperity for the brand—to “Make Dunkin’ Great Again.” The franchisee community in general, and this organization in particular, is eager to help Hoffmann and his team create success and prosperity, for all those who are associated with this brand. There exists an unquestionable commonality of interest, and unless that commonality of interest is obscured or obfuscated by conflicting objectives, all interests work cooperatively to achieve the ultimate goal even though they may disagree on the best way to achieve it.

I believe it incumbent upon both to approach the objective with the acknowledgement that the interests of both the corporate officers and the franchisees are in sync and, ultimately, are seeking the same outcome. The pathway to achieving those goals becomes muddy and more challenging when either side loses sight of their common interests. When corporate interests focus on shifting costs or

responsibilities onto the franchiseowner community for the wrong reasons, our interests diverge. When franchise owners rebel against corporate mandates for reasons other than achieving common goals, our interests diverge.

Across the franchising spectrum, there are many examples of how brands are blatantly putting their own interests ahead of their franchisees. 7-Eleven, Subway and Tim Hortons are just a few that come to mind. In these cases, franchisees stood in loyal opposition— pressing their brands to address the issues that are in their common interest.

At one time, Dunkin’ was in a similar situation, but today we’re fortunate there is a strong commonality of interest within the Dunkin’ system, which, seemingly, will remain for the foreseeable future.

Now, about the situation in Washington…

Ed Shanahan DDIFO Executive Director

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

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SUB HEADLINE

CONTENTS From the Executive Director: Putting Common Interests Above All Else. . . . . . . . . . . . . . . . . . . . . . . . . . 3

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What’s Brewing: A Look at State Issues Around the Footprint. . . . . . . . . . . 7 Hey, Want a Job? Franchisees pull out the stops to attract workers in a tight labor market. . . . . . . . . . . 10 Look at the Law: Buyer Beware. . . . . . . . . . . . . . . . . . . . . . . . . 12 Can I Take Your Order?

Dunkin' leads the way in speedy and customized service. . . . . . . . . . . . . . 13

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COVER STORY Espresso: Dunkin’s Best Shot . . . . . . . . . . . 18 Franchisee Profile: Neal Angelini. . . . . . . . 20 Directory of Business Members .... 24 Photo Story: Joy in Childhood Foundation. . . . . . . 26

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Independent The Magazine for DD Independent Franchise Owners December 2018/January 2019 Issue #53 Independent Joe® is published

by DD Independent Franchise Owners, Inc. Editors: Edwin Shanahan, Matt Ellis Contributors: Cindy Atoji-Keene, Erin Bass, Wendy Jacobson, Scott Van Voorhis

REACH A SPECIFIC AUDIENCE

Business Member Coordinator: Joan Gould Creative Director: Caroline Cohen

Direct all inquiries to: DDIFO, Inc. 2 First Avenue, Ste. 127 – 3, Peabody, MA 01960 978-587-2705 • info@ddifo.org • www.ddifo.org

Advertising in Independent Joe is the yeast that makes the dough rise...

Contact Joan Gould to Advertise 978-933-1123 or joan@ddifo.org 6

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

DD Independent Franchise Owners, Inc. is an Association of Member Dunkin’ Donuts Franchise Owners.

INDEPENDENT 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 © 2019 Printed in the U.S.A.

WHAT’S

BREWING A LOOK AT STATE ISSUES

By Scott Van Voorhis Plastic straw bans, predictive scheduling, and the increasing use of automation in quick-service restaurants. These are some of the trends Dunkin’ and other quick service franchisees can expect to be hearing more about as we head into 2019.

The big Democratic gains in the midterms are the biggest new development on the political and regulatory scene and will likely result in a number of consequences.

The Democrats’ successful campaign to regain control of the House, combined with gains at the state level, are already reenergizing the effort to raise the national minimum wage to $15 an hour.

The wage increases – combined with the tightest labor market in years – is fueling increased interest in automation by quickservice chains.

And amid all these changes, Dunkin’ and other franchise owners may soon also be dealing with irate environmentalists as they target one of the great issues of our times, banning plastic straws.

AROUND THE FOOTPRINT an hour one of the first things they do after formally taking charge in January, CNBC reports.

The designated Democratic chairman of the House Committee on Education and the Workforce, Virginia Congressman Bobby Scott in one of his first acts, is planning to introduce legislation that would gradually raise the current minimum to $15 from $7.25 per hour, according to the business news network. House Speaker Nancy Pelosi is already on record supporting previously filed legislation mandating a $15 an hour minimum wage.

Of course, even if the Democraticcontrolled House passes a $15 an hour minimum wage bill, it is going nowhere fast. Republicans now control 53 of 100 seats in the Senate after a gain of two during the mid-term elections.

But banging on the $15 an hour issue is obviously good politics for the Democrats as we head towards the 2020 presidential election, analysts say.

House Democrats aren’t beating around the bush, that’s for sure.

Still, the real action, at least in terms of minimum-wage legislation that actually passes and goes into effect, continues to be out in the states.

In fact, the House’s incoming majority leadership plans to make the rollout of a bill that would hike the minimum to $15

Democrats flipped a number of governorships and state legislatures this November, increasing the number of democratic

New minimum wage push

state government trifectas – where one party has control of the executive and legislative branches of state government – by six. There are now 14 Democratic state trifectas compared to 23 Republican.

One of those state’s flipping to Democratic Party control was Colorado. Voters in the Rocky Mountain State have already approved minimum wage hikes leveling off at $12 an hour in 2020, but state senator-elect Jessie Danielson, who had been the Speaker pro tempore of the Colorado House of Representatives, plans to submit a bill that would allow individual towns and cities to set their own minimums and go higher, the Denver Post reports.

Republicans aren’t going down without a fight. Rick Snyder, Michigan’s outgoing Republican governor, inked a bill that would delay from 2022 to 2030 plans to increase the minimum wage from $9.25 to $12 an hour.

Robots to the rescue?

To say there is a labor shortage in the quick-service industry does not do justice to the situation.

Companies across the U.S. are trying to fill a million more jobs than they were a year ago, according to federal stats cited

by The Wall Street Journal.

And the biggest chunk of the increase

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

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WHAT’S

BREWING – some 200,000 – comes in the accommodation and food service sectors. Given the combination of a labor shortage and rising wages, it should come as no surprise that the quick-service industry is increasingly experimenting with automation.

However, it’s important to not buy into all the hype related to automation. To read some tech zealots, quick-service restaurants will be filled tomorrow with robots taking orders, boxing donuts and pouring coffee.

Wiederhorn tells Forbes that ordering tablets and kiosks haven’t worked out as smoothly as expected. And he calls the idea of robots flipping burgers “gimmicky.”

But the restaurant chain chief does see big potential in automation as it relates to third-party delivery services, which Fat Brands is turning to as it looks to reach customers at home. By going the thirdparty route, Fat Brands is gaining the technological edge without the headaches of running the delivery app itself.

“Delivery services have taken on the whole technology headache because they host your menu and keep the app current and all of the programming burdens have been transferred to app providers,” Wiederhorn tells the business magazine. “There is a tremendous amount of automation that restaurant delivery services are taking on.”

Predictive scheduling Philadelphia became the latest major city to pass a “fair workweek” law. Mayor Jim Kenny signed legislation on Dec. 20 that requires employers with more than 30 locations and 250 workers to post schedules two weeks in advance, pay more if the shift is changed within that two-week window, and offer additional shifts to current workers before hiring.

The new law, which kicks off in 2020, comes after a nearly year-long campaign by local unions and affiliated organizations.

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Vimeo/Miso Robotics

One quick service chief executive who seems to be pushing the envelope with automation while also keeping a grip on reality is Andy Wiederhorn of Fat Brands, which includes Fatburgers and Buffalo’s Cafe.

Philadelphia is now the second-largest city in the country with a fair scheduling law, behind only New York, which passed predictive scheduling regulations in 2017.

In early December, three restaurant industry groups went to state court in a bid to scrap the New York law, which requires that employers schedule employee shifts two-weeks in advance and pay fines ranging from $10 to $75 if they make changes within that window, Nation’s Restaurant News reports.

The lawsuit by the New York State Restaurant Association, the National Restaurant Law Center and the International Franchise Association (IFA) contends the new law has forced quickservice restaurants in the Big Apple to shell out hundreds of thousands of dollars in “premiums” to employees after making changes to their shifts, the restaurant publication reports.

“This policy makes it prohibitively expensive for businesses to quickly adapt their staffing to fit changes in market demand, unexpected employee absences, or myriad other staffing issues,” the IFA said in a statement.

Chicago may be the next major city to pass scheduling regulations.

The nation’s third largest city has been

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

mulling a “Fair Workweek Ordinance” for more than a year and recently created an Office of Labor Standards to enforce a newly-raised minimum wage – rising to $13 an hour next summer – and a new paid sick-leave law.

The scheduling law being debated in the Windy City includes all the standard provisions – two weeks’ notice and premium pay for changes made within that window – as well as a “right to rest” rule that gives employees the ability to reject a new shift that begins less than 11 hours after they were last on duty, according to The National Law Review.

Philly and Chicago, in turn, are following the lead of San Francisco and Seattle, which were the first major cities to pass predictive scheduling laws, followed by the state of Oregon last summer.

New Hampshire may have passed the least-taxing predictive scheduling bill, as far as franchise owners are concerned, barring retaliation against employees who request flexible work schedules, with Vermont also having put a similar “right to request” law on its books.

Banning straws the latest activist cause As if Dunkin’ and other franchise owners didn’t have enough to deal with, there is a growing movement, at least in blue states and cities, to ban plastic straws.

WHAT’S

BREWING While plastic straws may not seem like a major environmental threat given all the other issues facing the world right now, the slender but non-biodegradable pieces of plastic have become Public Enemy No. 1 in the eyes of some activists, who complain they are washing up beaches.

California, not so surprisingly, is leading the way. Gov. Jerry Brown recently signed into law a ban prohibiting full-service restaurants from automatically passing out plastic straws to customers.

Diners who still want that plastic straw experience will have to specifically ask for them – and hope not to draw dirty looks in the process.

Supporters say it will help prevent straws from winding up in the ocean and harming marine animals.

“It is a very small step to make a customer who wants a plastic straw to ask for it.

And it might make them pause and think again about an alternative,” Brown said

in a statement, published in Restaurant Business.

over $40. That will rise to $80 for further violations.

Restaurants that flout the plastic straw ban could face fines of $25 a day, leveling off at $300.

New York City, Hawaii and San Francisco are now considering joining the war on plastic straws as well.

Cities are also debating whether to jump on the anti-plastic straw bandwagon, with Seattle and St. Petersburg, Fla., having passed laws of their own. St. Petersburg’s City Council recently voted to ban plastic straws starting in 2020, with an immediate banishment of Styrofoam.

Summing up

“This is such a big victory for our city," council member and plastic ban leader Gina Driscoll told the Tampa Bay Times. "It really shows that St. Pete is ready to lead the way in environmental stewardship."

In fact, St. Pete has outdone California on fines. While you’ll get off with a warning the first time you are caught handing out plastic straws in St. Pete, the second time you’re caught you’ll have to fork

As we’ve seen, rules and regulations have a way of eating away at profit margins for small business owners. The resurgence of efforts on the federal and state level to raise the minimum wage to $15 an hour bears watching, as does the spread of predictive scheduling regulations and the growing movement by states and cities to strictly regulate or outright ban the use of plastic straws. Automation promises to provide some relief given both rising wages and a tight labor market, but, as we have seen, having a strong game plan to make new technology work for you and your business is key. Throughout the year, Independent Joe will continue to monitor the issues, regulations, trends and new technology that will impact how you operate your business and profit from it.

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“ It is a very small step to make a customer who wants a plastic straw to ask for it. And it might make them pause and think again about an alternative"

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 9

FEATURE

local big box stores, and other retail jobs, Gallo says hiring is a priority for all, not just for HR. White Donuts has mounted “help wanted” boxes on drive-thrus and windows containing hiring cards, which give a link to the White Donuts’ “two minute application.” This is a simple list of five to eight questions, after which the form goes directly into the store manager’s email.

Gallo calls the move an important step in the “talent race.”

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e don’t need to tell you about the labor shortage in QSR restaurants. It’s probably one of the things that keeps you up at night.

It’s definitely an issue for Alex Fernandez, who owns one Dunkin’ shop in St. John’s County, Florida, and five other locations in neighboring counties.

With an unemployment rate of 2.8 percent, St. John’s County ranks lower than the national average. Considered part of the Jacksonville metro area, St. John’s County’s major city is St. Augustine, which is home to many golf courses and a tourist industry served by restaurants, fast food chains, and hotels – all of which are competing for a shrinking workforce. This county can serve as a case study for the struggle for low-wage workers. One small business owner there says that there’s such a finite talent pool that employees can play “restaurant bingo,” hopping from one job to another. At one point, the local press reported a Dairy Queen temporarily closed its doors because the management couldn’t rely on its staff to keep the shop running.

HIRING EVERY DAY

For Fernandez, who has been in the Dunkin’ system since 2011, the labor crisis has prompted him to re-evaluate his approach. In this highly competitive marketplace, Fernandez says he wants to “be hiring every day.” How does he approach it? He instituted an employee referral program, paying $25 to the employee who

By Cindy Atoji-Keene refers a successful candidate. He also posts signs to solicit walk-up inquiries and posts ads on local job sites. He says his managers and staffers are constantly on the lookout for available help.

And, he puts his money where his mouth is. Fernandez boosted wages for incoming employees well beyond minimum wage of $8.25 per hour and then instituted financial bonuses for workers who reach 90 days of service and then one year of service.

Then there’s recruiting. Fernandez found a creative approach, hiring workers from a women’s substance abuse recovery home.

He found people who are looking for ways to re-establish themselves in the community and an opportunity to add to his staff—a situation he found to be mutually beneficial. “We have had several that have grown from crew member to shift leader or store manager. They made a big turn in their life,” he says.

In Ohio, where Tiffany Gallo is director of human resources and training for White Donuts – a group of 24 Dunkin’ stores in the Youngstown area – there is a company-wide emphasis on hiring.

“It’s not just up to the field team in the offices – it’s now a constant conversation and constant talk, and all hands are on deck for hiring,” says Gallo, who told us in December that over 10 percent of her 700 total positions were currently open. With competition coming from manufacturing,

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“Every time we hand out a business card, on the back is hiring information and our hiring website.” The company has also raised wages above minimum wage and does reviews twice a year, re-assessing salaries to keep crew members happy.

Such strategies have become par for the course for some time across the Dunkin’ footprint. Even before he stepped out of the CEO’s office last year, Nigel Travis told Business Insider that labor shortages and the battle to hire and retain workers is the biggest problem facing the fast-food industry. This year, Dunkin Chief Operating Officer Scott Murphy was quoted in The Wall Street Journal saying, "I've never seen the labor market this tight. We spend a lot of time training people and a month later they walk out the door."

COSTLY TURNS

Every time the revolving door turns in a quick service restaurant it costs the operator about $2,000, according to data from TDn2K, a Dallas-based restaurant research firm that studied the costs of replacing the average hourly restaurant worker.

At that price, automation begins to look a lot more attractive. And, while mobile ordering apps and in-store ordering kiosks come online, many operators are finding the new technology still requires people to work alongside the machines and be able to assist customers who have trouble with the user interface or questions the computer can’t answer.

According to research from the MIT Technology Review, the stress employees feel to learn new gadgetry – especially if their employer is skimpy on training – is a factor contributing to the record-high turnover of fast-food employees.

The idea of a robot flipping your burger and a drone delivering it to your table is still more science fiction than reality. But, the industry is finding more mundane tasks for robots to perform, like cleaning and printing labels. Such automation can improve an operator’s efficiency while sparing hourly employees from menial work and keeping them more customerfocused. In a super-tight labor market, that can make a real difference.

INVESTING IN PEOPLE

Long before this current labor shortage exploded, franchisee Ed Wolak was taking steps to invest in his people. The Wolak Group has grown to nearly 100 Dunkin’ restaurants in New England and upstate New York and employs close to 2,000 people. He provides incentives like flexible work schedules and discounts on food and beverages to all his employees. Those who reach certain mileposts, like 1,000 hours of service, can receive health benefits and tuition reimbursement as well.

Last year, the Wolak Group opened a Career Development Center in Syracuse, NY, where employees can seek mentorship and gain knowledge to keep them competitive in today’s workforce. It also serves, Wolak says, to educate the public about opportunities that exist generally within the quick service industry and specifically within the Wolak Group.

"We built it this way so employees could get real world experience while getting trained," says Wolak, who believes it is the only career development center of its kind in the Dunkin’ system.

"The quick service restaurant industry has created lots of opportunities for individuals, but generally it gets a bad rap," Wolak told Independent Joe. "Yet there are numerous examples of people who start in entrylevel jobs and with mentoring and hard work they earn their way to top management.”

Of course, not all those who take jobs at a Dunkin’ shop are looking to make a career in the QSR industry. Many are just working for the paycheck. Scott Absher, co-founder and CEO of ShiftPixy, a tech platform that matches employers with qualified workers, advises employers consider giving workers flexibility in their schedules, if they can—especially if they want to attract millennial workers. That demographic, he says, puts great value on flexibility and control over when they work.

“Employees in the QSR industry don’t always have much control over which shifts they work and how many hours they receive, which feeds into the high turnover seen in the industry. One strategy operators can consider is leveraging concepts from the gig economy and offering more control over schedules,” Absher says.

On the employment page of its website, the Wolak Group states, “We have fun and celebrate our successes together.”

They offer flexible scheduling “because we value the skills that every employee brings to our restaurant.”

Recognizing that employees want to be heard and valued, White Donuts has implemented a program called CrewApp, which gives frontline employees a simple way to communicate, remain engaged and be more successful. “We emphasize family atmosphere, core values, and emphasize praise and recognition,” says Gallo. “It’s a pretty big deal.”

Bottom line, the fast food worker shortage “is probably going to get worse before it gets better,” says Gallo, who is optimistic that with innovative ideas and a commitment to truly engage with employees, the company can continue finding quality people to work behind their counters.

Something else that makes a difference is workplace culture. The concept of creating a place where people enjoy coming “We are willing to give anything a shot,” to work has taken on more importance she says. as employers have watched staffer after staffer leave for more money elsewhere or a different challenge.

Fernandez defines the strategy in simple terms: “Keep workers happy, and “One day we advertised our 99 cent breakfast oatmeal. they’ll stay.”

That morning the manager called me to say that we sold

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GROW YOUR SALES

10% OR MORE out all of our oatmeal. I noticed that whatever we advertise on the LED sign sells fast and usually sells out.”

GIANNA D’ANGELO Dunkin’ Donuts®, Everett, MA

Learn more at watchfiresigns.com/donuts

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 11

A LOOK AT THE LAW

Buyer Beware

BY DAVID S. PARIS

Avoiding the pitfalls of successor liability when purchasing a network

O

ver the last decade, our firm has represented hundreds of Dunkin’ franchisees who have expanded their networks through the purchase of existing restaurants. The vast majority of these acquisitions are transacted as purchases of tangible (e.g. furniture, fixtures, and equipment) and intangible (e.g. telephone numbers) assets, as opposed to the purchase of the stock or membership interests in the seller’s companies. The popularity of asset purchases is largely attributable to the notion that the buyer is acquiring the assets in a new entity, free from all (or most) of the seller’s liabilities.

Many franchisees, however, are unaware of those few, seller liabilities that can actually attach to their new acquisition entity, or even penetrate its shield to create personal liability for its individual members. This article will explore some of these lesser known pitfalls and provide guidance as to how a buyer can mitigate and protect against any resulting successor liability.

I. PAID SICK LEAVE Numerous states have enacted laws allowing employees of certain businesses to earn and accrue paid sick time. While the specifics of these laws differ among states, some statutes allow the employees to carry forward a certain amount of the unused portion of their accrued sick time into the following year. These tranches of accrued sick time can create significant risk for a buyer acquiring a Dunkin’ network. More specifically, those employees of the seller, hired at the time of closing, may be permitted to retain and use the accrued sick time from their prior employment.

Under such circumstances, the buyer may even be required to compensate those employees for any unused portion of that time. Given the foregoing, a buyer acquiring a network of existing Dunkin’

restaurants should, at minimum, request all diligence relating to the seller’s reports and practices relating to paid sick time.

II. VIOLATIONS OF THE FAIR LABOR STANDARDS ACT Courts in certain states throughout the country have determined that a successor-employer may be held financially accountable for its predecessor’s wage-and-hour violations under the Fair Labor Standards Act (FLSA). In the context of a Dunkin’ acquisition, a buyer (and the individuals who own the buying entity) that hires the seller’s employees at the time of closing may be exposed to liability for the seller’s failure to pay those employees minimum wage and overtime in accordance with the governing laws. In light of this trend, a buyer should understand and inquire about potential FLSA and state wage-and-hour violations when acquiring a Dunkin’ network to assess the risk of successor liability stemming from a predecessor’s non-compliant action.

III. UNPAID SALES/USE TAX State statutes require Dunkin’ franchisees to collect and remit sales tax in connection with most transactions involving the sale of food and beverages at their restaurants. Most, if not all, of these statutes will render the buyer of a Dunkin’ network liable for any of the seller’s unpaid sales taxes. Fortunately, state taxing authorities implement a process through which it can issue the buyer a letter or certificate, absolving the buyer of any such successor tax liability.

The requirements for tax clearance are unique to each state; some processes simply require the buyer to mail a request for clearance to the governing agency; others are more comprehensive, requiring the parties to escrow all or part of the network’s purchase price until clearance

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is issued. Accordingly, it is critical that the buyer of a Dunkin’ network consult with his/her legal and accounting professionals to ensure that all necessary steps are taken to comply with the relevant state’s clearance process.

IV. STEPS TO AVOID OR MITIGATE SUCCESSOR LIABILITY Each of the concepts discussed above presents a formidable source of entity and personal liability for a franchisee purchasing a network of Dunkin’ restaurants. To protect and/or mitigate against such successor liability – in addition to requesting the appropriate diligence materials – there are certain terms and conditions a buyer can include in the governing purchase agreement. Examples of these provisions include: 1. Require that the seller represent and warrant that he/she has complied with all rules, regulations and laws governing the operation of its network; 2. Require that the seller entity AND the individual owners of the seller entity provide indemnification for any damages arising from successor liability; and 3. Require that a portion of the purchase price be held in escrow for 45–90 days to serve as a fund for reimbursement of any damages arising from a breach of seller’s representations and warranties.

Of course, any decisions regarding a sale or transfer of any of your assets should be done with the guidance of an experienced attorney or advisor.

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David S. Paris is a founding partner of Paris Ackerman LLP, a transactional law firm specializing in franchising, licensing and distribution, and commercial real estate.

Dunkin' leads the way in speedy and customized drive-thru service.

M

obile apps, dedicated lanes, digital menu boards … the future of drive-thru service has changed. Dunkin' Brands has made an almost 70-year legacy out of its commitment to quick, friendly service. As Next Generation store concepts and new innovations in coffee products come online, franchise owners must serve more sophisticated customers in all age groups—and they must do it faster.

Victor Carvalho owns the original Dunkin' Donuts store in Quincy, Mass. He also opened the system’s first Next Gen location down the road last January. An example of the juxtaposition between yesterday's and today's franchisee owners, Carvalho operates his two locations very differently. His Next Gen store has three drive-thru lanes, digital menu boards and a two-point confirmation system, which Dunkin' considers a best practice for ordering. His original location doesn't have a drive-thru at all and still relies on face-to-face customer service.

CAN I TAKE YOUR ORDER? 2.5 minutes

Dunkin' Standard Drive-Thru Time

3.9 minutes

Average Time of Brands in QSR Study

“What's appealing about Next Gen is we can service both traditional and younger customers, and everybody walks away feeling like they got what they came for,” he says.

According to a QSR magazine 2018 Drive-Thru study,

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 13

FEATURE

By Erin Bass

show up as a different color so that staff can monitor drivethru progression on screen at all times.

“Today, in the traditional drive-thru, you have to stop at a speaker box, we pull up your order and start assembling at that point, and you have to get in the lane and stop and speak to someone,” says Carvalho. “A big benefit to the on-the-go lane is you don't have to stop and talk to anybody. You're bypassing that traditional lane and don't stop at any point until you get to the window.”

In that way, on-the-go reduces a typical two-minute drive-thru time to 20-30 seconds, a big perk during peak traffic times. restaurant operators agree their most important responsibilities in the drivethru are accuracy, customer experience and speed of service. Mobile-powered delivery and kiosk ordering are leading the way in off-premises – or dining done outside the location – and most major quick-sale restaurants report 70 percent of their sales coming from the drive-thru window.

Eric Eskander, CEO of Cadete Enterprises, which owns 59 Dunkin' Donuts shops in Massachusetts, says some of his highestvolume locations make 80 percent of their sales from the drive-thru. “Especially here in New England, historically our focus was always on the drive-thru, so I think that set us up to be in a good place right now,” he says. “The drive-thru could be considered the most important part of our business.”

Eskander has two Next Gen stores under construction and 39 locations with a drive-thru. He says the biggest challenge today is satisfying customers' taste profiles. “What they expect has changed so much that drive-thru service has become more difficult to manage,” he says. “Orders and beverages have become more complicated as a natural evolution, but at the same time you have to be more focused on managing the process in order to accommodate them.”

The QSR study addresses the rise of items per transaction as a factor in slowing down drive-thru times. As Eskander reminds us, customers aren't just ordering black coffee anymore. There are so many ways a customer can ask for a beverage to be prepared, plus there are specialty drinks which take far longer to prepare than a hot cup o’ joe. The brands included in this year’s study clocked in at an average of 234 seconds, compared with about 225 seconds last year.

Dunkin's standard is 2.5 minutes or 150 seconds, but that time has fallen drastically where dedicated on-the-go lanes are being used.

Carvalho's Next Gen store was first to demonstrate how a drive-thru lane designed for customers to pick up an order they placed before arriving at the shop can be more efficient than a traditional drive-thru where the customer places on site, then drives up to the window to pick it up. The Next Gen stores have a special printer that spits out the order so it can be prepared ahead.

Two-point confirmation by the customer happens upon ordering and again at the window before their order is handed to them. Monitors connected to loop detectors alert staff when a car hits the lane.

Carvalho explains that as a vehicle drives over the loop detector, it communicates with the monitor, and on-the-go vehicles

14 INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

Eskander has an on-the-go lane planned for one of his Next Gen locations and says speed is ingrained in the culture of his restaurants. “The first thing I do when I walk in is ask how are we running today, how is everybody deployed and how can we improve?” he says. “Can we shave a second here, shave a second there?”

Drive-thru timers also help identify opportunities for improvement and speeding up large orders, while other processes ensure accuracy. Printers have taken the place of employees marking cups, and orders are confirmed through digital boards at Next Gen locations. “The customer can see and make sure that's what they asked for,” says Eskander.

Eskander also stresses the importance of staffing for successful drive-thru service. “Management of a restaurant that has drive-thru and front counter service is always heavy toward drive-thru production,” he says. It might take up to six employees to staff the drive-thru, not including the sandwich station, compared to two or three at the front counter.

The QSR study mentions expertise at the drive-thru for quick-serve restaurants like Dunkin' and states “that expertise gives most major quick-serves a leg up when it comes to staffing, packaging, expediency, and all of the other systems necessary

DRIVE-THRU for running a robust off-premises dining program.”

The study credits Dunkin' with making a splash by announcing Next Gen prototypes with mobile-order-only lanes in the drive-thru but says that not all brands have the real estate luxury of incorporating two separate lanes.

Eskander has a mobile-only lane planned for one of his locations but not the other due to lack of space. In Carvalho's case, his Next Gen location has an additional third lane that hasn't even been allocated yet. “The middle lane today is not functional because we don't know what that's going to be just yet,” he explains. “It will be a more technology-based lane, maybe Google Voice interacting with Artificial Intelligence.”

Some of the executives interviewed in the study, like Taco Bell Chief Operating Officer Mike Grams, say they're not sold on mobile ordering quite yet. Carvalho admits he wasn't sure about it either, but says the lane is working well.

“Customers like the convenience and speed factor,” he says. “They like that they're building their drink the way they like it, and they can store their orders and fire them every day. People are coming back and using it again and again. Millennials are less conversational so they prefer to do it through technology. It's definitely working.”

Robots and Artificial Intelligence (AI) are discussed in the QSR study as possible tools important for the future of drive-thru operation, but on the flip side some brands are using staff members to help personalize the drive-thru experience. Starbucks features video of a barista on its menu boards, while Chick-fil-A sends an employee out to the drive-thru to talk to customers.

“As we move forward, you need that mix of technology and customer service,” says Carvalho. “It's kind of like the bank who has the ATM and the drive-thru. The future of the drive-thru will probably always incorporate some of both.”

In that future, the customer will likely be served by a machine. The question is whether she will have a choice of also being served by a person.

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INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 15

Espresso-based drinks are “the future”

By Matt Ellis

Photos by Caroline Cohen

COVER STORY

DUNKIN’S BEST SHOT

16 INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

E

spresso is a term derived from the Latin "to press" and the Italian word for "to press out." It refers to strong black coffee made by forcing steam through finely-ground coffee beans. In Italy, people stand and socialize at their local espresso bar while they wait for their hot shot to be concocted. Mary Beth Albright, the food writer for The Washington Post, says “Espresso is social.” Her 2018 column, “How to drink coffee like an Italian” declares “A happy reverence surrounds espresso, in the way of an honored guest dropping in for five minutes during a party.

The guest leaves a resonant sparkle in her wake, but the point was the visit itself.”

Dunkin’ franchisee Deo Braga, who like

many long-time New England operators is originally from the Azores, says he learned to drink the dark, bitter shots of hot espresso with sugar. Today he is excited at Dunkin’s revamped espresso strategy.

“It is the future,” he says. “It will make Dunkin’ bigger than it is now. Without espresso, Dunkin’ would be in a weak position.” From his perch on Cape Ann in northern Mass., Braga sees that iced espresso-based beverages are popular with his teenage and 20-something customers—especially young girls.

His observations match what researchers are finding. According to a survey by the National Coffee Association (NCA), 48

percent of millennials say they had a cup of coffee they consider to be gourmet the day before.

DDIFO Restaurant Analyst John Gordon, founder of Pacific Management Consulting Group, confirms the purchase patterns of younger customers “are more specialty coffee oriented.” All those lattes, cappuccinos and macchiatos, he says, also help boost franchisee bottom lines. “The profit on specialty coffees is much higher than the profit on drip coffee.”

Maybe that’s why chains like Dutch Bros Coffee, the country’s largest, privately held drive-thru coffee company, doesn’t even serve drip coffee. Drip may be where

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 17

COVER STORY

the retail business started, but Gordon says it is moving into espresso-based specialty beverages because that’s what makes smart business sense. “Any effort to get away from drip coffee and get into more [specialty] coffee is gross profit and revenue positive.”

Franchisees like Luis Ribeiro, who has a network of stores in Rochester, NY, is among those who remember Dunkin’s original espresso-based beverage roll out in 2003. At the time, Dunkin’ called their foray an “Espresso Revolution,” promising “freedom from espresso oppression and the tyranny of long waits, high prices and confusing sizes.”

It was a clear shot at Starbucks, the category leader, which popularized espresso beverages for Americans in the mid-1980s. But, through the years, espresso did not revolutionize the Dunkin’ business.

“We told them the old espresso wasn’t great,” says Ribeiro, who is also Portuguese and grew up drinking espresso.

Today, he says he is optimistic about Dunkin’ espresso.

“It’s a category we need to be in and this time we have the right flavor and taste profile. We realized it was time to rebrand the category and give franchisees better quality machines and better quality coffee,” he says.

At Dunkin’s annual media day in November, Chief Marketing Officer Tony Weisman said, “Our espresso is so good, you don't have to go to Starbucks.”

" Any effort to get away from drip coffee and get into more [specialty] coffee is gross profit and revenue positive."

At Ribeiro’s Next Gen shop, the new espresso machine sits right behind the register. “It draws a lot of attention, it’s lit up, it’s interactive and the customer can watch the employee making it and hear him banging it,” he says in reference to the practice of banging the pitcher of steamed milk on the counter to remove any bubbles before it is infused into a latte, cappuccino or macchiato.

“There is a buzz around espresso right now, the question is can we make it stick?” he asks.

Braga believes the key to securing a

18 INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

strong position in the retail espresso space is making a better cup than people can make at home. “You can’t imitate this at home. You would have to have the best equipment and the best beans,” he says.

Dunkin’s espresso machines are made

by Schaerer and cost about $12,000.

Some busier shops are stocking two machines to keep up with the anticipated rush and make good on the promise Dunkin’ CEO Dave Hoffmann made at the recent media day.

“For us, it's get in, get out, and get on your way. That's the Dunkin' way.”

To accomplish what Weisman referred to as specialty drinks that are “blazingly good and blazingly fast,” Dunkin’ reimagined the work circles behind the counter by finding the optimal place to locate the machines to quicken workflow. It devised recipes to optimize speed and simplicity and provided fourto five-hour training sessions for store managers nationwide, according to Business Insider.

“There are a lot of competitors in this space and we think if we go after the best espresso, and we have the machines and training and the people to deliver against that, we think that’s the best place we can be,” Hoffmann says.

Going full steam ahead into espresso gives Dunkin’ a competitive advantage against convenience stores, which have ramped up their coffee offerings in recent years. According to Gordon, chains like 7-Eleven, Circle K and AMPM won’t invest the capital into buying espresso machines and training counter workers to become baristas.

Plus, he points out, their clientele is more blue-collar and may not want to spend the additional money for a specialty drink.

McDonald’s, which is also a significant player in any coffee war, has planted its Golden Arches in the specialty coffee arena as well, and routinely offers $2 lattes and macchiatos on its McCafe menu. But, Dunkin’ brass seems more intent on capturing the potential

Starbucks customer with its latest espresso push, by focusing on something that is not a core competency of that brand: speed of service Parag Patel, a franchisee with 30 Dunkin’ shops in California and Maryland, was among those who tested the new espresso platform last summer. He told QSR Magazine, “We’re faster than we used to be, even with the handcrafted element.”

Ribeiro says the training and workflow has also helped his team quickly create the handcrafted specialty drinks. “It’s ready by the time the person gets to the drive thru window.”

Speed is certainly a major consideration for convincing Dunkin’ customers that specialty coffees are worth the extra money, though the brand’s own $2 promotion for espresso drinks purchased between 2:00 p.m. and 6:00 p.m. has removed the financial consideration for those so inclined.

The offer matches consumer preferences for specialty coffees, according to Gordon.

“Specialty coffees sell later in the day,” he says, noting these drinks can also prompt customers to order a snack as part of the whole experience.

Ribeiro reports he saw an uptick in afternoon sales as a result of the discounted espresso drinks. Results like that give franchisees a reason to believe Dunkin’ has a solid strategy for increasing sales after the morning rush (when drip coffee comprises the bulk of purchases), and appealing to a new generation of customers, for whom frothy milk and ice added to an espresso shot is as much a boost of excitement as it is a boost of caffeine.

Franchisees appear united in their support for Dunkin’s espresso push. It’s a testament to the quality of the platform as well as the brand’s willingness to solicit franchisee opinions regarding the product and equipment. Octavio and Victor Carvalho, franchisees in Dunkin’s birthplace of Quincy, Mass., told reporters in November, Dunkin's rebranding efforts and focus on espresso was the “right thing to do,” and a commitment that will be worth it in the long run.

•

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 19

FRANCHISEE PROFILE

Take Care of the Business, and The Business Will Take Care of You

Neal Angelini reflects on his three decades as a franchisee

By Wendy Jacobson

T

he year was 1989. Microsoft released its Office suite for the first time, “The Simpsons” made its television debut, George Herbert Walker Bush was inaugurated as the 41st President of the United States and Neal Angelini entered the donut business.

Born and raised in Connecticut, Angelini already had stints managing machine shops, building and installing kitchen cabinets, and building specialized equipment for children who couldn’t walk or had difficulty doing so. Now, he was seeking a change and looking for a recession-proof business to buy.

He thought he found it with Mister Donut.

“What’s more recession-proof than coffee and donuts?” Angelini says.

With no prior experience in the food or retail business, he purchased a very small

Mister Donut store – all 1,500 square feet of it – at 381 Main Street in East Haven, Conn.

Now, almost 30 years later, Angelini still looks back on those early days with a scowl.

“I remember putting in incredibly long hours at the store, only to have to go back at night to make the donuts,” Angelini recalls. “I went many weeks without a paycheck working my butt off, but eventually my perseverance started paying dividends.”

Perseverance and, perhaps, a little luck.

Dunkin’ Donuts ended up purchasing Mister Donut in 1992. Two years later, Angelini converted his Mister Donut store to a Dunkin’ shop, a step that strengthened his business overnight and probably saved it from ruin.

20 INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

“I will never forget the first day we opened as a Dunkin’ Donuts after I converted the store. We had more sales in the first six hours of business than we had on our busi- Neal Angelini est day as a Mister Donut.”

What does he attribute that to? “The Dunkin’ brand, for sure,” he says.

Along with its brand, Dunkin’ instituted new systems that also helped Angelini immensely.

Thankfully, he says, things began to really pick up. As a result of his initial success, Angelini was able to grow his Dunkin’ footprint.

Two years after converting his Main Street Mister Donut to a Dunkin’, Angelini developed and opened a second store in East Haven in 1996. A year later, he opened a third.

In 2002, he purchased an old bank site down the street from his original store and he relocated the shop. This building was much larger than the original location, easier for cars to access and it had a nice drive-thru, all of which contributed to a 65 percent increase in sales for Angelini.

And he wasn’t done yet. In 2006 and 2008, he opened two more stores, for a total of five. In 2012, he decided to sell the two locations that lacked a drive-thru. Today, he still owns and operates three locations: two in East Haven and one in New Haven.

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 21

NEAL ANGELINI Some Things Change; Some Stay the Same As he looks back over the last 25 years as a Dunkin’ Donuts franchisee, Angelini has seen plenty of change. There are new systems and processes to streamline operations. There was also the move to baking and finishing donuts in central kitchens instead of in the stores—a change Angelini was very grateful for.

Even with all that’s changed, Angelini notes that one basic – yet critical – tenet has stayed the same: taking care of his employees his employees.

To Angelini, his employees are an extension of his family. As such, he has always focused on treating them well. They, in turn, treat the guests well.

“The better the systems you have, the less fires you have to put out. That enables me to focus on other aspects of the business, like the front of the house,” he says.

“I think my biggest success is how we’ve trained and developed a team of great staff and managers who are loyal to the stores and to our customers,” says Angelini. “They truly are what keeps our business running and our customers coming back every day.”

Take Care of Your Staff and Your Staff Will Take Care of You

In addition, Angelini says he never takes the business for granted and never gets lax. He admits he can do most of the work from the comfort of his home office these days, yet he still goes into the stores every day to show his face and stay involved.

Another key component to a smoothrunning and successful business is the emphasis he puts on communication. He schedules regular meetings – one for his managers and the other for the crew – twice a month to ensure everyone is on the same page.

Plus, advancements in technology have helped him be able to better communicate with his employees on a day-to-day basis. Angelini’s son Peter, who is general manager for the family’s network, recently created and implemented a streamlined communications system for each of the three stores.

Very quickly, this system has become part of their culture.

“I didn’t want to simply put this into place and not use it the way it’s intended to be used,” Angelini says. “I’m a big believer in using systems – whether brand or your own – so they can help you.”

Using them, they are.

The IT dashboard Peter developed allows each store manager to input a slew of information about their particular store, including employee schedules, hire dates and birthdays (more on that in a minute).

What’s more, the dashboard illustrates the product mix for each store in each category, and how it compares to the previous week, month and year, a tool that Angelini notes is invaluable.

22 INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

Angelini is proud of the high retention rate he enjoys from his staff, and he goes out of his way to let each one know how much he appreciates them.

Take birthdays. One reason he wanted the dashboard to record the birthday for each employee is so that it can be celebrated.

On an employee’s birthday, not only will the crew sing “Happy Birthday,” but that employee also receives a birthday cake and a monetary gift from Angelini.

But wait. There’s more.

Every December he rents out a banquet room at a local hotel and hosts a holiday party for his 68 employees and their families, complete with a visit from Santa Claus.

Does he realize he goes above and beyond what others in his industry do? “Absolutely, but I have an amazing, loyal staff that keeps the business running, and our guests coming back each and every day.

Why wouldn’t I treat them like family?”

And he wants his guests to feel like family, too, with each visit.

“I want our guests to feel comfortable and special in our stores. I want it to feel as if it’s their home away from home.”

Angelini’s biggest store, the one that he re-opened in the old bank building on Main Street in 2002, underwent an extensive renovation and expansion in 2016 that includes adding booths, soft seating, high seating, bar-style seating, a large fireplace, and TVs, including one dedicated to running aquarium videos and special continuous loop videos for different holidays.

This 4,200-square-foot store also has an outdoor covered patio with seating for about 20, and a conference room that guests can rent for a small fee.

to create a special “turkey donut,” donating a dollar to a local food bank for every unit sold. As a result of these efforts, the group raised $8,000.

A Family Affair Throughout it all, Angelini is most grateful for the support of his family. Although his wife, Elizabeth, is not officially on the clock, she frequently is on-site at the stores, lending her support to the staff in any way she can.

And will Angelini’s three young daughters, aged 9, 10 and 13, join Peter, age 30, one day to keep the business in the family?

And, let’s not forget about the Kids Corner, complete with small tables and chairs, coloring sheets and other games for the kids.

Along with providing a nice place to sit, Angelini’s stores also are deeply rooted in the community, partnering with local schools throughout the year to host their

fundraisers, and supporting the local police and fire departments whenever they can.

And just this past fall, Angelini’s stores teamed up with other local Dunkin’ franchisees from Branford, Guildford, Hamden, Killingworth, Madison, Milford, New Haven, North Haven and West Haven

“I sure hope so,” says Angelini.

For now, Angelini has no plans to slow down. He’s not sure what the future brings and would not rule out growing his Dunkin’ network more. After all, he’s enjoyed his 30 years in the coffee and donut business and is glad he had the good fortune to join the Dunkin’ brand.

And, so has his staff.

•

“ I want our guests to feel comfortable and special in our stores. I want it to feel as if it’s their home away from home.”

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 23

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ACCOUNTING Adrian A. Gaspar & Company, LLP, CPAs Robert Costello 617-621-0500 • cpas@gasparco.com 6 Kimball Lane, Ste. 150, Lynnfield, MA 01940 www.gasparco.com

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Carl Huerth 781-806-3139 • carl@skaleast.com 131 Padelford St., Berkley MA 02779 www.skaleast.com/index.cfm?keyword=dunkin

TGC Development Group

Chris Hitchcock 316-393-6802 • chris@tgcdevgroup.com 125 N Emporia, Ste. 202, Wichita, KS 67202 www.tgcdevgroup.com

Thank You to Our Business Members!

INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019 25

PHOTO STORY

A NIGHT TO REMEMBER This past holiday season, the Dunkin’ Brands Joy in Childhood Foundation celebrated #GivingTuesday in a big way, announcing $2 million in grants to 150 nonprofit groups that bring joy to children battling hunger or illness.

Earlier in November, the Foundation’s Mid-Atlantic chapter held its second annual gala at the Edison Ballroom in Times Square, featuring the swank theme of the Broadway show “Guys and Dolls.”

Guests dined, danced and bid on exceptional sports memorabilia and Broadway show tickets offered through a silent auction.

The title sponsor was the DECK Group: Konse-Angelo, Teddy and Peter.

We are pleased to share some of the photos from this wonderful event.

Later this winter, the Foundation’s Northeast chapter will hold its own gala, with a Roaring ‘20s Great Gatsby theme at the Fairmont Copley Plaza in Boston.

Proceeds raised from tickets, raffles and the silent auction will benefit local children's health and hunger organizations.

26 INDEPENDENT JOE • DECEMBER 2018/JANUARY 2019

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