Riya V. Anandwala reports in STLouisToday.com that Dunkin’ Donuts, which pulled out of the St. Louis area in early 2000, is returning early next year with a new strategy for success in the Midwest.
The national chain plans to open its doors to more franchise owners with fewer stores. Under the strategy, not only could franchisees agree to standard 10- to 12-store deals, but they also could agree to two- to four-unit contracts.
Reggie Wright, the director of franchising in the Midwest for the company, said this approach will allow Dunkin’ Donuts to move into the St. Louis market less aggressively than in the past, and drive sales in the next three years.
Traditionally, Dunkin’ Donuts has never signed a franchise owner for fewer than five stores, Wright said.
With a huge base on the East Coast, Dunkin’ Donuts has been rapidly signing franchise owners in the Midwest. The company announced several deals this year with franchise owners in Ohio, Tennessee, Minnesota and Mississippi. Based in Canton, Mass., the company has grown from 7,988 shops worldwide in 2007 to 8,835 stores, including 6,395 in the United States.
Dunkin’ Donuts’ strategy is largely a response to the economic downturn, according to Scott Watkins, a senior consultant in market and industry analysis with the Anderson Economic Group.
He added that several companies are exercising flexible agreements with franchise owners in order to grow.
However, he says Dunkin’ Donuts could run into managerial and cost challenges with its new approach. Under its standard system, fewer franchise owners handle more stores, and there are fewer people for the company to manage, he said.
Dunkin’ Donuts plans to open its first three stores in the St. Louis area by early 2010, and one by the end of spring. Two stores would be at Lambert-St. Louis International Airport, one in Kirkwood and another in Rock Hill.
Wright said the company is looking to sign one more franchise owner for the St. Charles area, which would complete its activity in St. Louis for the next three years.
Off The Menu: Dunkin’ Donuts returning to St. Louis soon
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The two Lambert stores, owned by Deli Enterprise’s Milan Patel, will occupy 550 square feet in East Terminal and 380 square feet in Terminal A.
Patel, who has a four-store deal with Dunkin’ Donuts, plans to open the East Terminal store in early 2010.
Baskin Robbins and Dunkin Donuts will be housed in a single store in the East Terminal, Patel said.
His other two stores are at the Baltimore airport.
Michael Geller, who has a 12-store deal with the company, plans to open his Kirkwood store in mid-January. Construction began a few weeks ago.
Geller, a Washington University law school graduate who has lived in the city for several years, said the St. Louis area was a natural choice.
His location, he said, will be very different from the ones that were in the area previously.
He plans to open his second location, in Rock Hill, by the end of spring, which will be followed by other locations in the region, he said.
In the 1990s, Dunkin’ Donuts had as many as 12 to 13 stores in St. Louis. In 2001, the last of the franchised shops shuttered, and there have been none in the area since.
The company’s renewed interest in the St. Louis market isn’t striking fear into its competitors. Neither Starbucks, Krispy Kreme nor locally owned doughnut shops seemed worried about the chain re-entering the market.
While Krispy Kreme would not comment on another company’s strategy, Starbucks said that choosing coffee is a personal choice.
Starbucks has 75 stores in Missouri; Krispy Kreme, 7.
Read more at: STLouisToday.com