D
unkin’ Donuts franchise owners who attended the 2015 National Conference came to Caesars Palace in Las Vegas with different goals. For some, it was a chance to get away from day-to-day operations and focus on big-picture issues and answers. For others, it was an opportunity to catch up with friends and colleagues, share stories and gain new insights. The two-day conference featured panel discussions with franchisees, legal updates and an examination of the competitive coffee QSR landscape. At a time when the phrase, “content is king,” permeates media and business discussions, DDIFO’s National Conference had content fit for an emperor.

Conversation with franchisees

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Photo by Zoran Dobrijevic

Dunkin’ Donuts franchise owners face a myriad of challenges. Some are universal, others are specific to the states or regions where owners operate their shops. As moderator for this year’s “Conversation with Franchisees,” Robert Branca led discussions on multiple topics, seeking opinions and insights from his panel, which was comprised of: Michael Cavallo, a franchise whose network covers Massachusetts and Connecticut; Eric Eskander, a Massachusetts franchisee, Parag Patel, a former securities trader and current franchisee from the Baltimore/Washington, D.C. market who is expanding into Orange County, California; and Alex Smigelski, a graduate of the U.S. Merchant Marine Academy and former Wall Street trader who now operates Dunkin’ Donuts shops in six states.

Each member of the panel expressed thoughts on how regulatory pressures are impacting the business. Branca set the stage by characterizing the situation this way: “I see alarming trends.”

Smigelski noted how labor costs in New York were rising, as a result of state and local increases to the minimum wage—particularly for restaurant workers. “When you do the math in the first year, we’re looking at a $1.75 increase. That’s eating at your profits.”

Commenting on new regulations for employers to provide paid sick leave, Cavallo said, “We’re not going to change any of our existing policies, cut hours or do these different things. We want [employees] to view it as, if you need it, it’s there. It’s a resource and we figure that with our employees, if they have a problem they’re going to get the time needed to take care of it. Most of the people that are with you day in and day out, those are the people you need to reward anyway.”

The panelists all pointed out that in a tight labor market, they may have to sweeten their benefits packages in order to attract and retain good workers. Eskander told the audience that new labor laws not only cost him money but they also require additional paperwork.

“Aside from the increased cost that comes with paid sick leave, you’re paying two people to do the job of one. Administratively, it can be a nightmare.”

Patel, who’s quickly come up to speed on California’s labor-friendly rules said, “With these new laws, we have to do things differently. If it’s rewarding them for not calling out [sick] or just having a different approach at scheduling, it costs us a lot more than what it seems like on paper.”

Smigelski offered the principle that franchise owners who create a culture where workers value their workplace, are better able to keep good employees. That, he said, is accomplished through better communication, “not just by throwing more money at a person.”

Cavallo spoke passionately about the importance of hiring store managers who have strong communication skills and a passion for what they do.

“Managers who handle the problems and stress of the day, they have the least amount of turnover; people want to work for them,” he said. “When you go into a store and there’s a bad vibe in the store and everyone wants to talk to you, most of the time, it’s about the manager.”

Another of the challenges this panel addressed was managing an ever-complicated menu mix.

“We need to get rid of that one percent of products that aren’t generating any income for us. Streamline the operation make it more efficient and focus on the profitable items that we have that are aren’t so complex,” said Eskander. “You have to streamline that menu.”

At the same time, panelists agreed innovations are important. Cavallo pointed out everyone wants to find the next bagel or the next beverage that will further separate Dunkin’ Donuts from a multitude of competitors—from Starbucks, to McDonalds, to Tim Hortons to convenience stores and mom-and-pop shops. The question is how, with so many new offerings added to the menu on a limited-time-only window, can franchisees know what will be sustainable and profitable?

“There is a lot of innovation that [exists within] our core products. Macchiato is a great example. That’s definitely part of the business we want to grow, it’s exciting for us and might even be something new for the industry,” Patel said. “That is certainly going to help grow a platform that is what we stand for and is going to be part of our future.”

The franchisee community knows the strength of Dunkin’s beverages will continue to drive profits—particularly as America’s thirst for coffee continues. According to a 2015 coffee trends study conducted by Zagat and Gallup, 82 percent of respondents say they consume coffee drinks every day, and 25 percent of those people get their coffee at a large national chain like Dunkin’ Donuts.

Citing the Zagat/Gallup survey, DDIFO Restaurant Analyst John Gordon, principal of Pacific Management Consulting Group, noted that for Dunkin’ Brands coffee sales are not enough to support continued stock growth. “Brand economics are driven by new store openings,” he said. “So, the question is, is there a better way to open new stores more efficiently?” Gordon suggested perhaps franchisees could provide insight to improve efficiency.

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Photo by Zoran Dobrijevic

Opportunities for diversification

Something new at this year’s National Conference: a conversation of franchisees representing other systems. The panel – franchise owners of Pizza Hut, Maaco, Meineke and Retro Fitness – discussed the benefits of multi-unit franchising as a way to diversify a Dunkin’ Donuts owner’s portfolio, and take advantage of the efficiencies and management structure he/she already has in place.

Sultan Kurani, the nation’s largest Pizza Hut franchisee, who owns 22 Dunkin’ Donuts shops in addition to interests in Long John Silver’s, Wingstop, Meineke and Maaco franchises, told the group that multi-unit franchising not only helps increase profits, it also helps a business owner plan for the inevitable down cycles.

“I had a structure in place and that helped me go into a different brand even though the customers are different and final product is different,” he said. “I tell you I did the right thing. Thirty-eight years in the fast food business; this was the best decision I ever made.”

Other panelists, Jose Costa, representing Maaco; Greg Brening, representing Meineke; and Jason Mattes, representing Retro fitness, agreed the common denominator in franchising is people.

“We’re in the people business. Auto repair can be a scary industry looking in, but it’s not that different from fast food. The key is connecting your customers to your employees,” said Rivera.

Words to live by

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Photo by Zoran Dobrijevic

Beyond specific discussions about the challenges and opportunities Dunkin’ Donuts franchise owners face in their business, the 2015 DDIFO National Conference offered something a bit different: a primer on how to achieve excellence in life (as well as in business).

Dr. Sneh Desai, a world renowned expert in the power of the mind, presented his ten secrets, which include: visualization, goal setting, positive mental attitude and excellent relationships. He reminded attendees that it’s important to count our blessings and be “thankful and grateful for what we already have in our life. Life has so much to offer.”