Jon Chesto writes in the Patriot Ledger that nothing can get Dunkin’ Donuts franchisees excited like a good food fight. And there are few more public places to duke it out than the streets of Manhattan.
Tim Hortons arrived in town on July 13 with much fanfare, taking over a dozen Dunkin’ locations in New York City. The switchover to the Canadian chain marked the end of a long legal battle between a local restaurateur and Canton-based Dunkin’ Brands Inc. – and the start of a new battle for New York customers’ hearts and wallets.
Dunkin’ Brands CEO Nigel Travis says the arrival of a major competitor in one of his company’s key markets has its benefits: He tells me he talked about the rivalry while playing in a golf tournament with Dunkin’ franchisees a few weeks ago, and he had never seen them so pumped up.
The truth is, these dozen stores run by the Riese Organization represent a small portion of the massive empire that Dunkin’ has built: There are still nearly 350 Dunkin’ shops in New York’s five boroughs, among more than 6,000 nationwide.
But the first Tim Hortons shops in New York represent a notable invasion, especially because many of the shops are at high-traffic spots such as Madison Square Garden and Penn Station. The chain has targeted the Northeast – Dunkin’ Donuts’ home turf – for growth, and the reaction to the incursion will help set the tone for the Canadians’ future forays into this area.
The divorce between Riese and Dunkin’ can be traced back more than 10 years ago when Dunkin’ Donuts was ridiculed after the New York Post published a photo of a happy customer at a Riese-owned Dunkin’ shop. Unfortunately for both companies, that customer happened to be a mouse.
The lawsuits and bitter words flowed almost as quickly as coffee until both sides settled in 2004, with Riese agreeing to take down the Dunkin’ signs this year after Dunkin’ pushed to sever its ties with Riese over issues of shop cleanliness and other business practices. Importantly, Riese didn’t agree to not reopen the shops with another coffee-and-doughnut chain.
Ontario-based Tim Hortons, Canada’s answer to Dunkin’ Donuts, was the logical choice for a replacement. A spokesman for Riese says the Tim Hortons name, a reference to the former hockey player who started the business, is a bit unfamiliar to many New Yorkers. However, he says the freshly baked doughnuts and wider array of food options – Tim Hortons offers soups as well as more sandwiches than Dunkin’ – are generating a positive response among customers.
Dunkin’ has been in a similar position before, back when Krispy Kreme made its notoriously unsuccessful advance into the Northeast more than five years ago. Each Krispy Kreme opening in New England was a big event back then, drawing crowds that lined up out the doors. But by the time the last one in Massachusetts closed in 2007, the enchantment had faded and Krispy Kreme had retrenched, unable to keep pace with Dunkin’ Donuts’ ubiquitous presence here.
Tim Hortons hasn’t had an easy time breaking into New England, either. The company entered Maine in 1997, according to a spokeswoman, but didn’t have much of a presence in the region until it won an auction for the former Bess Eaton chain in 2004. That deal brought Tim Hortons 42 shops, largely in Rhode Island, with some in nearby communities in Connecticut and Massachusetts.
To make its New England operations more profitable, Tim Hortons closed 11 shops in the region last year and converted most of the remaining locations to franchise ownership. However, Tim Hortons still has grown over five years in New England despite the closings, and now boasts of 54 shops in southern New England and 28 in Maine.
Both doughnut chains have found a sweet spot in this recession: Their relatively low prices have enabled franchisees to thrive while those saddled with larger restaurant operations have struggled.
Dunkin’ has slowed its pace of growth, but it is still in an aggressive expansion to become even more of a nationwide brand. Meanwhile, Tim Hortons wants to add 30 to 40 new locations to its 500-plus shops in the U.S. this year. It recently reached a deal to share store space in some locations with Cold Stone Creamery franchisees – mirroring the combo approach that Dunkin’ occasionally uses with sister chain Baskin-Robbins.
Travis, the chief executive at Dunkin’ Brands, says he takes his Canadian rival seriously. But Travis also says Dunkin’ franchisees near the Tim Hortons locations in New York have already seen an increase in business. And he says his chain’s coffee, breakfast sandwiches and serving speeds are superior to Tim Hortons’ offerings.
Despite his company’s high-profile showdown in Manhattan with a former business partner, Travis remains confident that America will keep choosing to run on Dunkin’ for some time to come.