Pros and Cons of Buying a Dunkin' Donuts Franchise
In 1946, entrepreneur William Rosenberg founded a company that delivered meals and snacks to factory workers in the Boston area and called it Industrial Luncheon Services. While selling food in factories and at construction sites, Rosenberg noticed that the two most popular items he sold every day were coffee and doughnuts.
Convinced he could make more money focusing on just those two items, he closed Industrial Luncheon Services in 1948 and opened a doughnut shop in Quincy, Massachusetts, called the Open Kettle, which he renamed to Dunkin' Donuts a year later.
After slow, steady growth, primarily through franchising, Dunkin' grew to 100 locations by 1963, when William’s son Robert took over the leadership of the company, where he stayed for the next 35 years.
Growth of Dunkin' Donuts
According to the Entrepreneur Franchise 500 2019, Dunkin Donuts currently ranks second as the fastest growing franchise in the United States and Canada.The company has more than 11,300 Dunkin' Donuts worldwide located in more than 36 countries.
In the United States alone, there are more than 8,400 Dunkin' Donuts franchises located in 36 states, in addition to over 3,300 franchised locations internationally. Dunkin' Donuts parent company, Dunkin' Brands Inc., also franchises Baskin-Robbins, and the parent company sometimes co-brands the two concepts.
Recognizable brand and established customer base
Support system for running the franchise to ensure adherence to the business model
Freedom as a franchise owner
High initial investment
Limits in types of products sold or creativity concerning changes or additions to branding
Royalty fees that reduce profit potential
Dunkin' Donuts Franchise Benefits
Dunkin' Donuts has a strong team of field support experts covering franchising, development, construction, and marketing. The company has deep expertise in providing franchise opportunities by offering assistance that ranges from site selection through the development process to providing ongoing new product training.
The Company’s training and support teams deliver tools and information franchisees need with a level of support that is “among the best in the Quick Service Restaurant (QSR) industry.” For example, new franchisees undergo an extensive six-week course to learn about the brand, as well as how to manage a restaurant. Local stores also have free access to marketing tools that be customized and downloaded through its website LSMNow.com.
If you require a loan to get started, Dunkin’ Donuts has lender relationships that can help you get financing.
Cost of a Dunkin' Donuts Franchise
Dunkin' Donuts has grown into a very well-known brand globally, and as such the barriers to entering are rather high. After you pass your criminal background check, credit check and proof of assets check, you'll focus on due diligence and the development of your business plan. This business opportunity requires significant resources, including a net worth of at least $500,000 and liquidity of $250,000.
If you are considering a partnership, Dunkin' requires that one single candidate personally meet the financial qualifications. Additionally, the initial franchise fee is $40,000-$90,000, and if you want more units, the company requires you to expand at the rate of five stores at a time.
Pros and Cons of Owning a Dunkin' Donuts
Consider the pros and cons of buying a Dunkin' Donuts franchise to determine if it is a venture that you should pursue.
Some of the advantages include:
- Name recognition: If you can afford the franchise, Dunkin' Donuts offers excellent profit potential for entrepreneurs willing to put in the effort.
- Own boss: As a franchise owner, you will be in charge of your store and its employees, and will also receive support in terms of advice or assistance when needed.
- Online courses: The Dunkin' Donuts Online University offers numerous learning programs, courses, and resources to franchisees and crew.
Some of the disadvantages include:
- Candidate profile: Becoming a Dunkin' Donuts franchisee requires skills and resources that could make this franchise prohibitive for many investors.
- Possible lawsuits: Dunkin' Donuts has been a party to many lawsuits with its franchisees. The company has been involved in 10-15 times the number of lawsuits than the average franchise.
- Limited creativity: Franchises usually have a predetermined brand, which limits the amount of freedom a franchise owner has to change or make additions to the company's business model.
As with any investment, you should research the company and talk to other franchisees to determine if buying a Dunkin' Donuts makes good business sense. With the right amount of resources and knowledge, you can own a Dunkin' Donuts that is rewarding and profitable.