Dunkin Donuts war on Starbucks

With the latte giant reeling from overexpansion and a softening economy, the doughnut maker took aim at its upscale rival. Now McDonald’s has joined the coffee fray as well. Can Starbucks pull through?

By Joseph V. Tirella, MSN Money

Starbucks slashes jobs and stores

Coffeeshop giant Starbucks has announced it will cut around 6,700 jobs and shut 300 stores as it reported a 69% plunge in quarterly profit.

Starbucks has struggled as hard-up consumers forego expensive lattes and frappucinos as the recession bites.

It said it made a net profit of $64.3m in the 13 weeks to December 28, down from $208.1m a year ago.

Two-thirds of the store closures will be in the US and they come on top of the 661 closures announced in 2008.

Starbucks is the latest multinational company to announce massive layoffs. Earlier on Wednesday, Boeing said it would cut 10,000 jobs.

‘Leaner’

In a letter to employees, chairman and chief executive Howard Schultz said that the company was working hard to “navigate the deteriorating global economy”.

“These decisions have been made to ensure the company is leaner and prepared to endure a worsening economic climate,” he told staff.

“The financial crisis is affecting almost almost every company in the world.”

Starbucks’ revenue fell 6% to $2.6bn driven by 9% fall in sales in established coffee shops.

But Starbucks’ problems are not just down to the economic downturn.

Mr Schultz has admitted that the firm over expanded, devaluing its upmarket image.

Starbucks has further been hit by the likes of McDonald’s and Dunkin’ Donuts greatly improving the quality of their own coffee, which is generally also cheaper.

BBC also CNNMoney

Checking the unions

“Card-check” would make it easier for unions to organize, but critics say it is undemocratic.

John Almaier, a dealer and supervisor at Bally’s in Atlantic City, and his colleagues thought they were following procedure when they voted in June 2007 to join the United Auto Workers union.

They contacted the UAW to represent them. The union had an organizing campaign. The workers voted. The union won. And 19 months later?

“We have no contract,” said Almaier, 61, of Winslow Township, Camden County.

Unions say the delay has become commonplace. They are focusing on the federal Employee Free Choice Act to make it easier to join a union, create stiff penalties for employers that violate the law and end the long decline in union membership.

But the bill has sparked intense opposition from business groups that say it would upend 70 years of labor law in favor of a system that is downright undemocratic. But with President Barack Obama, a Democrat, now in office, the legislation’s chances have been revived.

Read the whole story at Asbury Park Press

The Coalition of Franchisee Associations (CFA) for which DDIFO is a member, is lobbying against card check.  See what the CFA has to say about the Employee Free Choice Act.

Obama Gets Into Your Coffee

Barack Obama is into coffee… literally. Krispy Kreme in Britain cashed in on the inaugural fervor by offering coffee with the likeness of our President in the coffee foam. Check out this clever franchise promotion:

SBA helps franchisees face the uncertain economy

“We’re here to help.” That’s what you hear from the Small Business Administration (SBA) and in today’s uncertain economic climate that phrase can be a stabilizing force for small business owners, including DD franchisees.

Anne Hunt is the assistant district director of the Massachusetts office of the SBA and she says the economic downturn is the worst she has seen in her 27 years at SBA. “You hear how banks are constricting lending and it’s harder to get financing-there’s no news there.” But, she says there are some bright spots that business owners should be aware of.

“Even as guaranteed SBA loans are falling off in the nation as a whole, the situation in Massachusetts is not as bad. You could say that the 504′s are the silver lining.”

504′s refer to specific loans that enable business owners to buy buildings, real estate and durable goods (defined as having at least a 10-year life span). Looking at the last quarter of 2008 versus 2007, the SBA has seen an increase in the number of 504 loans written in Massachusetts. “We’re up about 37% year to year,” Hunt says.  When pressed to isolate a reason why the 504′s are surviving in a bad economy, Hunt agrees there are smart business owners who know how to bargain shop for distressed assets and banks are willing to underwrite these SBA guaranteed loans.

If you are a business owner and you want or need to borrow money these days where should you go? Hunt suggests bypassing the big banks in favor of the small, community banks in your area. In 2007, the SBA saw an increase in lending from community banks. Hunt says, “These banks didn’t have to change their underwriting rules when the economy went bad because they were conservative to begin with.” As a result, she says, lenders can look at deals on a case by case basis instead of just matching results to a credit score.

And, as a DD franchisee the news can be even better. Because Dunkin Donuts has a proven concept and well established business practices, banks are more willing to lend within the system than to a stand-alone mom and pop business or to the operator of a less well known franchise.

Still, there are some franchisees that have accumulated too much debt and, amid falling sales and increasing expenses, are having trouble paying the bills. Hunt’s advice: get in front of your banker as soon as possible. “It’s best not to hide. The SBA encourages lenders to offer deferments to business owners who are going through tough times. And, lenders are complying.”

If you need to borrow money, the SBA’s website (www.sba.gov) is a great place to start. Among the resources you’ll find a list of your state’s banks that have SBA programs, including contact names and numbers.

Any small business can benefit from the advice and the know-how offered by the SBA-especially in these tough times.

BAC Profitability Subcommittee Enhanced and Improved

The Brand’s reorganized Profitability Subcommittee is off to a good start according to Brand Advisory Council (BAC) co-chair Jim Allen and to DDIFO members we talked to.

During 2008 franchise contract negotiations, President and Chief Brand Officer of Dunkin’ Donuts Worldwide Will Kussell and the franchisee leadership agreed to reorganize the long-standing Profitability Subcommittee and give it new powers to endorse all new initiatives before they are presented to the BAC. According to its charter, the Profitability Subcommittee’s objective is to “provide leadership, oversight and counsel on products, programs and brand initiatives with the overriding premise to protect and enhance franchisee profitability.”

“It’s time we became focused, especially in light of the current economic conditions,” says Allen. “The times demand we work together and right now the Brand and the franchisees are both focused on economics and profitability.”

In a statement provided to us by Dunkin’ Donuts, Kussell echoes Allen’s sentiments. “Now, more than ever in this challenging economy, Dunkin’ Donuts and its franchisees must have a laser-like focus on profitability. The Profitability Subcommittee is working closely with our franchisees and supply chain partners to both identify and maximize efficiencies within the system to determine how we can minimize costs, increase store traffic and further grow sales. Supporting our franchisees’ long-term success and profitability is our top priority.”

The Profitability Subcommittee is one of only two standing committees established by the BAC whose charters are written into that committee’s by-laws; the other is the Marketing Steering Committee. Members are appointed by the subcommittee’s co-chairs. There are 13 total members made up of six corporate employees, six franchisees and one national DCP executive. The subcommittee meets at least six times annually.

“The subcommittee has been doing excellent work on behalf of the franchisees and is delivering on what Will Kussell promised us during contract negotiations,” says Rob Branca, a DDIFO member who was part of the franchisee team that helped draft the charter for the subcommittee “I hope that the follow-through that Kussell has demonstrated is reflected throughout the Brand.”

Because the subcommittee will evaluate the viability and suitability of new products, programs and initiatives to ensure a minimum margin and ROI, the belief is that franchisees won’t be forced to invest in costly programs that have not been tested.

“We want to make decisions based on profitability and not just growth of the top line because if the bottom line doesn’t grow proportionally, then it’s not a recipe for success,” says Ken Blum, a subcommittee member who helped draft the profitability form that the subcommittee is using to evaluate potential initiatives. “The template is modeled after something the Brand had been using but has been modified to help us analyze costs with greater consistency. It’s still a work in progress,” says Blum.

Going forward, all new product plans, store concepts and equipment purchases will be vetted through the Profitability Subcommittee. Its formation not only represents a more open dialogue than has previously existed, it also better aligns the needs of franchisees with the goals of the Brand.

Read the BAC Profitability Charter and Operating Guidelines

Dunkin Franchisee Goes Green for Profits (and for the Planet)

Roger Deslauriers, a Dunkin’ franchise owner and operator whose family has been in the business for 50 years, is bringing green technology to a number of his stores. Deslauriers and his family have always strived to be at the forefront of business decisions that improve their franchises for their own benefit and for the benefit of their employees and customers. In keeping with this family business tradition, Deslauriers has implemented the installation of solar-electrical generation panels and other technological innovations that promise to lower his store utility bills considerably.

Art Krebs is CEO of Construction Art, which specializes in Green Building Technologies. Years ago, Krebs built one of the Deslauriers stores in Florida. When he started Construction Art, he contacted Deslauriers and offered to meet with him to tell him about new technologies and related incentive programs. Deslauriers could hardly believe the incentives available, so he did some additional investigation on his own. He found that not only could he save money on electric utility expenses, but also he could recover much of his investment. Through a combination of government rebates, tax credits and other incentives (depending on which state a company is located in), businesses can potentially recoup up to about 70% of their initial investments.

“Were it not for the tax incentives and rebates, I’m not sure I’d be pursuing this,” Deslauriers shared candidly. “When you consider the programs supporting green technology in Massachusetts and on the federal level, you realize you can do something good for the planet and for yourself – for your bottom line – and, consequently, for your customers. It’s a win-win!”

The installation of solar panels at Deslauriers’ two franchise locations in Attleboro, Massachusetts – one on South Main Street and one on County Street – is complete and the system went online on January 15. At his location on Winthrop Street in Rehoboth, Massachusetts, the electrical work has been completed and the solar panel installation is in its final phases with expected completion in the next few weeks.

In addition to solar-electrical generation and solar water heating, Deslauriers is implementing other conservation measures at these locations including automatic faucets, which can save up to 70% of water that otherwise literally goes down the drain; motion sensor lights, which studies have shown can save at least 35% of energy used for lighting; and energy efficient Dyson hand dryers, which use about 60% less electricity than standard electric hand dryers.

With the green technology he is employing, Deslauriers expects to save about 30% on electric costs at each of the Attleboro locations and, at the Rehoboth location, all of the electricity will be largely solar-generated.

Beyond the utility expense savings, Deslauriers should be able to recover his initial investments quickly. Massachusetts offers a rebate program that provides a direct cash rebate of about 30% of all planning and installation costs within 90 days of qualifying systems going online. Further, a federal accelerated depreciation schedule allows businesses to recover money spent on green technology equipment in less time than normal.

“You do your best to control payroll and food costs, but the reality is that there are so few costs you can truly control,” says Deslauriers. “When an opportunity like this comes around, you have to take advantage of it.”

Krebs says that every business owner, including Dunkin’ franchisees, has the potential to improve energy efficiency, thereby reducing: energy used, energy wasted and energy costs. His company specializes in implementing Green solutions resulting in high impact operational efficiency and increased profitability. Construction Art can provide: energy audits to identify usage, waste and feasible conservation measures; assistance with paperwork for permits, rebates and the like; media pieces for marketing efforts; procedures and training for staff and (depending on the technology implemented) a Green Vue™ monitor which lets customers see the benefits of the technologies in use.

“We want to help business owners identify Green solutions, maximize profits and minimize operational costs through top quality Green implementations,” says Krebs. “We encourage everyone to join the Green movement in order to become more profitable and to help our environment.”

Investing in technology that increases energy efficiency can also have a real impact on customers. In his case, Deslauriers says that the savings he anticipates mean he won’t have to raise prices at the rate he would have without the Green investments and implementations he made. Such efforts should serve to bolster customer loyalty, attract new customers and boost the bottom line.

Superbowl Runs on Dunkins

And those sprinkles are yellow and red.

Beginning Thursday and running through Sunday, all Dunkin’ Donuts stores in the Tampa Bay area are offering Super Bowl XLIII donuts in the colors of the two teams — plain donuts with white icing and red sprinkles for Arizona fans and chocolate donuts with yellow sprinkles for Pittsburgh fans.

“With professional football crowning a champion this Sunday, and with the game being in our backyard, it seemed only natural to make donuts showing support for both teams,” said Natalie Ostroski, Dunkin’ Donuts Field Manager, North Florida.

Brandenton Herald

Donut Chains’ Inauguration Promos Generate Buzz

Dunkin’ Donuts and Krispy Kreme, which each created a promotion around Inauguration Day, are getting some returns, at least in social media buzz.Dunkin’ offered a new “Stars & Stripes” frosted donut for 89 cents for four days up to and including the big day – and in some markets, coffee and hot chocolate purchasers could buy the special donut for 44 cents. Participating Krispy dealers actually gave out one free donut of choice per customer, no purchase required, on Inauguration Day.

According to the Social Media Index (SMI) developed by social media services provider Vitrue, which can measure the extent of online conversations about a brand in social networks, blogs, Twitter and video and photo sharing on a daily basis, both brands got a lift in share of online voice.

Dunkin’s SMI rose five points or 20% — from 42.6 to 47.6 – between the day before the Inauguration (Jan. 19) and Jan. 26.

Krispy has a significantly lower presence in the social space, but saw a larger gain in percentage terms. Krispy’s SMI rose by 3.4 points or 25%, from 13.4 to 16.8.

Karlene Lukovitz Media Post

Baskin-Robbins expands in China

Baskin-Robbins, the Canton-based chain of ice cream specialty shops, said it opened its first two locations in Shanghai as part of its Greater China expansion plan.

A third Baskin-Robbins shop will open late February in Shanghai, bringing its number of shops in the country to 47, added Baskin-Robbins, which is a sister chain of Dunkin’ Donuts, known for coffee and baked goods. Baskin-Robbins said its brand has more than 2,000 shops in Asia.

Commenting on the Shanghai stores, Baskin-Robbins noted in a press release that it had granted franchise rights to Shaanxi Stellerich Food & Restaurant Co. in 2008 to develop 100 shops in the Shanghai Municipality and Zhejiang Jiangsu and Shaanxi Provinces over the next 10 years; Shaanxi Stellerich is also a franchise partner with Dunkin’ Donuts, in Guangdong Province.

The Chinese name for Baskin-Robbins is “Ba Si Luo Bin,” said a chain that boasts of more than 1,000 flavors in its “ice cream library.”

To read the press release, please click here.

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