DDIFO Gives Jim Coen Presidential Nod

The Board of Directors of the Dunkin’ Donuts Independent Franchise Owners (DDIFO) has officially named Jim Coen president of the organization, elevating him from interim to full-time status.

Board chairman Kevin McCarthy said, “DDIFO is indeed fortunate to now officially have Jim Coen as our President. Jim brings unrivalled enthusiasm, creativity, integrity and common sense to this vital position. We all look forward to Jim now leading DDIFO well into the 21st century and making DDIFO a major positive force in the franchising industry.”

Coen took over as president December 1, 2008 after serving as a director and clerk of the DDIFO board of directors. He brings 25 years of experience in franchising not only as Executive Director of the New England Franchise Association, but also as a former owner and operator of an Emack & Bolio’s Ice Cream franchise and as Vice President of sales and marketing for Direct Home Advertising, a SuperCoups franchisee.

Since stepping in as interim president last year, Jim has focused on improving the flow of information Dunkin’ Donuts franchise owners receive. “My approach is to try and provide as much pertinent information as possible to enhance and protect the business interests of franchise owners,” he said

Under Coen’s leadership, DDIFO now produces a monthly newsletter, DDIFO Insider, that includes articles written by DDIFO journalists, the bi-monthly Legal and Legislative Update and a weekly compilation of interesting and relevant news stories packed under the umbrella News You Can Use. Coen has also shepherded the creation of Independent Joe, a quarterly DDIFO magazine containing in-depth articles also written by DDIFO journalists, on issues that effect Dunkin’ Donuts franchise owners.

Coen hired Amy Levine as Membership Director and together they created the Associate Member program for vendors who currently do business with Dunkin’ Donuts. “The Associate Member program is designed to offer vendors various opportunities for exposure to franchise owners thru online, print and meeting sponsorships, as well as offering franchise owners alternative vendor options and choices,” Amy said. She has recruited well over 30 Associate Members with more in the works.

“What’s great about the Associate Member program is that we’re able to use the revenue to support our communications efforts while also contributing 5% to the Dunkin’ Brands Community Foundation,” Jim said. “We anticipate this program adding significant revenue to our budget increasing the resources with which we have to work with.” 

Coen said there are specific goals for DDIFO. Shortly, DDIFO will establish a “Member’s Only” section at the ddifo.org website where; articles, surveys, forums and research will be accessible only to members with predetermined logins and passwords. Coen expects that to be set up by early September and he and Levine will be personally contacting all DDIFO members in the coming weeks to find out who in each network will have access to this valuable section of the website.

DDIFO has set a date for its next meeting which will be September 22nd at the DCU Center in Worcester, MA. The theme of the meeting is “Cutting Costs and other Strategies to Improve the Bottom Line”.

For the next 90 days, DDIFO will be focused on expanding membership. “That is a critical piece of our mission,” Jim said. “I strongly believe no franchise owner is ever as strong as a group of united independent franchise owners. Increasing franchise owner participation in DDIFO will strengthen our collective voice and enable DDIFO to have the resources to gain more impact and greater influence for all members.”

Emergency Small Business Loans to the Rescue

The Small Business Administration says its new loan program is off to a promising start. Small businesses owners disagree.

Emily Maltby reports at CNNMoney that struggling small businesses got their first shot at debt relief this week, through a long-anticipated emergency loans program.

The Small Business Administration says that in the first week of the program, which kicked off last Monday, lenders approved 72 loans totaling $2.4 million. While the SBA is pleased with the numbers, business owners who have been waiting months for the loans remain discouraged.

The program, called America’s Recovery Capital (ARC), was authorized in February’s stimulus bill. Businesses are eligible to apply for a loan worth up to $35,000 to cover existing debt if they have been profitable in one of the past two years, and have been adversely impacted by the recession.

The ARC loans are interest-free to the business owner, who has up to 12 months to make the first payment and another five years to pay back the entire principal. They are administered by banks and other lenders and are 100% guaranteed by the SBA, meaning that if the borrower defaults, the government picks up the tab.

The SBA had estimated that these loans would reach 10,000 businesses by the time the program is slated to end on September 30, 2010. (It will shut down sooner if funding runs out.) But if things continue at the pace set in the debut week, fewer than 5,000 businesses will end up receiving loans.

Lender participation. Still, the SBA isn’t worried. “We rolled out this program differently than other loan programs because of the urgency — we needed to implement it as quickly as possible,” said SBA spokesperson Jonathan Swain. “But we always knew there would be a ramp-up period. We knew there would be lenders who would need to take some time to look at the loans, the terms, their customers, and — specifically with larger lenders — how it would impact their system.”

The SBA says that the loans were made by 42 lenders from 21 states, but Swain is confident that once larger lenders with greater geographic reach jump on board, the program will expand into more regions.

SBA doesn’t know how many lenders are already on board; the majority of the were on the fence in May, when the SBA announced the program’s June 15 start date. Many remained skeptical after receiving the guidelines for the program in early June.

“SBA is doing the best it can to implement the program, but the guidebook came out one week before [the program's start date], which is not a lot of lead time,” says Tony Wilkinson, president of the National Association of Government Guaranteed Lenders (NAGGL). “It’s been a slow start because lenders are either saying ‘I have so many questions that I won’t bother playing’ or ‘Give me time to have my questions answered and I’ll decide.’”

Wilkinson says his organization has collected a list questions from its constituency that it plans to submit to the SBA this week. “They want to know, for example, how fast will the SBA pay the interest on the loans,” says Wilkinson. “And, with a 60% default rate expected, [they want to know] how and when can they collect on a guarantee, given that one of the biggest expenses is liquidating a loan.”

Since the guidelines were released on June 8, the SBA has held in-person and virtual informational sessions aimed at addressing the lenders’ questions. Thousands of lenders representing 1,300 institutions have been in attendance, according to their tally.

“We fully expect that the participation numbers at those information sessions are an indicator. Of those 1,300 institutions, many of them are probably going to do the program,” says Swain.

Favoring existing borrowers. Although banks are allowed to administer ARC loans to cover debt issued by competing lenders, the SBA predicts that banks will primarily award these loans to their existing borrowers.

Read more at:  CNNMoney

SBA’s Karen Mills on Thawing Credit

How the Administrator says her agency is helping get banks to lend to small business again

Getting credit to small business owners is Job One for former venture capitalist Karen G. Mills, who was confirmed as Administrator of the Small Business Administration in April.

BusinessWeek SmallBiz Staff Writer Jeremy Quittner spoke with Mills recently about her agency’s efforts to help small companies during the recession, how the federal stimulus package is affecting entrepreneurs, and ways to boost innovative small businesses.

Since March the SBA has eliminated the fees and increased the caps and guarantees on its bread-and-butter 7(a) loans. It also has agreed to provide 100% guarantees on emergency bridge loans. Yet small business owners say banks still won’t lend. How can the SBA get banks lending again?

In October…the credit markets really froze. SBA-backed lending was down at least 50%. The purpose of the $730 million received from the American Recovery & Reinvestment Act was to get capital flowing back into the hands of small businesses. We reduced the fees, and the banks wanted to make the loans. [And] when we put the guarantee up to 90% they said: “Now we can feel comfortable putting these on our balance sheet.” Since the passage of the Recovery Act, our loan volume is up 40%, and [we] have put $6.2 billion in the hands of small business. We now have 600 banks lending that had not made a [SBA] loan since October 2008.

Some banks say businesses that are coming to them now are less creditworthy, so they can’t make loans.

Many small businesses are under duress and looking for liquidity. But we are not taking more risk, and banks are not sending us loans that are riskier. We are not using taxpayer money to go down the risk curve.

How many businesses have received loans under America’s Recovery Capital Loan Program, which provides 0% interest bridge loans to distressed companies?

We just rolled it out in the past couple of weeks, and there have been 300 loans from 151 different lending institutions. Banks are signing up, and we have people offering these loans in almost every state now.

You have to give these banks time. This program has a different level of risk than we usually take, and we had to be very clear about what a viable small business was. They must have been profitable within the past two years and show how [they] will transition back to profitability and pay back the loan.

The SBA recently announced a plan to offer inventory loans for dealerships, which seems focused on the auto industry. Does the SBA have other plans to help specific industries?

Actually the dealer floor plan is for [all] auto, RV, boat, and other dealerships. This is not really for the Chrysler and General Motors (GM) dealers. Banks, which usually provided liquidity to these companies, are not providing as much support. And that is our role.

There is debate over whether venture-capital-backed companies should receive government grants under the Small Business Innovation Research program.

If we want to create jobs, we have to have commercialization [of small firm innovation]. We have two principles: First, this is a program for small businesses, not big businesses masquerading as small businesses. Second, we don’t want to turn away the most promising businesses…[just] because they have a certain structure.

BusinessWeek

7-Eleven Plans to Slurp up Southern California Real Estate

Roger Vincent and Andrea Chang report in the LA Times that the 7-Eleven convenience store chain says it will add 600 stores over the next seven years, a move that could save it millions because of the weak commercial land market.

In a move that could nearly double its Southern California footprint, the 7-Eleven convenience store chain is taking steps to lease up to 600 new locations in the region.

The company hired commercial real estate broker CB Richard Ellis on Thursday to begin scouting locations for a planned seven-year expansion that would add to the 800 stores that 7-Eleven operates from San Luis Obispo County to the Mexico border.
7-Eleven, a Dallas unit of Tokyo-based Seven & I Holdings Co., said that by launching so many stores in the middle of a crushing real estate downturn it will save millions of dollars on rent.

But can Southern California — struggling in a recession that has caused other retailers to drop locations or even go out of business — support all those Slurpees?

Buoyed by an uptick in convenience store sales nationwide and support from its Japanese corporate parent, officials at 7-Eleven say they want to restore the empire that the company reigned over before gas stations and other retailers moved onto their turf.
But the recession has been hard on the chain, which earlier this year laid off 200 non-store workers and said it would stop contributing to employees’ 401(k) retirement plans. With upmarket convenience stores such as Famima making inroads and competition for late-night shoppers from local supermarkets, analysts say it could be tough for 7-Eleven to pull off such a huge expansion.

“It is difficult to see that there is a screaming need for more convenience stores,” said analyst Richard Giss, a partner in Deloitte & Touche’s consumer business division.

7-Eleven, which at its peak in the 1980s had about 1,500 stores in California, is banking on consumers’ stopping in for chicken wings or a prepackaged sandwich instead of buying lunch out, part of a nationwide shift that has consumers shopping at Target instead of Nordstrom and taking advantage of dollar specials at fast-food chains.

By offering inexpensive food and other impulse items, said Jeff Lenard, spokesman for the National Assn. of Convenience Stores, 7-Eleven and its competitors can attract more business during downturns than other retailers.

“When you’re thirsty, you don’t check your 401(k),” Lenard said. “You just go in and buy a drink.”

Lana Nardiello, a 23-year-old film editor who recently stopped at a Studio City location for a can of Red Bull and toiletries, turns to convenience stores in a pinch but doesn’t patronize them regularly.

“It’s an emergency kind of thing,” she said. “It’s convenient, but it’s overpriced.”

To succeed, analysts said, the company needs to continue attracting customers like Nardiello, but also reach out to those who might become regulars — people gassing up at the locations that offer fuel and grabbing a Big Bite hot dog or a cup of coffee with breakfast or lunch.

7-Eleven has also moved to accommodate changing tastes in convenience food by upgrading its coffee bars and rolling in more nutritious selections every morning, said Dan Porter, vice president of real estate and new store development.

“We have a daily distribution of fresh sandwiches, salads, fruit cups, dairy products and bakery items made in local commissaries,” Porter said.

7-Eleven also sells hot foods such as pizza, chicken tenders and nachos. In 2007 the chain launched a proprietary energy drink called Inked, meant to appeal to the young and tattooed.

Last year the company also introduced a line of products under its own brand — including cookies, potato chips and jerky — that are priced about 20% less than popular name brands.

What Porter jokingly calls “smokes and Cokes” still pull in the lion’s share of customers, though.

One in three people who walk in the door buys a drink — perhaps a 64-ounce Double Gulp or Slurpee — while pricier tobacco products account for the biggest share of revenue, Porter said.

Southern California stores outperform the chain’s national average, he said, suggesting there is demand for more of them. “We’re very bullish on Los Angeles,” Porter said, “because there are significant opportunities” for expansion.

Read More at the LA Times

More SBA Funding Aim of Congressional Committees

McDonald’s Helps Drive Starbucks Sales: Schultz

Emily Bryson writes in Crains Chicago and AdAge that  Starbucks Coffee Co. appears to be coming out of freefall — thanks, in part, to marketing by McDonald’s.

In a third-quarter-earnings call Tuesday afternoon, Starbucks CEO Howard Schultz credited margin improvements, cost savings and attention brought to the category by its rival’s big-budget McCafe launch with helping to improve Starbucks’ same-store sales.

The chain’s same-store sales fell 6% during its fiscal third quarter in the U.S., but that still bests the prior quarter, when same-store sales were down 8%.

‘Unprecedented awareness’
“As you know, extraordinary advertising dollars have been spent by fast-food companies trying to attract coffee consumers during this quarter,” Mr. Schultz said. “Many commentators and industry watchers have been concerned that this marketing spend would have a negative adverse impact on Starbucks.”

But on the contrary, he said, the “various marketing campaigns,” including Starbucks’ own first branding campaign, have “created unprecedented awareness for the coffee category overall and has actually had a positive result on Starbucks’ business.”

Of course, though McDonald’s advertising may have benefited Starbucks, the push is likely to have cast a far bigger halo on the Golden Arches itself. McDonald’s is expected to report U.S. same-store sales up as much as 4% Thursday when it announces earnings.

McDonald’s launched its McCafe ad push, estimated at $100 million, in May. By comparison, TNS Media Intelligence figures put Starbucks spending at just $26 million in measured media throughout 2008.

Competitors such as Dunkin’ Donuts have also stayed in the mix with aggressive value-menu advertising.

‘Meaningful’ investment for Via

Starbucks’ next big marketing push will be for Via, the instant-coffee product released in test markets in February. Mr. Shultz said to anticipate a meaningful marketing investment for the national launch this fall.

“We are going to create a very creative campaign that will be different than what we’ve done to date and will take advantage of the social media that we become very good at as well as traditional levels of media,” he said. “Via, I think, has given us an opportunity to recognize we’ve got a very big category without a lot of innovation.”

He added that since “people have so much trust in our brand and the coffee delivers, we have something I think that people want to hear about, and the three test markets justify the expense and the commitment that we’re going to make.”

Mr. Schultz also used the call to underscore the brand’s social-media successes, including 3.5 million fans on Facebook and 250,000 followers on Twitter. “The key here is we are connecting directly with our loyal customers who will be driving our future growth,” he said.

Crains Chicago and AdAge

McCafe Helps Fuel McDonald’s Earnings

Kenneth Hein writes in Brandweek that while launching a premium coffee line smack in the middle of a recession may seem counterintuitive, the debut of McCafe helped drive McDonald’s second quarter sales.
 
The chain announced a comparable U.S. sales increase of 3.5 percent and a 4.8 percent spike globally. CEO Jim Skinner, in a statement, gave credit to the chain’s “balanced focus” on favorites like the Big Mac, beverage value offerings and the McCafe launch.
 
This growth comes as the restaurant category is suffering. Total restaurant traffic was down 2.6 percent March through May compared to the year prior, per the NPD Group/Crest. Quick service restaurants were off 2 percent while burger chains were flat.
 
“This is the weakest the restaurant in 28 years,” said NPD restaurant industry analyst Bonnie Riggs. “McDonald’s is one of the few that is faring well. They have a lot of marketing initiatives. It’s not just the value menu. They are introducing a lot of new products.”
 
None were bigger than McCafe premium coffees which debuted in May. The chain has vowed to spend $100 million behind the new product which takes aim squarely at Starbucks. Ironically, Starbucks said the attack has helped given its chain a boost due to all of the attention surrounding the category.
 
Overall, servings of specialty coffee has increased for the hamburger category by double digits, per NPD. A similar double digit increase occurred in the doughnut category.
 
The more expensive McCafe and Angus burger has helped create higher dollar register rings which has benefited McDonald’s, said Ron Paul, president of the food service consultancy Technomic. “Their mix is changing…On a relative basis this has helped them to continue to do quite well while the industry is in a slump.”
 
Maintaining this growth will continue to be challenging as competitors like Subway, KFC and others continue to offer high quality, low cost offerings, said Arjun Sen, president of the Restaurant Marketing Group. “There is a lot of compression. Everyone is moving their pricing down to $5, $4, $3. It’s making it easier to cheat on McDonald’s.”
 
To keep help convince consumers to stay faithful, McDonald’s has spent $370 million on media for the first five months of this year, per The Nielsen Company.
 
Skinner said that July sales look to be similar or better than June. He said, “I am pleased with McDonald’s results and remain confident in our outlook for the year.”

Brandweek

Dunkin Donuts Breaks Ground in Selma, NC

Rebecca Piscopo reports in the Selma News that a Dunkin Donuts will open in Selma, next to Exxon on 446 U.S. Highway 70 E., in November.

Smithfield Dunkin Donuts business owner Parth Patel said the Selma site is perfect because it is located off of Interstate 95.

“We want something to attract traffic coming from the North,” Patel said.

He added it is also ideal for Selma traffic on U.S. Highway 70. Residents, he said, will have another option for breakfast and coffee on their way to work each morning.

Sampson Bladden Oil Company, of Clinton, broke ground last week, according to real estate agent Teresa Daughtry of Weaver Commercial Properties in Smithfield. The company already owns the property and will also own the building.

Daughtry said her company worked with Patel and Sampson Oil on a contract. Patel will be a tenant leasing the space, and the company is doing all ground construction.

Dalton Construction Company, of Clayton, is constructing the Dunkin Donuts structure.

The structure will have a drive through window for customers and will also be a dine-in. Office Manager Ann Lee, with Dalton Engineering, said the construction of the building should cost about $300,000.

Right now, the building firm doesn’t have an exact idea about how large the structure will be, according to Lee, but Daughtry said it would be about 1200 square feet.

“We are just waiting for them to start construction,” said Patel, adding it should take about 60 days to complete the inside.

The structure will have a drive through window for customers.

“I think it is a good thing for the area,” Daughtry said.

Before construction can start, Selma Planning Director Ryan Simmons said the parties involved will have to apply for a building permit from the town of Selma.

Selma News

Dunkin’ Donuts Rolls Out Chicken Parm Sandwich

Dunkin’ Donuts said it is introducing the “Oven-Toasted Chicken Parmesan Flatbread Sandwich” to its all-day menu, but the new item will not be immediately available in New England stores.

At the Canton-based coffee-and-baked-goods chain, the Tao of chow for the company’s food scientists is delivering convenience in a hand-held cuisine format.

A Dunkin’ press release said: “The Chicken Parmesan Flatbread Sandwich features lightly breaded, seasoned chicken topped with melted provolone cheese and a flavorful marinara sauce served in a convenient flatbread that is easy to eat and hold while on the go. Dunkin’ Donuts’ unique cooking ovens, using patented technologies, deliver the “Oven-Toasted” result. The Chicken Parmesan Flatbread Sandwich will be available at participating Dunkin’ Donuts shops throughout the country beginning today, with the exception of shops in New England, for the suggested retail price of $3.99.”

The new item will be available in New England at a later date, the company said.

The release cited data from the NPD Group research firm that the chicken sandwich category grew by 7 percent in the quick service restaurant industry over the past year, reaching 3.5 billion servings for 2008.

Other items in Dunkin’s Oven-Toasted flatbread sandwiches line-up include Ham & Swiss, Turkey Cheddar & Bacon, and Grilled Cheese, the chain noted.

Boston Globe

Dunkin’s Brouhaha

Josh Kosman and Holly Sanders Ware report in the New York Post that Dunkin’ Brands’ aggressive growth plan has some holes.

The doughnut chain is pushing ahead with a plan to open hundreds of stores this year to meet growth targets despite a rash of franchisee bankruptcies and a near freeze in restaurant financing.

One reason for the urgency: Dunkin’ Donuts, owned by private-equity firms Carlyle Group, THL Partners and Bain Capital, needs to meet certain financial targets, including new-store openings, to extend $1.5 billion in debt coming due in the next two years.

Kate Lavelle, Dunkin’s CFO, said the company has already hit the new-store target for 2011, and expects to remain there by the time the loan comes due.

However, a source close to the situation said the company has fallen slightly behind on its store schedule but believes it will get back on track by picking up the pace again later this year.

“The next year is key for Dunkin’,” the source said.

Meanwhile, franchise owners are feeling the pinch.

Four Dunkin’ Donuts franchise operators have filed for bankruptcy since June.

Kainos Partners Holding Co., which runs 56 stores in New York, Nevada and South Carolina, filed for Chapter 11, joining three other franchise operators in Tennessee and Florida.

Aside from the economic downturn, banks have clamped down on financing, making it hard for franchisees to open new stores.

What’s more, the precarious situation facing CIT — a long- time commercial lender to many Dunkin’ Donuts franchisees — has only complicated matters.

In May, the Zale family, which owns the Zales jewelry-store chain and is one of the lead players in Dunkin’ Donuts’ expansion into Texas, abandoned plans to open 70 stores.

The Zales opened four stores when they lost their financing, leading them to sell their franchise territory back to the company for an undisclosed amount.

“The company has had trouble growing outside its core markets,” said a source who works closely with Dunkin’ franchisees.

“They pushed it to really grow and now with the economy and financing being a challenge they’re not going to meet financial goals.”

Dunkin’ Donuts, bought in an expensive leveraged buyout in 2006, borrowed $1.5 billion through a market securitization handled by Lehman Brothers that was designed to push expansion far beyond its base in the Northeast.

The debt comes due in 2011. Dunkin’ can extend repayment up to two years if it meets certain thresholds, including a set number of new-store openings.

At the end of 2008, Dunkin’ Donuts had 8,835 franchised stores, and while Dunkin’ continues to tout its planned expansion, the private-equity owners have told their investors that they are breaking even on the investment since they bought it three years ago.

New York Post

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