Michael Geller plans to open the first of his dozen planned St. Louis stores at 5 a.m. at 1210 South Kirkwood Road.

Geller, who until recently lived in New York, said he’s long wanted to return to the St. Louis area and bring the Dunkin’ Donuts brand with him.

He is a Washington University law and business school alumnus who hails from a family with a 20-year history of operating Dunkin’ Donuts on the East Coast.

“My mother and aunt have operated Dunkin’ Donuts in New Jersey, where Dunkin’ Donuts has a major presence, for more than 20 years,” he said in a statement. “I grew up with it, always loved the business and always loved the products.”

The last Dunkin’ Donuts in St. Louis closed about a decade ago. But the chain has been working with Pace Properties since late 2007 tore-enter the market.

Franchisee Milan Patel of OHM Concession Group LLC plans to open a unit at Lambert-St. Louis International Airport’s East Terminal next week.

Last year,the company signed a deal with Jay Patel, managing partner of Dunkin’ Development of Greater St. Louis, for 10 stores in St. Louis. Patel owns multiple convenience stores and gas stations in St. Louis as well as six Subway restaurants in Philadelphia. He is also the president of Accurate Personnel Services.

To cut costs and better access financing, some Dunkin’ franchisees are shifting away from new construction and toward retrofits of existing space. Under that plan, stores will require about$400,000 to $500,000in investment — half the cost of a new stand-alone building.

Each store will employ about 20 to 30 people. Company guidelines suggest franchisees should possess a minimum net worth of $500,000 and liquid assets of at least $250,000 per unit.

Read more at: St Louis Business Journal 

Related Story at DDIFO.org: Dunkin’ Donuts Sweetens to St Louis Again Under New Plan

McDonalds "Urban Design" from Brandweek

Late last year, the franchisee Paul Hendel became the first operator in the Golden Arches’ 14,000-unit system to adopt the “urban redesign” aesthetic—one that the burger chain had earlier used to update its locations throughout the E.U. At roughly the same time, archrival Burger King an-nounced plans to make over its 12,000 American units with an industrial look featuring corrugated metal and brick walls—all in the name of décor. Menus, prices and clientele will largely remain the same. The upshot? Expect fast-food interiors to change.

What’s going on here? Well, in large part, it’s because of Starbucks—or at least the effect that Starbucks and other so-called “fast-casual” restaurant chains have had on the QSR segment. Roughly translated, it boils down to, get hip or risk losing market share.

For decades, QSRs adopted some variation of the standard layout of fiberglass seats and mustard-colored wallpaper. The materials were cheap to buy, easy to keep clean—and who cared what the restaurants looked like? Most fast-food customers didn’t stay much longer than 15 minutes, anyway. But fast food’s strategy is changing. Not only do quick-serve chains have to hold their own against encroachment of fast-casual competitors like Chipotle and Panera (which offer nicer settings and higher-end fare for only a modest bump in the average ticket), but consumer eating habits are also getting more sophisticated. In a category whose main culinary attribute has always been “fast,” companies are increasingly catering to consumers who want to linger. Wi-Fi is a given and among other new features are laptop plugs, upholstered chairs and flatscreen TVs.

Read More at: Brandweek

The litigation was over Burger King Holding’s unilateral decision to appropriate a substantial percentage of soft drink rebates for the franchisor’s designated use. Franchisees have received the “restaurant operating funds”, or ROFs, for the last decade based on the amount of syrup they purchased from the drink companies. The burger chain had hoped to start taking 40 percent of the soda rebate money this year as a way to increase its national marketing efforts.

NFA Chairman William Harloe Jr. made this statement yesterday to members: “We are pleased to report that we have been successful in negotiating a joint stipulation that memorializes [Burger King's] decision to cancel the implementation of the reallocation of ROF and preserves your rights in the event the ROF issue emerges in the future.”

Burger King was served with federal lawsuits, filed in the Southern district of California, on the opening day of its grand annual convention on May 4, 2009. Since that time, the franchisor has been dealing with negative press resulting from its tensions with franchise owners over the soda litigation and it requiring its franchisees to discount certain menu items. Another lawsuit filed by the franchisee association last year challenged Burger King’s promotion of its $1 Double Cheeseburger, which franchisees claim costs more than a dollar to make.

The franchisor recently acquiesced, saying that it will raise the menu price for the double cheeseburger to $1.19.

Kainos CFO Christopher Cortese

Christopher Cortese, 54, of Rockville Centre, has been charged with grand larceny for allegedly siphoning $429,000 from the company where he was employed as the chief financial officer.  He used the money to finance trips, car payments, gift cards and payments to two girlfriends that he hired as “consultants” to the company, Nassau County District Attorney Kathleen Rice said today.

Cortese, 54,was working for Kainos Partners Holding Company, LLC, a corporation that owns and operates Dunkin Donuts franchises. Prosecutors began investigating Cortese last year after his expenses ran a little high — including $53,500 for a home office, $60,000 in gift cards, and more than $100,000 in trips, meals, and other expenses.

In addition, Cortese “hired” two girlfriends as consultants, funneling $110,000 to one woman for information technology services that were never performed, the D.A.’s office said in a statement.

“The level of this defendant’s deception, arrogance and sheer greed is shocking,” Rice said.

Cortese was terminated by Kainos in 2009 and he faces up to 15 years in prison if convicted.

Attorney J Michael Dady

David Farkas writes in  Chain Leader that attorney J. Michael Dady claims that restaurant chain discounting ruins franchisees’ profits and insists more disclosure would keep franchisors honest.

J. Michael Dady of Dady & Gardner has been arguing case law on behalf of franchisees for more than 30 years. Today, Dady’s list of adversaries includes just about every major restaurant brand including Starbucks, McDonald’s and Burger King. Chain Leader recently asked the Minneapolis-based attorney to bring us up to date on legal issues currently affecting franchisees.

Can you offer a brief overview of restaurant franchisor-franchisee relations?

Across the board today there is an unusually significant emphasis on discounting to get people through the front door or to the drive-thru. There are pluses and minuses to that strategy from a franchisor’s perspective. They make their money based on a percentage of total revenues. But my clients make their money based on bottom-line profitably. You can’t lose a little on every deal and expect to make it up on volume, which is one of my criticisms of Burger King’s $1 double cheeseburger.

What are the legal implications of that situation?

There is attached to the franchisor-franchisee relationship a two-way street called the covenant of good faith and fair dealing. This means franchisees in their relationship with franchisors, and vice versa, have to act in a way that is fair and reasonable and is not discriminatory and in a way that does not deprive the other party of the fruits of the relationship. [Franchisees] buy into a franchise opportunity because they expect a franchisor will help them on the road to profitability. To the extent franchisors are imposing obligations on [franchisees] to sell goods below their actual costs, it violates that contract.

Has there been good news from a legal standpoint for franchisees lately?

We like the Randall, et al. vs. Lady of America case that came out recently in federal court in Minnesota. It says a franchisor may not disclaim the protections afforded to a prospective franchisee by applicable federal or state laws–be they statutory or common law principles–by a [written] disclaimer.

Can you elaborate?

I’ve said often that despite doing this for 30-plus years, I’ll still bet one of these super salesmen could probably talk me into signing just about anything. What the law says, and it varies some from state to state, but in general it says that when you are selling someone a franchise, you’ve got to do it like they did after the ‘33 and ‘34 [Securities Exchange] Acts were passed for selling stocks or bonds. You have to do it with full and fair disclosure so buyers can make informed decisions based on good information.

And the fact that you might oversell somebody, and the in process get them to sign some kind of disclaimer that says we didn’t say or do anything unlawful, that doesn’t work. If you indeed do or say something unlawful, you can’t avoid liability because as a great salesman you got them to sign the disclaimer. That’s a very important point. Before that case, which incidentally is mine, there were cases that suggested the contrary.

Has there been good news from a legal standpoint for franchisors?

I like to talk about my wins. Let someone else talk about my losses.

Let me put it this way, then. In your article “Calling a Penalty on Your Partner,”  you mention that some franchisees forced to close early are still responsible for future royalties. Do franchisors easily get away with that?

It’s the number one point I raise with potential clients. People think intuitively, “If I enter into this franchise opportunity, I’m optimistic things will work out with my good effort and my franchisor’s partnership. But if after three or four years, I have lost lots of money, I will be able to shut my business down and go to law school without further liabilities to the franchisor.”

Lo and behold, if they have assets apart from what they poured into the business, franchisors will say, “You signed up for a 20-year franchise. You closed after five years. I have 15 more years of royalties coming. You’re obligated to keep your doors open and fund your operating losses so I can get my royalty check. Send me a check for 15 years worth of royalties. You owe me hundreds of thousands of dollars.”

And there are cases out there that say that’s right. I say to prospective franchisees that you want to have the express right to get out early if you can’t make it despite your best efforts.

How likely is it that a national franchise brand would require those royalties?

It varies dramatically, much more than you’d think. Let me ask this: How would you like to be a CEO of a company that says to prospects, “Whether you make money or not, you’ll be on the hook for royalties for 20 years”?

Read more at: Chain Leader

Jon Luther, chairman of Canton, Mass.-based Dunkin Brands Inc., the parent to Dunkin Donuts and Baskin-Robbins, said the intrusion of government through such proposed legislative measures as menu labeling, card check and health care reform, would have the most profound effect on the industry’s future cost of doing business.

“Government, that’s the greatest single threat we have,” Luther said Monday during a panel discussion at the New York State Restaurant Association’s trade show. “Every time something happens, it affects the bottom line.”

Luther added that although some of the plans making their way through the Obama administration “are well thought out,” more needs to be done to ensure the success of business “for the long term.”

He told attendees a story about the late Roberto Goizueta, who, he said was “one of the most wonderful CEOs” in the foodservice industry. “The venerable CEO of Coca-Cola,” Luther mused, “was once asked why [the company had] a huge government relations office overlooking the White House. He said, ‘government could put me out of business.’”
Rick Sampson, chief executive of the New York State Restaurant Association, also weighed in on the subject of increased legislation during a presentation on environmentally friendly restaurant initiatives within the New York restaurant community.
“It’s coming,” he said. “We’re already starting to see [mandated] deposits and sales tax on bottled water. You will be paying higher taxes, fees and on and on. The last thing we want is mandates on how to run our business.”
He suggested that restaurants that work to initiate green programs now will get ahead of the legislation curve, as well as manage to do something good for the environment.

Michael Oshman, executive director of the Green Restaurant Association, the Boston-based nonprofit group that assists operators going green through the association’s certification program, agreed with Sampson, saying that initiating green practices before many become law is the smartest way to circumvent future problems.

“California is legislating left and right,” he said. “The question is, do you want to [make changes] now when you can or wait until 2013 when you have to do it? I don’t know of any restaurant [company] that wants to be mandated to by government.”

NYSRA formed a partnership last year with the GRA to increase eco-friendliness among industry members. According to Oshman, there are 120 restaurants in New York that have either obtained or maintained green restaurant certification since the program began and another 40 to 50 locations are on deck. He said there are a total of 650 restaurants throughout the United States that have so far been GRA certified.

Read more: Nation’s Restaurant News

Kainos Partners Website

In an email sent out to Dunkin’ franchisees, CEO Nigel Travis explained the franchisors intent to buy the company. “Kainos has been unable to emerge from bankruptcy and has filed a motion seeking an order authorizing bidding procedures to be employed in connection with the proposed sale of their Dunkin’ Donuts restaurants and related assets,” Travis wrote. “Dunkin’ Brands has submitted a bid to purchase a substantial portion of the assets and business operations.”

Travis went on to write, “Kainos will continue to operate its Dunkin’ Donuts restaurants in Buffalo, NY, Greenville, SC, and Las Vegas, NV until the conclusion of the sale process.”

Attorney Adam Seigelheim, chair of Stark & Stark franchise group elaborates. “The implication from Nigel’s email is that Kainos is not going to put forward a plan to come out of Chapter 11,” the franchise attorney explains of last Wednesday’s deadline by the court to file a plan and the company’s missing of that deadline. “They’ll remain in chapter 11 but will move to sell off their assets in the ordinary course of business,” says Seigelheim.

Refranchising bankrupt Dunkin’ stores

“Dunkin’ submitted a proposed order to acquire the assets of Kainos under a 363 sale, which is the code section for selling stuff through bankruptcy,” says Jim Balis, who is both chief executive officer and chief financial officer of Kainos Partners.

A “363″ sale refers to a sale of a company’s assets who is undergoing bankruptcy, as in a Chapter 11 reorganization. It refers to the bankruptcy code that regulates the procedure, 11 USC §363.

“I think the order will be entered on Monday (March for that proposed 363 sale, says Balis. “Over the next month, we will be marketing units to see if anybody else is interested to buy the assets of Kainos, the debtor.”

“It looks like they are going to sell off their assets through a liquidated chapter 11,” explains franchise attorney, Adam Seigelheim.

Michelle King, director of global public relations for Dunkin’ Brands, adds, “Other buyers will have an opportunity to purchase the assets of Kainos subject to bankruptcy court approval. Although a final date has not yet been set for completion of the sale, we believe it to be in early April. In the meantime, Kainos will continue to operate in all markets.”

One year’s high flyer crashes the next

Kainos’ Balis says that the original franchise agreement that Dunkin’ required was for Kainos to commit and build over a hundred units in various states. Kainos received development money when credit was flowing from private equity investor Palisades Capital and senior secured lender CIT.

The master franchise quickly built some 56 stores in New York, South Carolina and Nevada since 2005.

Dunkin’ was happy.

Dunkin’ Donuts honored New York-based Kainos Partners as “developer of the year” in July, 2008, meant to have the way it grows emulated by others. In a toast given at a ceremony for its award winners, Jon Luther, who at the time was chairman and chief executive officer of Dunkin’ Brands, Inc., said: “This room is filled with an accomplished and elite group of leaders from all around the world who represent the very best of the Dunkin’ Brands system. I applaud the values and dedication you all bring to this company.”

But a year later, Kainos was filing Chapter 11 for bankruptcy protection.

When asked why the master franchise failed and whether the high number of store locations spread out in such a diverse geography had caused the company’s downfall, CEO Balis replied, “Unfortunately, I cannot comment on that.”

Dunkin’ has been caught up in the coffee wars, a war over the menu price among McDonald’s, Starbucks and others over cups of coffee. Meanwhile, competitors are increasing breakfast offerings to raise revenues in the tough economy. “It is a challenging market,” says Balis over his firm’s decline. “It didn’t help that some of our competitors are advertising very aggressively in the breakfast segment.”

Kevin McCarthy, current chairman of Dunkin Donuts Indepedent Franchise Owners association and a former vice president of real estate and operations at Dunkin’ Donuts, thinks that it is a problem of franchisor Dunkin’ not understanding the chain’s traditional strengths. Speaking strictly on behalf of himself, McCarthy thinks misconceptions caused Dunkin’ to use the wrong development strategy.

He stresses that Dunkin’ is largely a mom & pop franchise chain. It should grow organically, rather than using large area developers. “Nothing replaces a franchise operator who is on premise,” declares McCarthy. He stresses a slower but more steady growth is by opening a store to get it profitable, and then open another in a fairly contiguous neighborhood that the owners know well.

Read More at: BlueMauMau

Video 1: Welcome to the DDIFO Members Meeting! Congratulations to the World Champion Yankees and Happy 60th BirthDDay Dunkin’ Donuts.

Video 2: Competition and Introduction to Street Fighter Mark Slutsky!

Video 3: Politics and Introduction to DDIFO Legislative Affairs Coordinator Joe Giannino!

The members serve a two year term, providing strategic advice and guidance on brand initiatives. They attend regular meetings with the senior leadership team at Dunkin’ Brands corporate headquarters in Canton, Mass. This group represents the entire franchise community and serves as a forum to exchange ideas, provide feedback, observations and suggestions.

For 2010-2011, eleven new representatives were elected to the Dunkin’ Donuts Brand Advisory Council by their colleagues from a slate of candidates for each respective region. They include:

* Nick Apostoleres (Florida)
* Rob Branca (Shrewsbury, MA)
* Mark Cafua (North Andover, MA)
* Jim Cain (Norwalk, CT)
* Dan Costa (Acton, MA)
* Jason Duffy (Phoenix, AZ)
* Barkat Gillani (Chicago, IL)
* Sid Mody (New Brunswick, NJ)
* Parth Patel (Clayton, NC)
* Vipul Patel (Chicago,IL)
* Vishal Shah (Chicago, IL)

The new franchise leaders will serve alongside returning members, Jim Allen (co-chairman). Danny Bouzianis (Biddeford, ME), Scott Campbell (Great Neck, NY), Neal Faulkner (Upton, MA), Lou Garcia (Manasquan, NJ), Ram Javia (Westminster, MD), Dinart Serpa (Beverly, MA), Perry Shah (Philadelphia, PA), Dave Sisson (Cleveland, OH), Clayton Turnbull (Boston, MA), Rod Valencia (Woodhaven, NY), Mike White (Atlanta, GA), Ed Wolak (Scarborough, ME), George Zografos (South Yarmouth, MA) and John Justo (Providence, RI).

“It is a privilege and honor to serve on the Brand Advisory Committee again this year to represent the Dunkin’ Donuts franchise community,” said Dunkin’ Donuts BAC co-chairman, Jim Allen of Lexington, MA. “I look forward to working with my fellow franchisees and senior management to help address many of the topics that are important to the Dunkin’ Donuts network.”

“We are always working towards building a stronger franchise system and the BAC plays a critical role in providing senior management with thoughtful and valuable advice and worthwhile perspectives to further strengthen the business,” said Nigel Travis, Dunkin’ Brands CEO and Dunkin’ Donuts President. “We look forward to the contributions of our newly appointed members who join a strong group of dedicated franchise leaders that takes its commitment to Dunkin’ Donuts seriously.”

Dunkin’ Donuts senior leadership consults with the Brand Advisory Council on a wide variety of topics, including the brand’s strategic direction, marketing strategies, menu innovation, operations, technology issues, education and training needs, regional and national meeting agendas and more.

The Dunkin’ Donuts Franchise Advisory Council system has been in place for more than three decades and includes operators located in 35 United States across the country.

The big coffee and doughnut chain said new locations in Canada will focus on growth markets in Quebec, western Canada and major urban locations, as well as Ontario. The company had about 3,000 stores in Canada at the end of 2009 and sees potential for another 1,000 across the country.

U.S. expansion will focus on existing regional markets in New York, Ohio and Michigan. It plans to differentiate its brand through a new concept restaurant design to be piloted in at least 10 existing locations. The new concept features a “dramatic re-imaging” to define itself as a cafe and bake-shop destination.

At an investor conference, the company said a key part of its U.S. strategy is to become “famous” for its core coffee and baked goods, and so it will add the words “Cafe & Bake Shop” to its logo. “We have to call out what we are,” said David Clanachan, chief operations officer for U.S. and international at Tim Hortons.

He said the company’s new U.S. store concept will have the feel of a cafe inside and out, with goods baked before customers' eyes, equipment moved out of the way to create more opportunities for interaction with staff, and tables and chairs that aren’t fastened together or to the floor.

The company also plans to complement its standard restaurant-development activity in Canada and the U.S. with non-standard formats and locations, extending its reach in hospitals, universities and colleges, airports and other non-traditional sites.

As part of its overall development strategy, Tim Hortons will target smaller communities in Canada, mostly with standard restaurants, though it will also test a new, flexible restaurant design in these communities.

The chain will extend its co-branding initiative with Cold Stone Creamery and plans to convert up to 60 locations in Canada in 2010 to include the Cold Stone Creamery concept. In the U.S., it plans to co-brand 15 to 20 existing locations and open 10 to 15 new restaurants as co-branded locations in 2010.

It's also exploring the idea of co-branding with other companies.

For 2010, Tim Hortons is also projecting operating income growth of 8% to 10% and same-store sales growth of 3% to 5% in Canada and 2% to 4% in the U.S. Capital spending for 2010 is projected at C$180-C$200 million.

Beyond 2010, it’s targeting share earnings growth of 12% to 15% on a compound annual average growth rate basis from 2011 to 2013.

Executives said that, while Tim Hortons does most of its business in the morning and snack periods, it sees room for growth at all times of day, notably lunch and dinner through the launch of new products that appeal to its “on-the-go” customers.

In Toronto Friday, Tim Hortons is up 81 Canadian cents to C$32.73 on 723,000 shares.