Dunkin' Donuts Suing Its Own Small Franchisees Out Of Existence

If your favorite Dunkin’ Donuts shop is an individually-owned franchise and not part of a large group of stores, don’t grow too attached to it, warns Cindy Gluck, a DD owner in Brooklyn. She claims DD corporate waits patiently for smaller franchisees to make any mistake at all, then strong-arms them out of business at a huge financial loss. The sheer number of lawsuits DD has aimed at small-time owners recently indicates that something unusual is going on:

Dunkin’ Donuts has sued other franchise owners 154 times since 2006. Over the same stretch of time, McDonald’s was involved in five lawsuits. And Subway, a company that has four times the number of locations as Dunkin’ Donuts, sued its franchises 12 times.

Why would they do something so apparently self-destructive? Because the company’s larger business strategy requires bigger franchisees who can open lots of stores rapidly to compete with Starbucks, and it’s too expensive to buy out the small owners any other way. She and her business partner are currently being forced out of business for this very reason, even though their two Brooklyn-based stores are doing fine.
 
Gluck’s mistake was offering to sell a 15% stake in her company to a store manager. She told Dunkin’ Donuts about this beforehand to make sure it was okay. It turns out it wasn’t. In fact, even though she immediately withdrew the offer, Dunkin’ Donuts has threatened a lawsuit against her and her business partner unless they sell DD corporate their two stores for half of what they’re worth and pay a $100,000 penalty fee.

The consequences of this are real, personal and painful. The owners of these stores – who overwhelmingly tend to be immigrants – lose their entire life’s work.
 
Maybe America runs on Dunkin’, but Dunkin’ itself is a corporate giant that runs on the sweat of franchisees large and small.
 
We small franchisees have just about been sweated out.

“Dunkin’ Donuts business practices have lots of holes” [New York Daily News] (Thanks to Rob!)
(Photo: Consumerist)

Comments

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  1. JayDeEm says:

    The DD just down the street from my house closed about a month ago for some kind of ‘restructuring’ and will supposedly re-open in August. I wonder if they are one of the franchisees mentioned above. As a side note, they are right next to a McDonalds and a Starbucks.

  2. TechnoDestructo says:

    Are Subway and Quiznos still being sued by their franchisees, for overselling franchises?

  3. DeltaPurser says:

    It’s a good thing I don’t do either coffee or donuts… Or I’d have to boycott DD…

  4. Parting says:

    That’s extortion.

    Nice going, Dunkin’ Donuts just lost me as a customer, and many people around me.

    Tim Horton’s is better anyway.

  5. sharonlives says:

    this sounds horrible. glad i prefer starbucks.

  6. Black Bellamy says:

    Yeah because Starbucks is sooooo much better. What a tool!

  7. humphrmi says:

    There used to be a Kosher Dunkin Donuts near me; a real rarity (kosher fast food). Donuts, breakfast sandwiches, and all were Kosher Dairy. They got into trouble because they wouldn’t put bacon on their breakfast sandwiches. Pretty soon that store closed, was “remodeled”, and re-opened… and guess what, no more kosher food!

    The best part was, whoever the new owner was, refused to take the CRC sticker off his door (Chicago Rabbinic Council, one of the nationwide Kosher certifiers) even though they sold breakfast sandwiches with bacon!

    I would love to join you in your boycott now, but unfortunately I have not been a DD customer since then.

  8. humphrmi says:

    @humphrmi: Oh yeah, and BTW I gave up DD for a Krispy Kreme store nearby which promptly went Tango-Uniform too. I took it as a sign that it was time to give up donuts. Sigh.

  9. hamsangwich says:

    Well that’s enough for me, I’ll stop buying any D&D products now that I know they evil. Actually, I guess a “regular” coffee that actually has 5 scoops of sugar is already kind of evil.

  10. Shutterman says:

    Corporate America and the Federal Justice system at their finest…

  11. thirdbase says:

    sue the franchisees all ya want. Just don’t serve burnt coffee.

  12. Shmonkmonk says:

    @Black Bellamy: Not that I want to get into a Starbucks debate but… How does liking Starbucks make one a tool? I don’t buy coffee often but when I do, I prefer to pay $1.72 for a fresh pot of coffee over the stale $1.50 cup from DD where they won’t even let me put cream and sugar myself.

    Oh, and I used to think Starbucks’ coffee was too strong as well (aka “burnt”) but seriously, their new place, Pike Place Roast or whatever, is really good.

  13. As a Bay Statah and a future cop, I find this misconduct by Dunkin’s highly disturbing.

  14. Shmonkmonk says:

    Oops, I meant to say their new roast, not place.

  15. Half Beast says:

    Apple Fritters: Serious Business.

  16. bohemian says:

    Way to keep those small business owners going when the economy is in the dumper. Like we need more people in financial ruin and their employees looking for a new job.

  17. DeeJayQueue says:

    I think there’s something else to this. Why would DD ask its franchise owners to take over a store, then open even more stores in the same area, when the current owners are doing fine?
    A smarter idea would be to get the franchisers who would be moving into that area anyway to just open new stores instead of refurbing old ones AND opening new ones.

  18. dmuth says:

    I’m not surprised by this at all. Back in the 90s, my parents owned a Duncan Donuts franchise in Allentown, PA, and I heard similar stories from them. No outright lawsuits, but there seemed to be a definite pattern of the company treating people who owned multiple stories better than people who owned single stores.

    My parents sold of their store and got out some years ago. That seems to have been a good idea.

  19. mgy says:

    John Goodman’s voice on the commercials really makes me hungry. I don’t know why – it has a fullness to it that just makes me want to eat donuts.

  20. DamnSkippy says:

    Is it any coincidence that DD is owned by neo-con private equity firm The Carlyle Group?

  21. sharonlives says:

    @Black Bellamy: @Shmonkmonk:

    i’m not a big time poster here or anywhere for that matter, but this is the first time i’ve ever been called a name on the internet! kinda cool actually… thanks!

    and i don’t care what you say, starbucks is awesome and i know that because i get super bad headaches whenever i don’t drink it. lol.

    also, i agree with all the reasons Shmonkmonk spelled out. DD cost more than starbucks and it doesn’t even taste like coffee.

    plus the workers at starbucks look happy whereas the workers at DD look miserable. now i know why…

  22. And yet everyone jumped over these same owners a few days ago when they refused to give away free cups. Hrmmmm.

  23. spinachdip says:

    @mgy: Aren’t they using Zach Braff’s voice now (I skip past commercials these days, I admit)? He *sounds* hungry, so maybe that works too.

    I know franchisees get treated like shit in general, but this is awful. I’ll miss my DD coffee – the stuff is liquid crack, I tell you.

  24. spinachdip says:

    @Git Em SteveDave: Yes, because the issues are directly related and/or if you criticize someone, you can never, ever ever ever criticize someone else that’s doing something bad to that first someone. Ever.

  25. WraithSama says:

    I’m not sure what the point was of mentioning that they’re mostly owned by immigrants, but I’m not terribly suprised by this development. Companies will gut themselves just as soon as another company if they see profit at the end of the tunnel.

  26. rickshawed says:

    As a Bostonian, I felt it was my duty once I got a GPS was see how many Dunkin Donuts there were within 2 miles of my house.

    13! Yes, there are 13 DD within 2 miles. If you go to 2.5 miles, it climbs to 19.

    I actually drove around to see if it was legitimate and, god help us, it was.

  27. WNW says:

    We had 2 DDs here in Eugene that closed for a bit and reopened under different names. This was about 2 years ago I think.

  28. TonyTriple says:

    I guess something happened like this in Lexington, KY too because the one Dunkin’ Donuts we had closed for a while, then opened back up as “Honeydip Donuts”.

    I must admit though, the ‘nut game here in town must have been pretty stiff what with with older family owned enterprises Spalding’s (mmmm) and “Donut Days”, then heavyweight Krispy Kreme comming to town I suppose the rest is history. Now it’s just a caricature of its former self. It even retained the DD color scheme.

  29. Mr.Ninethree says:

    I remember years ago our local Dunkin Donuts closed down for no apparent reason for almost a year. Back then(only 6 years ago max) they used to actually MAKE their donuts and bagels fresh in the building. Then they re-opened as the “new” Dunkin Donuts, which had terrible tasting EVERYTHING, and it’s been that way ever since.

    I’ll admit though that I do still eat there, but still, I miss the OLD Dunkin Donuts and there FRESH donuts…not the old, hard, crusty donuts that they have now.

    :(

  30. Skankingmike says:

    i’d rather they start going after all the unsavory DD’s in NJ so many of them in such a small state there’s 2 in my old town that’s only 1 mile square!!!! WHY!!!!!

    anyway, most of them are run by horrible business’s owners so i say good.

    this doesn’t effect us as consumer’s btw

  31. forgottenpassword says:

    I read the article… wow!… that’s pretty damn evil of them.

    There hasnt been a dunkin donuts around these parts in 20 years (that I know of),but when I was a kid I remember them being quite good (their donuts)…. now all we got around here is lamars donuts chain (nothing special) & the over-sugarry-diabetic-coma-donuts known as krispy kreme (yuck!!)

    Note: while making sure there was no DD donuts stores areound here I ran across this artical saying that DD plans to upen up shops here starting this year.

    [kansascity.bizjournals.com]

  32. DD severely overestimates the tastiness of their donuts. It’s all about the Winchell’s.

  33. LUV2CattleCall says:

    That’s it…I’m never flying jetBlue again!

  34. GC says:

    @LUV2CattleCall: STOP BLAMING THE VICTIM!

  35. Trai_Dep says:

    @Black Bellamy: Because Dunkin Doughnuts offers health bennies to it’s employees, even the part-timers, right?
    Starbucks does. Say what you will about their Borg-ization across the globe, but they treat their employees better than most chains.
    Shocking, coming from me (I know!), but credit where it’s due.

  36. Mollyg says:

    I am surprised that no one has yet to mention how odd it is that an owner ASKING PERMISSION to sell a stake of the store would be a contract violation. This does not make any sense to me.

  37. sleze69 says:

    Looks like DD wants to be a tournament contender next year.

  38. kalmakazee says:

    I HATE Dunkin Donuts Coffee and Doughnuts.

    I prefer Starbucks Coffee and I prefer Krispy Kreme Doughnuts.

    Not that anybody out there probably gives a rat what I like but I thought that i would add in my two sense anyways.

  39. RokMartian says:

    @Shmonkmonk: I am right there with you. The DD next to me is surprisingly horrible with their stale donuts and the brown water they call coffee.

    One of the 3 starbucks close to me has really bad customer service, which turned me off for a long time – So, I so much wanted to dislike Starbucks, but their Pike Place roast has totally won me over.

  40. BalknChain says:

    @Skankingmike: I’m also in NJ and our local DD is run by some very miserable people. Let me stress very. The coffee sucks and I believe I am old enough to add the cream and sugar myself, so why do they do it? The donuts are ok at best. Thank heaven for Wawa. Wawa just brought out the “box of joe” style coffee boxes so no more Dunkin’ runs for work ;)

  41. rellog says:

    @Victo: Same here. I hate Crispy Creme, and love D&D. Guess I’ll simply stick to the ex-DD stores that have almost the exact same product…

  42. @BalknChain: I’m with ya on that. I have to go a few miles out of my way to get to the good D&D. I’m not sure if the good one is a small fran. but I KNOW that the crappy one is. They’ll have 4 kinds of donuts, max, and maybe a couple kinds of coffee. Anything else is just the end of the world to them.

    For that, I say bring on the larger franchisees.

  43. RokMartian says:

    If there are any georgians out there,in marietta, off of Austell road is a small place called Dough in the Box that has the freshest and best tasting donuts available anywhere.

  44. usually I read stories on here and think ‘wow this company sucks’. I still go on to use that product or service despite hearing about a bad company desicion.

    Taking advantage of the hard working little guy who has helped to make DD what it is. Very wrong. I am no longer going to go there, not like I went a lot before, but I was thinking of getting breakfest there today. Nope.

  45. vermontwriter says:

    I’d LOVE to see our local independently owned DD shut down. They’re horrible. I’d volunteered to bring donut holes to my daughter’s classroom for a party the teacher had set up. Got to Dunkin Donuts at 7am and they were out of donuts, bagels, donut holes and muffins and told me they didn’t have time to make more. I ended up driving another 20 miles to one of the grocery store locations and then told me this is a common thing with that location. They have the donut making equipment right in the store but the manager doesn’t like the smell of oil, so she puts off making donuts until a certain amount of complaints are received.

  46. alfundo says:

    i can’t understand why anyone wants to add the cream and sugar themselves…doesn’t make sense to me.

    it’s my opinion that franchise owned dunkin donuts don’t taste as good as privately owned franchises.

  47. I seem to remember that McDonald’s tends to own the land and buildings and leases them to its franchisees. As a result, it doesn’t need to sue its franchisees out of business, it can just not renew the lease… so while Dunkin’ Donuts might be awful, the comparison isn’t a good one.

  48. @alfundo: Because if the barrista adds it, they usually put in four tablespoons of sugar and a third of a cup of half and half. I like to at least taste SOME of the coffee part.

  49. adamcz says:

    @humphrmi: We’ve got a kosher DD in my town in NJ. Don’t know if they take any heat from corporate over it.

  50. FreeMarketGravy says:

    Maybe it’s just my area of NJ, but I am dumbfounded by the concept of having different coffee places with different tasting coffee to choose from. Don’t get me wrong; we have Starbucks, DD, etc., but the only two options around are “gas station coffee-flavored water” and “coffee.”

    Maybe I just don’t have a taste for coffee.

  51. Chairman-Meow says:

    Dunkin Donuts used to be really good back in the good ole’ days ™ when they used Araban Coffee and each site made their own donuts.

    Once they were bought by Allied, the first things they did was kill “Fred the Donut Guy” from the commercials and proceed to use cheaper coffee and consolidate donut production to centralized factories.

    Of couse the result is watery flavorless coffee that is way oversugared and donuts that sit on the shelves for days instead of one day as in the past.

    I live in Eastern Massachusetts and you can actually see DD stores in line-of-sight of each other (i’m not kidding). The market out here is way oversaturated with “product” and how any of them make money being so close together is beyond me.

  52. Wet_Baloney says:

    just the thought of donuts makes me want to spew chunks.

  53. Wally East says:

    @rickshawed: I’m a fellow New Englander (in the Constitution State). It always surprises me that DD and Starbucks can do such good business in the land of independent doughnut shops. (Of course, the same can be said for the pizza business, too.)

  54. alfundo says:

    @Steaming Pile:

    i like the fact that i can go to my favorite dd shop and my coffee is waiting for me before i get to the counter…fixed just the way i like it.

  55. BigElectricCat says:

    @humphrmi:

    “The best part was, whoever the new owner was, refused to take the CRC sticker off his door (Chicago Rabbinic Council, one of the nationwide Kosher certifiers) even though they sold breakfast sandwiches with bacon!”

    Maybe a little whack to the door with that rock hammer (appearing in your nym) would fix the problem?

  56. bluxed says:

    When i first started reading the comments i thought yeah lets boycott DD!!! but as i kept reading i thought “hmm some dunkin doughnuts sounds delicious right now”

    =(

  57. nequam says:

    @Front_Towards_Enemy: Ever consider asking for less sugar?

  58. YvesTuditanus says:

    Comment on Dunkin’ Donuts Suing Its Own Small Franchisees Out Of Existence DD has a commercial where they make fun of other coffee shops for speaking
    “Fritalian” – in other words, fancy foreign language for a simple cup of
    joe. I thought it was pretty funny until it got to the end of the spot and
    they try to sell you a “latte”. Way to slam the other guys and then
    immediately do EXACTLY what you are poking fun at.

  59. Toffeecake says:

    I hope the owner of the store near my parents house gets sued; he’s a jerk. I used to work for him, but quit after I realized he wasn’t going to give me a manager position like he said, and decided that I was too cute to work in the back baking donuts. The only good thing was that it was also a Baskin Robbins and we got to take a couple scoops home every day.

    Also, we were allowed to take home the day-old donuts before they threw them away, but apparently he put an end to that soon after I left.

    I always thought it would be fun to own a Dunkin Donuts, but I guess I’ll pick a different chain. How about Taco Bell?

  60. deedrit says:

    a$$holes

  61. notallcompaniesareevil says:

    Growing up, I never really considered DD to be a huge corporation. I always thought of it as a local, Northeast thing. 20 years on, I think it’s safe to say that has changed.

  62. Trai_Dep says:

    Surely I’m not the only guy that has several non-chain doughnut places around. They’re not making iPods, for Christ’s sake. Guys, avoid Winchell’s, Krispy AND DD? Better for your local economy and better. Right?

  63. lim says:

    I really like the non-chain donut places in the area, but I’m not usually out the door by 7 am, when my very favorite shop closes. Seriously, if you can’t get there by 5:30 you may as well not go since there is so little left after the various early morning crews go through.

    Fortunately our DD is mostly good, but someone needs to teach them how to run a drive thru.

  64. Lambasted says:

    These people pour their heart and soul into their business, establish a solid customer base, and Dunkin Donuts swoops in to steal it from them only to reopen their own store in its stead. EVIL!

    I know my boycott not only hurts Dunkin Donuts corporate but the franchisee owner as well, but I don’t need a donut that badly to support bullying thief-in-the-night tactics like these.

    So Dunkin Donuts can kiss my patronage goodbye. I thank you, and my ass that certainly doesn’t need any donuts, thanks you too. However, if DD decides to change its wicked ways, there is a chocolate cream donut that has my name written all over it.

  65. Lambasted says:

    @lim: Wait, I don’t get it. Your local donut shop closes at 7am? Isn’t that when they should be opening for business?

  66. csdiego says:

    @Front_Towards_Enemy: No wonder I haven’t had a good donut in years. I used to like one type of donut from DD, the French crullers, and maybe twice a year I stop by DD on the off-chance of getting a fresh one. It never works: they’re always stale. Stale donuts are never a good thing, but the French crullers especially have to be fresh and hot or they’re revolting.

    Oh well, now I know. My nearest DD sits right next to a Starbucks, so it’s probably not long for this world anyway. I’ll save myself the trouble of going there anymore.

  67. Chairman-Meow says:

    @nequam: When you live in these parts, Your coffee selection is:

    Black – Means Black no Sugar
    Regular (pronounced Regalah) which is cream and sugar.
    Anything else you will exceed the brain capacity of the DD worker and they will stare at you until someone resets them. Also, If you go to a DD and start with the mocha-lattte-skinny-shit, you are likely to get whacked with a stale donut.

  68. SpdRacer says:

    I once considered opening a DD/BR franchise. Where I live they could make a killing, but upon researching it they require a minimum number of stores to be opened (I think its like five) within a like two years and we had no desire to open that many or even to find the locations that would make owning five locations in my area reasonable/profitable.

  69. Jabberkaty says:

    Local bakery it is. Mmmm… Homemade donuts.

  70. woot says:

    There are two approaches to franchising:

    If you are evil and are only franchising because you can’t finance a whole lot of store openings on your own and want to make some quick money as well, then sell people franchises and then, later, find excuses to screw them over and make the best locations corporate.

    If you are smart, you parter with your franchisees to build good solid businesses and foster innovation. McDonalds seems to do this very well. New menu items, like the Sausage & Egg McMuffin were invented by franchisees, tried, tested, and then rolled out on a wide scale. McDonalds also seems willing to give franchisees a ton of leeway in trying new concepts like this one:
    [www.mcfun.com]

    Yup – real chefs preparing freshly cooked meals to order. Incidentally, the owner of this one has 19 others in Orlando, many of which are also heavily themed – including the menus. It’s nice to see people having the freedom to innovate. It’s good for the franchisor, the franchisee, and customers alike.

    Dunkin Donuts: You are being evil, short sighted, and sucking. This will come back to haunt you, as it should.

  71. TTFK says:

    Back in the early 90’s I worked 3rd shift at a DD. Many years before the KK craze hit, I used to bring the hot, freshly-dipped, french crullers out from the back room at 3am, still on the metal rod, and people would buy them up in under two minutes.

    Those were the good ol’ days..

  72. juggler314 says:

    What I can’t understand is how this makes sense. Suing small owners out of business doesn’t prevent existing large owners from opening oodles of stores right now. The premise in the article seems flawed in that sense. DD should be able to have it’s existing large owners open lots of new storefronts without killing off the small owners no?