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Dunkin' Donuts Suing Its Own Small Franchisees Out Of Existence

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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)

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72
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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.

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

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

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That's extortion.

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

Tim Horton's is better anyway.

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this sounds horrible. glad i prefer starbucks.

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

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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.

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@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.

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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.

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Corporate America and the Federal Justice system at their finest...

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

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@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.

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

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

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Apple Fritters: Serious Business.

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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.

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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.

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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.

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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.

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

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@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...

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

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@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.

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@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.

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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.

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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.

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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.

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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.

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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.


:(

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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

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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]

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

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That's it...I'm never flying jetBlue again!

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@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.

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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.

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

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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.

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@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.

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@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 ;)

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@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...

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@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.

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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.

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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.

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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.

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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.

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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.

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@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.

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

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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.