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)

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