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After an introduction to franchising, the definition and motivation, two firms were studied: Dunkin Donuts as a success and Krispy Kreme as a failure.
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Group #4
Christina Lehmann
Neelotpal Shukla
Nijansh Verma
IMEN301: Technology Management & Strategy | Homework #3
Ref: http://www.investopedia.com/terms/f/franchise.asp
Ref: http://www.investopedia.com/terms/f/franchise.asp
Ref: http://en.wikipedia.org/wiki/Franchising
SUCCESSFUL FRANCHISE ANALYSIS
COMPANY SNAPSHOT
Reference: Dunkin Donuts Official Website
Founded in 1950 by WILLIAM ROSENBERG in QUINCY, MASSACHUSSETTS.
First Franchise: 1955
It is now the world's leading baked goods and coffee chain owned by DUNKIN' BRANDS, INC
COMPANY SNAPSHOT
Reference: Dunkin Donuts Official Website
More than 3 MILLION customers per day
52 VARIETIES OF DONUTS More than a dozen coffee beverages as well as an array of bagels, breakfast sandwiches and other baked goods.
At the end of 2011, there were
10,083 DUNKIN' DONUTS STORES worldwide, including
7,015 FRANCHISED RESTAURANTS in 36 United States and 3,068 international shops in 32 countries.
THEIR FRANCHISE MODEL
START-UP COSTS
Reference: Dunkin Donuts Official Website
Total Investment: $ 294,000 - $ 1,523,100
Franchise Fee: $40,000 - $90,000
Ongoing Royalty Fee: 5.9% OF GROSS SALES
Term of Franchise Agreement: NOT RENEWABLE
CANDIDATE REQUIREMENTS
Reference: Dunkin Donuts Official Website
AVAILABLE MARKET Should be in a country which is open for development (in Pink)
CANDIDATE REQUIREMENTS
Reference: Dunkin Donuts Official Website
EXPERIENCE • In food service, retail or multi-unit management.
• Understanding of local store marketing and community involvement.
• Knowledge of real estate development process
PASSION • Dedication for operational excellence.
• Demonstrated ability to build a high performance team and organization.
CANDIDATE REQUIREMENTS
Reference: Dunkin Donuts Official Website
RESOURCES: FINANCIAL
Net Worth: $ 250, 000
Liquid Cash Available: $125, 000
CANDIDATE REQUIREMENTS
Reference: Dunkin Donuts Official Website
RESOURCES: REAL ESTATE (PREFERRED) • Site Size: 1/4 - 2 acres Building Size:
1,200 to 2,600 square feet
• Morning drive side
• Drive-thru
• Freestanding, shared pad or end-cap
located in mixed use "major tenant"
community shopping center with
national or regional tenants
• Option for 24 hour operations
CANDIDATE REQUIREMENTS
Reference: Dunkin Donuts Official Website
RESOURCES: REAL ESTATE (PREFERRED)
• High visibility from major arteries
• Easy ingress and egress (no more than 2
turns in or out)
• Minimum of one (1) parking space for every
three (3) seats
• Signage:
i. Building: maximize square feet, (use
prototypical colors and materials)
ii. Pylon and/or monument: maximize square
feet, use prototypical colors and materials
WHY WERE THEY SUCCESSFUL?
Reference: http://www.entrepreneur.com/franchises/dunkindonuts/282304-0.html
1. STRONG FRANCHISE REPUTATION
Ranking 2013 2012 2011 2010 2009
Franchise 500®:
13 10 15 7 36
Fastest-Growing:
9 6 29 4 6
America's Top Global:
12 9 13 6 31
Dunkin Donuts had maintained a good image as a franchise as can be seen in the franchise rankings done by various organizations. This attracted potential franchisees and led to a larger network.
2. PROVIDED STRONG SUPPORT
Reference: Dunkin Donuts Official Website
FRANCHISE TEAM AND
ADVISORY COUNCIL Newsletter, Meetings, Toll-free phone line, Grand opening, Security/safety procedures, Field operations/evaluations. All franchisees participate at the District Advisory Councils, and elected franchisee representatives participate at the Regional and Brand Advisory Councils. Together with the Dunkin' Team, the advisory councils focus on issues that impact franchisees and the brand.
Reference: Dunkin Donuts Official Website
BRANDING AND MARKETING Regional Marketing and Free Access to Marketing Tools Dunkin' Brands owns and operates LSMnow.com, a one-stop shop for local store marketing needs. Franchisees get free downloads of brand-approved, customizable creative, local store marketing programs, and other valuable resources.
2. PROVIDED STRONG SUPPORT
Reference: Dunkin Donuts Official Website
TRAINING PROGRAM
Dunkin Donuts conducts a our six-week course, where the candidates will have the tools so they can learn all about the brand and the ins and outs of restaurant management.
2. PROVIDED STRONG SUPPORT
Reference: Dunkin Donuts Official Website
TECHNOLOGICAL SUPPORT
Dunkin' Mobile, the mobile app, lets guests send virtual gift cards, load & reload their DD card, locate nearby Dunkin’ stores and view menu items.
2. PROVIDED STRONG SUPPORT
F A I L E D F R A N C H I S E A N A L Y S I S
Reference: Krispy Kreme Official Website
Founded on July 13, 1937 by Vernon Rudolphin. Headquartered in Winston-Salem, North Carolina, United States
First Franchise: 1982
Has 2.1% of the U.S. coffee and snack shop market (Starbucks:36%, Dunkin Donuts: 25%)
C O M P A N Y S N A P S H O T
Reference: Krispy Kreme Official Website
20 different Donuts,
Sale of Donuts: 88% of total retail sale
141 Domestic Franchise Stores in 29 states,
358 International Franchise Stores in 18 countries
83 Company stores in 18 states and
the District of Columbia
C O M P A N Y S N A P S H O T
T H E F R A N C H I S E M O D E L
Reference: Dunkin Donuts Official Website
Royalty fee: 4.5% of their total sales
plus
2% to for brand development and public relations
costs
Start-up cost: $25,000 – $50,000
Total investment: $933,000 – $1,888,250
S T A R T - U P C O S T S
Reference: http://smallbusiness.chron.com/open-krispy-kreme-doughnut-business-10206.html
Available Market
USA: Chicago, Buffalo/Rochester, Harrisburg, Lancaster, York,
Houston
ASIA: India, China, Taiwan, Singapore
EUROPE: Russia, Poland, Hungary, Czech Republic, Bulgaria,
Romania, Spain, Portugal, France, Germany, Belgium, Norway,
Holland, Sweden, Finland, Greece, Italy
Canada, Mexico, Puerto Rico, Australia
C A N D I D A T E R E Q U I R E M E N T S
Core Requirements
Passionate about the Krispy Kreme brand and products
proven track record of running a successful business
(retail/ restaurant industries)
Highly committed to providing great customer service
Strong Understanding of the local culture
C A N D I D A T E R E Q U I R E M E N T S
Reference: http://smallbusiness.chron.com/open-krispy-kreme-doughnut-business-10206.html
Resources: Financial
Liquid Capital Required: $1,000,000
(initial investments range from $928,000
to $1,883,250)
Minimum Net Worth : $5 million
C A N D I D A T E R E Q U I R E M E N T S
Reference: http://smallbusiness.chron.com/open-krispy-kreme-doughnut-business-10206.html
Resources: Real Estate
Hotlight stores: extend to 3,600 sq ft (approx.)
generally located on retail parks/leisure parks/busy arterial
routes in major cities
Fresh shops: comprise of 300 sq ft kiosks or 1,000 sq ft
in-line retail units.
Units are required to be on busy thoroughfares, transport hubs
or shopping centers.
C A N D I D A T E R E Q U I R E M E N T S
Reference: http://smallbusiness.chron.com/open-krispy-kreme-doughnut-business-10206.html
W H Y D I D T H E Y F A I L ?
Reference: http://www.morebusiness.com/franchise-risks
1. Aggressive Growth
• Attempt to sell its brand everywhere and anywhere, from gas
stations to kiosk (dilutes appeal of core product)
• Allow franchise locations that are too close in proximity (new
store may offer additional revenue to the home office, but the
overall result is less profit for each individual store owner)
e.g. 2003 – 2004: second quarter revenues increased by 15% -
same store revenues only by 1%
W H Y D I D T H E I R F R A N C H I S E F A I L ?
2. Market Oversaturated
Distance to actual key product by new introduction of
product lines (line of high-carb, high-calorie frozen
drinks, or "drinkable donuts”, sugar-free donut, large
coffee section, sausage rolls)
W H Y D I D T H E I R F R A N C H I S E F A I L ?
Reference: http://www.morebusiness.com/franchise-risks
3. Profit over Growth mistake
• “Channel Stuffing": Stores received twice the
inventory at the end of quarter so corporation could
bolster its reported profits
• Questionable transactions and self-dealing
accusations over the buybacks of franchisees
Reference: http://www.morebusiness.com/franchise-risks
W H Y D I D T H E I R F R A N C H I S E F A I L ?
Reference: http://money.cnn.com/magazines/fsb/fsb_archive/2002/05/01/322792/
4. Accounting scandal 2005
• Franchisees are forced to purchase
equipment/supplies from headquarters with extreme
markups (greedy short-term profit generating
solution)
• Result: 31% percent of sales were generated for
required mix and doughnut-making equipment
W H Y D I D T H E I R F R A N C H I S E F A I L ?
Dunkin Donuts generally does not sell equipment or product to its
franchisees, they have a strong royalty stream that is based
solely on store sales
Company looks to own profit rather than profit of all franchisees
as it has gone public and trades stock shares on the public
market, which forced company to produce high profits at the
parent-company level, while its outlets struggled.
Reference: http://money.cnn.com/magazines/fsb/fsb_archive/2002/05/01/322792/
C O M P A R I N G T O D U N K I N D O N U T S