Much to my chagrin, I have never met a doughnut I didn't
like. However, whenever I think about owning a doughnut shop, the
memory of the summer I worked at an ice cream store still dissuades
me. (A normal human does not gain 30 pounds in three months.) I
also recall the pity I felt when I saw the TV ad for Dunkin'
Donuts (DD) that featured the old guy stumbling out of bed in the
wee hours of the morning, grumbling, "Time to make the
doughnuts." Yes, it's a good idea to be a skinny morning
person when you're in the doughnut biz. So, assuming you
qualify, let's explore the salient remaining issue: How on
earth can you make a living baking 55-cent doughnuts?
The answer is, you can't. You make a living selling
doughnuts, bagels, coffee and juice, plus some new proprietary
additions known as the Omwich, the Dunkaccino and the Coolatta. New
products like these have created some pretty exciting same-store
sales growth in DD's strongest markets, which consist of the
Northeastern and Mid-Atlantic states, Chicago and Northern and
Southern Florida. With several markets in its prime territories
seeing double-digit growth, DD says, average sales for the entire
system are up 8 percent. Because DD doesn't make earnings
claims, we don't know what the baseline sales figures are;
however, it appears the franchise is putting lots of effort into
improving them.
Here's why that effort's so important: It's pretty
illogical to go to the trouble and expense of building a
free-standing retail store that only actively sells products during
a limited time frame. Taking note of that, British conglomerate
Allied Domecq PLC, the owner of the DD franchise system, also owns
the Baskin-Robbins and Togo's franchise systems. The company
made these acquisitions with an eye toward creating a multibrand
identity in a single space. On the surface, the strategy seems to
make sense, but the jury is out on which combinations actually
work.
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Other franchisors are experimenting with that same concept.
Tricon International, for example, has combined some KFC, Pizza Hut
and Taco Bell locations into single facilities. When three concepts
coalesce in one building, industry insiders call it a
"trombo." The vision for the trombo at hand is that your
DD customer would buy doughnuts and coffee in the morning, grab
lunch at your Togo's and drop by later for Baskin-Robbins ice
cream. In the marketing world, this is known as creating
"complementary day parts."
I doubt there are many people in the United States who
haven't heard of Dunkin' Donuts or Baskin-Robbins, but
Togo's, which is mainly a California chain, has a long way to
go before it has strong consumer recognition. One of the issues
that's arisen when combining DD and Togo's locations is
that, to uninitiated passersby, their signs appear to indicate they
can get Dunkin' Donuts "to go," which is not
particularly newsworthy. However, if you choose the DD and
Baskin-Robbins combo as a franchisee, the long hours could exhaust
you.
The management of Allied Domecq deserves credit for being
innovative, but the smartest franchise buy is usually a proven and
enduring concept in a market that already has consumer acceptance.
This chain claims, "It's not just about doughnuts
anymore," but I recommend new fran-chisees leave it to
experienced franchisees to prove it. For the best chance of success
with this system, stay close to established DD markets where TV
advertising occurs, make sure your store has a drive-thru window,
place the store on the side of the road that carries the morning
commuters, and purchase a really good alarm clock.
Todd D. Maddocks is a franchise attorney and small-business
consultant who is presently the CEO of The Worldlink Group. You can
reach him at TMaddocks@aol.com.