When considering franchising a Dunkin Donuts, the first thing you need to keep in mind is that the majority of your business will likely take place in the early morning hours. Early morning for most stores starts as early as 4 a.m., something to keep in mind when you have to consider who to hire to staff your store. There are more than 10,000 stores around the world, so it is obvious they have a good thing going. The question is whether you can be the beneficiary of that morning coffee and donut smell that translates into a bottom line profit.
Money is the obvious first necessity, and the estimated startup costs come to about $125,000 in what is known as liquid capital. It doesn’t have to be cash, but it does have to be the next best thing such as bonds or CD’s. Overall, you will have to have a proven net worth of $250,000, twice the amount of your upfront money requirement.
You can expect to be spending between $200,000 and $1.7 million to get your new franchise up and running. Unlike other franchised company stores, almost all of the Dunkin Donuts stores are franchised, which means they have a ton of experience to help you get off the ground and profitable. As a side note, you will often find the Baskin-Robbins brand right next to a Dunkin Donuts. That is because the same company owns both, opening the door for a potential new opportunity for you. All this means you have a better chance of success after plunking down that six or seven figure initial investment.
Now comes the franchise fee, which will be a minimum of $40,000 but can be as high as $90,000. Generally, it is about location and profitability – profitability if you are buying an existing store that is a proven money maker. That fee along with the initial investment will result in a franchise having an average net worth of $250,000. You will also have to pay a Royalty Fee of 5.9% and an Ad Royalty Fee of between 2% and 6% of sales.
Since it is likely to be your first venture into the world of franchising, a high level of training and support for you is essential. The good news is that Dunkin Donuts, because of its long and successful history of developing franchises, has perhaps the best reputation in the Quick Service Restaurant (QSR) industry for supporting their local stores. They will help you with everything from site selection to marketing, and naturally will provide the necessary training for you to be successful.
If you are thinking that running a donut shop doesn’t require a lot of training, you are both right and wrong. There is a lot to learn – accounting, management, customer service – but much of that is made easier as the company has some of the best technology to shorten the learning curve. The goal is to get your store to operate both efficiently and cost-effectively.
There are also other, non-financial requirements to meet. They will conduct the expected criminal background check as well as a credit check and make sure you have the assets you claim to have. You will have to be knowledgeable about constructing a business plan, though they are glad to help you with that part.
We’ll jump ahead here a bit and tell you that if your first store is successful and you want to start another one … well, there is no such thing as another “one.” You will be required per the company agreement to expand with no less than 5 stores at a time. There are probably some good solid business reasons for this, but it likely accounts for why starting up a single store is much easier and cheaper than other franchises. You are either committed to the future of the company, or you can make the minimum. An interesting approach, to say the least.
There is the Dunkin Donuts Online University (of course it is online – remember the technology?) that supports not only the store owners but the employees as well. This is a second level of support as the primary support comes from a personalized involvement from local field training offices that are with you every step of the way.
A potential roadblock in deciding to jump onboard with Dunkin Donuts is that their franchise owners have sued the company at a rate 10 to 15 times higher than other franchises. The specifics on this is something you will need to look into yourself, but you may find out that the underlying reasons for the lawsuits are not something you expect to be involved with. Naturally, this should nudge you in the direction of hiring a lawyer when going through the application process.
The end question is: is it worth the risk? Lawsuits aside, you will be investing in an established brand that knows what franchising is all about. They have a deserved reputation for helping franchises be successful, and their financial requirements aren’t steep by industry standards. What the company is looking for is a long term commitment to the brand. That commitment has the potential to make you become a reasonably wealthy person.
Written by Garrett Parker
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