Dunkin’ Donuts

1988 Distribution Strategies

z
Aman Agarwal
Group 4 - Batch 3 Ayussh Gupta
Chaitanya Hemrajani
Isha Chhaya
Jayati Chugh
Ria Singla
 Q1. Explain the Franchisee Vs Own Store
z
Policy? Which is easier to manage?
Franchisee Own Store Policy
 Franchisee stores were operated on  Own stores were operated on
company owned land and managed by company’s own land and
someone else managed by the company itself

 A large number of units of Dunkin  It meant a lot of staffing problems

Donuts were franchisee owned and it and administrative costs
could earn more due to rental income.

Franchisee policy is better as it is easier to manage and more rental

income can be generated. Moreover, market penetration was higher
due to the presence of franchisees.
Q2. What is the main problem in Region 1 and
z
Region 2?
Region 1 Region 2
 Overpenetration and Excess  No Trademark
Capacity Recognition

 DD had approved sites that  ‘Selective’ Haphazard

has affected individual Distribution
business of franchisees
 Operational Inefficiency
 Intensive Distribution leading
to frenetic franchisee
development
Q3. What
z are the alternatives that addresses the DD
distribution problem and suits the aim in becoming
national and not having lopsided distribution
development?
 Supply the Convenience Stores from Local
Commissary
 Area Franchising in Region 2

 Focused sequential development of

Underdeveloped Markets in Region 2
 Selling Exclusive Micro-territories to qualified
existing franchisees.
 Q4.
z
Difference between exclusive macro area
development agreement and micro development
agreement as a part of the satellite design strategy.

 An Area Development Agreement is a type of agreement

made with a franchisor which states that a franchisee must
open a certain number of franchise units in a particular area
within a set timeframe.
 In case of macro area development agreement, the territory
is vast and a single producing units will have to deliver
donuts to far off places.
 This would increase the payroll expense of delivery person.
Sudden fluctuation in demand in a satellite outlet cannot be
catered on time, since the production unit is not near by.
 Q5. What is the capacity utilization in outlets
z
of Region I and II?
• Franchisees were facing operational issues related to capacity utilization

• Production capacity of a Dunkin Donuts kitchen with basic configuration was 250 dozen
donuts per shift

• Franchisees run 3 shifts: 11PM to 6AM, 7AM to 11AM and Noon to 7PM with maximum
sales between 6AM to 10AM

• Dunkin Donuts had diversified its product portfolio by introducing various products like
croissants, soups, sandwiches etc

• Franchisees normally has one baker who is overburdened with baking the donuts, glazing
and filling them and also preparing muffins and croissants which reduces the production
efficiency to 140 dozen per shift

• Donuts cannot be pre baked in the other two shifts due to quality issues and thus work is
never evenly distributed
• Also, high work load is there in the night shift because maximum sales are in the morning
which requires large production in the night
 Q6.z What would have to change for you to
support the following designs?

1. Area development agreements in region II

• The new franchisees should be given limited control
with a short term and long-term plan of development
of stores in the area

2. Sub-franchising in Region II
• The issue to be solved was better penetration in
Region II so that by opening new outlets the existing
outlets do not experience added pressure due to
smaller territories
3. Focused fill ins development in region II
• It was needed to increase the producing units which
will supply to these fill-ins
 Q6.z What would have to change for you to
support the following designs?

4. Revitalization of co-owned stores division

• Revitalization of these stores will involve more capital
expenditure with no surety of return

5. Focusing on Branded products through supermarkets

channel design
• If the friction between the convenience store and the
producing store could be reduced this strategy would
be more profitable

6. Satellite units and exclusive micro areas

• The logistical problems involving satellite units were
needed to be solved. The design of exclusive areas
and allotment of those to the existing franchisees was
an issue. Moreover, the main problem was to device
such a plan which addresses all the issues pertaining
to exclusive micro areas
 Q7. What's most difficult problem in
z
developing satellite areas?

• Should territories be defined so as to include more than one franchisee’s

existing shop, or should some markets be immune from exclusive territory
development?
• Development of a policy regarding the design of the exclusive
development micro-territories
• What criteria should be used to determine whether to permit a franchisee
to buy a territory?
• How big should territories be? Should they require more than one or two
additional shops
• A particularly difficult issue involved those markets where there had
already seen significant development
z

THANK YOU