If you are a morning person, you have likely spent a bit of time going to Dunkin’ Donuts. Dunkin’ Donuts is a widely popular doughnut and coffee franchise, serving a wide variety of drinks and morning snacks, such as bagels. Dunkin’ Donuts has had massive success, growing to over 11,000 locations worldwide. It has been made famous in popular culture, television, and in everyday interactions with others.
If you are an entrepreneur, you might be getting ready to open your own business. You may have saved up quite a bit of money and are interested in investing it soon. As a result, you might be exploring various franchise opportunities. This makes sense, as franchising can come with benefits like reduced risk off of a proven business model and supportive franchisor.
In any case, as you are exploring brands to franchise with, you might be considering the profitability and cost of the franchise you are investing in. You might be looking for cheaper franchises to start, especially if this is your first business. For all your franchise information needs, you have come to the right place. We will review the Dunkin’ Donuts brand, advantages and disadvantages of the franchise, requirements for owning a location, the Dunkin’ Donuts franchise cost, profitability, training programs, term of agreement and renewal, and application process. We’ll cover the following topics in-depth in this article:
Cost of Starting a Dunkin’ Donuts
If you are confident that you meet the requirements and are on track to meet the recommendations for a franchisee candidate, you should begin to consider the costs of the investment. There are two main categories of costs: corporate costs and other investment costs. Corporate costs are costs that you pay to corporate to franchise a Dunkin’ Donuts. Other investment costs are related to the construction, setup, and operation of your Dunkin’ Donuts. These costs are also divided into costs to strictly start your Dunkin’ Donuts as well as costs that you have to operate the locations in the first few months.
Starting with the costs you will need to pay to corporate, the first of these is called the initial franchise fee. The initial franchise fee is a lump sum payment that you pay upfront at the signing of the franchise agreement to the franchisor. The franchise fee is used as revenue by corporate, but it theoretically establishes and funds the franchisor and franchisee relationship in starting your franchise business. The initial franchise fee for Dunkin’ Donuts ranges from $40,000 to $90,000. The exact figure depends on the location.
This fee can be relatively steep. While $40,000 may be a reasonable fee compared to peer franchising options, a franchising fee of up to $90,000 is extremely high. You should be dedicated to the decision to run a Dunkin’ Donuts franchise if you are going to be paying a franchise fee as high as this. Of course, Dunkin’ Donuts does have a reputation for being successful for a reason, but the costs involved are quite high.
Next are the ongoing fees related to the franchise obligation to pay corporate each month. There are two main fees associated with this expense. The first is known as the royalty fee. The royalty fee is a monthly fee, usually as a percent of gross sales, paid to corporate to help continue the corporate relationship and sustain the support structure that exists to help the franchise. The royalty fee charged by Dunkin’ Donuts is 5.9% of gross sales. This is pretty standard for franchises in this industry.
The second ongoing fee is known as the advertising fee or marketing fee. This monthly fee is used to fund advertising at a national and local scale for your franchise and is usually a percentage of your gross sales. Theoretically, you are getting more value out of this fee to your franchise in the form of advertising. The advertising fee charged by Dunkin’ Donuts is 5% of gross sales, which is also pretty standard for franchises.
These represent the essential charges from corporate on the starting and ongoing costs of a Dunkin’ Donuts franchise. The exact information on all of the corporate-related franchise charges can be found in the franchise disclosure document (FDD) when you enter conversations with corporate about becoming a franchisee.
There are also costs related to investment in the real estate costs, construction, equipment, and setup of your Dunkin’ Donuts franchise location. The costs related to the total investment, or initial investment, in needing to set up your location are estimated to range between $100,000 and $1,700,000. This is a wide investment range. The reason for this is due to the various forms of Dunkin’ Donuts locations that you can open up.
The options for a Dunkin’ Donuts location include a freestanding location such as a drive-thru, a non-traditional location such as a convenience store option, a shopping center option, or a walk-through location. The flexibility here also allows you to have flexibility in potential costs. This can make opening up a Dunkin’ Donuts easier for you, both logistically and financially.
In any case, the estimated costs both to corporate and to realize your location will depend on your unique situation. You should continue to do more research if you find these costs to be affordable to you.
Dunkin’ Donuts has a rich history dating back to its founding in 1950 in Quincy, Massachusetts, by Bill Rosenberg. Its model is a quick-service restaurant focused on serving coffee and donuts to its customers. By the turn of the century, the brand had expanded to have over 2,500 locations. Now, Dunkin’ Donuts has grown to over 11,000 locations internationally.
There are a variety of Dunkin’ brands combined under the Dunkin’ Donuts parent company. A Dunkin’ location is a mix between a coffee shop and a donut shop. It has become a popular place for people to stop for delicious donuts and a variety of coffee beverages.
If you are considering franchising with Dunkin’ Donuts, you should sift through the advantages and disadvantages of franchising and determine if franchising with Dunkin’ Donuts is right for you.
Advantages of Owning a Dunkin’ Donuts
One of the advantages of owning a Dunkin’ Donuts franchise is getting access to selling its line of products. From its donuts to its coffee, Dunkin’ Donuts is famous alone for both its delicious food and its tasty coffee. Dunkin’ Donuts has a wide selection of products that have become popular with the general public. It is hard for others to compete with the specific tastes and products of Dunkin’ Donuts, providing a sort of moat for the business.
Dunkin’ Donuts, as a sort of follow-up, has a large existing customer base. This is proven by the sheer size of their expansion to over 11,000 locations. Having a large customer base reduces the need for local advertising or marketing. Customers will pass by your location and already recognize the brand and sometimes seek out stopping at your location. This can reduce the costs of needing to acquire customers. You just need to be ready to franchise and operate.
Another advantage of franchising with Dunkin’ Donuts is the experience that comes with the brand and the support they are ready to provide. Dunkin’ Donuts has dedicated parts of its corporate business to mastering the food service industry, helping open franchise businesses, the effective operation of food franchises, the perfection of a franchise business plan, and more. When you sign with Dunkin’ Donuts to open up a franchise, you should expect to receive expert help at every step of the way. This includes everything from designing and building your store to helping staff, creating the basis for advertising efforts, and stocking your store with the foods you need.
In all, Dunkin’ Donuts has all the great benefits of franchising with a large brand. They are also very proactive with big, national marketing efforts. At the same time. Dunkin’ Donuts also benefits from a unique menu and following that helps to make the Dunkin’ Donuts franchise so successful.
Disadvantages of Owning a Dunkin’ Donuts
While there are several important advantages to owning a Dunkin’ Donuts location, there are also some downsides that you should consider before arriving at a decision to purchase a Dunkin’ Donuts franchise.
One of the downsides to purchasing a Dunkin’ Donuts is the sheer competition that the brand faces. A coffee and donut shop quick-service restaurant concept is nothing new. You will be competing with other famous coffee brands, like Starbucks. Or, you might be competing with donut brands like Krispy Kreme. In either case, these brands have strong products that will compete with the Dunkin’ Donuts brand. Dunkin’ Donuts is fortunate to have a strong customer base with a solid menu. However, this does not diminish the ultimate competition that Dunkin’ Donuts faces.
Another disadvantage of buying and owning a Dunkin’ Donuts is the costs that you pay to corporate. The franchise fee and ongoing fees that you will owe to corporate are somewhat high. You should be prepared to cough up quite a bit of money to corporate Dunkin’ Donuts. If you are concerned about paying a large number of costs to corporate, Dunkin’ Donuts may not be the brand for you.
An additional disadvantage of franchising with Dunkin’ Donuts is that they do not offer financing options in-house. If you need to seek financing to help you get started with your Dunkin’ Donuts franchise, this may complicate the process for you. You may need to find a bank loan or an alternative lender to help you facilitate your franchising financing needs. While financing is still not impossible, it does increase the effort required to franchise.
There is also an additional downside to franchising with Dunkin’ Donuts contained in the application time. There is a reputation that Dunkin’ Donuts takes a while to process your application and go through additional steps, taking up to 8 to 13 months. If you are looking to deploy your capital quickly and start realizing returns rapidly, Dunkin’ Donuts may not be for you.
In all, there are some substantial downsides to opening and running a Dunkin’ Donuts franchise. From the costs and process of setting it up to the competition and costs you will face as a part of your business operations, you should factor in the downsides into assessing the business opportunity of franchising with Dunkin’ Donuts.
Requirements for Opening a Dunkin’ Donuts
If you have read through the advantages and disadvantages of opening a Dunkin’ Donuts and continue to be interested in the prospect of franchising with Dunkin’ Donuts, you will need to be sure that you meet key requirements before applying. Meeting these requirements will ensure the speedy processing of your application and help a positive result when Dunkin’ Donuts responds to your franchise application.
There are two main financial requirements that you need to meet when opening a Dunkin’ Donuts. The first is the net worth requirement. The net worth that Dunkin’ Donuts requires you to have is $500,000. If you are not sure if you meet this requirement, consider calculating your net worth. To do so, add up the value of all of your assets, including your house, cars, savings, cash, and anything else of value that you could theoretically sell. Then, subtract the outstanding amount of any debt you currently have, such as home or car loans. The number you finally reach is known as your net worth. If it is at or greater than $500,000, you meet the net worth requirement.
The $500,000 net worth requirement is likely pretty standard for the size of your Dunkin’ Donuts operation. It is both less than larger and more expensive franchises like McDonald’s and more expensive than smaller franchises like Subway.
The next financial requirement is a liquid assets requirement. Dunkin’ Donuts requires you to have at least $250,000 in liquid assets. Liquid assets, or liquid capital, is the sort of cash requirement that Dunkin’ Donuts requires of their prospective franchisees. This is essentially the amount of cash, savings, or stock value that you can access directly on short notice. You can calculate this number for yourself to be sure that you meet this requirement. This requirement makes sure that you have enough capital to be able to fund the start and operation of your franchise business.
Meeting these two financial requirements is a great start toward applying for a franchise of Dunkin’ Donuts. While these are the strict requirements for applying to Dunkin’ Donuts, there are also other things you can do to prepare the quality of your communication in the application process. This can improve the likelihood of your application being approved.
The first of the recommendations that corporate offers is to be financially capable of supporting a single-unit franchise or multiple-unit franchises. Having proof of your net worth and liquid assets may be sufficient for this. In any case, make sure to communicate that you will not have financial difficulties supporting your franchise ambitions. Of course, make sure this is also true for yourself financially. If you are going to need access to credit, make sure you have those credit options available.
From an experience-related background, it is recommended that you communicate any of your experience with leading a team in a workplace. Managerial experience or even leadership experience in a team setting is a great example. This can help Dunkin’ Donuts be assured that you will have no problems transitioning into the role of an owner or operator of a Dunkin’ Donuts franchise. Even if you do not have professional experience, being prepared to offer examples of your leadership from your personal life might help as well.
An additional part of your background that might help is your past experience in sales or marketing. If you have worked in these roles, you should leverage your experience as part of your application for being a good candidate. Sales and marketing will likely help you drive business in your local community and for your franchise. That is why leveraging any past business or personal experience with sales and marketing is a great idea for your franchise application.
The next two recommendations are easier to meet. First, you should demonstrate your entrepreneurship. This is probably one of the best ways to show that you are ready for a franchise. You should communicate that you are ready to own and lead a franchise to success. Moreover, you should want to grow the brand and get your franchise to do exceedingly well.
The final recommendation from Dunkin’ Donuts is that you show your passion and knowledge for the brand. Since you are interested in starting a Dunkin’ Donuts, you might have eaten there a few times before. It would be a good idea to review their menu and the dishes and beverages that they offer. You could also study the history of Dunkin’ Donuts. Know the reasons you want to become a franchisee and be prepared to voice those reasons. Showing your commitment this early on in the process is a great way to demonstrate you are a worthy candidate for franchising Dunkin’ Donuts.
How Profitable is a Dunkin’ Donuts
Just as important as assessing the costs is assessing the profitability of a Dunkin’ Donuts location. Once you understand your costs, you can look at your potential franchise profit to determine if the investment is worth it for you.
There are challenges in currently determining the profitability of a Dunkin’ Donuts franchise. Dunkin’ Donuts does not publish information on the depreciation or interest payments of its franchises, so it is only possible to estimate the operating profit of a franchise. The real net profit will very likely be lower. The average operating profit of a Dunkin’ Donuts franchise is about 29% of sales. This is a good margin for operating profit, but the net profit will be lower. A lot will be contained in the taxes, interest, and more that you have to pay.
The exact profitability of your location will depend on your situation. This includes the location you select, the style of the store you build, your management, your crew, and your unique market situation. Since there are so many factors, profit can be variable.
The best way to think about assessing whether your Dunkin’ Donuts franchise will be profitable is to discuss with Dunkin’ Donuts about your concerns, read the FDD, and determine what level of profit you will need against your estimated costs to make the investment worth it for you. Once you have considered all of these sources of information, you will be ready to better understand whether opening a Dunkin’ Donuts franchise is right for you.
Training for Dunkin’ Donuts
Aside from the profitability and costs of a Dunkin’ Donuts location, you might be concerned about your ability to drive it to profitability. Some of the driving factors for this may include your knowledge about how the products are made, how to run the store, and dealing with challenges in your franchise as they arrive. Rest assured, Dunkin’ Donuts does have a good and comprehensive training program for their franchisees.
Training for Dunkin’ Donuts is given to new franchisees for around 15 days. There is also online training that is made available to franchisees. These will help the franchisee learn more about Dunkin’ Donuts and how to run their franchise. Support is also provided to help franchisees with the technology and systems used to operate a store.
Regarding marketing, there is an advertising fund that franchises will be a part of and have access to. Franchisees also get the best technology made available to them. There is also a Dunkin’ Donuts-owned website that gives franchisees different business-related materials, marketing programs, and more.
If you are concerned about building and setting up your store, you do not need to worry. Dunkin’ Donuts will be around to support you and your store as you set up your business. This includes help in the real estate acquisition process to the construction of your franchise.
Term of Agreement and Renewal for a Dunkin’ Donuts
Another relevant aspect of acquiring a Dunkin’ Donuts franchise is the term of agreement and renewal for a Dunkin’ Donuts franchise.
When you buy a Dunkin’ Donuts franchise, you are buying the right to license the Dunkin’ Donuts franchise for a period of 20 years. This assumes that you are meeting all of the financial and other requirements of operating a location as required to you by law.
At the end of these 20 years, there will be an opportunity to renew the license and continue operating a Dunkin’ Donuts location.
Process of Starting a Dunkin’ Donuts
The process of starting a Dunkin’ Donuts involves many steps. The first of these steps is to head to the Dunkin’ Donuts website and fill out an inquiry form. The Dunkin’ Donuts team will then get in contact with you to discuss the next steps of pursuing a franchise with Dunkin’ Donuts.
Special Pricing on a Dunkin’ Donuts Franchise
As you are considering your Dunkin’ Donuts franchise opportunities, the cost may remain a concern to you. This might especially be the case given the high initial franchise fee paid to corporate. There may be special pricing you can get on a Dunkin’ Donuts franchise, given your background and intentions.
If you are a veteran, you may be able to get a discount on a Dunkin’ Donuts franchise by having a lowered initial franchise fee. Discussing your previous service with Dunkin’ Donuts may allow you to get a discounted cost on your corporate fee obligation to corporate when starting your franchise.
Another way to get special reduced pricing on your Dunkin’ Donuts franchises is if you are intending on opening multiple locations. If you are applying for a multi-unit license with Dunkin’ Donuts, you may be granted a discounted cost for the initial franchise fee to franchise with Dunkin’ Donuts. This is because Dunkin’ Donuts wants to encourage the expansion of its franchises at a faster rate.
Even if you still do not qualify for reduced franchise pricing, you should not necessarily worry about the initial corporate fees until you understand the exact amount you will be charged. Meaning, because there is such a large variation of prices in the initial franchise fee due to the location you are trying to open, one location might be substantially cheaper than what you are thinking corporate might charge you. In any case, it is best to ask and find out. Once you know the certain price of your financial obligations to corporate with a given location, you can then make an educated decision on whether a Dunkin’ Donuts franchise is right for you.
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