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Dunkin Donuts case - Essay Example

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Dunkin Donuts case

With this concern, the essay will qualitatively along with financially analyze and recommend better implementation strategies for DD in addressing and mitigating the aforementioned issues. II. DUNKIN DONUTS AND TOMMY’S FRANCHISE STORE ANALYSIS Tommy can be apparently observed as serving a franchise owner of DD for more than 17 years. However, as days passed, the performance of Tommy’s store declined as per the standard of Customer Satisfaction Guide (CSG). This eventually resulted in deteriorating the franchisee standard of DD. Besides, DD has also been making complaints against Tommy about his non-payment of fees to DD within the stipulated time period. Thus, considering the aforementioned situation, it can be affirmed that DD should disenfranchise its affiliation with Tommy and restructure the store into a company-owned establishment. The company-owned store would certainly assist DD towards making greater sales through having greater control over the operational functions (Trefis, “How Important Are Company Owned Stores to Mcdonald’s Stock ?”). However, prior to making this decision, certain options that have been provided to this situation require to be analyzed. These options have been elaborated hereunder. 1) Maintaining Tommy as Franchisee. The initial option, which has been provided to DD in this situation, is keeping Tommy as the franchise owner till the end of the contract. It can be affirmed that this particular option would not be appropriate for DD owing to Tommy’s bad performance in maintaining the standards of his franchise store, which in turn, affected the brand image of DD at large. In addition, the non-payment of fees in a fixed time period by Tommy might also generate certain potential problems between him and DD. Thus, this option would not be relevant for DD in the situation of buying the store of Tommy with the lowest probable price. 2) Royce as a New Franchisee Replacing Tommy’s Position. The second option of replacing Tommy with another franchise named Royce has been given to DD. It is strongly believed that Royce will not only be able to meet the industry standards, but would also deliver significant profits to DD. Therefore, this particular option can be justified on the grounds that DD will get 4.5 and 4.9% variable fee along with additional rental fee above sales of $165,000. 3) Company Owned Store at Tommy’s Franchise. The third option is to form a company owned store at Tommy’s franchise. This could be a favorable option for DD in terms of making significant profits. Assuming that this particular store would generate a sale of $ 290,000 and the total profit margin of a company owned store is of 13%, the total cash flow and the profit margin of a company owned store would be more as compared to a franchise store. This can be better understood with the help of the following tabular representation. Apart from attaining substantial profitability, DD can also be benefitted from this option i.e. setting up a company owned store at Tommy’s franchise in terms of effectively monitoring the store, scrutinizing customers’ voice and controlling various operational functions of the store efficiently contributing further to its well-built brand image (Chabaud and Saussier, “Incentives and Control In Company-Owned Vs. Franchised Outlets: An Empirical Study At The Chain ...Show more

Summary

Dunkin Donuts Case I. INTRODUCTION In this modern day context, the organizations usually prefer the option of franchising stores. However, it would be vital to mention that there are certain issues that can be associated with franchising stores. These might include moral hazards and adverse selection of franchise partners among others (Karle and Staat, “Signaling Quality with Initially Reduced Royalty Rates”)…
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