Drive down any city street in America and you’re bound to see countless coffee shops—with two major brands attracting the most attention: Starbucks and Dunkin’ (formerly Dunkin’ Donuts). Both brands have loyal followings, employ thousands of workers, and generate millions in revenue; but there is one major difference between the two: Starbucks does not franchise any of its stores, rather, it licenses 41 percent of its stores while the rest are corporate owned. Dunkin’, on the other hand, franchises 100 percent of its locations.
If your dream is to own a Starbucks store, you might be out of luck. But, if you’ve been curious about what it takes to own a Dunkin’ franchise, we’ll tell you everything you need to know. If you’re interested in opening a coffee shop franchise, whether it’s a Dunkin’, PJ’s Coffee, Aroma Joe’s, BIGGBY COFFEE, Ellianos Coffee, or The Human Bean, Franchise Business Review can help you conduct due diligence so you can make an informed decision.
The History of the Dunkin’ Donuts Franchise
Dunkin’s most loyal customer base is in the Northeast, where it was originally founded in 1948 by William Rosenberg in Quincy, Massachusetts under the name “Open Kettle.” Donuts were five cents, and coffee was ten cents, if you can even imagine that.
After a brainstorming session with his executives, Rosenberg renamed his restaurant “Dunkin’ Donuts” in 1950. His goal was to “make and serve the freshest, most delicious coffee and donuts quickly and courteously in modern, well-merchandised stores,” a philosophy which still holds true today.
In 1955, the first Dunkin’ Donuts franchise opened as a Quick Service Restaurant (QSR) and, in just 10 years, the number of restaurants had grown to over 100 shops. Since 1950, the number of Dunkin’ restaurants has increased to more than 12,600 restaurants worldwide in 46 countries.
In 2019, the brand changed its name to Dunkin’ to reflect its increasing emphasis on coffee and other drinks as well as sandwiches. Today, the 72-year-old, Massachusetts-based chain, also affectionately known to its loyal New England fan base as “Dunks”, is part of the Inspire Brands family of restaurants.
Photo credit: Dunkin’
Is a Dunkin’ Donuts Franchise is Worth the Investment?
A common misconception is that you need to have prior experience in business (marketing, finance, etc) in order to buy and operate a successful coffee franchise. This is not the case! In fact, many franchisees have little to no business background or education. One of Dunkin’s most successful franchisees, Robert Branca, has a law degree from the University of Michigan. He owns and operates nearly 700 stores (along with his wife, Lisa) across Massachusetts, Connecticut, and New York. While having knowledge of business certainly helps, you do not need to drop thousands of dollars on a business degree to set up shop.
If you’re intrigued by the idea of owning your own Dunkin’ coffee franchise, here are a few other reasons to consider owning a Dunkin’:
1. Dunkin’ Has a Large Customer Base
The popular chain has become an icon in the Northeast, where it was founded and where the majority of its stores operate. In an article comparing the loyal fan bases of Starbucks versus Dunkin’s, The Seattle Times wrote, “New Englanders seem to have an almost unconditional love for their Dunks. In Boston, not far from where the chain is headquartered, about 47 percent of adults say they’ve patronized a Dunkin’s in the past 30 days. The numbers are even higher in nearby Manchester, NH, where more than half the population frequents the chain.”
Worldwide, Dunkin’ serves approximately 3 million customers per day — and they have more than 8 million customers enrolled in their perks program. Perhaps, this is due in part to their loyal fan base and commitment to providing superior customer service.
2. Dunkin’ is a Recognized Brand
There are more than 12,000 locations across the globe, with 8,500 in the United States alone (spread across 41 states), according to their website. In addition, the Dunkin’ Brands has a 98 percent brand recognition among consumers. That doesn’t mean they’re resting on their laurels, though. Dunkin’ continues to prioritize brand awareness, partnering with other major brands such as JetBlue, Saucony and Coca Cola.
3. Dunkin’ Has Plenty of Available Markets
While much of America’s East Coast states are reserved for current franchisees, the brand has big plans to expand west. In a press release, the brand noted their growth plan to “add approximately 1,000 new Dunkin’ Donuts locations in the U.S.” They expect that more than 90 percent of these locations will be built outside of the Northeast.
4. Dunkin’ Employs a Quality Support Team
One of the most attractive aspects of franchising is the support you receive as a franchisee. Dunkin’ has a team of experienced franchising support professionals to guide their franchisees toward success. The support staff includes real estate managers, operations managers, field marketing managers, and more. Each of these individuals assists with everything from site selection, to training, to marketing and management. Aside from this, the brand provides an advisory council, which offers feedback to Dunkin’ franchisees to help them determine what is working and what is not.
5. Dunkin’ is Focused on Staying Relevant
Dunkin’ is famous for its donuts; but the company has adjusted its food and drink offerings with the changing market. Dunkin’ caters to a wide range of clientele, including those with gluten intolerance and those who are watching their waistline. With menu items such as gluten-free goodies, reduced fat muffins, egg white flatbread sandwiches, and sugar-free flavor shots for coffee drinks.
Also, as their customer base grows, so does the need to enhance technology. Dunkin’ offers a loyalty program and mobile app that makes ordering ahead and paying on the fly a convenience enjoyed by many. In addition, more than 75 percent of new Dunkin’ restaurants will have a drive-thru, with many featuring a dedicated mobile order lane. Dunkin’ is the first in the country to create this new method of getting food, fast.
Why Dunks Might Not Be the Right Franchise for You
While owning a Dunkin’ franchise may have wide appeal for many, it may not be the right business opportunity for everyone. For one, it can be difficult for many prospective Dunkin’ franchise investors to meet the requirements of ownership. Dunkin’ franchisees need a net worth of at least $500,000 and $250,000 cash on hand. See more about how much it costs to open a Dunkin’ franchise below.
Dunkin’ also has a fair amount of competition to contend with, including big rivals like Starbucks and McDonalds. In an analysis of the brand, the Motley Fool wrote, “Its quality and increased competition, however, will keep it from making major headway in its same-store growth numbers. This is a chain that’s going to have to fight for every sale and that’s not an attractive proposition for me as a potential investor.”
In general, the food sector can be challenging due to competition in the space, labor challenges, and low margins. Many restaurants struggle to make a profit as tastes and trends in food change, and keeping up with these changes can become costly.
To learn more about what it takes to own a Top Food and Beverage Franchise, check out FBR’s Top Food Franchises List now.
How Much Does a Dunkin’ Donuts Franchise Cost?
The financial barrier to entry turns many potential franchise buyers away. As a Dunkin’ Franchisee, you’ll need to have a minimum of $250,000 in liquid assets and a net worth of $500,000 per restaurant. The total initial investment ranges anywhere from $97,500 to $1,717,103. This is relatively low when compared to some other big brands such as the competitor Krispy Kreme, which requires an investment between $440,500 – $4,115,000, according to FDD data for both companies.
Dunkin’ Franchise Costs are as follows:
Total Initial Investment: $97.5K to $1.7M
Franchise Fee: $40K to $90K
Net worth: $500,000 (minimum)
Liquid Assets (cash on hand): $250K (minimum)
How Much Does a Dunkin’ Donuts Franchisee Make?
The annual sales of a Dunks location range from about $620,000 to $1.3 million* depending on the type of franchise you own – freestanding store, in-line shopping center, or a non-traditional location in a gas station or convenience store. Locations with a drive-thru window will bump sales an extra $200,000 to $300,000 per year.
Dunkin’ franchise profitability has been declining since the “good old days” of the 80’s and 90’s when “DD was the only game in town” according to franchisees we spoke with. Franchise Business Review estimates the average Dunkin’ franchise today is generating net profits of roughly 8 percent to 12 percent – slightly higher for some of their top performing operators.
That said, with the average Dunkin’ location doing just over $1 million in annual sales, net operating income (aka “profit”) would be roughly around $100,000 per location after all expenses such as food costs, labor, rent, royalties, and general operating expenses. Additionally, most franchise owners have loans to repay, which will take another big bite out of net profits before the franchise owner can pay themselves a salary.
Bottom line: Dunkin’ is a strong brand with a solid future, but if you only own one franchise location, you’ve essentially bought yourself a job. Like many business owners in the franchise sector, multi-unit Dunkin’ franchisees that own 5, 10, or even more locations, are the people in franchising that are truly building significant wealth.
Traits of Successful Dunkin’ Franchise Owners
Much like other QSR establishments, you’ll need a certain skill set to be successful as a Dunkin’ franchise owner. These include, but are not limited to:
- You need to work well with the company restrictions and limitations. You may not always get a say in how things work. For example, you will only be able to purchase supplies and products from approved lists of suppliers and manufacturers.
- You must be willing to undergo the training and take advantage of the support offered by the home office to be successful.
- You must have exceptional interpersonal skills. Positively interacting with customers and employees is one of your most important responsibilities.
- You must be able to not only be a good listener and follow/apply instructions, but also believe in the product you are selling to the public.
Finally, if you want to become a Dunkin’ franchisee, you better be prepared to roll up your sleeves and get behind the assembly line. According to the company FDD, it is required, especially in your first year of business. To quote, “Expect to work a full shift at the restaurant every day.”
Alternatives to Dunkin’s—Top Coffee Franchises
If you like the idea of owning a coffee franchise, but have decided that Dunkin Donuts is not the franchise for you, there are several alternatives to consider. The three franchise brands listed below have been highly recommended by the franchisees that own them, landing them on the FBR Top Food and Beverage Franchises list.
The Louisiana favorite was founded in 1978, and has been franchising since 2008. PJ’s boasts 96 franchised locations across eight states, and has experienced a 47 percent growth over five years! Their franchise fee ranges from $20,000 to $30,000 depending on the store, and the initial investment is $406,000 – $1,024,000 with a cash requirement of $150,000. The company values sustainability, and sources all of their coffee beans from farms in Nicaragua; producing jobs and great coffee at the same time. Learn more about owning a PJ’s Coffee franchise here.
Photo Credit: Biggby Coffee Facebook
Biggby opened their first location in Michigan in 1995, and they currently have 77 retail locations across the Midwestern and Southeastern United States. Their franchise fee is anywhere from $26,000 to $35,000, and the initial investment is between $166,350 and $324,100. Dunkin’, beware: Biggby has donut holes, too. Learn more about owning a BIGGBY Coffee franchise here.
Aroma Joe’s has quickly become a beloved destination for handcrafted coffee and espresso drinks, unique infused blends, signature AJ’s RUSH® Energy Drinks, and all-day food offerings served in a friendly and upbeat environment. Their goal is to ensure each customer leaves feeling positive and energized. That’s positively impacting people. The initial investment cost is $296,000 – $1,046,500 and the cash required is $150,000. Learn more about the Aroma Joe’s Coffee Franchise Opportunity.
The Human Bean franchise team delivers the experience and expertise to assist franchisees – from start to finish – in opening a Human Bean Espresso Drive-Thru business. The company does not charge royalty fees. It earns revenues from bulk sales of coffee and other supplies ordered from its franchise locations. The initial investment is $386,350 – $908,770 with a cash requirement in the amount of $200,000. Learn more about The Human Bean Coffee Franchise Opportunity.
“Italian Quality at America’s Pace” is the goal of Ellianos Coffee Company, a double-sided drive through coffee franchise whose vision is to position themselves as a dominant regional brand, with national presence, by growing their customer base and expanding their franchise system. Ellianos Coffee is a rapidly growing brand with territory availability in states across the southeast United States. The initial investment is $397,500 – $690,000 with a cash requirement of $150,000. Learn more about the Ellianos Coffee Company franchise opportunity.
Ready to Invest in a Coffee Franchise?
There are thousands of food and beverage franchise opportunities to consider. Do your research, compare franchise opportunities using FBR’s top franchise lists. Once you narrow your search to a few contenders, speak with current franchise owners who can provide first-hand advice and feedback on what it’s like to own a particular franchise. Owning and operating a franchise is no small feat. As Dunkin’s founder, William Rosenberg, once said, “Winning takes effort.” Dunkin’ franchisees, or any franchise owner for that matter, must put forth an effort to see their business grow.
Click here to explore our top coffee shop franchises with detailed reviews and ratings.
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*Based on 2018 Item 19 data in the Dunkin Donuts Franchise Disclosure Document (FDD).