Selling donuts and coffee alone lifted Dunkin’ Donuts to become one of America’s most loved brands and to grow to 10,000 outlets in 37countries. It owes much to the spunk and vision of its founder, William Rosenberg, who thought the four kinds of donuts being served in US shops were an anomaly. So he proceeded to make 52 kinds and won. His creation is now the world’s largest coffee and baked goods chain serving more than two million customers a day.
Rosenberg had partnered with his brother-in-law to put up his first outlet in 1946. By 1953 he was keen on franchising the business, so he came up with a franchise brochure called Dollar From Donuts. He had to mortgage his house to buy out Harry Winokur – he saw no future in franchising – and used just $90,000 from investors to start because the banks were not convinced Rosenberg could grow the business through franchising. He proved the banks and his brother-in-law wrong.
Rosenberg went into franchising in the belief his success lay in sharing his gains. With this in mind, he started profit sharing with employees and eventually gave them stock options. He involved franchisees in decision-making, giving them representatives in the advisory councils to discuss goals and profit targets with management. Eventually, his franchisees came to enjoy a tremendous advantage over independent operators as a result of Dunkin’ Donuts’ volume purchases, which made supplies cheaper, and its top management team backed them all the way. Dunkin’ even hatched a clever public relations campaign that helped secure its outlets. It recommended that franchisees provide free doughnuts and coffee – to be consumed on the premises – to police officers on duty, hence buying protection for shops that were open 24 hours a day.
To compete more effectively, Rosenberg imposed continuous franchisee training and eventually put up Dunkin’ Donuts University in Randolph, just outside of Boston. He drew up a system that allowed Dunkin’ Donuts to redesign the business, redefine its strategy, and introduce new products when possible. When Dunkin’ came up with its donut holes, the “munchkins” increased sales system-wide by 10 percent. To satisfy the health-conscious, it added oat bran and low-cholesterol donuts to its menu. Today the franchise routinely taps independent laboratories to test its products to ensure they’re of the highest quality.
Still, Rosenberg was sometimes difficult to satisfy. “I tell [people] that progress is the result of enlightened dissatisfaction. If you are satisfied, you will never get better,” he says in the book Franchising, The Business Strategy That Change the World by Carrie and Robert Shook. Nevertheless, Rosenberg remains (@committed to his people. And he never lost faith in his son Bob who helped him manage the business in good times and bad. In 1973, when sales dipped alarmingly as a result of Dunkin’s rapid expansion in the Midwest, Bill and Bob toured the area and realized they must close 100 stores and write off $3 million in losses. As a result, Dunkin’s share price tumbled; angry board members and bankers leaned on Rosenberg to sack his top managers. His reply: “Look, I have faith in these people. If I let them go, I must start all over by hiring other people and teaching them all the things I have already taught our current management. If you were a father with Bob’s background and you have the faith that I have in him, how could you let your son go through the rest of his life thinking he was a failure? There is no way I would do that. I couldn’t let Bob and the others go through life believing that they hadn’t succeeded.” His faith in his people proved him right. Dunkin’s share price recovered. And in 1990, the same management team presided over Dunkin’s takeover of rival Mister Donut.
Rosenberg’s people paid him back in 1989 when a Canadian financier started buying up Dunkin’s stock and then announced a takeover. Franchisees placed huge ads in The Wall Street Journal in protest, and though Dunkin’ eventually was forced to sell later, the new parent firm, Allied Lyons, kept its management intact. Dunkin’ Donuts continued to prosper.
William Rosenberg died aged 86 on September 22, 2002, at his home on CapeCod. Today he is remembered for charting the course of one American success story, and for propagating and professionalizing the franchising business by helping to establish the International Franchise Association, a group committed to self-regulation and to improving franchising as a strategy for expansion. In 1970, American lawmakers almost outlawed franchising as a result of the shenanigans of a few franchisers, so the group became the voice of the true and legitimate. In tribute to Rosenberg, it opened the William Rosenberg Franchise Leadership Institute, a school that now provides scholarships to those wishing to embark on a franchising career. “In my humble opinion, franchising is the absolute epitome of entrepreneurship and free enterprise, and is unquestionably one of the most dynamic economic factors in the world today,” Rosenberg says in the book Franchising, The Business Strategy That Changed The World. How true!
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