Dunkin’, formerly known as Dunkin’ Donuts, is a classic stop for your morning coffee and donuts. The business was originally founded in Massachusetts as Open Kettle and then in 1950 began to expand and franchise. The company was eventually acquired by Baskin Robbins in 1990. Down the line, both of these brands became subsidiaries of the Dunkin’ Brands in 2005 and now are part of Inspire Brands to be more focused as a “beverage-led company”.
How much will you need to open a Dunkin’ Donuts franchise? You’ll need a total investment of around $97,500 – $1.7 million to open one store. You’ll also need liquid capital of $250,000 and a net worth of $500,000 or more in combined assets to qualify. Take our franchise quiz to find out if Dunkin’ Donuts if right for you.
Dunkin’ has nearly 13,000 locations worldwide and is the largest donut and coffee shop chain in the world. While there are many entrepreneurs who have had success opening a Dunkin’ franchise, you’ll want to complete your own due diligence before investing your hard earned money. Here are the topics we cover in this franchise opportunity analysis and review.
- Financial Requirements and Fees
- Average Sales / Revenue per Year
- Franchise Facts
- Average Profit
- Things to Consider
- Advantages of Dunkin’ Donuts Franchise
- Challenges of Dunkin’ Donuts Franchise
Financial Requirements and Fees
Here is a base overview of what the essential finance requirements for a franchise under Dunkin’ Donuts consist of.
|Fees/ Expenses||Amount Needed|
|Total Investment||$120,000 – $1,700,000|
|Franchise Fee||$40,000 – $90,000|
Here is a further breakdown of the costs and fees for specific aspects for the opening of the franchise.
|Fee||Low-End Costs||High-End Costs|
|Site Development Costs||$0||$325,000|
|Additional Development Costs||$4,700||$82,500|
|Equipment, Fixtures and Signs||$25,000||$268,000|
|Restaurant Technology System||$16,000||$80,200|
|Licenses, Permits, Fees and Deposits||$500||$5,500|
|Real Estate Costs||Varies depending on location|
|Miscellaneous Opening Costs||$9,500||$70,000|
|Travel and Living Expenses While Training||$2,000||$35,000|
|Marketing Start-Up Fee||$0||$10,000|
|Additional Funds for First 3 Months of Operation||$0||$105,000|
Keep in mind these are just the initial funds you need to get started with the franchise. As with starting any other franchise, there are always fees that come along with it, including royalty fees, since you’re in motion to profit off a big brand.
|Type of Fee||Amount|
|Continuing Franchise Fee (royalty)||5.9% of gross sales.|
|Continuing Advertising Fee||5% of total gross sales.|
|Franchise Transfer Fee (for a majority interest in the first 3 years)||$12,500 (or $20,000 if the restaurant is a combo) plus the amount listed in table in the FDD.|
|Franchise Transfer Fee (for a majority interest, after 3 years have elapsed)||An amount based upon the Gross Sales of the Store for the 12 months preceding the date of the contract of sale.|
|Franchise Transfer Fee (no change of control or transfer to spouse or children)||The then-current Fixed Documentation Fee, which is currently $2,000 per restaurant plus an additional $2,000 for each new transferee.|
|Audit Costs||The franchisor’s cost to audit the gross sales reports, including legal and investigative costs.|
|Immigration Status Review Costs||The franchisors out-of-pocket costs to hire attorneys or others.|
|Interest, Late Fees, and Collection Costs||The then-current late fee or dishonored check fee, and if applicable, interest on unpaid amount at 1.5% per month or highest rate allowed by law.|
|SDA Transfer Fee||$10,000|
|SDA Transfer Fee (for a less than majority interest or transfer to spouse or children)||The then-current Fixed Documentation Fee (presently $2,000 plus an additional $2,000 for each new transferee).|
|Lease Guaranty Fee Agreement||Varies.|
|Fixed Documentation Fee – Generally||The then-current Fixed Documentation Fee (presently $2,000 per restaurant).|
|Fixed Documentation Fee – Transfers||The then-current Fixed Documentation Fee (presently $2,000 per restaurant) plus an additional $2,000 for each new transferee.|
|Costs for Tests Used to Approve Additional Supplier(s)||The franchisor’s out-of-pocket and internal costs allocated to this activity, typically $1,000 to $10,000 depending on the complexity of the testing.|
|CDC Buy-Out Option||Varies.|
|CDC Annual Lease Administration Fee||$1,200 each year.|
|CDC Rent, if Payable to Franchisor||Varies.|
|Enhancement Fee||$10,000 for each enhancement activity set forth in the agreement.|
|SEA Transfer Fee||$10,000|
If you need financial assistance, Dunkin’ does have relationships with a couple of lenders and they’ll refer you to their programs to help you get started.
Average Sales / Revenue per Year
The average Dunkin’ franchise is getting around $620,000 to $1.3 million in sales per year. This results in the average Dunkin’ franchise owner to have an annual salary of around $124,000. This varies depending on the type of store you’re hosting, such as a regular freestanding store, drive-thru, gas station, etc., and also the amount of foot traffic you get.
|Incorporated Name:||Dunkin’ Brands|
How Much Profit Does the Dunkin’ Franchise Make Per Year?
From an annual income standpoint, the average Dunkin’ franchisee will make $124,000 per year or about $60 per hour.
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Going back to their annual sales per year, Dunkin’ franchises make between $600,000 to over $1 million. This big gap happens due to the flexibility of how you manage and operate the Dunkin’ stores and where you’re located.
Things To Consider Before Becoming a Franchisee
Type of Franchise
There are several different types of franchises you can open with the Dunkin’ stores. You can have a freestanding store, in-line shopping center, or a non-traditional location such as being part of a gas station or convenience store. Some even have the option of opening a drive-thru for their franchise. Each of these choices will have its pros and cons that may pose challenges for some franchise owners, but the profits will tell you another story!
For instance, drive-thrus greatly impact business in a positive light especially in suburbs or busy downtown areas where people are driving. It offers choices so customers don’t need to get out of their cars or find parking to grab a cup of coffee with a tasty donut. The location may greatly affect the type of franchise you may want to open.
Dunkin’ also has the benefit of being able to be located at various places. We mentioned earlier that they can even be inside gas stations or convenience stores. They can also be part of college campuses, airports, mass transit terminals, and more. There’s always someone who will be looking for a quick cup of coffee and a bite to eat that goes along well with it, especially in the morning when they’re on the way to work or on the way to school.
Finances are obviously something that will have the biggest impact on anyone’s profit margins. If you already have a decent foundation, you won’t need to worry about loans or interest rates and you can invest in new avenues that can increase your profit.
However, most of the franchise owners aren’t in that situation. Dunkin’ requires a bit of a steep pocket for initial investment, so some people may have to grab loans and a portion of their profits will have to go back to paying them off.
Advantages of Dunkin’ Donuts Franchise
Dunkin’ franchises have several advantages. They’re the lead brand authority in the coffee and donut industry with over 13,000 locations internationally, gathering a large and loyal customer base. Catering to the staple of coffee and donuts simplifies many people’s destinations since they usually have to go to one shop for donuts and another for a decent cup of coffee.
Corporate also provide a wide range of resources that franchise owners have access to. When you first start your store, they’re able to help you launch a grand opening with specialized marketing and research for the best location. They also have online courses and training programs for new hires and if you have questions about how to manage your business. Even if coffee and donuts are not your specialties, the brand provides you with everything you need to get started. Dunkin’ also has support lines and field operations for your convenience. They’ll not only support you at the start and opening of your franchise but throughout your years of partnership.
Due to their specialty of donuts and coffee, Dunkin’ also has the choice of providing drive-thru service for the convenience of their customers. This attracts a much larger consumer base. It benefits both parties, creating more options for customers and more revenue and prestige for Dunkin’. According to reports, adding a drive-thru window can add between $200,000 – $300,000 in annual sales for a Dunkin’ location. That’s a lot of revenue being accepted through a window!
Dunkin’ also stays on top of their game. With people leaning more towards healthier options, Dunkin’ has adapted its menus with reduced-fat muffins, egg white flatbread sandwiches, and sugar-free flavor shots for coffee. WIth new items that follow the latest trends, more people will be inclined to stay loyal customers of Dunkin’ Donuts.
The company is continuously working on their brand as well, partnering with JetBlue, Coca-Cola, and other major brands to boost their marketing and publicity.
- International presence and marketing strategies
- Plentiful of corporate resources
- Lead in the donut and coffee franchises
- Versatility in store functions (drive-thrus)
- Built in audience with 98% of the U.S. population being aware of Dunkin’ and Baskin-Robbins brands.
Challenges of Dunkin’ Donuts Franchise
However, there are some obvious challenges just as opening any franchise does.
You have limited creativity in terms of how you operate and the types of food and beverages you sell. This also goes for where you get your supplies from. They all have to be approved by the corporate headquarters. Even though there may be certain changes you want to make, some decisions are not up to you as a franchise owner. There’s a playbook you need to follow for success. If you like to experiment with flavors, product options, and suppliers franchising might not be the right path for you.
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Getting started with Dunkin’ franchises also has a huge amount that you need to initially invest in. As mentioned earlier, you’ll need a net worth of more than $500,000 to qualify. This may cause you to have to go through finance programs or loans and this will dampen your profit margins. Careful consideration the financial requirments before starting any franchise.
In addition, Dunkin’ doesn’t have any official financial sponsors that can help franchise owners. The most they can do is give referrals to lenders.
Dunkin’ also has lots of competitors, just as much as anyone who’s in the food business. This may or may not impact them more since they sell both donuts and coffee too. Starbucks, McDonald’s, and Krispy Kreme are all tough competitors.
There are also all of your smaller mom-and-pop shops that sell donuts and coffee. While independent donut shops don’t have the brand awareness and marketing advantages of a multinational company like Dunkin Brands, independent donut shops can get started for a fraction of the initial investment since there are no franchise fees or ongoing marketing costs.
- Large amount of money needed for initial investment
- Huge competition in the market
- You must follow corporate guidelines
Is the Dunkin’ Franchise Right for You?
Starting a franchise takes a lot of investment, but it’s not just in money or finances. You’ll be living and breathing the Dunkin’ brand as you approach opening the business. Understanding the day-to-day operations of the business, the product, hiring and building out a supportive team is time intensive and will require some growing pains if it’s your first time going through the process.
There are some skills and experiences that will give you an advantage starting out. For instance, the ideal franchise owner of a Dunkin’ store should have prior management experience or a store owner. Individual who have worked in the food or customer service industry will have a better understanding the foundation of what it takes to run a restaurant or coffee shop. Franchisees should be patient and willing to follow the operations plan outlined by corporate. The ideal franchisee will be open to learning accounting, team building, customer service, management and leadership. An overall “learning mindset” will be beneficial to anyone getting into the franchise game.
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The application process is not so much different from other franchises. You’ll need to fill out an application and they’ll have an overview of your business plan: how are you going to tackle certain issues and your business mindset. You’ll undergo training, attend classes, and work at a Dunkin’ store too so you’ll be about to experience the perspective of an employee serving the coffee and donuts. In fact, if you’re serious about starting this type of business, working as an employee at a Dunkin’ location will get you more educated about what it’s like to run this business.
You’re going to need to go above and beyond the usual Dunkin’ methods if you wish to create much more profit to be sustainable. Even if you do reach a comfortable level at one point, you can’t let your guard down because in the food industry customer’s tastes and demands will always be changing.
However, once you’re able to get past the initial learning curve, opening a franchise with Dunkin’ should be able provide a comfortable living with the opportunity to grow with the company. Having a huge brand like Dunkin’ will keep you well equipped with marketing and help you navigate changes in consumer taste preferences. Historically, the company has done well embracing changes in technology and consumer taste.
You can learn more about franchising with Dunkin’ at their official website. Here you can identify the regional markets that are still available for new franchisee’s and learn more about the business opportunity.