Synopsis(Group 5) Dunkin Donuts (E): 1988 Distribution Strategies

Mission: - Time to make Profits. The company was into business formatting franchisees. By early 1988 the sales to capital ratio of the company fell down from 1.1:1 to 1:1, had stiff competition and even expansion added to their problem of profitability and also its relation with franchisees. Several surveys were conducted to understand customers behaviour some of the results are as under. 86% purchased donuts on their last visit to Dunkin Donut shop. 30% purchased coffee. Maximum purchase of 46% was done for consumption at home. Breakfast Am Snack Takeout got the majority market of 39% on a Weekday sale. 48% of the users consumed once a month or less than once a week).

Product awareness was highest in northeast and lowest in Southwest/West region. Many franchisees sold unbranded products in wholesale to local convenience store. There was competition between on franchisee and other also. To avoid problems company had grievances procedure. Revenue System. Base Rent 12% Franchise Gross Sale Royalty 4.9% of Gross Sale Advertising fees 5% of Gross Sale.

The company on a demographic way divided the segment into two parts i.e. region 1 and region 2. Region 1 was making more profits then region 2 the main factor was the amount of coffee sales. Coffee being high margin product impacted the profits. The overcapacity of existing full- producing unit was one of the main problems. The customer satisfaction level although being high, was flat. A number of options to increase distribution were explored. 1. Development of new or under developed market. 2. Sale of branded product through convenience store. 3. Opening satellite retail outlet. Out of all three options the profits were high in opening satellite stores and also keeping cost in mind break-even was reached before any other option did.