We are a Delaware limited liability company that was formed on March 15, 2006. Our principal place of business is 130 Royall Street, Canton, Massachusetts 02021 (781-737-3000). We currently do business under the mark Dunkin’ Donuts and in the organizational name “Dunkin' Donuts Franchising LLC.” Our agents for service of process are disclosed on Appendix I. At the end of our last fiscal year, on December 0730, 2017, there were 9,141 franchised Dunkin' Donuts restaurants (“Restaurants”) operating in the United States and an additional 3,397 Restaurants operating in 545 other countries. As of the date of this disclosure document, neither DD, nor any of our affiliates, operate any company-owned Restaurants. Some of the franchised Dunkin’ Donuts Restaurants are operated on military bases. Some Restaurants operate in combination with Baskin-Robbins restaurants. The total number of U.S. Restaurants above does not include central manufacturing locations (“CMLs”) operated by franchisees. We do not conduct any business activity other than franchising Restaurants. If we offer and you agree to develop a Combo Restaurant or you purchase an existing Combo Restaurant, you will receive separate disclosure documents for each of the Dunkin’ Donuts and Baskin-Robbins brands.
The Dunkin’ Donuts System. Dunkin' Donuts Incorporated was incorporated on January 15, 1960, as Universal Food Systems, Inc., and changed its name on October 24, 1967. Dunkin' Donuts Incorporated's predecessor, Dunkin' Donuts of America, Inc. (“DDoA”), was a Massachusetts corporation incorporated June 24, 1954, and was merged into Dunkin' Donuts Incorporated in December 1987. DDoA began operating Restaurants in 1954 and began franchising in 1955. DDoA continuously granted franchises until it merged with Dunkin' Donuts Incorporated (now Dunkin’ Donuts LLC, a Delaware limited liability company), which continuously granted franchises until the date of the 2006 Refinancing Transaction. Dunkin’ Donuts LLC also maintains its offices at 130 Royall Street, Canton, Massachusetts 02021 (781-737-3000).
While we do not operate businesses of the type being franchised, certain of our affiliates have operated Restaurants in some markets in the past. If you sign a franchise agreement, you will operate a Restaurant. Under our franchise agreement, we grant our franchisees the right (and they accept the obligation) to operate a Restaurant, selling doughnuts, coffee, breakfast sandwiches, bagels, muffins, compatible bakery products, croissants, snacks and other sandwiches and beverages that we approve. We may periodically make changes to the systems, menu, standards, and facility, signage, equipment and fixture requirements. You may have to make additional investments in the franchised business periodically during the term of the franchise if those kinds of changes are made or if your Restaurant’s equipment or facilities wear out or become obsolete, or for other reasons (for example, as may be needed to comply with a change in the system standards or code changes). All Restaurants must be developed and operated to our specifications and standards. Uniformity of products sold in Restaurants is important, and you will have no discretion in the products you sell. The franchise agreement is limited to a single, specific location, and we have the right to operate or franchise or license others who may compete with you for the same guests. The distinguishing characteristics of the Dunkin’ Donuts System include, for example, distinctive exterior and interior design, decor, color and identification schemes and furnishings; special menu items; standards, specifications and procedures for operations, manufacturing, distribution and delivery; quality of products and services offered; management programs; training and assistance; and marketing, advertising and promotional programs, all of which we may change, supplement, and further develop. The typical Restaurant depends upon serving a large number of guests for its success and is generally located in heavily populated areas. Most products are purchased primarily for off-premises consumption: "take-out" is estimated at 70-100% of sales, which may vary by region. DD encourages you to develop a network of Restaurants within a targeted area or areas under the Store Development Program. A network may consist of a manufacturing Restaurant that supplies bakery products to one or more satellite Restaurants. In some markets, you may elect to support your Restaurant or your network by becoming a member in a co-operative manufacturing facility to source your bakery products. In some markets, you may have access to a third-party manufacturer as a source of your bakery products to support your Restaurant or your network. For most markets, another option for donut supply is the just baked donut product, which many Restaurants use to maintain a supply of inventory throughout the day. Satellite Restaurants typically cost less to develop than manufacturing Restaurants (though satellite Combo Restaurants can cost as much, or more, to develop than some manufacturing Restaurants). Developing and operating a network of Restaurants is generally more challenging than developing and operating a single Restaurant. Periodically, franchisees sell existing Restaurants at varying prices and terms. Also, we may periodically sell existing franchised Restaurants we have bought or taken back from franchisees or our affiliate, DBI Stores. Many factors affect the sales price and terms for existing Restaurants, such as location, age, length of remaining occupancy and franchise rights, rent, physical condition, operating history, whether the purchase price is paid in cash or financed over time, the prices and terms on which comparable Restaurants have been sold in the market and the negotiations of the parties. If you agree to buy an existing Restaurant from a franchisee, we may exercise our right of first refusal. If we do not, then you and the seller must comply with the transfer provisions of the seller's franchise agreement, such as obtaining our approval of the terms of sale and of your qualifications to be a franchisee, correcting any defects in the condition of the Restaurant, paying a transfer fee, signing a new franchise agreement, and other conditions in the franchise agreement. You may also have to comply with transfer provisions of the seller's lease. You may not achieve potential economies of scale until you have a number of Restaurants operating in the store development area and the timing and phasing of overhead and related expenses is critical to your early financial performance. You should have sufficient working capital to cover potential operating losses and development costs. In the past, DD offered (and its predecessors entered into) franchises for both wholly owned and cooperatively owned CMLs in selected markets. We may pursue opportunities to convert similar businesses operating under different trade-names to one of our systems. We may provide conversion incentives to those businesses. The terms of conversion incentives vary depending on factors such as the number of outlets to convert, perceived competitive advantage of the outlets, their location, physical condition and age, length of remaining occupancy and franchise rights, rent, the outlets' production or satellite capability, access, visibility, demographic profile, hours of operation, operating history, the prices and terms on which comparable outlets have been sold in the market, our then current conversion policy, the negotiations of the parties, among others. Information on past conversion incentives is available from us upon request. We may offer a “Contract for Development and Construction” (the “CDC”) (in addition to our standard form of Franchise Agreement and related contracts) in certain markets and to prospective franchisees that we determine are qualified for this purpose. Under the terms of a CDC, among other things: (1) we would assume your obligation to pay for the initial cost of constructing your Restaurant, as specified in the CDC; (2) we would lease (or sublease) the Restaurant premises (the “Premises”) to you (as described in the CDC); and (3) you would pay us rent under the lease or sublease, which would include, among other things, payment for the expenses we incurred related to the construction and/or build out of the Premises. Please see the CDC for additional terms and information.
Initial Franchise Fees: (20 year term) You must pay the initial franchise fees (“IFFs”) immediately below for our standard franchise offerings in the Development Area Type that your Restaurant will be located. The Designated Market Areas (“DMAs”) are defined by Nielson Television Media Marketing, and the counties included in these DMAs are listed in Appendix V-A. For Initial Franchise Fee rates for special distribution opportunities (also commonly referred to as alternative points of distribution or non-traditional outlets, all collectively “APODs”), please see below. Variations to Initial Franchise Fees: • In our fiscal year ended December 2017, the IFFs paid by our franchisees ranged from $0 to $90,000 based on factors such as development area type and other factors listed below. • Military Veterans Development Incentive: We intend to offer qualified military veterans a 20% IFF discount on up to a total of five Dunkin’ Donuts and/or Baskin-Robbins restaurants developed under either past or present incentive offers. These reduced fees only apply if all of the terms and conditions of the Military Veterans Development Incentive are met. • We may offer other reduced or deferred IFFs in special circumstances, such as to franchisees that commit to and have the ability to develop a large number of Restaurants. Additionally, we may have special incentive offers in certain markets, such as new and developing markets, which include reduced, waived or deferred IFFs. These special incentives may be offered to existing and/or new franchisees. You will be notified by us in advance, in writing, if any reduced fees are available to you. Failure to meet an SDA development schedule, including the “Control Date” or “Required Opening Date” may void any discount and deferral, and the full standard IFF will be due and payable at that time. These reduced fees only apply to those who are in compliance with all of our agreements and requirements. • Currently, we are offering reduced or waived IFFs for certain qualifying Restaurants in select developing markets. • APOD Development: The IFF for all APOD Restaurants is 50% of the standard IFF referenced above and then pro-rated for the term. (Example: 10 years of APOD term in Development Area Type 1 is $22,500.) The term for APOD Restaurants is sold in one year increments to meet the distinctive requirements of each location and the term is not transferable to other traditional locations. • For any corporate developed APOD restaurant, you agree to also pay us ten percent (10%) of the Cost of Development, as defined in the APOD Development Agreement. This Cost of Development fee is due and payable when the APOD Development Agreement is signed. • Gas/Convenience Restaurants: The IFF for Gas/Convenience Restaurants (with the exception of SelfServe Gas/Convenience Restaurants), is the standard IFF in each Development Area Type referenced above and then pro-rated for the term. Self-Serve Gas/Convenience Restaurants pay 50% of the standard IFF in each Development Area Type referenced above and then pro-rated for the term. • Self-Serve Restaurants: For certain existing franchisees who presently own or operate certain “host” environments, the IFF for new Self-Serve Restaurants added to such locations is $500/year for the first 5 years with a conditional 5-year renewal option at 50% of the standard IFF in each Development Area Type referenced above and then pro-rated for the term. • DD/BR Combo Restaurants: If we approve your addition of a Baskin-Robbins restaurant to your Restaurant, you will pay to our affiliate, Baskin-Robbins, $10,000 for a 20 year Baskin-Robbins franchise and you will need to execute a Combo Franchise Agreement. We may have special incentive offers which reduce or waive the Baskin-Robbins IFF. These special incentives may be offered to existing and/or new franchisees. You will be notified by us in advance, in writing if any reduced fees are available to you. These reduced fees only apply to those who are in compliance with all of our agreements and requirements. • We offer a conditional renewal in the Franchise Agreement (“FA”) for an additional term of twenty (20) years (the “Renewal Term”) if all of the conditions are satisfied timely, including payment of our thencurrent renewal fee. For APODs and in certain other circumstances, we may not offer such Renewal Term or such Renewal Term may be for less than twenty (20) years. • Unless you are qualified to receive an offer, you should not anticipate that you will receive one. If you do receive an offer, you will not be entitled to receive the benefits of more than one incentive or deferral program. We reserve the right to cancel or modify any or all of the programs described above at any time. If you do not satisfy all of the conditions set forth in any offer or addendum, then our standard IFF or renewal fees will apply. Renewal Fees: Renewal Fees vary by market and are based on the average annual rate for IFF in the relevant Development Area Type, as described above. Restaurants Developed Under an SDA IFFs paid under an SDA are not refundable even if you do not open the required Restaurant. You must pay your IFF with unencumbered cash and it cannot be borrowed. In some geographic regions, SDAs will only be offered to those who commit to a minimum number of Restaurants. If you are purchasing an SDA for more than one Restaurant, we may offer a payment schedule instead of requiring full payment upon signing. If you are on a payment schedule for a multiple Restaurant SDA, IFFs are payable in full even if you do not open all of your required Restaurants. If you do not remain current on your development schedule or otherwise default under the terms of the SDA, such default may result in termination of the SDA and acceleration of all remaining fees due under the SDA. If you are offered a payment schedule, you will typically be required to make an initial payment upon execution of the SDA and subsequent payments may be based on certain SDA milestone dates (e.g. - the Required Control Date). Restaurants Not Developed Under an SDA In the case of a franchise granted for a new Restaurant that is not part of an SDA, you must pay the entire IFF when you sign the franchise agreement. You must pay your IFF with unencumbered cash and it cannot be borrowed. Refunds IFFs are paid in consideration of the costs incurred by us in connection with the execution of the SDA and with our lost or deferred opportunity to enter into an SDA with other prospects. IFFs paid under an SDA are not refundable. For individual franchises not granted as part of an SDA, your payment is not refundable. If you or the location is not approved by us, we may elect to refund your payment in our sole discretion. Other Initial Payments To Us Reimbursement of Expenses. If you are developing a Restaurant and you or your architect is not prepared for a scheduled meeting when required, you must reimburse us for certain out-of-pocket costs. Real Estate Lease Related Charges. A security deposit or other charges payable under your real estate lease or sublease may be required before the business opens. If you sublease from us, the security deposit is refundable at the end of the sublease term if, after we receive a final accounting from the landlord under the Prime Lease, you have no outstanding financial obligations to us under either your franchise or lease agreements. Contract for Development and Construction (“CDC”). If you sign a CDC, then you will pay us an Administrative Fee in an amount that we agree upon in the CDC. The Administrative Fee will vary based on the complexity of the transaction, but in no event will it be less than $25,000. The Administrative Fee will be due on or before the closing date and it will be in addition to other fees that you will have to pay to us (for example, the IFF). To the extent that we have advanced funds on your behalf to purchase equipment between the time when you signed the CDC and the closing, you must also reimburse us at the closing for those amounts. Training Related Fees Paid to Us. You will be required to pay an initial non-refundable online access fee of $340 per location and thereafter an annual subscription fee, which is currently $340 per location. The above fees are quoted as of the date this Disclosure Document is prepared. These fees may change. These fees are not refundable. If you own and operate multiple Restaurants, you must continuously manage your network with a minimum number of individuals who have successfully completed our training program in order to meet operational standards. If your network needs to send people back through the New Franchisee Learning Path to meet these requirements, there will be a charge for each learner per class. Payment is due with the registration request. Marketing Start-Up Fee. In connection with the opening, remodeling or relocation of your Restaurant or Combo Restaurant, you must undertake promotional activities in the manner and to the extent that we prescribe in accordance with our brand standards, which we will provide to you. The brand standards will advise you of the manner and timing of payment for each activity. The minimum required Marketing Start-Up Fee is currently $10,000 per opening or remodel event and $5,000 per relocation that we approve. The promotional activities are designed to promote the opening, re-opening or relocation of your Restaurant and the fee is spent by you. If you fail to administer these promotional programs yourself, we may require you to pay the fee to us or one of our approved vendors to conduct these activities for you. If you add a Baskin-Robbins to a standalone Dunkin’ Donuts restaurant to become a Combo restaurant, and you are not required to remodel the Dunkin’ Donuts, the minimum required Marketing Start-Up Fee is $5,000. If you add a Baskin-Robbins to a standalone Dunkin’ Donuts restaurant to become a Combo restaurant as part of a remodel, the minimum required Marketing Start-Up Fee is $10,000 ($5,000 for the Baskin-Robbins and $5,000 for the Dunkin’ Donuts). The Marketing Start-Up Fee for APOD Restaurants and Self-Serve Restaurants is 50% of the Marketing Start-Up Fee for traditional Restaurants as stated above and may be waived in our discretion. The Marketing Start-Up Fee for Gas/Convenience Restaurants is the full standard Marketing Start-Up Fee referenced above, currently $10,000. Referral Incentives/Fees We may provide referral incentives to existing franchisees, employees, real estate professionals, franchise brokers and others for qualified referrals of prospective franchisees. We reserve the right to determine the amount of these incentives, which may be equal to some or the entire IFF. We may also pay membership fees to public, quasi-public and private services that refer potential franchisees from identified groups (such as veterans or military personnel planning to leave the service).
General Overview of Programs: We have facilitated certain lending arrangements, through third-party lenders which may provide financing for qualified franchisees. The amount of financing and period of repayment varies by program, circumstances, and creditworthiness of the applicant. For the purchase of both new and existing franchised businesses, the costs that are typically financed include, but are not limited to, construction, remodeling or leasehold improvements; site acquisition; and new or replacement equipment and fixtures. Typically, financed costs do not include initial inventory or supplies. We do not permit financing of initial franchise fees and require at most 90% financing on new restaurants or purchases of existing restaurants. All decisions to provide financing are at the sole and absolute discretion of the respective lender. You acknowledge that we have no responsibility whatsoever with regard to a lender’s decision to provide or not to provide financing to you or to any other franchisee. Terms of financing and rates may vary among the lenders. We may make changes to the list of lenders with which we have financing programs. The terms and conditions of these programs may change and the programs may be withdrawn without notice. The rates change frequently according to a variety of factors, including market conditions. The significant changes in the current economy have led to large swings in the cost and availability of credit. You should obtain current information from the lender before committing to financing. We do not advise you as to which financing program to choose. We strongly encourage you to investigate several alternative sources of financing and to discuss each available program with a qualified accountant, legal, tax or other advisor to determine which program best suits your individual business needs. We do not typically offer financing. However, we may from time to time, at our discretion, offer voluntary financing to existing franchisees for specific programs such as the purchase of specialized equipment or accelerated development in specified markets. If approved, you would be required to sign a promissory note and comply with other requirements specific to such program. Typical Qualifications: Each lender maintains its own underwriting criteria and reserves the right to approve or deny any application for credit based on its internal rules and guidelines. These criteria typically include, but are not limited to: acceptable pre-financing and anticipated post-financing cash flow, net worth, and debt to equity (leverage); acceptable credit history; management and/or food service experience; an acceptable purchase price if you are purchasing an existing Restaurant; the amount proposed to be financed must be within certain approved parameters; the applicant must provide designated equity participation; an acceptable business and financial plan; certification that the applicant is in compliance with its agreements with us; or has completed our training programs, and other factors from time to time required by the lending institution. In addition, the lender may require that you own other Restaurants at the time of the loan application and require that the restaurant be located in certain geographic locations. Typical Contractual Obligations: Among other things, the lenders’ documents typically provide for the acceleration of principal and for the removal and sale of the collateral upon your default. The documents may also contain financial or other covenants, waivers of defenses, notice, demand, protest, redemption, appraisement, suretyship rights, set-off, recoupment or counterclaim against us and/or the lender. A termination of your Franchise Agreement may constitute a default of your loan. Also, you may be required to waive all exemption and homestead laws and to consent to a non-jury trial where not prohibited by law. Financing may not be transferable, and payment of principal and interest may be due upon the sale of your Restaurant. Late fees, attorneys’ fees and default interest may also be imposed under certain circumstances. (See Exhibit C, Sample Loan Documents). The loan documents, and the loan terms in such documents, may change from time to time and will generally vary from lender to lender. Each of your shareholders, owners and partners will typically be required to personally guarantee the obligations under the loan documents. Financing is typically secured by perfected first priority liens against your business and, in some cases, personal assets, including without limitation, real estate, improvements, equipment and signs. Prepayment penalties are often required and are dependent upon the individual agreement. Interest income may be recognized under the “Rule of 78s” (precomputation of interest due over term of loan reflecting monthly principal balance). The specific provisions of individual contracts will vary from program to program and among the lenders. Third-party lenders provide virtually all of the financing arrangements to the System. You should check with the third-party lender you select regarding their policy on selling, assigning or discounting loans. We strongly encourage you to review the terms and conditions and other required documents with an accountant, legal and/or tax advisor before executing such documents. Programs for Franchisees: Limited Availability and Types of Programs: If you are qualified, financing for specific purposes may be available to you through third-party lenders. To qualify for new Restaurant or remodel financing, you typically are required to have been a franchisee for at least one to two years and meet other qualifications then applicable. Third-party lenders have, from time to time, provided financing for conversions of retail outlets to the System. Third-party lenders may finance your purchase of a Restaurant previously owned by us. Third-party lenders may also make available to you a program to lease equipment and signs. Under such a program, third party lenders may lease the equipment and signs to you with or without an option to purchase at the end of the lease term. We may, from time to time, have one or more programs with one or more third-party lenders. The following describes programs available at the time this Disclosure Document was prepared. If there is any inconsistency between the above general overview and the specific programs described below, the terms of the specific program apply. Interest rates vary based on the cost of funds, credit quality, loan size and other considerations including but not limited to current market conditions and whether or not the lender is a bank or non-banking institution. The interest rates and annual percentage rates displayed below were effective as of the date of this Disclosure Document and are subject to change at any time without notice. Guaranteed Financing Program with National Cooperative Bank (NCB) The following guaranteed financing incentive program was developed in partnership with NCB to finance Restaurants, central manufacturing locations (CML’s) and delivery trucks and will be offered to certain franchisees previously approved by us. We intend to offer a variation of this program to certain prospective franchisees for CML’s and related truck leasing in markets we designate. Real estate acquisition is not allowed under this Program; however, we reserve the right to make exceptions from time to time at our sole discretion. We will not receive any fees from NCB as part of this Program. We reserve the right to cancel or modify this incentive program. We do not advise you as to which financing program to choose. We strongly encourage you to investigate other sources of financing and to discuss each available program with an accountant or tax advisor to determine which program best suits your individual needs.
Before you start to review the information in this Item 19, we want to call your attention to these important points: 1. A new franchisee’s individual financial results may differ from the results stated in the financial performance representations in this Item 19. 2. We will make written substantiation for the financial performance representations in this Item 19 available to prospective franchisees upon reasonable request. 3. If you are thinking of entering into an agreement to operate an alternative point of distribution (“APOD”) Restaurant (whether Dunkin’ Donuts or DD/BR Combo Restaurant) please note that the information in this Item 19 does not apply to APOD Restaurants. We do not make financial performance representations about APOD Restaurants. 4. If you are thinking of entering into an agreement to operate a Restaurant or DD/BR Combo Restaurant in Alaska or Hawaii, please note that the information in this Item 19 does not apply to Restaurants or DD/BR Combo Restaurants in those states. We do not make financial performance representations about Restaurants or DD/BR Combo Restaurants in Alaska or Hawaii. 5. There are eight tables that follow in this Item 19. You should read them together with all of the notes and explanatory information that follows in this Item 19. DUNKIN’ DONUTS RESTAURANTS: The following tables and notes provide financial performance representations that are historical, and that are based on information from existing Dunkin’ Donuts Restaurants (exclusive of DD/BR Combo and APOD Restaurants) that have been open for business to the public for at least one year during a one-year measuring period from OCTOBER 30, 2016 TO OCTOBER 28, 2017. The site types listed in the following tables are defined as follows: Freestanding: A Restaurant, either newly constructed or an existing structure (to be retrofit), that does not share any common walls with any third party. Shopping Center/Storefront: A Restaurant that shares a common wall (or walls) with third parties. The Restaurant could be an anchor (endcap) or inline tenant space in a strip center, or it could be a location in a high density, multiple level construction (typically urban/downtown office building setting) sharing common wall and ceiling/floor construction with any third party. Gas/Convenience Restaurants: A Restaurant that is a sub-or shared tenancy within a Gas/Convenience host environment. Drive-Thru Only: A Restaurant that does not have any indoor seating, but allows for customers to drive up to the structure to place orders. In some cases, there may be a walk up window or front counter. Restaurants may be Freestanding, Shopping Center/Storefront or Gas/Convenience but are typically smaller than their counterparts with indoor seating. For more information regarding the “Regions”, please refer to Appendix V-B at the end of this FDD. The Region descriptions are approximations. Some Restaurant locations included in this data may not precisely follow the descriptions contained in Appendix V-B. (For example, some Restaurants near the boundary of another Region may be included in that other Region’s data.) All of the Restaurants or Combo Restaurants in Tables 5 & 8 reported at least one month of COGS and Labor data for the twelve month reporting period. Our nation’s current economic conditions are unusually volatile both in terms of consumer spending as well as the costs of doing business, such as for example, energy, commodities, credit, etc. As a result, historical performance results may not be as useful in your financial planning as they may have been in less volatile times (in terms of anticipated sales or anticipated costs). If you choose to use the historical financial information appearing in this franchise disclosure document, you must carefully consider the potential impact of the current economic volatility, price spikes in the cost of commodities, and in your potential sales volume. There are numerous factors that may affect COGS and Labor at your Restaurant. The factors listed in this Item 19 are not an all-inclusive list of those factors. Other than the preceding financial performance representations, we do not make any financial performance representations. We do not make any representations about a franchisee’s future financial performance. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor's management by contacting Richard Emmett, Senior Vice President, Chief Legal and Human Resources Officer, Legal Dept. 3 East A, 130 Royall Street, Canton, MA 02021, 781-737-3000, the Federal Trade Commission, and the appropriate state regulatory agencies.