Category : Articles
Dunkin Donuts Case Analysis
Chain Management and Franchising- HTM550
October 23, 2011
When an individual makes the decision to become an entrepreneur they have a few routes available to them. They can either start from scratch, with their own business idea, or franchise from an already established company. The option of franchising is more of a safe route if done properly. Ideally if a business is franchising they have established a great business plan and how to run the business successfully. Most of the leg work is done and the most critical trial and error portion has been done alleviating risk from the franchisee. While franchising is a good option for those not as daring, it is important to know what to look for in a business when making the decision on which one to franchise from. This paper will be an analysis on Ramone and his franchising venture. This analysis will discuss the critical issues within the case with actions and rationale to address them, what Ramone needs to know before franchising, and what marketing mix Ramone should look for with his business.
Ramone has been interested in franchising for the last year and a half. After visiting a Dunkin Donuts he believes he has found the one he would like to operate. After raising $38,000 in funds he believes financially he is ready. In addition to Dunkin Donuts being the largest donut shop franchise in the world, it has the highest level of sales. Dunkin Donuts has a simple strategy of providing superior products, at the right price, in a clean atmosphere with great customer service.
Before franchising a Dunkin Donuts, or any business there are a few things Ramone most know. It is important for him to understand the nature of the franchising method of business. Like any business venture there are both advantages and disadvantages to franchising that Ramone needs to be aware of. Advantages of a franchise are the already established product or service, technical and managerial assistance, quality control standards, less operating capital, and opportunities for growth. Disadvantages to a franchise include failed expectations, service costs, overdependence, restrictions of freedom of ownership, termination of agreement, and performance of other franchisees. He also must be aware of the financial requirements that are involved with franchising. The costs of franchising include, but are not limited to; the franchising fee, reals estates costs, personal living and traveling costs, equipment costs, start-up expenses and inventory, and working capital.
Marketing is very important in establishing a successful business. Ramone needs to be fully aware of Dunkin Donuts marketing structure. The immediate marketing information that he should seek are, the marketing objectives, the threats and opportunities, target markets that have been established by the franchisor, the product mix, and the plans of action. The marketing objectives are established by the franchisor, in this case, Dunkin Donuts. The objectives listed will be based on the overall goals of the company. The threats and opportunities analysis is also conducted by the franchisor; however it doesn??™t hurt for the potential franchisee, Ramone, to do one on a local scale in his area. It will include the threats that not only the industry faces but the company as well. The opportunities will be windows of growth or new developments that can be established in the future. The target market is one of the most important components in not only the marketing aspect but the company as whole. The target market is established by the product or service being produced and the objectives of the company. The target market assists in advertising efforts because once established the unique characteristics of the various markets can be used. The product mix is important because it will give Ramone and idea of the different product lines being offered by the company. Besides donuts there are other things sold within the various stores so a clear understanding is needed. The plans of actions are established from the objectives and strategies established in other parts of the marketing plan. This is important for Ramone to know because he should be aware of not only what is intended to be established but how it will happen.
Selecting a marketing mix will be important for Ramone in the success of his franchise. Guided by the information from the marketing strategy of the company, Ramone should pursue a marketing mix that aligns with the overall company objectives but that are also relevant to his store location. The marketing mix is a set of controllable elements the franchisor and franchisee put together to reach the target market. To reach his target market Ramone must first ensure, with assistance from the franchisor of course, that the location of his business will be in an area where his product is in demand. The product must also be priced in an acceptable range. If Dunkin Donuts were to give their franchisees freedom with pricing, Ramone would want to make sure that his pricing matches his area. This can be done with income research, also during the marketing process. Overall ???The Four Ps??? of marketing is what will best help Ramone determine his marketing mix. The four ps stand for; product, promotion, price and place. Since Ramone will be franchising, most, if not all, of this information will be provided by the franchisor. The product of a company can either be an actual product, something tangible, or a service, something intangible. In the case of Ramone the product for him is mixed, he is selling and tangible product but also providing service while selling it. The promotion and price more than likely will already be established by the franchisor with some flexibility given to the franchisee. The place will more than likely be a joint decision by both Ramone and Dunkin Donuts.
The issues presented in this case were Ramones uncertainty of the target market for a donut shop, his lack of understanding for research for the marketing process or the how available Dunkin Donuts is in assisting, he is also unsure if the company helps with advertising and location selection. Ramone also had unanswered questions about the product line and the continuous effort put towards improvement of it. The issues previously addressed all stem primarily from a lack of knowledge. Most companies only offer general information on their websites and when intent to franchise is put in. Since he already knows he meets the basic requirements need to franchise with this corporation he needs to put in his application so that he can receive more information. Once his process is started he will be able to find out the companies policy on assisting with advertising and location selection. Finding out the information on location assistance should be his first priority because though he meets the basic financial requirements, without the assistance in not only location selection but the franchisor buying the land and financing the building, Ramone will not be able to financially move forward unless monies are obtained from elsewhere. Ramone also should look into receiving a personal loan for the purchase of land and building in case Dunkin Donuts does not offer any assistance. Ramones uncertainty of the target market and lack of knowledge on conducting research for the marketing product are also important matters. While making his inquires on his other issues, Ramone could also find out if this information is provided by the company. Since Dunkin Donuts is not only an established franchise but the lead in its industry a clear target market will surely have already been developed and readily provided. While the company will also most likely provide marketing research and assistance in that area it would be wise for Ramone to either enroll in marketing classes to gain better understanding or do research on his. It would prove to more advantageous for him to enroll in classes because of the guidance provided. It is important for Ramone to have his on understanding on marketing research because though he will be a part of an already established corporation this information is necessary on an individual level for continued success. Advertising again is information that Ramone will find out about as he advances further in the franchising unit. Again, since Dunkin Donuts is a large corporation that has already been established, advertising is probably already included in the agreement. Finally Ramones interest about the product line and continuous improvement are things that will be established once he attends the six week training program. Beforehand a general synopsis will be available, but the detailed information would be provided during that time.
In conclusion, the decision to franchise isn??™t one that can be made over night. Establishing a business is a long term commitment and a person must make sure to the best of their ability that they are aware of all aspects. While franchising gives the comfort of knowing a business has proved to be successful it is the individual franchisee who will ultimately determine the success of their unit. Marketing is one of the most crucial aspects in establishing a successful business. Ramone is off to great start on being a successful business owner and has good questions. However he must make sure he makes the effort to have all issues addressed and prepare himself completely to be a business owner.