News

Dunkin’ Donuts takes franchisees to court

January 4, 2011

Dunkin’ Donuts is driving an effort to withdraw the franchise rights of three separate unit operators in Billerica, Mass., a town 20 miles northwest of Boston and about 37 miles from the chain’s Canton, Mass.-based headquarters.
According to the Patriot Ledger, the chain filed a breach-of-contract suit in Boston federal court last week claiming the franchisees hid revenue from the company.

The defendants include Coelho Family Donuts Inc., Billerica Donuts Inc., Family Donuts Inc., as well as the individual owners of these companies.

Dunkin’ Donuts claims that Coelho Family Donuts and Family Donuts were both contractually bound to pay a franchise fee of 5.9 percent of their gross sales. Billerica Donuts’ agreement required a 4.9 percent fee.

Additionally, the franchisees agreed to an advertising fee of 5 percent to the parent company.

Dunkin’ Donuts’ franchise contracts allow the company to inspect franchise books to assure that accurate revenue is reported and, if so, the choice to terminate the agreement. Upon a recent inspection, Dunkin’ Donuts unearthed the intentional underreporting of weekly sales by almost $120,000.

The chain sent termination notices to all three units. However, all three have refused to accept the terminations and continue to operate their businesses under the Dunkin’ Donuts brand.

The chain is seeking a halt to their use of the brand, as well as reimbursement of the underreported revenue.