Dunkin' Donuts signs long-term supply chain deal

Dunkin' Brands, Inc., the parent company of Dunkin' Donuts and Baskin-Robbins, announced that they had signed a long-term, performance-based agreement with National DCP (NDCP) to be the exclusive supply chain provider for all Dunkin' Donuts restaurants in the continental United States.

The agreement, which was effective the first of the year upon the merger of the four existing regional franchisee-owned cooperatives into one national cooperative, offers numerous financial savings and service-improvement benefits to Dunkin' franchisees, including:

• A long-term agreement with Dunkin' Brands for the procurement and distribution of products;
• A more streamlined system that will provide significant future cost-efficiencies for the franchise community;   
• A consolidated Cooperative board structure, and;   
• Greater consistency in supply and distribution service levels to all U.S. restaurants.

For Dunkin' Brands, the agreement allows the company to realize the benefits of a long-term, performance-based procurement and distribution agreement. Most importantly, the agreement supports the company's domestic expansion plans by providing franchisees in new markets with the same product costs as franchisees in the more highly built-out, established Dunkin' markets. Uniform product costs will be phased in over a three-year period beginning in 2012.

“This agreement is a momentous one for Dunkin' Brands and for existing, new and future Dunkin' Donuts franchisees,” said Neil Moses, Dunkin' Brands Chief Financial Officer. “In addition to securing our franchisees' role in the Dunkin' Donuts supply chain, it will result in significant cost savings, a higher level of service, and, in the near term, uniform product costs for franchisees across our domestic restaurant network.

“This is a huge step forward toward our goal of continuing to drive store-level profitability in newer markets and accelerating the expansion of Dunkin' Donuts across the U.S.”

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With almost 7,000 Dunkin' Donuts restaurants in the U.S. today, the company has said it has plans to more than double its current number of restaurants in the U.S. over the next 20 years.

Since the 1970s Dunkin' Brands has utilized franchisee-owned regional distribution centers to supply products to its domestic Dunkin' Donuts franchisees, but the costs of those supplies, historically, would vary depending on the concentration of restaurants and other distribution requirements. Under the new agreement, uniform costs will eventually be charged across the core distribution area so franchisees in areas with fewer restaurants will not pay a premium compared to franchisees in areas with more stores.

In return, the Dunkin' Donut franchisee-owned cooperative will be assured that, provided they meet certain performance-based requirements, Dunkin' Brands will use them as the sole procurement and distribution partner for domestic Dunkin' Donuts restaurants.       

“We are excited to announce the formation of this new national entity and our long-term agreement with Dunkin' Brands to be the exclusive supply chain provider for all Dunkin' Donuts restaurants in the U.S.,” said Kevin Bruce, NDCP Chief Executive Officer. “Our mission is to provide our members – the Dunkin' Donuts franchisees – with the very best purchasing and distribution service in the industry.”

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Edited by Kevin Scarpati