franchising dunkin donuts in bangladesh. (full analysis)

1 Management Term Paper on Franchise of Dunkin’ Donuts


Dunkin’ Donuts Bangladesh

Submitted to

Ms. Iffat Tarannum

Lecturer, BRAC Business School

BRAC University

Submitted by:

Date of Submission:

6th August 2015

Name Student ID

1. Sumaita Proma 14104189

2. Fabiha Binte Nayeem 14204106

3. Marzia Tanzim 14304157

4. Sadman Kabir Mohammed 14110017


Letter of transmittal

6 August, 2015

Ms. Iffat Tarannum

Lecturer, BRAC Business School

BRAC University.

Dear Madam,

We would like to submit our term paper titled ‘Dunkin’ Donuts’ as a requirement for the

Principles of Management course. In this paper, we tried to form a franchise business according

to the knowledge we have gained throughout this course.

Therefore, we would like to thank you for giving us this wonderful opportunity to prepare this

term paper.

Sincerely yours,

On behalf of the group members,

Sumaita Proma

ID -141041889

Section – 07

Course code - MGT 211


Executive Summary

The main purpose of this term paper is to build up a business plan using the knowledge that we students have gained by taking this course. We choose to build a franchise company of Dunkin’ Donuts in Bangladesh. The mission of our company would be to provide wide range delicious beverages & baked products around the kingdom in a convenient, relaxed, friendly environment that insures the highest level of quality product and best value for money. Firstly a Five forces Model and SWOT analysis of the industry that Dunkin’ Donuts would operate in Bangladesh has been provided this analysis is what has helped us determine whether to start a business in this industry or not. The strategic planning and corporate strategies have also been discussed in the paper. Then the human resource management is illustrated. We hope to encourage all in having a good time in our future shop.


Index

Content Page Number

Intro, Mission & Vision -------------------------------------------------------------- 6

SWOT ------------------------------------------------------------- 7-9

Porter’s Five Forces Model ----------------------------------------------------------- 10-12

Corporate Strategies -------------------------------------------------------------- 13

Strategic Planning ------------------------------------------------------------ 14-16

Organizational Structure ------------------------------------------------------------ 17-19

Human Resource Management ------------------------------------------------------------ 20-22

CSR & Future Plans ------------------------------------------------------------- 23


Intro:

We are a renowned company SCRIBER LTD. We are about to start a new business. We are going to bring “DUNKIN DONUTS’ in Bangladesh through franchising. Now, Bangladesh is a lower middle income country. Ten years back people did not think of having any international food chain shop in the country. The situation changed. Now, we have not many but a few international food chain shops. As living in a rapid economical growing country we believe that by bringing “DUNKIN DONUTS” we can not only satisfy the sweet loving nation but also creating job opportunities for the people of the country.

Mission:

“To be the leading provider of the wide range delicious beverages & baked products around the kingdom in a convenient, relaxed, friendly environment, that insures the highest level of quality product and best value for money.”

Vision:

“To be always the desired place for great coffee beverages and delicious complementary donuts & bakery products to enjoy with family and friends.”


SWOT Analysis

Strengths:

Dunkin’ Donuts has developed a good reputation for its high-quality products particularly coffee, as it uses 100% Arabica coffee beans and has its own coffee specifications, which are recognized as a superior grade of coffee in the industry. Besides, it is also well-known for its convenience customer services as being able to serve quick breakfast for the busy workers.

Research found out that there is high brand recognition for Dunkin’ Donuts in the States. Brand Keys, a customer satisfaction research company carried out a research and states that Dunkin’ Donuts as no. 1 in the US on its Customer Loyalty Engagement Index in the coffee category, and it has obtained this loyalty recognition for six consecutive years, which implies the brand, has a strong loyalty level.

Dunkin’ Donuts has a comparatively competitive pricing and at the same time, offering quick service, which enables it to maintain its position in the coffee industry even in tough economic times. Coffee pricing at Dunkin’ Donuts is lower than that at Starbucks. This price advantage attracts more people to buy its coffee with the reasonably good coffee quality. The far trade coffee, which allows coffee growers at the third-world countries to earn more income from growing coffee, provides good reputation to Dunkin’ Donuts that it is acting its social responsibility.

Strength High goodwill

Low Price

Weakness Lack of Marketing

Limited geographical presence

Opportunities High growth market

Mostly local competitors

Threats Revenues highly effected by

changes in consumer preference

SWOT


Weaknesses:

The lack of the marketing effort and appearance of packaging is not appealing is the weakness of the Dunkin’ Donuts which Dunkin’ Donuts does not have spent much on advertising and the appearance is not attractive comparing to other competitors. Since the Dunkin’ Donuts has a lot of franchise around the world there will be constants rift with the franchises owner. Dunkin’ Donuts has a very limited number of franchises in this part of the globe thus very less number of people have actually tried the product resulting in only a word to mouth experience of Dunkin’ Donuts for most of the target consumers of Bangladesh.

Opportunities:

Consumption if coffee is ion a constant increase in Asia as in these countries the disposable incomes of the people are increasing and they are spending more on hot and baked items. One such country that has a large potential market is china. Furthermore, there is an increase in demand for doughnuts and similar baked items Singapore, Malaysia, Taiwan and Bangladesh as well.

With rapid globalization, the services have also quicker and flow of information is easier. Due to this the Dunkin’ Donuts is now able to serve the customers better. Dunkin’ Donuts has established and positioned itself as a quick stopover to have great snacks and beverages. With the growing western influences and increasing acceptance of western trend among the youth is another opportunity that can result in greater market share of the company.

The main competitor of Dunkin’ Donuts globally is Starbucks and they have not yet penetrated the market of Bangladesh. Moreover mostly all existing competitors in the market are local brands except Columbus Coffee and Starbucks.

Threats:

Revenues will be affected easily when there are changes in consumer preferences on coffee, or when there are medical opinions about the health effects of consuming coffee. Coffee is said to be addictive and it will have harmful health effects if people drink excessively. Such awareness will alert the public to drink less coffee or even not to drink at all. This will affect the revenues generated from the segments.


The market expansion also means that it will face strong competition from the competitors. Glorea Jeans and Coffee World are the main competitors that offer similar kind of food items and snacks in Bangladesh and there is a chance of customers switching to other food products. Another major competitor and hence threat for the company is Columbus Coffee that can cause a large reduction in the market share of Dunkin’ Donuts.

The brand value depends on the operation of restaurants by the franchisees, so if the franchisees fail to operate them with the required standards, it will bring bad reputation to the brand name as a whole. Payments of the franchise fees and royalty income will be greatly affected, as the income generated from this franchising models mostly depend on the financial results from the operation effectiveness of the franchisees. The company has to implement enough quality procedures to ensure that it not be out of the control.


Porter’s Five Forces Model The Porter’s Five Forces Model reflects the level of rivalry among organizations in an industry, the bargaining power of suppliers and buyers, power of the potential for entry into an industry and the threat of substitute products. Dunkin’ Donuts operates in the coffee snack shop industry and the Porter’s Five Forces Model will help determine the level of attractiveness of the market.

The bargaining power of suppliers poses a very low threat. This is due in large part to the fact that the inputs for the industry are standard as opposed to differentiated. This allows companies to switch quickly and easily between suppliers. For these reasons, suppliers are not necessarily locked in to a specific firm in the industry. Moreover, most of the ingredients needed would be imported from outside by the Dunkin’ Brand approved suppliers.


Referring to the chart above, there is a relatively low level of threat from the bargaining power of buyers. This is due to the fact that there are a large number of buyers with relatively small purchases. The coffee industry is based around individual customers buying a cup or two of coffee and a snack, but usually not much more than that. It is important to note, however, that customers do not face any significant switching costs when moving between coffee shops, the consumer may then switch to Columbus Coffee or Gloria Jeans. This gives some power to the buyers. Furthermore, coffee drinkers could make the product in their own house rather than buying it, which also gives them more power.

The threat of substitutes in this industry is relatively high as the buyer may choose to have anything in their will. Tea is the main substiut to coffee and donuts have all the desserts as its substitute, therefore the treat of substitute us the biggest drawback of the industry.


As depicted in the chart above, there is a relatively low threat of new entrants into the Bangladesh coffee and snack shop industry. One reason for this is the low threat level is that existing firms have a cost and performance advantage. They are well- established and have already learned how to continually lower costs and improve performance. A new entrant to the industry can expect retaliation from existing companies due to the strong competition for market share. Although, somewhat difficult, it is still possible for new entrants to thrive in this market. Since, our company will be taking the franchise of a already established brand name thus it would be easier for us to thrive in this industry.

Rivalry among existing Competitors

The rivalry among existing competitors in this industry is moderate and there isn’t much presence of trying to take one another’s customers. But the companies do try to duplicate each other’s products.


Corporate strategies

Growth strategy:

As we are introducing Dunkin’ Donuts, a world renowned coffee and donut franchisee, our target

is to capture the highest position in market. For that we need to follow growth strategy to grow

and prosper.

Concentration: we use concentration to bring variations in the products we serve. For example –

we serve different types of coffees like –Americano, latte, hazelnut mocha, Irish Choco Nut Meg

etc. We also prepare 52 different flavors of donuts like – blueberry cheese filling, triple

chocolate, strawberry delight etc. thus we bring variations in our product lines to fulfill our

customer need and ensure their satisfaction.

Vertical integration:

We follow vertical integration for the growth our organization. By combining backward and

forward integration system we are trying to grab the top positon in the market.

I. Backward integration: we focus on or flour refinery machine to produce best

quality donuts, maintain sugar refining machines. Coffee beans are brought from

best coffee exporters and grinded with special care to produce the smoothest

texture in coffee-making. Coffee making machines are also maintained to serve

best quality coffee in town.

II. Forward integration: as we provide home delivery service, we recruit delivery

boys, hire delivery vans and other emphasize on other distribution channels.


Strategic Planning

Process of Franchising Dunkin Donuts

Dunkin Donuts has a standardized the application process of franchising the brand as everyone applies through their website initially. Before applying online the applicants must ensure that they have four basic resources for having a Dunkin Donuts franchise, they are a market that’s available for current or future development, experience in the food industry, retail market and the real state market, passion for excellence and capability to build an excellent operational team and finance to franchise the brand. As our company has all these resources we have decided to go forward with the application for franchising Dunkin’ Donuts. The first step is to fill up the application form available at their international Dunkin franchising website. After the application has been reviewed by the Dunkin’ Donuts tam they would contact our company and provide The Franchise Disclosure Document (FDD), required by the Federal Trade commission, that provides prospective franchisees like us with information about the franchisor, the franchise system and the agreements that will be required so that our company has the information needed to make an informed decision. Our company has to provide citizenship proof of the directors and the proof of assets disclosed in the application given to Dunkin’ Donuts. Once Dunkin’ Brand is done with their screening, representatives from our company have to go and meet the Franchise Manager of Dunkin’ Brand and other franchisees of the brand. Then the Business plan would be submitted to the Franchise Manager of Dunkin’ Donuts after the financial background checks have been completed by the mother company. The location select by us have to meet the criteria set by the Dunkin’ Brand. The Preffered Site Criteria:

• Site Size: 1/4 - 2 acres

• Building Size: 1,200 to 2,600 square feet

• Morning drive side

• Drive-thru

• Freestanding, shared pad or end-cap located in mixed use "major tenant" community shopping center with national or regional tenants

• High visibility from major arteries

• Option for 24 hour operations

Easy ingress and egress (no more than 2 turns in or out)

• Minimum of one (1) parking space for every three (3) seats

• Signage:


o Building: maximize square feet, (use prototypical colors and materials)

o Pylon and/or monument: maximize square feet, use prototypical colors and materials

The site submitted by our company has to be approved by Dunkin’ Brand. Then the financial review based on the business plan if all criteria meet then our company will receive the franchise approval from Dunkin’ Brand.

Opening of the store

The location of the store would already be selected by the Dunkin’ Brand, after the approval our company would need to finalize the store space and begin construction for the store. While this takes places the recruitment and training process of the t employees would also start. The appointed employees would be trained by the trainers of Dunkin’ Donuts who would fly out to Bangladesh to train them, so that they can provide the international level of service that is associated with the brand name of Dunkin’ Donuts. After the completion of all the construction work and training the store would be ready to open for customers.

Operational Planning

The shop would be open from 9:00 am till midnight local time and home delivery would also be available in this time. The regular menu would differ from the home delivery menu. All employees would have to follow hygiene and wear uniforms at all time when on duty.

Short Term Planning

The short term plans of the company include pans of expansion rough the opening of new branches with in Dhaka city. The first store would open at Gulshan and within six months of its opening the second would open at Jamuna Future Park. Considering the performance and revenue turnover of these two shops, further two more branches would be opened in Dhaka coring to demand. The location of the later twp branches would be decided after survey of customer demand.

The baristas and bakers of the shops would be highly experienced and trained by trainers of Dunkin’ Donut thus it is very important to keep a very low employee turnover rate.


Long Term Planning

The company aims to expand its branches all over the country with a minimum of thirty outlets in Bangladesh within six years of successful operation in the country. To do this the company would need to generate a revenue turnover of TK 200000 per annum.


The organizational structure

1. Work specialization:

Work specialization, sometimes called a division of labor, refers to the degree to which an

organization divides individual tasks into separate jobs. Our organization has employees

specialize in individual tasks so that the workers become highly proficient in their specialized

area. For instance, we have a group of workers who are involved in making donuts only, other

group of workers are assigned to prepare only coffee. We also have a team for grinding the

coffee with the smoothest texture possible. Bagels and sandwiches are also prepared by separate

group of workers, respectively.

2. Departmentalization:

Through this process we group our departmental works. For our organization, we basically

consider functional and customer departmentalization – these two types of departmentalization to

be the most important ones.

• Functional departmentalization: We group the activities of our organization according

to function (work being done) to pursue economies of scale by placing employees with

shared skills and knowledge into departments such as- human resources, IT, accounting,

manufacturing and marketing.

• Customer departmentalization: we group our activities on the basis of common

customers or types of customers. Jobs are grouped according to the type of customer

served by our organization. The assumption is that customers in each department have a

common set of problems and needs that can best be met by specialists. For example,

some customers may prefer their coffee with skimmed milk; the others might like it with

whipped cream. Other than that we serve 52 different flavors of donuts to meet up with

different customer demand.


3. Chain of Command:

This refers to our company's hierarchy of reporting relationships -- from the bottom to the top of

our organization, who must answer to whom. The chain of command not only establishes

accountability, it lays out our organization’s lines of authority and decision-making power. The

chain of command, from top level to low level, for our organization is mentioned below,

respectively –

i. The Owners: they own this franchisee

ii. General Managers: they supervise our employees at the lower levels.

iii. Executive Chefs: highly experienced chefs are recruited with proper training

iv. Shift Leaders who manage the stores

4. Span of control:

Our span of control or in other words, the number of staff in our organization that report to our

manager – is very reasonable. To ensure the presence of ideal span of control, we do not recruit

too much subordinates. To ensure the quality of our service and to make sure that our manager is

capable of supervising the staffs directly and properly, we have decided to keep the number of

subordinates to a reasonable level. For example - We do not recruit more 7-8 chefs at once. We

keep one manager at each store in each of the particular branches.

4. Centralization and Decentralization:

As our organization represents a well reputed international brand, centralization is the best

process for us to maintain the quality of service. This means the activities of our organization,

particularly those regarding planning and decision-making, is concentrated within a particular

location, keeping all of the important decision making powers within head office or the center of

the organization. The owners take all the vital decisions and the subjects or lower level

employees abide by the rules, regulations and specified direction so that the quality of our

service remains unharmed. Decentralization involves also subordinates in the decision making

process. In this case, decentralization is not appropriate for us because it might affect our

excellence. And our quality is something with which we do not compromise. Hence, we follow

centralization for the betterment of the organization.


5. Formalization:

It is the process through which our managers specify, in writing, responsibilities of the

individuals and the organization as a whole, which leads to the development of processes,

relationships, and operating procedures.

Formalization creates a series of provisions that specify our –

• Mission and goals: our basic mission and goal is to - make and serve the freshest, most

delicious coffee and donuts quickly and courteously in modern and well-merchandised

stores, satisfy our customer needs and generate profit.

• Ranges of responsibilities and power: determines the chain of command.

• Patterns of action: main processes and procedures.

• Terms and conditions.

• Job description etc.


Human Resource Management

HR Planning:

For our business we are going to follow four basic process:

1. Hiring Experts: We will hire 2 chefs and 1 waiter from the mother company for training purpose.

2. New Recruitment: New chefs and waiters will be hired 3. Training: The experts will provide training to new faces. 4. Firing: Based on situation we may fire our employees.

Job Specification:

We have set up a job specification for our future employees. We will take one head chef, four sous chef, seven waiters, one receptionist cum cashier, one manager (optional), two security guards.

Head Chef:

• Minimum 15 years of experience in BAKERY • Must have positive attitude • Must be a team player • Should be able to take stress • Minimum academic qualification : HSC/A level

NB: Five star restaurants chef will be prioritized.

Sous Chef:

• Minimum 6-8 years of experience in Bakery • Must be a team player • Should be able to take stress • Minimum academic qualification : HSC/A level

NB: Five star restaurants chef will be prioritized.

Waiters (Permanent):

• Minimum 1 year of experience • Must be smart • Must be friendly & team player • Should be able to take stress


• Minimum academic qualification : SSC/ O level

NB: Waiters from KFC, Pizza Hut, and Gloria Jean’s etc brands will be prioritized

Receptionist cum cashier:

• Minimum 1 years of experience • Must be Friendly & Smart • Minimum Degree: BBA or Diploma in Accounting/Finance

Manager (Optional):

§ Experience of 5 or more years § Must be friendly & smart § Must be a team Player § Must have fluency in English § Minimum Degree: BBA

NB: For the beginning we like to operate our restaurant by ourselves. The situation will tell us whether we need a new manager or not. Security Guard:

• Minimum experience of 5 year • Must be Physically & Mentally Strong • Min Degree: SSC

NB: Army Soldiers will be given extra priority

Recruitment & Decruitment Process:

Our recruitment process has some specific steps. Steps are:

1) Advertising: We will advertise through Facebook, Websites, News papers and TV’s. 2) Employee Referral: We will also take referrals from employees to find a quality chef. 3) Selection Board: The will be a 5 member of selection board including experts from

mother company 4) Selection Process: This includes a basic written exam, practical exams such as baking,

stress handling, maintaining order etc. and medical exams (Mandatory for everyone). 5) Orientation & Training: The selected employees will be given a brief about the company,

its vision and missions, rules and regulations etc. They will also sign a code of conduct and agreement bond. Then, they will be given training by our experts.

6) Monitoring: We will monitor our employees whether they are doing their works efficiently or not


7) Firing: Based on situation we may fire our employees.

Employees Performance Management:

We will set a target for each of our employees. Based on their performance they will be given rewards such as best waiter of the month etc. We will try our best to manage workforce diversity and try to keep our employees ratio 50-50. There will be zero tolerance for any kind of harassment, if needed we will take help from police. We are going to make the place as a family friendly work place such as giving benefits, arranging family picnic, giving leave etc.


CSR (Corporate Social Responsibility):

We will do CSR activities such as food campaigning to aware people the need of good food. At the first launching year we will conduct a dinner for the poor people for free. We also have a plan to do charity works. We will offer part-time work opportunities to the university students so that they can enhance themselves with skills like team player, stress taker.

Future Plans Establishing minimum a number of 30 outlets all over the country. Having a revenue turnover of 200000$ per annum.