#165 Dunkin’ Donuts’ arduous (early) global journey
Today, coffee and donut chain Dunkin’ Donuts (DD), part of Inspire Brands that also owns Baskin Robbins, Arby’s, Sonic and others, has more than 3,200 restaurants in approximately 40 countries. It took a long time to develop such an impressive global presence, and success didn’t come easy. DD’s internationalization began 1964. Shortly after he had taken over from his father, Robert Rosenberg, CEO of 35 years of DD, heard that their major competitor in the United States, Mister Donut, was going on a trade mission to England and Germany to stake their claim to these markets. Rosenberg moved fast and quickly opened its first foreign location in London, England, in 1966, one year after he had visited the city for the first time. However, a second location and two years later, DD pulled out of the market again, deciding that culture and consumer behavior were too different for them to change – not to adapt to, but to change! Soon thereafter, DD sold their first master franchise in Japan to retail group Seibu, mainly driven by a strategic move of their U.S. competitor Mister Donut, which had sold a master franchise to a Japanese company called Duskin. By 1978, Mister Donut – then part of a different company, International Multifoods – had around two hundred shops in Japan. DD, on the other hand, could not gain traction and had a difficult time managing the transformation from a wholly owned domestic coffee and donut company into an international franchising operation. Then, in the 1980s, DD put their internationalization into high gear, licensing entire countries to large companies and successful entrepreneurs from Colombia, the Philippines, England, Hong Kong, and Thailand – without much of an intentional plan and to whoever knocked at their door. Spoiled by high growth rates in the domestic market, DD had unrealistic growth expectations. It took a while for the company to realize that internationalization was not a “get-rich-quick” scheme. Even the hefty up-front fees to licensees barely covered the cost of negotiating deals, legal fees, sourcing costs, shop-opening crews, training, etc. Plus, each country’s unique consumption patterns required adaptions to the menu that the company was hesitant to make. For instance, in the Philippines, the importance of local relationships practically forced DD into opening small kiosks in movie theatres and gas stations, operated by the spouses of their business partners. For many years, DD had modest success and its fair share of failures – from Canada to India to Israel and South Africa. But even in those markets where DD had a legal right to withdraw the license or master franchise from their business partners, doing so proved difficult because of substantial investments in time and resources that had been made. Ultimately, internationalization picked up in the 2000s, and Dunkin’ Donuts grew into the global powerhouse it is today.
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Meyers, J. (2016). With new flavors, Dunkin’ Donuts again targets China, after two failed attempts, Boston Globe, July 18, retrieved from https://www.bostonglobe.com/business/2016/07/18/with-new-flavors-dunkin-donuts-again-targets-china-after-two-failed-attempts/U9EbcjTXP7wnq19ioftSlN/story.html on March 5, 2021.
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Rosenberg, R. (2020). Around the Corner. Around the World. A Dozen Lessons I Learned Running Dunkin’ Donuts. Harper Collins Leadership.
Sigalos, M. & Turner, A. (2018). Where Dunkin’ went wrong in India, retrieved from https://www.cnbc.com/2018/10/26/dunkin-india-coffee-donuts-restaurants-krispy-kreme-mad-over-donuts.html on March 4, 2021.
July 8, 2021 @ 6:39 pm
Well prepared article. This shows perfectly, that with no adaption of the product (or the way to present it and the service) the company is likely to fail abroad. It seems like a bit of luck also played a role for the success of Dunkin’ Donuts.
Perhaps they would have been more successful at the beginning, if Rosenberg waited an additional year wo open the store in London and started investigating some eating habits of English people.
In addition to that, you mentioned that the licensing fees barely covered the cost associated with starting the business abroad. In order to gain a foothold in a foreign region, you must, in my opinion, forego profits in short terms to be successful in the long term.
December 4, 2021 @ 7:30 am
Great Article! Dunkin Donuts biggest issue was rushing things just to beat out the competition. In doing so they never got a chance to prepare themselves. When internationalizing, DD should have done research on the countries and create a concept based on their target market. Understand who they are going to be selling to and what their customers want. I am curious to see how they were able to successfully grow to what they are today despite the bad international reputation they built when they first started. My advice if I were part of DD would be to be patient and build a concept that will be tailored more towards each country and their culture. Make them feel like the company is a part of their country rather than coming to take over.
December 10, 2021 @ 1:31 am
There were a lot of worthy things to note in this article, however I cannot help but first think about the duality of a business owner in this situation. If your company were to essentially fail outright upon attempting global expansion, it could be incredibly discouraging. The business owner would likely have to accept the reality that the brand is probably capped to existing solely in its home country or continent (depending). This is not inherently a bad thing, for some corporations keeping the focus relatively local may be the best option. Many will aspire to be the next Starbucks, Apple, etc. but it must be accepted that this simply won’t be the case.
I think the most notable thing from this article was Dunkin Donuts’ misconception that expanding internationally was a simple way to get richer, faster. It seems to be a common fallacy that companies are under the impression that very little needs to change to break into new markets. Fortunately, it seems larger companies have grown privy to these shortcomings, however I theorize that start-ups will fill the gap. Understanding whether or not there is even a desire for a certain brand internationally is another overlooked aspect, especially in an industry such as coffee.
January 14, 2022 @ 12:29 am
This was a very interesting deadly sins post to learn about as it proves that every current successful company can go through times of unpopularity and struggle. Starting off, I believe that Rosenberg was too anxious to open a shop in London. I can understand the rush to beat another competition, but not knowing enough about the market in addition to only having visited once will not correctly set up business success. Rosenberg definitely should have used the marketing mix analysis to compare product, physical environment, people, place, and process in order to define what he was working for within a foreign country. Mister Donut most likely had made strategic moves long before, with careful planning and analysis on London’s coffee consumer and fast-food market. A successful international brand has the ability to adapt to different environments and be able to offer appealing products based upon country culture and tendencies. It seems that Dunkin’ Donuts completely left out the planning of implementation, entry mode choice, and product readiness. Not to mention, the corporation was not ready to take on such a drastic move. When the London market wasn’t working for DD, they removed themselves, which is a smart move because they could reanalyze the situation before attempting to re-market themselves in the area. The trend appears to be following in competitors’ footsteps instead of being one step ahead. In the 1980s, DD used a more indirect marketing approach, creating public promotions for the brand and selecting a reactive approach. With this, cultural attractions from Colombia, the Philippines, England, Hong Kong, and Thailand developed the following clients and sales opportunities. Going international is not a “get-rich-quick” scheme, respect towards the given country and healthy adaptation will create slow growth over time for an invading service. Dunkin’ did not supply a balanced view of attractiveness and risk towards these countries as there was no initial consumer appeal. Their hesitancy to modify products and services proved that they were not able to represent current trends. Lastly, they lacked creating low-cost opportunities as well as being timely. My suggestion for DD at the time would have been to plan and target what specific areas of the world they wanted to begin with. Then, assess if the markets selected offered opportunities or if Dunkin’ was willing to make prior adjustments. In partnering with foreign businesses, Dunkin’ could have set up a better pathway for success. Creating valuable relationships with international firms provides deeper insight and knowledge into what the foreign marketplace is really longing for. It is great that the company ultimately decided to step back and restart its process of going global.
January 22, 2022 @ 2:19 am
This was such an interesting read because you would never assume Dunkin’ Donuts to run into such issues. I think Dunkin’ was a little too overconfident with their entry into London. They should have worked on it a little more to make sure they were ready to enter the international sector.
January 25, 2022 @ 6:56 pm
This article shows the importance of researching and adapting to the country in which you are trying to enter. It seems like Dunkin Doughnut just thought that since they were popular in the United States, that they would also be popular abroad without changing anything. If Dunkin had done their research in Japan as well as in London before entering, they probably would have achieved success much quicker. It seems as though Dunkin Doughnuts was lucky in the end to make it big. They were unwilling to make menu adaptations for the local preferences and flavors. The article mentioned that when they expanded into the Philippines, they were forced into opening small kiosks in movie theaters and gas stations that were run by the spouses of the business partners. They did this to create relationships with their business partners. It seems as though they could have found other ways to enter the market rather than in small scale operations. It seems as though they were scared from their previous internationalization efforts to invest a large amount of money in large stores from the beginning. In going international, there will likely not be profit in the short term. It takes time and figuring out the new markets. This is why it’s important to do research before entering each market.
March 7, 2022 @ 8:20 am
Great elaboration of the global journey of Dunkin’ Donuts (DD).
Retrospective, the first attempt could have been also successful by doing some analysis of the culture and consumer behavior upfront and the adjustment to the predominant situation at that time, but it seemed that DD wasn’t ready at that time to adjust. As time has also shown, oftentimes it is not the time for another country or culture to be open towards a new product or technology and people are just reluctant towards something new but several years later the product or technology is already highly awaited. Unfortunately, there are too many possibilities why offering new products or technologies may fail. Especially the readiness of the people which can just barely be influenced, especially without any adjustment to the predominant environment. Nevertheless, DD still pursued the strategy of going abroad and successfully executed that, but also needs to learn that going abroad requires adjustments of already proven business behaviors as nicely described above for the Philippines where the local relationship is necessary to succeed. By and large, this serves as a good example of how going abroad is working and every company which intends to go abroad can learn from that case, especially that adjustment is necessary to succeed.
March 19, 2022 @ 10:55 pm
I like to eat these donuts. They were available for purchase at Merkur (now Billa Plus) in Austria.
As we learned in the MBA course, it is a serious mistake when managers think they can copy and paste their successes in one country 1:1 into another country. That might work in Europe between individual countries like Germany and Austria, but not on other continents. It surprises me that there were no ideas for regional flavors at the beginning. They just took what was there in the US and copied it to other countries. Market entry doesn’t usually work that way. The advantage of DD is that their products can be customized very quickly. Market entry in Europe is generally more difficult, as the European nations are increasingly focusing on their health etc. Then there are the high prices for DD. So it doesn’t surprise me that there have been ups and downs at DD in recent years. Plus the high license payments and quality requirements. Also not a good soil for some countries in this world. A market entry in Europe, especially with such sweets, is more difficult since the European nations are increasingly focusing on their health etc.
In summary, I think DD had lack of knowledge about process and steps of and wrongful believe in own abilities. Furthermore, it will become more and more difficult for DD in the future since healthy food is becoming more and more important. I therefore recommend DD to sell more vegan and healthy donuts. Otherwise, DD will soon be gone from the market.
And that would be a shame for my love for donuts!
March 25, 2022 @ 8:43 am
This is an example of how DD adapted to the various countries cultures. However, I think DD rushed into the international market without doing an assessment of the country culture and wants. I personally think DD taste much better then Krispy Crème Donuts. The last several years I have noticed DD added stores in many airports which is a great business strategy. Its perfect location. DD also offer very good coffee and breakfast sandwiches. Love DD ..
July 8, 2022 @ 4:42 pm
What can go wrong with selling Doughnuts? It is a sugary delight one would assume that such a treat would sell anywhere – but it did not.
When expanding their market to an international level, the company felt too safe with their concept. Dunking Doughnuts didn’t plan ahead in thinking about possible cultural differences such as preferences in taste or even their communication styles. However, “failing” the first time going global can be extremely discouraging for a company. Failure only makes one stronger and one will always grow from past mistakes. It would have been better, to rather take a closer look at the British market, than to give up. Being successful with a similar concept is not easy, but it certainly is possible – adaption is key. It’s pretty unlikely to be a successful global company over night – it’s important to be patient, and willing to learn about the new market and its customers.