The rise and fall

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Note Pro: https://bit.ly/4rDVDdL 10% code: GIRDLEY Amazon: https://amzn.to/4iQoY3O 10% code: MBJAKGY6 Today’s video is done in partnership with Plaud. Plaud helps me capture meetings, calls, research, and ideas without having to manually take notes. I can record a conversation, get an AI-generated summary and mind map, and even ask questions about what was said later. I’d also like to invite you to Compound, our annual conference where we bring together business owners, operators, and entrepreneurs. We do it once a year in February, and you can learn more here: https://www.girdley.com/compound This is the story of Dunkin’ Donuts: how Bill Rosenberg turned a working-class coffee-and-donut shop into a massive franchise system, how coffee became the real economic engine of the business, and how changing ownership, competition, and incentives eventually transformed the brand into Dunkin’. It’s a business breakdown of what happens when a company’s economics start pulling it away from the product and identity that made customers love it in the first place. Get the 2-minute cheat sheet for this video → https://girdley.com/youtube 👇 SUBSCRIBE for more business breakdowns https://www.youtube.com/@Michael-Girdley?sub_confirmation=1 ► Get my weekly letter to business owners: essential insights to run, grow, and stay ahead in your business → https://links.girdley.com/newsletter-yt ► For sponsorships or inquiries please reach out to: Contact@girdley.com ► Do you have a hat I should wear in a video? Send it to us: Contact@girdley.com ► Free events on all things small business: https://links.girdley.com/lectures-yt ► Deep dives on businesses for sale: https://www.youtube.com/@AcquisitionsAnonymousPodcast ► Follow me on Twitter/X: https://x.com/girdley The rise and fall of Dunkin’ Donuts starts with Bill Rosenberg. After discovering that coffee and donuts represented nearly 40% of the revenue from his mobile food business, Rosenberg focused on those products, opened a shop in 1948, and renamed it Dunkin’ Donuts in 1950. Then came the decision that would turn a regional business into a giant: franchising. Rosenberg began franchising in 1955 and later helped establish the International Franchise Association. The model worked because Dunkin’ could expand without corporate paying for every new location. Franchisees supplied much of the capital while the company collected royalties. Meanwhile, Dunkin’ built an identity around working people, fresh coffee, donuts, and eventually campaigns like “Time to Make the Donuts.” But there was an economic tension hiding underneath the brand: coffee was a fantastic business, while donuts were harder to make, perishable, and ultimately less attractive economically. That tension became more important as competition increased. Starbucks attacked coffee from the premium end, while McDonald’s later went after many of the same value-conscious breakfast customers as Dunkin’. After a consortium of private equity firms acquired the business in 2006, the company pushed further toward higher-margin beverages while using the economics of its franchise system to its advantage. The owners also used a dividend recapitalization before Dunkin’ returned to the public markets. Eventually, the strategic shift became visible in the name itself. Dunkin’ Donuts became Dunkin’, franchisees faced the cost of refreshing stores and signage, and donut production increasingly moved away from being made inside individual stores toward a commissary model. In 2020, Inspire Brands acquired Dunkin’ in a deal valued at more than $11 billion. The company had become enormously valuable, but it no longer looked like the business Rosenberg originally built. So what happened to Dunkin’ Donuts? For me, the bigger business lesson is about incentives. Franchisees care about store-level profits. Franchisors collect royalties based on sales. Financial owners operate on their own investment timelines. Customers just want a good product. When those incentives stop lining up, a company can keep growing and creating financial value while weakening some of the qualities that originally made the brand special.