Dunkin' Donuts 2012 Annual Report Download - page 11

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PART I
Item 1. Business.
Our Company
We are one of the world's leading franchisors of quick service restaurants (“QSRs”) serving hot and cold coffee and baked
goods, as well as hard serve ice cream. We franchise restaurants under our Dunkin' Donuts and Baskin-Robbins brands. With
over 17,400 points of distribution in 55 countries, we believe that our portfolio has strong brand awareness in our key markets.
We believe that our nearly 100% franchised business model offers strategic and financial benefits. For example, because we do
not own or operate a significant number of stores, our Company is able to focus on menu innovation, marketing, franchisee
coaching and support, and other initiatives to drive the overall success of our brand. Financially, our franchised model allows us
to grow our points of distribution and brand recognition with limited capital investment by us.
We operate our business in four segments: Dunkin' Donuts U.S., Dunkin' Donuts International, Baskin-Robbins International
and Baskin-Robbins U.S. In 2012, our Dunkin' Donuts segments generated revenues of $500.9 million, or 78% of our total
segment revenues, of which $485.4 million was in the U.S. segment and $15.5 million was in the international segment. In
2012, our Baskin-Robbins segments generated revenues of $144.1 million, of which $102.0 million was in the international
segment and $42.1 million was in the U.S. segment. As of December 29, 2012, there were 10,479 Dunkin' Donuts points of
distribution, of which 7,306 were in the U.S. and 3,173 were international, and 6,980 Baskin-Robbins points of distribution, of
which 4,517 were international and 2,463 were in the U.S.
We generate revenue from five primary sources: (i) royalties and fees associated with franchised restaurants; (ii) rental income
from restaurant properties that we lease or sublease to franchisees; (iii) sales of ice cream products to franchisees in certain
international markets; (iv) sales at our company-owned restaurants, and (v) other income including fees for the licensing of the
Dunkin' Donuts brand for products sold in non-franchised outlets (such as retail packaged coffee) and the licensing of the rights
to manufacture Baskin-Robbins ice cream to a third party for ice cream and related products sold to U.S. franchisees; as well as
refranchising gains, transfer fees from franchisees, and online training fees.
Our history
Both of our brands have a rich heritage dating back to the 1940s, when Bill Rosenberg founded his first restaurant,
subsequently renamed Dunkin' Donuts, and Burt Baskin and Irv Robbins each founded a chain of ice cream shops that
eventually combined to form Baskin-Robbins. Baskin-Robbins and Dunkin' Donuts were individually acquired by Allied
Domecq PLC in 1973 and 1989, respectively. The brands were organized under the Allied Domecq Quick Service Restaurants
subsidiary, which was renamed Dunkin' Brands, Inc. in 2004. Allied Domecq was acquired in July 2005 by Pernod Ricard S.A.
In March of 2006, we were acquired by investment funds affiliated with Bain Capital Partners, LLC, The Carlyle Group and
Thomas H. Lee Partners, L.P. (collectively, the “Sponsors”) through a holding company that was incorporated in Delaware on
November 22, 2005, and was later renamed Dunkin' Brands Group, Inc. In July 2011, we completed our initial public offering
(the “IPO”). Upon the completion of the IPO, our common stock became listed on the NASDAQ Global Select Market under
the symbol “DNKN.” As of December 29, 2012, the Sponsors had sold of all of their existing shares in the Company via
secondary stock offerings during 2011 and 2012 and a share repurchase by the Company during 2012.
Our brands
Dunkin' Donuts-U.S.
Dunkin' Donuts is a leading U.S. QSR concept, and is among the QSR market leaders in coffee, donut, bagel, muffin and
breakfast sandwich categories. Since the late 1980s, Dunkin' Donuts has transformed itself into a coffee and beverage-based
concept, and is the national QSR leader in servings in the hot regular/decaf/flavored coffee category, with sales of over 1 billion
servings of coffee annually. From the fiscal year ended August 31, 2002 to the fiscal year ended December 29, 2012, Dunkin'
Donuts U.S. systemwide sales have grown at an 8.2% compound annual growth rate. Total U.S. Dunkin' Donuts points of
distribution grew from 3,776 at August 31, 2002 to 7,306 as of December 29, 2012. Approximately 84% of these points of
distribution are traditional restaurants consisting of end-cap, in-line and stand-alone restaurants, many with drive-thrus, and gas
and convenience locations. In addition, we have alternative points of distribution ("APODs"), such as full- or self-service
kiosks in grocery stores, hospitals, airports, offices and other smaller-footprint properties. We believe that Dunkin' Donuts
continues to have significant growth potential in the U.S. given its strong brand awareness and variety of restaurant formats.
For fiscal year 2012, the Dunkin' Donuts franchise system generated U.S. franchisee-reported sales of $6.2 billion, which
accounted for approximately 71.2% of our global franchisee-reported sales, and had 7,306 U.S. points of distribution (including
more than 3,300 restaurants with drive-thrus) at period end.