Dunkin' Donuts 2015 Annual Report Download - page 17

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Marketing
We coordinate domestic advertising and marketing at the national and local levels. The goals of our marketing strategy include
driving comparable store sales and brand differentiation, increasing our total coffee and beverage sales, protecting and growing
our morning daypart sales, and growing our afternoon daypart sales. Generally, our domestic franchisees contribute 5% of
weekly gross retail sales to fund brand specific advertising funds. The funds are used for various national and local advertising
campaigns including print, radio, television, online, mobile, loyalty, billboards, and sponsorships. Over the past ten years, our
U.S. franchisees have invested approximately $2.5 billion on advertising to increase brand awareness and restaurant
performance across both brands. Additionally, we have various pricing strategies, so that our products appeal to a broad range
of customers. In August 2012, we launched the Dunkin’ Donuts mobile application for payment and gifting, which built the
foundation for one-to-one marketing with our customers. In January 2014, we launched a new DD Perks® Rewards loyalty
program nationally, which is fully integrated with the Dunkin’ Donuts mobile application and allows us to engage our
customers in these one-to-one marketing interactions. As of December 26, 2015, our mobile application had over 16.3 million
downloads and our DDPerks® Rewards loyalty program had over 4.3 million members.
The supply chain
Domestic
We do not typically supply products to our domestic franchisees. As a result, with the exception of licensing fees paid by Dean
Foods on domestic ice cream sales, we do not typically derive revenues from product distribution. Our franchisees’ suppliers
include Rich Products Corp., Dean Foods, The Coca-Cola Company, and KGM. In addition, our franchisees’ primary coffee
roasters currently are New England Tea & Coffee Co., Inc., Mother Parkers Tea & Coffee Inc., S&D Coffee, Inc., and Massimo
Zanetti Beverage USA, Inc., and their primary donut mix suppliers currently are Continental Mills and Pennant Ingredients Inc.
We periodically review our relationships with licensees and approved suppliers and evaluate whether those relationships
continue to be on competitive or advantageous terms for us and our franchisees.
Purchasing
Purchasing for the Dunkin’ Donuts brand is facilitated by National DCP, LLC (the “NDCP”), which is a Delaware limited
liability company operated as a cooperative owned by its franchisee members. The NDCP is managed by a staff of supply chain
professionals who report directly to the NDCP’s board of directors. The NDCP has approximately 1,600 employees including
executive leadership, sourcing professionals, warehouse staff, and drivers. The NDCP board of directors has eight voting
franchisee members, one NDCP non-voting member, and one independent non-voting member. In addition, our Chief Financial
Officer is a voting member of the NDCP board. The NDCP engages in purchasing, warehousing, and distribution of food and
supplies on behalf of participating restaurants and some international markets. The NDCP program provides franchisee
members nationwide the benefits of scale while fostering consistent product quality across the Dunkin’ Donuts brand. We do
not control the NDCP and have only limited contractual rights associated with managing that franchisee-owned purchasing and
distribution cooperative.
Manufacturing of Dunkin’ Donuts bakery goods
Centralized production is another element of our supply chain that is designed to support growth for the Dunkin’ Donuts brand.
Centralized manufacturing locations (“CMLs”) are franchisee-owned and -operated facilities for the centralized production of
donuts and bakery goods. The CMLs deliver freshly baked products to Dunkin’ Donuts restaurants on a daily basis and are
designed to provide consistent quality products while simplifying restaurant-level operations. As of December 26, 2015, there
were 106 CMLs (of varying size and capacity) in the U.S. CMLs are an important part of franchise economics, and are
supportive of profit building initiatives as well as protecting brand quality standards and consistency.
Certain of our Dunkin’ Donuts brand restaurants produce donuts and bakery goods on-site rather than sourcing from CMLs.
Many of such restaurants, known as full producers, also supply other local Dunkin’ Donuts restaurants that do not have access
to CMLs. In addition, in newer markets, Dunkin’ Donuts brand restaurants source donuts and bakery goods that are finished in
restaurants. We believe that this “just baked on demand” donut manufacturing platform enables the Dunkin’ Donuts brand to
more efficiently expand its restaurant base in newer markets where franchisees may not have access to a CML.
Baskin-Robbins ice cream
We outsource the manufacturing and distribution of ice cream products for the domestic Baskin-Robbins brand franchisees to
Dean Foods, which strengthens our relationships with franchisees and allows us to focus on our core franchising operations.