Baskin Robbins 2012 Annual Report Download - page 14

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Restaurant type
Initial franchise
fee*
Dunkin’ Donuts Single-Branded Restaurant $ 40,000-80,000
Baskin-Robbins Single-Branded Restaurant $ 25,000
Baskin-Robbins Express Single-Branded Restaurant $ 10,000
Dunkin’ Donuts/Baskin-Robbins Multi-Branded Restaurant $ 45,000-90,000
* Fees as of December 29, 2012 and excludes alternative points of distribution
In addition to the payment of initial franchise fees, our U.S. Dunkin' Donuts brand franchisees, U.S. Baskin-Robbins brand
franchisees and our international Dunkin' Donuts brand franchisees pay us royalties on a percentage of the gross sales made
from each restaurant. In the U.S., the majority of our franchise agreement renewals and the vast majority of our new franchise
agreements require our franchisees to pay us a royalty of 5.9% of gross sales. During 2012, our effective royalty rate in the
Dunkin' Donuts U.S. segment was approximately 5.4% and in the Baskin-Robbins U.S. segment was approximately 5.1%. The
arrangements for Dunkin' Donuts in the majority of our international markets require royalty payments to us of 5.0% of gross
sales. However, many of our larger international partners and our Korean joint venture partner have agreements at a lower rate,
resulting in an effective royalty rate in the Dunkin' Donuts international segment in 2012 of approximately 2.0%. We typically
collect royalty payments on a weekly basis from our domestic franchisees. For the Baskin-Robbins brand in international
markets, we do not generally receive royalty payments from our franchisees; instead we earn revenue from such franchisees as
a result of our sale of ice cream products to them, and in 2012 our effective royalty rate in this segment was approximately
0.7%. In certain instances, we supplement and modify certain SDAs, and franchise agreements entered into pursuant to such
SDAs, for restaurants located in certain new or developing markets, by (i) reducing the royalties for any one or more of the first
four years of the term of the franchise agreements depending on the details related to each specific incentive program; (ii)
reimbursing the franchisee for certain local marketing activities in excess of the minimum required; and (iii) providing certain
development incentives. To qualify for any or all of these incentives, the franchisee must meet certain requirements, each of
which are set forth in an addendum to the SDA and the franchise agreement. We believe these incentives will lead to
accelerated development in our less mature markets.
Franchisees in the U.S. also pay advertising fees to the brand-specific advertising funds administered by us. Franchisees make
weekly contributions, generally 5% of gross sales, to the advertising funds. Franchisees may elect to increase the contribution
to support general brand-building efforts or specific initiatives. The advertising funds for the U.S., which received $332.3
million in contributions from franchisees in fiscal year 2012, are almost exclusively franchisee-funded and cover all expenses
related to marketing, research and development, innovation, advertising and promotion, including market research, production,
advertising costs, public relations and sales promotions. We use no more than 20% of the advertising funds to cover the
administrative expenses of the advertising funds and for other strategic initiatives designed to increase sales and to enhance the
reputation of the brands. As the administrator of the advertising funds, we determine the content and placement of advertising,
which is done through print, radio, television, online, billboards, sponsorships and other media, all of which is sourced by
agencies. Under certain circumstances, franchisees are permitted to conduct their own local advertising, but must obtain our
prior approval of content and promotional plans.
Other franchise related fees
We lease and sublease properties to franchisees in the U.S. and in Canada, generating net rental fees when the cost charged to
the franchisee exceeds the cost charged to us. For fiscal year 2012, we generated 14.7%, or $96.8 million, of our total revenue
from rental fees from franchisees and incurred related occupancy expenses of $52.1 million.
We also receive a license fee from Dean Foods Co. (“Dean Foods”) as part of an arrangement whereby Dean Foods
manufactures and distributes ice cream products to Baskin-Robbins franchisees in the U.S. In connection with this agreement,
Dunkin' Brands receives a license fee based on total gallons of ice cream sold. For fiscal year 2012, we generated 1.1%, or $7.1
million, of our total revenue from license fees from Dean Foods.
We distribute ice cream products to Baskin-Robbins franchisees who operate Baskin-Robbins restaurants located in certain
foreign countries and receive revenue associated with those sales. For fiscal year 2012, we generated 14.4%, or $94.7 million,
of our total revenue from the sale of ice cream products to franchisees in certain foreign countries.
Other revenue sources include online training fees, licensing fees earned from the sale of retail packaged coffee, net
refranchising gains and other one-time fees such as transfer fees and late fees. For fiscal year 2012, we generated 2.7%, or
$17.8 million, of our total revenue from these other sources.