Baskin Robbins 2012 Annual Report Download - page 32

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Dunkin’ Donuts and Baskin-Robbins restaurants operate in a variety of formats. Dunkin’ Donuts traditional restaurant formats
include free standing restaurants, end-caps (i.e., end location of a larger multi-store building) and gas and convenience
locations. A free-standing building typically ranges in size from 1,200 to 2,500 square feet, and may include a drive-thru
window. An end-cap typically ranges in size from 1,000 to 2,000 square feet and may include a drive-thru window. Dunkin’
Donuts also has other restaurants designed to fit anywhere, consisting of small full-service restaurants and/or self-serve kiosks
in offices, hospitals, colleges, airports, grocery stores and drive-thru-only units on smaller pieces of property (collectively
referred to as alternative points of distributions or APODs). APODs typically range in size between 400 to 1,800 square feet.
The majority of our Dunkin’ Donuts restaurants have their fresh baked goods delivered to them from franchisee-owned and -
operated CMLs.
Baskin-Robbins traditional restaurant formats include free standing restaurants and end-caps. A free-standing building typically
ranges in size from 600 to 1,200 square feet, and may include a drive-thru window. An end-cap typically ranges in size from
800 to 1,200 square feet and may include a drive-thru window. We also have other restaurants, consisting of small full-service
restaurants and/or self-serve kiosks (collectively referred to as APODs). APODs typically range in size between 400 to 1,000
square feet.
In the U.S., Baskin-Robbins can also be found in 1,163 combination restaurants (combos) that also include a Dunkin’ Donuts
restaurant, and are typically either free-standing or an end-cap. These combos, which we count as both a Dunkin’ Donuts and a
Baskin-Robbins point of distribution, typically range from 1,400 to 3,500 square feet.
Of the 9,734 U.S. franchised restaurants, 90 were sites owned by the Company and leased to franchisees, 872 were leased by
us, and in turn, subleased to franchisees, with the remainder either owned or leased directly by the franchisee. Our land or land
and building leases are generally for terms of ten to 20 years, and often have one or more five-year or ten-year renewal options.
In certain lease agreements, we have the option to purchase, or the right of first refusal to purchase, the real estate. Certain
leases require the payment of additional rent equal to a percentage of annual sales in excess of specified amounts.
Of the sites owned or leased by the Company in the U.S., 24 are locations that no longer have a Dunkin’ Donuts or Baskin-
Robbins restaurant (surplus properties). Some of these surplus properties have been sublet to other parties while the remaining
are currently vacant.
We have 10 leased franchised restaurant properties and 3 surplus leased properties in Canada. We also have leased office space
in Australia, China, Dubai, Spain and the United Kingdom.
The following table sets forth the Company’s owned and leased office, warehouse, manufacturing and distribution facilities,
including the approximate square footage of each facility. None of these owned properties, or the Company’s leasehold interest
in leased property, is encumbered by a mortgage.
Location Type Owned/Leased Approximate Sq. Ft.
Canton, MA Office Leased 175,000
Braintree, MA (training facility) Office Owned 15,000
Burbank, CA (training facility) Office Leased 19,000
Dubai, United Arab Emirates (regional office space) Office Leased 3,200
Shanghai, China (regional office space) Office Leased 1,700
Various (regional sales offices) Office Leased Range of 150 to 300
Item 3. Legal Proceedings.
In May 2003, a group of Dunkin’ Donuts franchisees from Quebec, Canada filed a lawsuit against the Company on a variety of
claims, based on events which primarily occurred 10 to 15 years ago, including but not limited to, alleging that the Company
breached its franchise agreements and provided inadequate management and support to Dunkin’ Donuts franchisees in Quebec
(“Bertico litigation”). On June 22, 2012, the Quebec Superior Court found for the plaintiffs and issued a judgment against the
Company in the amount of approximately C$16.4 million (approximately $15.9 million), plus costs and interest, representing
loss in value of the franchises and lost profits. During the second quarter of 2012, the Company increased its estimated liability
related to the Bertico litigation by $20.7 million to reflect the judgment amount and estimated plaintiff legal costs and interest.
During the third and fourth quarters of 2012, the Company accrued an additional $493 thousand for interest that continues to
accrue on the judgment amount, resulting in an estimated liability of $25.8 million, including the impact of foreign exchange,
as of December 29, 2012. The Company had recorded an estimated liability of approximately $3.9 million as of December 31,
2011, representing the Company’s best estimate within the range of losses which could be incurred in connection with this