Baskin Robbins 2015 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 19,000 points of distribution in more than 60 countries worldwide, 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 restaurants, 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 2015, our Dunkin’ Donuts segments generated revenues of $614.0 million, or 79% of our total
segment revenues, of which $591.1 million was in the U.S. segment and $23.0 million was in the international segment. In
2015, our Baskin-Robbins segments generated revenues of $164.2 million, of which $119.0 million was in the international
segment and $45.2 million was in the U.S. segment. As of December 26, 2015, there were 11,750 Dunkin’ Donuts points of
distribution, of which 8,431 were in the U.S. and 3,319 were international, and 7,607 Baskin-Robbins points of distribution, of
which 5,104 were international and 2,503 were in the U.S. See note 12 to our consolidated financial statements included herein
for segment information.
We generate revenue from five primary sources: (i) royalty income and fees associated with franchised restaurants; (ii) rental
income from restaurant properties that we lease or sublease to franchisees; (iii) sales of ice cream and other products to
franchisees in certain international markets; (iv) retail store revenue at our company-operated 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 Dunkin’ K-Cup® pods), the licensing of the rights to manufacture Baskin-Robbins ice cream products to a third
party for sale to U.S. franchisees, 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. 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.”
Our brands
Dunkin’ Donuts-U.S.
Dunkin’ Donuts is a leading U.S. QSR concept, and is a QSR market leader in donut and bagel categories for servings. Dunkin’
Donuts is also a national QSR leader for breakfast sandwich servings. 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 and the iced regular/decaf/flavored coffee category, with sales of over 1.7 billion servings of total hot and iced
coffee annually. From the fiscal year ended August 31, 2005 to the fiscal year ended December 26, 2015, Dunkin’ Donuts U.S.
systemwide sales have grown at a 6.8% compound annual growth rate. Total U.S. Dunkin’ Donuts points of distribution grew
from 4,815 at August 31, 2005 to 8,431 as of December 26, 2015. Approximately 86% 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
offices, hospitals, colleges, airports, grocery stores, 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 2015, the Dunkin’ Donuts franchise system generated U.S. franchisee-reported sales of $7.6 billion, which
accounted for approximately 75% of our global franchisee-reported sales, and had 8,431 U.S. points of distribution (with more
than 50% of our restaurants having drive-thrus) at period end.