Dunkin' Donuts 2012 Annual Report Download - page 17

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-7-
The supply chain
Domestic
We do not typically supply products to our domestic franchisees. 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 Co., The Coca-Cola Company and Green Mountain Coffee Roasters, Inc. 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 General Mills,
Inc., Harlan Foods, and Aryzta. Our franchisees also purchase donut mix from CSM Bakery Products NA, Inc. and EFCO
Products, 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 Executive Management Team, members of which in turn report directly to the
NDCP's Board of Directors. The NDCP has over 1,100 employees including executive leadership, sourcing professionals,
warehouse staff, and drivers. The NDCP Board has eight franchisee members. In addition, the Senior Vice President, Chief
Supply Officer from Dunkin' Brands, Inc. 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 supplier
certification, quality assurance and protection of our intellectual property.
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 29, 2012, there
were 127 CMLs (of varying size and capacity) in the U.S. CMLs are an important part of franchise economics, and we believe
the brand is 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 relying upon 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 rely on 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
Prior to 2000, we manufactured and sold ice cream products to substantially all of our Baskin-Robbins brand franchisees.
Beginning in 2000, we made the strategic decision to outsource the manufacturing and distribution of ice cream products for
the domestic Baskin-Robbins brand franchisees to Dean Foods. The transition to this outsourcing arrangement was completed
in 2003. We believe that this outsourcing arrangement was an important strategic shift and served the dual purpose of further
strengthening our relationships with franchisees and allowing us to focus on our core franchising operations.
International
Dunkin' Donuts
International Dunkin' Donuts franchisees are responsible for sourcing their own supplies, subject to compliance with our
standards. They also produce their own donuts following the Dunkin' Donuts brand's approved processes. In certain countries,
our international franchisees source virtually everything locally within their market while in others our international franchisees
may source virtually everything from the NDCP. Where supplies are sourced locally, we help identify and approve those
suppliers. Supplies that cannot be sourced locally are sourced through the NDCP. In addition, we assist our international
franchisees in identifying regional and global suppliers with the goal of leveraging the purchasing volume for pricing and
product continuity advantages.