Dunkin’ Brands Group, Inc.
FI516- Advanced Financial Management
August 12, 2012
The company chosen for this assignment is Dunkin' Brands Group, Inc. (NASDAQ: DNKN). With approximately 16,800 points of distribution in nearly sixty countries worldwide, Dunkin' Brands Group, Inc. is one of the world's leading franchisors of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream. Its franchised business model comprises 9,760 Dunkin’ Donuts restaurants and 6,433 Baskin-Robbins restaurants. Dunkin’ Brand’s competitors include: 7-Eleven, Burger King, Cold Stone Creamery, Dairy Queen, McDonald’s, Quick Trip, Starbucks, Subway, Tim Horton’s, WaWa and Wendy’s, among others (Google Finance, 2012). Additionally, Dunkin’ Brands competes with other QSRs, specialty restaurants and other retail concepts for prime restaurant locations and qualified franchisees. As of December 31, 2011, it had 10,083 Dunkin’ Donuts restaurants in 36 states, the District of Columbia, and 31 other countries; and 6,711 Baskin-Robbins restaurants in 44 states, the District of Columbia, and 48 other countries. The company also leases restaurant properties. With approximately 120 years of combined history Dunkin’ Brands Group, Inc. is headquartered in Canton, Massachusetts (Yahoo Finance, 2012). According to its SEC Filings both of its 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. Both 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. (Dunkin’ Brands Group, Inc. 2011). Pernod Ricard made the decision to divest Dunkin’ Brands in order to remain a focused global spirits company. As a result, in March of 2006, Dunkin’ Brands was acquired by investment funds affiliated with Bain Capital Partners, LLC, The Carlyle Group and Thomas H. Lee Partners, L.P. (collectively known in the report as, the “Sponsors”) through a holding company that was incorporated in Delaware on November 22, 2005, and was later renamed Dunkin’ Brands Group, Inc. (Dunkin’ Brands Group, Inc. 2011). Associated Risks
The Company's business, financial condition, results of operations and cash flows are subject to various risks. According to its 10-K report, Dunkin’ Brands is organized into four reporting segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins U.S., and Baskin-Robbins International (Dunkin’ Brands Group, Inc. 2011). The Company generates revenue from four primary sources: (i) royalty income and franchise fees associated with franchised restaurants, (ii) rental income from restaurant properties that we lease or sublease to franchisees, (iii) sales of ice cream products to franchisees in certain international markets, and (iv) other income including fees for the licensing of our brands for products sold in non-franchised outlets, the licensing of the right to manufacture Baskin-Robbins ice cream sold to U.S. franchisees, refranchising gains, transfer fees from franchisees, revenue from our company-owned restaurants, and online training fees (Dunkin’ Brands Group, Inc. 2011). As indicated, a substantial majority of the company’s revenues are in the form of royalties, which are generally based on a percentage of gross sales at its franchised restaurants, rent and other fees from its franchisees. For that reason, Dunkin’ Brands’ financial results are to a large extent dependent upon the...