Dunkin'
Limited-Service Restaurants
What to ask about
6 standard terms listed below, common across the filings we have read.
What we look for — every rule and the figure it turns on.
Every flag below is arithmetic over a figure in the filing or the loan record — each names the item it came from so you can check it.
Worth asking about3 items
Not disqualifying on their own, but each one is a question the franchisor should be able to answer plainly.
- Worth asking aboutItem 6
10.9% of revenue goes to the franchisor before costs
5.9% royalty and a 5% brand fund, charged on gross revenue rather than profit. These are paid whether or not the outlet makes money, and they scale with sales, not with margin.
- Worth asking aboutItems 7 and 19
Opening costs 1.3x what an outlet makes in a year
Item 7 puts the high estimate at $1,832,500 to open. Item 19 reports $1,372,069 of annual revenue per outlet — revenue, not profit, so the money left after rent, wages, royalty and supplies is a fraction of it. Ask what the payback period actually is, and over how many outlets that revenue figure was averaged.
- Worth asking aboutItem 12
No protection against another outlet of this brand
Item 12 promises nothing that stops the franchisor opening, or franchising someone else to open, another outlet of this same brand inside your territory. Most filings do promise that, which makes its absence worth asking about.
Context1 item
Neither good nor bad — things that shape how much weight the figures above can carry.
- For contextItem 7
The estimated cost to open varies 3.4x
Item 7 puts the total investment between $532,400 and $1,832,500. A band this wide means the cost depends heavily on the site, so the midpoint is a poor figure to plan against — build your model on a quote for a real location.
Standard terms in this agreement6 items
Normal for franchising, and here so you know what you are signing rather than because anything is wrong. A census across every filing we have read found these terms in most agreements — which is why they are not counted as warnings above.
- StandardItem 12
Your territory has carve-outs, and no same-brand protection
Item 12 reserves rights inside your territory: online sales, other channels such as grocery or wholesale, competing brands the franchisor controls, company-owned outlets and non-traditional locations such as airports or sites inside another business. A protected territory limits who else may open a location there; it does not always limit who may sell there.
- StandardItem 17
2-year non-compete after you leave
Item 17 imposes a covenant not to compete for 2 years after the franchise ends. If the business does not work, this limits what you can do next in the trade you will have just learned.
- StandardItem 8
The franchisor earns from suppliers you must use
Item 8 states the franchisor or an affiliate receives rebates or other revenue from required suppliers. That is common and lawful; it also means their interest in your input costs is not the same as yours.
- StandardItem 9
Missing the sales quota can end the franchise
Item 9 imposes a minimum sales, purchase or performance quota. Failing it is stated as a ground for termination or non-renewal, so a unit that underperforms can be taken away rather than simply earning less. Ask what the quota is in dollars and how many current franchisees miss it.
- StandardItem 11
Ongoing support is promised in hedged language
Item 11 states the franchisor's continuing obligations with qualifiers — “may provide”, “at its sole discretion” — rather than as commitments. Training and support are a large part of what a franchise fee buys; ask which of them the agreement obliges the franchisor to deliver.
- StandardItem 16
You may sell only what the franchisor approves
Item 16 restricts the goods and services you may offer. Most systems do this and it is what keeps a brand consistent; the cost is that you cannot answer a local market the franchisor has not addressed.
Where this page stands on all 23 FDD items17 of 23 checked by a rule
Checked here 17
A rule ran against this filing. That a rule ran does not mean it passed — anything it found is in the flags above.
- Item 3: Litigation historyMore than 3 active actions per 100 outlets, and patterns in what franchisees are suing about.
- Item 4: BankruptciesAny bankruptcy in the last 10 years by the franchisor or its principals.
- Item 6: Other ongoing feesThe total burden — royalty plus brand fund plus technology plus required-vendor markups plus renewal.
- Item 7: Estimated initial investmentThe Item 7 high estimate against Item 19 revenue. If it costs more to open than an outlet takes in a year, the payback period is the first question.
- Item 8: Restrictions on sources of products and servicesRequired-vendor lock-in that inflates cost of goods, especially where the franchisor takes a rebate on it.
- Item 9: Franchisee's obligationsMinimum sales quotas that trigger termination — they can trap you in a unit that is not working.
- Item 10: FinancingFranchisor-provided financing, which usually costs more than independent lending and creates dependency.
- Item 11: Franchisor's obligationsHedged support promises. “May provide” and “at its discretion” are dilution language.
- Item 12: TerritoryNo protected territory, and encroachment carve-outs for online and delivery sales even where there is one.
- Item 14: Patents, copyrights and proprietary informationExpiring intellectual property — if the advantage runs out, what is being bought?
- Item 15: Obligation to participate in the operationOwner-operator requirements, which decide whether a semi-absentee plan is permitted at all.
- Item 16: Restrictions on what the franchisee may sellLimits that stop you adapting to your local market.
- Item 17: Renewal, termination, transfer and dispute resolutionTermination at will, non-renewal without cause, and forced arbitration in the franchisor's home state.
- Item 18: Public figuresCelebrity association, which carries the reputational risk of a relationship you do not control.
- Item 19: Financial performance representationsNo Item 19 at all is itself a finding; so is one that states no per-outlet revenue, or one whose population is ambiguous.
- Item 20: Outlets and franchisee informationDeclining unit counts and the closure rate — above 5% a year warrants investigation.
- Item 21: Financial statementsUnaudited financials, a recent change of auditor, or going-concern doubt raised by the auditor.
No rule yet 1
Nothing here tests this item. Some of it is on the Disclosure topic as a figure; none of it is judged.
- Item 5: Initial feesA high initial fee against comparable brands in the same category.
Yours to check 5
The answer is not in the disclosure document, or not in a form a rule can read. Each one names where to look.
- Item 1: Franchisor historySerial rebranding. A parent that has cycled through names may be leaving something behind each time.Where to look: Corporate filings and trade press
- Item 2: Business experience of key executivesLeadership with franchise-sales experience but no operator experience — people who have sold units but never run one.Where to look: LinkedIn and the executives' own history
- Item 13: TrademarksUnregistered or recently registered marks, which make the brand you are buying less solid than it looks.Where to look: The USPTO register
- Item 22: ContractsEvery agreement listed as an exhibit, read in full — not the FDD's summary of it.Where to look: The franchise agreement and its exhibits
- Item 23: ReceiptsThe FDD must have been delivered at least 14 days before you sign. If it was not, the contract may be voidable.Where to look: Your own copy and the date you received it
A short list of flags is not a clean bill of health — it is a short list. Nothing here is a substitute for reading the disclosure document, and none of it is legal advice.