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The story of Dunkin’ Donuts is a tale of franchising in America — and no one knows this better than Bob Rosenberg.
Now retired, Rosenberg served as CEO of the Massachusetts-based company for 35 years and took sales from $10 million to $2.6 billion. But in his new book, “Around the Corner to Around the World: A Dozen Lessons I Learned Running Dunkin' Donuts,” he writes that these years weren’t all sweet.
Dunkin’ Donuts — recently rebranded as simply Dunkin' — was a scrappy little company started by Rosenberg’s father, William Rosenberg, in 1950. When Rosenberg became CEO in 1963, Dunkin’ was owned by Universal Food Systems, a company with a small portfolio that later folded and changed its name to Dunkin’ Donuts.
While Dunkin’ food trucks served donuts and sandwiches at construction sites, Rosenberg attended Harvard Business School. Within a week of graduation, his father asked him to take over the company. Rosenberg says he grew up working in the store and expected to go into the business but never anticipated that his father would make this “breathtaking request” so soon after graduation.
The first years of the company were its "halcyon days," he writes. The company went public in 1968 when it was worth over $100 million.
But for decades, Dunkin’ faced a stiff competitor from within the family. A fight between Rosenberg’s father and uncle led his uncle to open a chain called Mr. Donuts.
The energy of this feud drove every conversation within the family, Rosenberg says. His father set out to thrill customers with the best coffee and donuts to complement it, he says, but his uncle was able to start a competitive chain without the burden of also owning other types of businesses.
“By the time I got there in 1963, we had just about opened our 100th store. And Mr. Donut had about 80,” he says. “And the outcome was very much in doubt as to who is going to emerge and dominate.”
For Dunkin’, quality control was the selling point. The company implemented 27 pages of standards on how to get customers fresh products, he says.
“For the first time, someone was going to focus solely on coffee and donuts,” he says. “The product had to be the best in the world.”
As a kid, Rosenberg worked at the first McDonald’s store in Massachusetts after his dad decided to go into the hamburger business. Unafraid to “borrow a good idea,” Rosenberg implemented the Dunkin’ Donuts University training program, mirrored after McDonald’s Hamburger University. Through Dunkin’ Donuts University, employees trained for production for four weeks and then management for two weeks — but the ongoing learning process never ends for Dunkin’ employees, Rosenberg says.
As CEO, Rosenberg expected franchisees to teach him, too. During the early ‘70s, former franchisee Robert Demery called Rosenberg to invite him down to Hartford, Connecticut, to see a new innovation from his wife, Edna Demery.
Edna Demery had developed a new cutter that made the donut holes one-fifth the size, Rosenberg says. Thanks to the frosted and filled donut holes, business at Robert Demery’s stores was up 20%.
An agency suggested calling the holes penny poppers, but controlling the price would be tough due to inflation and other economic factors, he says. Then someone suggested naming the bite-size treats after the munchkins from “The Wizard Of Oz” — and the company now sells 1 billion of them per year.
In the book, triumph is punctuated by moments of sheer terror. When a group of franchisees sued the company alleging violations of the Sherman Antitrust Act, Rosenberg says it served as a personal “turning point.”
The company’s strategy of streamlining the business worked well for the first five years, he says, but then Rosenberg lost his way. Franchisees suffered losses as the company veered away from them to focus on bigger problems, he says.
Rosenberg initially felt angry with the franchisees. But sitting in his living room reading “The Best And The Brightest” by David Halberstam in 1973, Rosenberg saw himself in the story of the Kennedy and Johnson administrations, when the United States was led by Ivy Leaguers who never visited people on the front lines of the Vietnam War.
The problem with these administrations was hubris and arrogance, Rosenberg says. He talked about the book with his management team and created a new strategy.
“We decided that our responsibility as leadership was never to blame our followership, but to take responsibility,” he says. “We decided we go out and visit, each of us, 100 stores a year. Talk to the franchise owners. Ride with our district managers. Listen rather than talk.”
Dunkin’ would now invite franchisees to help solve problems and apologize for the mistakes the company had made, he says. After this culture shift, the franchisees backed out of the lawsuit and saved the company, he says.
Franchisees give people an opportunity to go into business for themselves with the advantage of minimizing the risk, Rosenberg says. Franchisees fail at a lower rate than new independent businesses, he says.
Many people critique franchises for putting mom and pop shops out of business, but Rosenberg says customers decide which businesses make it.
“If it's a better opportunity, they will go there. If it's not, they won't,” he says. “So there are independents who can deliver convenience and value day in and day out just as well as a chain. They will thrive.”
In 1974, the board asked Rosenberg to step aside but then agreed to give him another quarter. During this time, ideas like an automated donut machine and frozen pies failed.
The company soon soared again before a hostile takeover took focus in 1989. At the time, greenmailers would purchase stock, threaten to find other people to buy more and hold the company up for money, Rosenberg explains.
A seven-month battle with the greenmailer ensued, he says. Dunkin’ was then purchased by British Allied-Lyons, a company more familiar with tea and crumpets than coffee and donuts.
A year after Allied-Lyons bought Dunkin, the greenmailer’s business went bankrupt and he lost $100 million, Rosenberg says.
“Had he bought Dunkin’, the franchisees and all the corporate employees would have been history,” Rosenberg says.
Instead, Dunkin’ now has 12,000 franchises across the globe and is worth close to $6 billion, he says. When Rosenberg looks back on the story that starts with his father’s hard work, he gets a “warm, wonderful feeling” of “tremendous gratitude for all the people that helped build this wonderful business.”
Book Excerpt: 'Around the Corner to Around the World: A Dozen Lessons I Learned Running Dunkin' Donuts'
By Robert Rosenberg
The Story Behind Our Donuts
The existence of fried dough products stretches back nearly eight thousand years to the invention of pottery, which enabled ground grain products to be fried in oil. Their popularity surged in the sixteenth century when the Dutch made oliekoek (oil cookies) to celebrate the Yule time. That tradition was carried to the New World when the Dutch founded New York. Myth has it that the product was transformed when, in 1847, a Maine sea captain, Hansen Gregory, accidently punched a hole in the fried dough to create the ringshaped treat we now know as a donut. The product grew in popularity in America when the ladies of the Salvation Army served our World War I soldiers donuts as a treat; rumor has it that this is one of the reasons our soldiers were called “dough boys.”
In the twentieth century, the Leavitt family in New York helped popularize donuts by manufacturing donut mixes and donut machines. Their company was called Donut Corporation of America (DCA). They also opened a small chain of restaurants in New York City called The Mayflower Donut Shoppes. I vividly remember the motto on the wall of their shops: “As you go through life, brother, always make this your goal, ‘keep your eye upon the doughnut and not upon the hole.’”
The Leavitts also invented a small frying machine called the Robot Turner, which automatically dispensed the raw dough product into a canal of frying oil, automatically flipping it at the right time. A customer could enjoy a hot donut on the spot. These Robot donut machines were a big hit at fairs, carnivals, and festivals. If delivering a quality cup of coffee requires the most laborintensive care from crop to cup in the beverage category, the same could be said about delivering high-quality hand-cut donuts in the bakery category. We lavished the same kind of attention and love on the quality of our donuts as we did on our coffee.
There were four types of donut mixes we used to make the infinite varieties we sold. The first, and by far the most popular, were the donuts leavened by yeast. Yeast donuts were the base for all the honey-dipped rings we sold, as well as the shells, which contained all the yummy real fruit fillings, from jelly (which in our case was a combination of apple and raspberry fruit) to blueberry and lemon.
Yeast-leavened donuts were particularly challenging and time-consuming to produce. The process began with the mixing. In order to ensure the yeast was released properly, exact dough temperatures were crucial.
The yeast donuts were made in twenty-five to fifty-pound batches. They were mixed for twenty minutes, allowed twenty minutes to rise then separated into loaves on a large hardwood table covered in canvas. The loaves were allowed to rest another few minutes before cutting. With the help of a little dusting flour to prevent the dough from sticking to either the rolling pin or the canvas, each loaf would be rolled out flat, then “shrunk” to relax the dough. Bakers used a round cutter to cut ring donuts, careful to cut close so as not to leave too much scrap. These rings were either honey dipped or frosted, and were known as “first cuts,” the most tender, since the dough was not yet reworked with minimal dusting flour to toughen it.
To see a skilled donut baker cut a loaf of rings was a sight to behold. He’d cut with one hand, and as the ring donuts popped up, impale them on the fingers of his other hand to be laid on a screen for proofing and ultimately frying.
The scrap would be rolled and loafed yet again, the loafed dough allowed to rest for a few minutes before being rolled out and cut into shells. Shells are the round donuts, looking like fluffy little pillows, filled with all those amazing real fruits or Bavarian Krème fillings. These shells are known in the trade as “second cuts.” Loafing would take place yet again. Then these “third cuts” would be used for coffee rolls or tarts, or as we called them, “fancies.”
The next step in the process was equally critical. All yeast donuts are allowed to “proof” before frying. Proofing is the process where temperature and humidity are controlled to allow the dough to rise before frying. Since atmospheric conditions are always changing, this step required a skilled baker to adjust the humidity and temperature in the “proof box” to ensure the product was neither over nor under-proofed.
Finally, the donuts were neatly placed on their screens, ready for frying, an equally challenging process. The three-foot mesh screens were lowered in pure vegetable shortening at 375 degrees, until the donuts floated free of the screen. After one minute of frying, the baker would use a pair of chopsticks to quickly turn the donut to its other side—careful not to stick the chopstick into the donut, allowing shortening to rush in and ruin the end product.
Finally, the product was ready for finishing. The rings were placed, hot out of the fryolator, on long sticks to be rolled into a large mixing bowl of honey dip, or to cool a bit before being frosted. The shells were allowed to cool, then filled by hand pumps with three-quarters of an ounce of filling.
A yeast mix donut could—from start to finish—take four hours, while a cake mix yielding plain cake rings and crullers took half an hour. While the plain and chocolate cake mixes didn’t need the same fermentation and proofing time, a great deal of care and skill was needed to create a stellar treat.
Cake donuts used softer wheat (less gluten than the hard wheat used in yeast donuts). Baking soda replaced yeast for the leavening process. Dough temperatures were equally critical. In the early years, we were so concerned with keeping the cake dough tender that we mixed only by hand rather than in the large Hobart mixers used for yeast products. A dash of nutmeg was added to plain cake mixes in our New England shops, just vanilla for the rest of the country. Cake donuts fry up with a delightful crunchy exterior and a tender, cakey center.
Rounding out the basic mixes was a French cruller mix. French crullers are basically a fried popover, meaning they have a high egg content. The mix was fed into a special machine that sat over the fryolator. The baker would crank out the spiral-shaped donuts, which were either honey dipped or frosted, and out-of-this-world good.
By this point I think you’ve got a sense of the physicality and skill it took to make high-quality donuts. If a customer had the patience and time to watch an eight-hour production shift, I suspect it might have looked like an intricate and deftly choreographed dance: the dance of the donuts.
Taken from Around the Corner to Around the World by Robert Rosenberg. Copyright © 2020 by Robert Rosenberg. Used by permission of HarperCollins Leadership.
This segment aired on October 19, 2020.
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