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Want to Own a Dunkin' Donuts Franchise? Know This First

Stocks in this article: DNKN KKD THI SBUX

We've set those standards to such a level that when they come in and they prove to us that they've got that much liquidity and net worth, it should be sufficient to be able to go to a local lender or even one of our national lenders, if necessary, and get the financing.

How is the recruiting going in California? Can you share any anecdotes on who is looking to buy or about the demand in general?

Benson: The demand is huge. We started a major franchising push back in 2006 and although we were not franchising in a lot of markets in the country, we did allow people to express interest and to kind of get on the waiting list, if you will. When the market would open, we checked with those people and see if they were still interested. California had always been the market with the longest line, if you will, since we started building that list. Now, that doesn't mean they had three dollars to their name, but there were people that had reached out and had said, 'Hey, I'd be interested in knowing more about this opportunity when you guys decide to come.'

In addition to that, when we announced the entry back on Jan. 16, they really came out of the woodwork. So it was exactly what we expected, exactly what we knew we would get -- very, very high levels of interest, much of which is from existing quick-serve restaurant groups who would be looking to add Dunkin' to their portfolio, and certainly we get our fair share of inquiries from people who just want to be part of the group that brings Dunkin' to the West Coast. And there's celebrities and sports figures and that type of thing, but that doesn't really carry a lot of weight with us. Our interest is in getting the best operators and the best developers into these territories.

With any franchise story, for as many happy franchisees as you may have, there are always those franchisees that are dissatisfied for whatever reason that might be. How do you ensure that your franchisees are happy and satisfied?

Benson: We have to have a good relationship. We are not a concept that operates company-operated locations. So if we are not getting along with our franchisees, and they have got issues, concerns, problems on a broad scale -- that's not to say the guy down the street may not have a challenge -- but if your franchise community is not supportive of what you're doing, they're not going to reinvest. Unlike other chains, we can't say, 'That's OK. We'll just go open 300 more company stores next year and we'll make up for the fact that our franchisees are choosing to sit this one out.' We value the franchisee relationship very, very highly.

We have a firm belief that if we can make our franchisees more profitable, they will continue to invest and reinvest their capital in this brand as opposed to another, and nice things happen for everybody. The only way you generate that is by having the right franchisees in the right sites, and making sure as a franchisor, we're providing what we need to provide, which is the right coaching and counseling, training, innovative product introductions, cutting edge markets and all of that.

My last question for you, Grant, are you a chocolate-frosted guy or a jelly- doughnut guy? What is your favorite?

Benson: I will tell you it's tough to beat the plain glazed doughnut. Regardless of how much frosting or sprinkles or whatever it may be, the good old-fashioned honey-dipped or glazed doughnut will always be the number seller. That's my favorite.

-- Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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