A SEMINAR REPORT

ON
“COMPARISON OF BUSINESS MODELS OF
STARBUCKS & DUNKIN’ DONUTS”

Submitted to
LJ Institute of Management Studies
5-Year Integrated MBA (IMBA)

A SEMINAR REPORT SUBMITTED IN PARTIAL FULFILLMENT OF 


THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF
(SEMESTER VIII OF INTEGRATED MASTERS
OF BUSINESS ADMINISTRATION – IMBA)

Under
Gujarat Technological University

UNDER THE GUIDANCE OF

PROF. SULEKHA MUNSHI

Submitted by
KRISHNAPALSINH INDRAJITSINH VIRPARA
Enrolment No. 147290585054
IMBA- SEMESTER VIII

Gujarat Technological University

Ahmedabad
May 2018
 DECLARATION

I, Krishnapalsinh Virpara, hereby declare that this seminar report titled

“Comparison of business models of Starbucks & Dunkin’ Donuts”
submitted by me to the L.J. Institute of Management Studies is a bona fide
work undertaken by me and it is not submitted to any other University or
Institution for the award of any degree diploma / certificate or published any time
before.

Place: Ahmedabad
Date: ________, 2018
Krishnapalsinh Virpara

2
 CERTIFICATION

This is to certify that the seminar report titled “Comparison of business models
of Starbucks & Dunkin’ Donuts” submitted in partial fulfillment for the award of
the degree of (Semester VIII Of Integrated Masters Of Business
Administration – IMBA) of Gujarat Technological University, was carried out by
Krishnapalsinh Indrajitsinh Virpara under my guidance. This has not been
submitted to any other University or Institution for the award of any
degree/diploma/certificate.

Name & Signature of faculty guide Date of Submission

Prof. Sulekha Munshi
__________________

Name & Signature of Professor in charge / Director of the Institute.

Stamp of the Institute with date.

3
 ACKNOWLEDGEMENT

I am glad to express my profound sentiments of gratitude to all who rendered

their valuable help for the successful completion of this seminar report on
“Comparison of business models of Starbucks & Dunkin’ Donuts”.

I record my deep sense of gratitude to, Dr. Viral Shah, Director – LJ IMBA,
Prof. Nikita Macquin, Dean LJ IMBA and Prof. Sulekha Munshi, who gave me an
opportunity to work under their guidance which led me to the right direction for
the research.

I would also like to thank sincerely from the deep of my heart to all those persons
constantly guided me and gave me the practical knowledge and materials of the
subject.

My genuine sense of gratitude goes to my college and university that gave me a

chance to brighten my academic qualification that provided me this opportunity to
have practical knowledge on seminar report.

4
 TABLE OF CONTENTS
Chapter No. Page No.

1. Introduction 6

2. Ownership 9

3. Operational Support 10

4. Products, Prices & Places 12

5. Focus and Branding 13

6. Revenue Sources 15

Bibliography 17

5
CHAPTER – 1
INTRODUCTION

STARBUCKS
Starbucks Corporation is an American coffee company and coffeehouse chain.
Starbucks was founded in Seattle, Washington in 1971. As of 2018, the company
operates 27,339 locations worldwide.

The first Starbucks opened in Seattle, Washington, on March 31, 1971, by three
partners who met while they were students at the University of San Francisco:
English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon
Bowker were inspired to sell high-quality coffee beans and equipment by coffee
roasting entrepreneur Alfred Peet after he taught them his style of roasting
beans.

At the time of its initial public offering (IPO) on the stock market in June 1992,
Starbucks had 140 outlets, with a revenue of US$73.5 million, up from US$1.3
million in 1987. The company's market value was US$271 million by this time.
The 12% portion of the company that was sold raised around US$25 million for
the company, which facilitated a doubling of the number of stores over the next
two years. By September 1992, Starbucks' share price had risen by 70% to over
100 times the earnings per share of the previous year.

The first Starbucks location outside North America opened in Tokyo, Japan, in
1996. On December 4, 1997, the Philippines became the third market to open
outside North America with its first branch in the country located at 6750 Ayala
Building in Makati City, Philippines. Starbucks entered the U.K. market in 1998
with the $83 million USD acquisition of the then 56-outlet, UK-based Seattle
Coffee Company, re-branding all the stores as Starbucks. In September 2002,
Starbucks opened its first store in Latin America, at Mexico City.

6
In October 2002, Starbucks established a coffee trading company in Lausanne,
Switzerland to handle purchases of green coffee. All other coffee-related
business continued to be managed from Seattle.

In August 2003, Starbucks opened its first store in South America in Lima, Peru.

In 2007, the company opened its first store in Russia, ten years after first
registering a trademark there.

In 2013, Starbucks opened its first store in Ho Chi Minh City, Vietnam.

In 2016, Starbucks announced that it will enter Italy, its 24th market in Europe.

On March 21, 2018, Starbucks announced that it is considering the use of

blockchain technology with an idea to connect coffee drinkers with coffee farmers
who eventually can take advantage of new financial opportunities.

As of January 22, 2018, Starbucks is present on 6 continents and in 75 countries

and territories, with a total of 23,768 locations.

DUNKIN’ DONUTS
Dunkin' Donuts is an American global doughnut company and coffeehouse
based in Canton, Massachusetts. It was founded in 1950 by William Rosenberg
in Quincy, Massachusetts and has become one of the largest coffee and baked
goods chains in the world, with more than 12,000 restaurants in 60 countries.
The chain's products include doughnuts, bagels, other baked goods, and a
variety of hot and iced beverages.

Dunkin' Donuts is owned by Dunkin' Brands Inc., which also owns Baskin-
Robbins and previously owned the Togo's chain.

7
William Rosenberg opened Open Kettle in 1948, a restaurant selling doughnuts
and coffee in Quincy, Massachusetts, but he changed the name in 1963 to
Dunkin' Donuts after a suggestion from Richard S. Snodgrass a 4 year old. He
conceived the idea for the restaurant after his experiences selling food in
factories and at construction sites, where doughnuts and coffee were the two
most popular items. The restaurant was successful, and Rosenberg sold
franchises to others starting in 1955.

In 1963, Rosenberg’s son Robert became CEO of the company at age 25, and
Dunkin’ Donuts opened its hundredth location that year. Dunkin' Donuts was a
subsidiary of Universal Food Systems at the time, a conglomerate of 10 small
food-service businesses, and Dunkin' Donuts locations varied greatly in their
menu options, with some selling full breakfasts and others serving only
doughnuts and coffee.

In the following years, the other businesses in the Universal Food Systems
portfolio were sold or closed, and the company was renamed to Dunkin' Donuts.
By 1998, the brand had grown to 2,500 locations worldwide with $2 billion in
annual sales. In 2004, the company's headquarters were relocated to Canton,
and in December 2005, Dunkin' Donuts and Baskin-Robbins were sold as
Dunkin' Brands to a consortium of three private-equity firms: Bain Capital
Partners, the Carlyle Group, and Thomas H. Lee Partners. By 2010, Dunkin'
Donuts' global sales were $6 billion.

At present, Dunkin' Brands' nearly 100 percent franchised business model

included more than 12,000 Dunkin' Donuts restaurants and more than 7,600
Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is headquartered in
Canton, Mass.

8
CHAPTER -2
OWNERSHIP
Starbucks Corporation and Dunkin’ Brands Group, Inc. are the two largest eatery
chains in the United States that specialize in coffee. While both companies
maintain similar menus and overall strategies, there are key differences in their
business models related to scale, store ownership and branding.

STARBUCKS

Majority of the Starbucks stores are autonomously operated. Independently

operated Starbucks locations exist they’re called as Licensed Stores. As of 2017,
4,962 licensed locations exist.

In the EMEA (Europe, Middle East, and Africa) markets, Starbucks holds a
franchising program. Different to the License program in which existing
corporations may apply to operate a Starbucks kiosk within an existing store,
Franchises have the ability to create new freestanding stores.

In India, TATA Starbucks Private Limited, is a 50:50 joint venture company,

owned by Tata Global Beverages and Starbucks Corporation, which owns and
operates Starbucks outlets in India. The outlets are branded Starbucks "A Tata
Alliance".

DUNKIN’ DONUTS

Nearly 100% of Dunkin's shops are franchised as the company operates only 36
of the more than 11,500 Dunkin' Donuts restaurants and more than 7,600
Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is headquartered in
Canton, Mass.

9
CHAPTER – 3
OPERATIONAL SUPPORT
The operational support which licensed stores gets from the master company i.e.
Starbucks Corporation, and the franchised stores gets from Dunkin’ Brands
Group, Inc.

STARBUCKS

Most of the Starbucks Licensed Stores allow offering customers more than the
great coffee and handcrafted beverages they love. From custom store design to
robust ongoing support, our Licensed Stores allow to immerse every customer in
the full coffeehouse experience they cherish and seek out.

The advantage a licensed store gets a package included:

 Unrivaled, customizable store design
 Starbucks menu, equipment, training and support
 Seasonal promotions
 Proprietary equipment and fixture package
 Exclusive Starbucks registered food and bakery program
 Whole bean packaged coffee and comprehensive merchandise
assortment
 Ongoing expertise, consulting and support including onsite visits

DUNKIN’ DONUTS

Dunkin’ Brands offers some of the best franchisee support in the industry.
Supports that a Dunkin’ Donuts franchisee gets from the Franchisor Dunkin’
Brands includes;

10
 Winning Franchise Team
A team of experts helps throughout the franchising application process
and beyond.

 Superior Marketing & Branding

Dunkin’ Brands complement national marketing with local campaigns and
Franchisees receive the benefits of a multimillion-dollar advertising fund.

 Technology
Dunkin’ Brands continuous innovation helps franchisees operate more
efficiently to communicate with customers. Dunkin' Mobile, our mobile app,
lets guests send virtual gift cards, load & reload their DD card, locate
nearby Dunkin’ stores and view menu items.

 Advisory Council System

Advisory Councils provide a forum for feedback from the existing
franchisees.

 Extensive Training Programs

Dunkin’ Donuts provides six-week course, during which the franchisee can
learn all about the brand and the ins and outs of restaurant management.

11
CHAPTER – 4
PRODUCTS, PRICES & PLACES

Starbucks and Dunkin’ Donuts product line are identical but the prices and
atmospherically location strategy is different.

They both offer following products:

 Regular Hot Coffee
 Special Flavored Drinks
 Iced Coffee
 Hot Chocolate
 Food

Prices of beverages and food at Starbucks are comparatively higher than the
Dunkin’ Donuts. Lower prices at Dunkin’ Donuts doesn’t mean lesser quality but
their strategy is low-cost pricing.

The location of the stores of Starbucks is not based on demographics and

customer traffic. Starbucks have strategy to place the store whose convenience
create and bring customer traffic to the store.
Whereas, The stores of Dunkin’ Donuts are placed at the locations which have
higher traffic i.e. based on demographics and geographic conditions.

12
CHAPTER – 5
FOCUS AND BRANDING

STARBUCKS
Starbucks brands itself primarily as a beverage provider that offers a more typical
coffee house dining experience. Starbucks locations are designed with the
comfort of their customers in mind. Free Internet access and inviting decor offer a
more enticing option for those looking for a place to read, relax or speak with
friends. This also makes going to Starbucks a potential social activity, turning the
stores into a destination rather than a simple distribution location. This appeals to
customers seeking a premium experience. Typically, these customers have
higher disposable incomes and are more willing to pay extra for higher quality
materials. In economic downturns, people with lower disposable incomes are
more likely to alter their consumption habits than people with larger financial
cushions. While Starbucks is undeniably impacted by the macroeconomic
environment, it is firmly established with a more resilient and less price-sensitive
customer base, which helps to dampen the blows brought on by economic
cycles. Like Dunkin' Donuts, Starbucks has also shifted focus to include more
products aimed at afternoon and evening customers. These include small plates
and sandwiches as well as wine and beer.

Starbucks has built a more premium brand than Dunkin' Donuts. Starbucks offers
a more extensive menu and more product customization, which is reinforced by
writing each customer's name on the side of his cup. The company offers a
comfortable and quiet environment with free wireless Internet access,
encouraging customers to stay to socialize, work, study, browse media or listen
to music while consuming their Starbucks product. Taken together, these factors
form a more premium experience and command a higher price point.

13
DUNKIN’ DONUTS
Dunkin' Donuts markets itself primarily as a coffee seller that also offers donuts
and foods, a fact made apparent by a coffee cup prominently featured on the
company's logo and executive management's explicit assertion that Dunkin'
Donuts is a beverage company. Despite building an identity as a coffee seller,
food is still an important element of Dunkin' Donuts' offering. In recent years,
Dunkin' Donuts has focused increasingly on nontraditional food options with the
hopes of attracting customers outside of breakfast hours. The introduction of
steak to its menu in 2014 was a step toward incorporating heartier food items
alongside a growing number of sandwich options. Dunkin' Donuts' interiors are
designed differently from Starbucks stores, with the former often resembling fast
food stores in furnishings and decor.

Dunkin' Donuts has more competitive pricing, focusing on the middle class. In
company filings and earnings conference calls, Dunkin' Donuts' management has
described its intent to be the lowest cost provider in the market while maintaining
quality above an acceptable minimum.

14
CHAPTER – 6
REVENUE SOURCES

STARBUCKS
Starbucks have three revenue sources:
1. Company-Operated Restaurants
2. CPG (Consumer Packaged Goods)
3. Licensed Stores
As per financial accounts of Starbucks, 79% of its total revenue comes from the
Company operated restaurants and 11% from the Consumer Packaged Goods
including the sale of tea and coffee related products and only 10% of the total
revenue is generated from the Starbucks Licensed Stores as royalties and
license fees.

DUNKIN’ DONUTS
Dunkin' Donuts makes money in several different ways. The five significant
revenue sources are:
1. Royalty income and fees from franchised restaurants
2. Rental income from properties leased to franchisees
3. Revenue from company-owned store
4. Other licensing fees
5. Sale of Ice-cream products to Baskin-Robbins.

As per financial accounts of Dunkin’ Donuts, 64% of its total revenue is

generated from the Franchised stores as a major source of its revenue. The sale
of ice cream products to Baskin-Robbins stores is the second major source of
revenue for the company and it contributed 16% to the total revenue. Company
owned income accounted for 3%. Companies that operate the franchise model
may own properties that they lease to franchisees to operate Dunkin’ Donuts.

15
Income from these properties comes in the form of rents and accounted for 13%.
Revenue from licensing, franchisee transfer fees, refranchising gains, and online
training fees are included in other revenue. Licensing fee includes manufacturing
rights to a third party for Dunkin’ Brands coffee and Baskin-Robbins ice cream.
This source accounted for about $30 million, or 4%, of revenue in fiscal year
2014.

In 2017, Starbucks generated revenue of $22.38 billion out of which $2.99 billion
was Net Income.

In 2017, Dunkin’ Donuts generated revenuw of $860.5 million out of which the
company managed to get $350.91 million as Net Income.

16
BIBLIOGRAPHY

https://www.marketwatch.com/investing/stock/dnkn/financials

https://www.marketwatch.com/investing/stock/sbux/financials

https://marketrealist.com/2015/04/dunkin-brands-five-sources-revenue

https://www.fool.com/investing/2018/05/08/why-bp-plc-adrs-stock-rose-10-in-
april.aspx?fs_test=False

https://marketrealist.com/2014/12/starbucks-transactions-declining

https://www.forbes.com/sites/greatspeculations/2017/06/01/why-the-company-
owned-model-works-for-starbucks/#66934e2819e7

https://www.forbes.com/sites/panosmourdoukoutas/2013/11/05/dunkin-brands-
panera-bread-and-starbucks-three-winning-business-models/#3f31d671200d

https://www.theodysseyonline.com/to-my-family-when-come-home

https://sites.google.com/site/starbucksanddunkindonuts/performance-analysis

https://sites.google.com/site/starbucksanddunkindonuts/business-strategy

https://sites.google.com/site/starbucksanddunkindonuts/corporate-and-
internationalization-strategy

17