Baptism By Fire: Dunkin's West Pioneer Learns to Thrive Despite the Economy

Multi-unit franchisee Jason Duffy may only be 38 years old, but he could write a book about being successful in business during tough economic times. After all, "that's all I've known as a franchisee, since I opened my first Dunkin' Donuts store in Phoenix on Aug. 15, 2008, during the worst economic times in 60 or 70 years," he says.

Having survived his baptism by fire and come out ahead, Duffy, recently named one of the 40 Under 40 to watch by the Phoenix Business Journal, now has 51 Dunkin' Donuts stores in four western states.

His path to franchising began with a fateful meeting nearly 20 years ago with John Luther, who would later become president, CEO and chair of Dunkin' Donuts. A 19-year-old Duffy, who was working his way through college back east in Amherst, started a gutter-cleaning business. At one of the doors he knocked on, he met Luther, who hired him and talked to him about hustling and paying his way through college.

Then Duffy had an accident, falling from a ladder and, in the process, damaging the side of Luther's house. "He had to fly out the next morning, and I assured him that I'd take care of everything," Duffy recalls. "He didn't know me or what would happen, but he went on his trip, and when he returned, everything was done."

Through the years, the two stayed in touch as Duffy graduated with a finance degree from West Virginia University and Melbourne (Australia) Institute of Technology. Luther became something of a mentor to the ambitious young man who had helped care for his blind mother since childhood.

Then in 2007, when Duffy was working in the finance industry, he - along with many others - "saw the handwriting on the wall" and decided to change professions. "I reached out to him, and he said he had an opportunity in Phoenix because Dunkin' was looking to open stores out west. I accepted and this was my first foray into franchising," he says.

If Duffy wrote an instructional manual for would-be franchisees, he says it would contain a lot of the lessons he's learned navigating the economic downturn. "First, I'd tell them, 'Understand the dynamics of the business you're getting into and do that well in advance of making a commitment. Due diligence should include talking to existing franchisees who are willing to share information,'" he says.

New franchisees should also "plan for the worst," he adds. "Whatever capital you think you need, double it. A five-year plan on a spreadsheet feels different when you have to live it out. It's always harder than you think it is."

Duffy, who says he is excited about continuing to grow with Dunkin' Donuts and his team, also offers personal advice garnered from his life. "Always surround yourself with good people, take on challenges outside your comfort zone and live every day to the fullest," adds the husband and father of three.

Name: Jason Duffy
Title: Managing partner
Company: First Cup LLC (Southwest Bakery Group, Wholesale Service Exchange), Phoenix, Ariz
. No. of units by brand: Dunkin' Donuts, 51 (in Arizona, Nevada, Colorado, California)
Age: 38
Family: Wife Erin and three children
Years in franchising: 6 years
Years in current position: 6 years

Personal

First job:
Newspaper carrier at about 10, and then worked in a pizzeria at 16.

Formative influences/events:
When I was in second grade, my mom lost her vision. Her strength influenced me and I became a more independent person early on. I became more aware of people and surroundings and issues earlier than somebody else without obstacles in their early life. Sports also played a big role in my life. I played football and basketball and learned about teamwork, losing and winning, and dealing with challenges. Meeting my wife in college was another major event - I guess there have been a lot of things that formed me.

Key accomplishments:
First and foremost, I'm most proud of my beautiful wife and three beautiful children. I'm proud of the work I did when I started building my stores; the economy was the worst it had been in the last 50 or 60 years when I opened my first store in Phoenix on Aug. 15, 2008. Having survived a lot of challenges and lived through them with the brand, I'm proud of what I've learned and overcome.

Biggest mistake:
I have no major regrets. One of the lessons I learned from 2008 and 2009 is to be careful in making certain assumptions, especially around debt. There was a lot of stress during that time, and I learned to be prepared if things go bad.

Smartest mistake:
Can't think of one.

Decision I wish I could do over:
Now, I always try to live life to the fullest on a daily basis. I wish I had gotten here sooner.

Work week:
As we were expanding and growing, there were a couple of years when I worked six or seven days a week. However, in the last 18 months, I've been a lot more aware of putting the phone down and spending time with the family. My hours are different every week, and I try to work from home at least one day a week. I drop in on the stores and talk to customers and employees, but I don't schedule those visits (by design).

Favorite fun activities:
I love playing basketball and running, and I do a lot of that. I take the kids fishing - they have a ball doing that. We also take them hiking, camping - we're an outdoor family. The beach is right up there, too.

Exercise/workout:
Running, basketball, lifting weights.

Favorite tech toys:
I'm not a huge tech guy, but I use my iPod every day when I run, and I also use my iPad a lot.

What are you reading?
The Goal: A Process of Ongoing Improvement by Eli Goldratt.

Do you have a favorite quote?
I find myself saying this a lot: 'Just get a little bit better every single day, every week, every month, because when you stop getting better, results start to slide.'

Best advice you ever got:
My dad told me, "Show up and work hard."

What gets you out of bed in the morning?
A Dunkin' cup of coffee.

What's your passion in business?
I most enjoy negotiating deals.

How do you balance life and work?
By understanding the priorities of the day and not compromising on my commitment to spending family time and getting exercise.

Last vacation:
We were at Del Mar beach in San Diego in July.

Person I'd most like to have lunch with:
Herb Kelleher of Southwest Airlines or Warren Buffet.

Management

Business philosophy:
People make the difference; people are the company. Without the right people doing the right things with the right motivations, we don't have anything. Our 1,200 employees make a difference every day, and we always want to lean in and do what's right for them, help them grow their careers and provide environments in which they want to stay.

Management method or style:
I'm a planner and I like to make sure everyone understands our goals and responsibilities. Then I'm a doer but with the right people in the right positions. You burn out if you try to do everything yourself.

Greatest challenge:
Building and growing the organization with people that match the positions they fill. It's amazing to me to see what one individual can do. I tell our team that, and it may sound corny, but I've seen it happen so many times.

How do others describe you?
Hardworking, reliable, and diligent, but with a sense of humor. If I don't understand something, I speak up.

One thing I'm looking to do better:
I'm always looking to forecast out and plan better. The more you plan and the better your plan, the more you succeed and hit your goals.

How I give my team room to innovate and experiment:
I let my team do what they do. The biggest thing is that I listen when they come with an opinion. I ask questions and probe to help us all get a better understanding. Sometimes it leads to experimenting and not being afraid. It's okay to make mistakes in our company. You just have to own it and move on.

How close are you to operations?
Very early on, I was very close. Now with the scope and responsibility and our COO, I'm less close. I provide feedback but don't step on his toes. With new stores, I'm close with all that goes into it until it opens.

What are the two most important things you rely on from your franchisor?
Marketing is at top of list and then innovative product offerings.

What I need from vendors:
Honesty and the lowest cost possible.

Have you changed your marketing strategy in response to the economy? How?
We've always been a value-driven brand. And for us in the west, we've always been in a bad economy. Our marketing has focused on driving awareness of what Dunkin' Donuts has to offer. We provide a great donut but also a lot of other products. Stores on the east coast seem to be more beverage-based, while on the west coast we're split between beverages, bakery, and sandwiches. People know we have some of the best iced coffee but they may not know we sell more bagels than anyone in the country.

How is social media affecting your business?
It just makes customers more nimble about providing responses - good or bad. I take all feedback, and try to respond and promote our business through messaging and social media. It's another tool in our toolkit.

How do you hire and fire?
I don't do lot of that.

How do you train and retain?
We have a training program set up in the stores and the biggest conversation our team has every month is about providing the best possible environment for our employees. We retain by offering the most competitive pay we can afford.

How do you deal with problem employees?
We assess the problem and get a game plan in place to put measurable results around fixing the problem. We follow up on that to ensure the problem is fixed.

Fastest way into my doghouse:
Not doing what say you say you'll do.

Bottom Line

Annual revenue:
$35 million-plus

2013 goals:
Increase of 10 percent comps, 10 percent cost reduction, and 10 percent cut in operating income.

Growth meter: How do you measure your growth?
We measure by comparable sales over the year and managing costs vs. the prior year. Since we're also an entity that continues to expand, we make sure we're meeting current store commitments and keeping good employees in the pipelines.

Vision meter: Where do you want to be in 5 years? 10 years?
I like what I'm doing, so I'd like to be in a similar position with continued growth - with close to 75 stores - and working with the same people five years from now. In 10 years, I'd like to continue to grow and expand but have a greater work/life balance. I have no real interest in slowing down at this point.

How is the economy affecting you, your employees, your customers?
The economy is getting better, especially in the last 12 months, across our different markets. On one hand, it's great because more consumers are willing to spend more and come more often. On other hand, it makes the job market more difficult and we have to make sure we offer paths of growth to attract employees.

Are you experiencing economic growth or recovery in your market?
We've had a lot of stops and starts but things seem to have stabilized. There are more positive signs than negatives.

What did you change or do differently in this economy that you plan to continue doing?
We'll continue to be maniacally focused on our customers and driving awareness of our products.

How do you forecast for your business in this economy?
We look at different compensating factors. Because we're still growing, we have to weight new stores with existing stores, but we expect to have between 3 and 5 percent sales growth on an annual basis in any given market.

Is capital getting easier to access? Why/why not?
Yes, there's an abundance of liquidity in the market. In the last 18 months, I've seen an increase in interest from lenders, because there aren't enough strong companies to lend money to.

Where do you find capital for expansion?
We're partners with GE Capital and also Infiniti Financing.

Have you used private equity, local banks, national banks, other institutions? Why/why not?
We've used no private equity - just our own capital with friends and family - along with national banks.

What are you doing to take care of your employees?
  We're providing good work environments and employment paths, because we want to offer them a career, not just a job. So many people come in as crew and become shift manager, associate manager, and then manager. This can change someone's life.

How are you handling rising employee costs (payroll, healthcare, etc.)?
We have a team of people focused on that. We've seen healthcare rise double digits every year since we started. The new laws are not clear and not easy to break through. Dunkin' has provided insight, but there are still some things outstanding. We do the best we can with managing all costs. If we have rising costs in one area, we try to make it up in another area.

How do you reward/recognize top-performing employees?
Performance-based bonuses and monthly newsletters that call out success stories.

What kind of exit strategy do you have in place?
I have no exit strategy, but in general, if we build the best company we can, it'll out work out.