On a Monday morning in July, something new greeted New York City commuters. In the space of one weekend, 12 Dunkin' Donuts stores and one Dunkin' cart had turned into new locations for the Canadian chain best known for its homemade doughnuts, Tim Hortons Inc.
"We did the quick switch to preserve our business," says Dennis Riese, CEO of New York-based franchise firm the Riese Organization, which operates more than 100 restaurants in the New York City market. "If you're closed, they're going to find a new place to find their doughnuts and coffee."
Riese is the mastermind behind the Riese Organization's new venture in the New York City market–a venture he hopes will allow the company to build its sales enough to offset Manhattan rents he says remain high despite the economic downturn. Unlike Dunkin' Donuts, Tim Hortons offers customers sandwiches, soups and other afternoon-friendly fare. "That was a very important consideration to us--that our locations have traffic all day and all night," he says. "I'm paying so much rent, I need to do business in all those hours."
The move to open Tim Hortons stores in the former Dunkin' locations wasn't without some controversy. Riese had a franchise relationship with Dunkin' beginning in 1983, but the relationship turned sour several years ago. Dunkin', owned by Canton, Mass.-based Dunkin' Brands Inc., at one point accused Riese of not maintaining the locations. The firm initiated a lawsuit in 2002 to terminate the franchise agreements for "alleged standards violations relating to health, sanitation and safety," according to Michelle King, director, global public relations Dunkin' Brands, Inc.
Riese, meanwhile, says his company wasn't making any money because Dunkin' demanded Riese invest too much into the brand. Both sides eventually wanted to end the relationship and agreed in 2004 to sever ties this month.
As part of the settlement agreement reached in 2004, the Riese organization agreed to leave the Dunkin' system and de-identify all their stores by July 31 of this year, according to King.
"Notwithstanding the disenfranchisement of the Riese organization, Dunkin's presence in Manhattan and throughout New York City continues to expand," King adds. "In the past 5 years, 244 new Dunkin' Donuts shops have opened in New York City, and we intend to continue this pattern of growth as opportunities arise."
Regardless, Riese says he's happy with the new Tim Hortons agreement, set to last at least 10 years. The Tim Hortons chain is new to the New York City market but the doughnut chain operates 500 stores in the U.S. and almost 3,000 restaurants in Canada. Its doughnuts, made in each location's kitchen, have a large following in Canada, in particular. Riese says it's too early to tell whether the product will translate into New York sales, but he says consumers "like the quality" of the product. "We already are happy with the amount of our sales," he adds.