A lawsuit recently filed in New Jersey state court by a group of former franchisees claims Dunkin’ doughnut chain discriminates against minority owners, especially African-Americans, by encouraging then to buy retail franchise owned stores in poor, less profitable areas.
According to The New York Post’s Mark Decambre, the complaint accuses Dunkin’ Brands of providing white franchise developers prime pastry locations, while minorities are left with “economically disadvantaged or marginal areas.”
The lawsuit claims Dunkin’ Brands, based in Canton, Massachusetts, operates nearly 7,000 franchises throughout the country, with roughly 50 owned by African-Americans. Of those, the majority are located in economically less advantageous areas.
The suit claims Dunkin’ has no African-American owners in Connecticut, New Jersey and Rhode Island, traditional strongholds for the Northeastern chain, and adds that Dunkin’ prevents minority owners from expanding with additional stores, precluding them from becoming profitable by lowering overhead costs.
Decambre explains that the suit has served to solidify the chains reputation as one of the country’s most litigious franchise groups.
Previous store owners have accused Dunkin’ of needlessly imposing minor infractions on them in a shameless and greedy attempt to collect hefty fines and penalties.
“Former franchise owners Reggie and Amy Pretto, who are African American, allege in the suit that the chain ‘steered’ the couple, who at the time lived in Croton-on-Hudson, NY, to ‘undesirable’ locations in Baltimore and Washington after making false representations regarding the unavailability of better locations.”
The Prettos supplied $750,000 of their own money and sold their New York home in 2004, which they had bought in 2001, to finance their franchisee operation.
The couple alleges that Dunkin’ officials intentionally misled them with wildly exaggerated financial projections about weekly sales at their Maryland locations, and then eventually were forced to file for bankruptcy in 2007 because of weak sales and income.
Both plaintiffs are represented by Marks & Klein, which won a $206 million settlement — one the largest franchisor settlements ever — against sandwich shop Quiznos after store owners sued it for racial discrimination.
Despite being a Dunkin’ employee before he became a franchisee, Reggie Pretto was amazed by the unexpected actions taken by the chain. “They can be very brutal,” he told The Post.
According to Reuters, the complaint also claims the other plaintiff, an Indian-American named Priti Shetty, faced harassment by Dunkin’s operations managers because of her gender and was prevented from opening a third store in Stockholm, New Jersey.
Dunkin’ officials told her she was not “servile enough” and rejected her as a stand-alone owner. Shares of Dunkin’ Brands Group Inc, which also owns the Baskin-Robbins ice cream brand, fell as much as 5 percent yesterday, and ended regular trading down 2.6 percent at $29.54.