Value Added: Dunkin’ brings private equity firms a sweet profit


Jelly donuts sit in a basket at a Dunkin' Donuts Inc. store in West Orange, New Jersey, U.S., on Thursday, July 7, 2011. (Emile Wamsteker/Bloomberg)
August 18, 2012

Dunkin’ Donuts may be packed with fat, sugar and calories, but the legendary Massachusetts-based chain contained something else in its fillings — nearly $2 billion in profit for the Carlyle Group and its fellow private equity investors, Bain Capital and Thomas H. Lee Partners.

Carlyle, Bain and Lee Partners bought the company for $2.425 billion from Pernod Ricard S.A. in December 2005.

On Wednesday, the firms sold the last bit of their shares in Dunkin’ — known for its coffee — bringing $600 million profit for each of the firms, according to a Washington Post analysis. The profit amounted to three times each firm’s investment. Most of the profit is distributed to fund investors.

How did they do it? Can you say latte? Espresso? Iced tea?

“We focused increasingly on beverages, which drives [customer] frequency,” said Sandra J. Horbach, who leads Carlyle’s consumer and retail team and serves on Dunkin’s board, where she expects to be for at least another year.

Horbach and her colleagues at Bain and Lee changed the management team and imposed a
service-oriented culture so the Danish and muffin lovers could move through the line faster. They expanded the number of stores in the United States and overseas.

Dunkin’ addressed the guilt factor by offering healthier snacks, such as egg-white breakfasts. It moved into lunches and zeroed in on the caffeine crowd with such items as espresso Turbo Shots.

Then the new owners dovetailed the whole thing with an amped-up marketing campaign called “America Runs on Dunkin’.”

“This is a great outcome for our fund investors,” Horbach said.

Maybe not so great for calorie counters, however.

By the numbers

How Dunkin’ Donuts has fared since December 2005, when it was bought by Carlyle, Bain and Lee Partners:

Earnings before interest,
taxes and amortization

 70.6%

from $194 million in February 2006 to $331 million in June of 2012

Number of corporate employees

21.6%

from 982 in February 2006 to 1,194 in June of 2012

Number of stores

36.9%

from 12,434 in February 2006 to 17,016 in June of 2012

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade.
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