Now Brewing: Energy Efficiency at Dunkin' Donuts

EDF Climate Corps fellow | September 14, 2011

By: Jochen Schloesser, 2011 EDF Climate Corps Fellow at Dunkin' Brands, MBA Candidate at Harvard Business School

“America runs on Dunkin’.”  

Freshly-brewed cups of coffee are sold to millions of faithful American guests that flock to the restaurants’ doors daily. The company’s culinary and operational recipes have proven to be quite successful: already a Northeast staple, Dunkin’ Donuts is continuing to extend its presence across the rest of the United States. Excitement at the company runs particularly high nowadays, in response to its recent and successful IPO.

After observing the success of EDF Climate Corps fellows at other companies, executives at Dunkin’ Donuts believed energy efficiency could mean potential savings for their own company as well. This led to my summer assignments: (1) estimate the total energy consumption across Dunkin’ Donuts stores and (2) value and plan out financially-attractive energy efficiency investments throughout the stores. This seems simple enough, right?

But it gets trickier when you consider that Dunkin’ Donuts, as a franchisor, owns virtually none of the Dunkin’ Donuts stores. The corporate parent owns only a handful of actual restaurants. Instead, individual franchisees own each of the nearly 6,700 Dunkin’ Donuts stores in the U.S. So even if Dunkin’ Donuts were to identify very financially attractive energy efficiency investments, these investments would not be undertaken unless franchisees (the actual store owners) became interested enough to implement and pay for the projects on their own.

How can a franchisor convince franchisees that an energy efficiency project is worth the investment? Below are some recommendations from my work to-date regarding franchisee engagement and benchmarking:

Step 1: Gather your test subjects

Find a small group of franchisees willing to participate in an energy efficiency benchmarking pilot project. Ideal candidates will have already expressed an interest in reducing their energy consumption to the franchisor. Collectively, participants should form a representative sample of the entire franchisee population. Obtaining buy-in from franchisees to participate in the pilot program will likely require one-on-one conversations to explain the costs and benefits of participation. Franchisees should commit to providing abundant utility and operational data for select stores. In exchange, the franchisor can reward participants with detailed “report cards” at the end of the benchmarking project that inform franchisees of how efficient each of their stores are in relation to their peers. While appealing to a person’s competitive spirit in hopes of lowering energy consumption is nothing new, the combination of providing savings evidence and benchmarking should prove effective.

Step 2: Collect your data  

Measure pilot stores’ energy consumption and gather store operating characteristics. Some companies gather energy consumption data electronically. If that isn’t the case, roll up those sleeves and gather raw energy consumption data on your own by reviewing monthly utility bills for each of the stores in the pilot set. At a minimum, observing a full year’s worth of energy usage per store is required to fully understand the effects of cyclicality. Once energy consumption data is collected, tabulate the stores’ physical and operating characteristics such as sales, geography and climate, square footage, operating hours, and other elements which might clearly influence energy consumption.

Step 3: Group your groups

Determine which attributes make individual stores comparable to each other and lump these stores into “comp” groups.Find correlations between a store’s physical and operating characteristics and its energy consumption. What types of stores have similar energy consumption drivers and are therefore comparable? Despite their obvious similarities, most stores probably shouldn’t be compared to each other for the purpose of ranking their energy efficiency. Take Dunkin’ Donuts’ example: we found that only stores of similar sizes, in similar geographies, and of similar structural builds (freestanding stores with their own parking lots as opposed to stores in a strip center, for example) should be considered “comps.”

Step 4: Rank your results

Lastly, rank “comp” groups based on energy efficiency. Identify the leaders and laggards, and allow franchisees to prioritize investment decisions accordingly. Identifying the most and least efficient stores motivates franchisees to prioritize investing in the laggards, and look for best practices in the leaders. At Dunkin’ Donuts, benchmarking results suggest that several freestanding stores could reduce their energy consumption by 15%. Depending on a location’s cost per kilowatt-hour, this consumption difference could translate into substantial monthly savings for franchisees.

Armed with a better idea of energy consumption in stores, and the savings potential in energy efficiency investments, Dunkin’ Donuts is now shifting gears to determine how it can encourage the adoption of energy efficiency projects by franchisees with busy stores outside of the pilot group. One idea is to lead by example. Dunkin’ Donuts could invest to make corporate-owned locations as energy efficient as possible (within the parameters of what makes financial sense), while continuously measuring the savings, documenting the work, and sharing lessons learned with franchisees.

Much implementation work remains, but it’s been exciting to have measured the massive potential for energy efficiency savings that exist within the franchisee pilot group alone. I look forward to seeing how Dunkin’ Donuts continues its energy efficiency efforts.

EDF Climate Corps matches trained students from leading business schools with companies to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit our Facebook page or follow us on Twitter to get regular updates about this project.