A New Jersey couple is accusing Canton-based Dunkin’ Brands of “systemic racial discrimination” against minority franchisees by steering them to poorer neighborhoods while awarding more lucrative locations to white franchise owners.
Former franchise owners Reggie and Amy Pretto sued Dunkin’ Monday in New Jersey Superior Court, alleging the company “steered” them to open stores in poor neighborhoods by falsely claiming that no opportunities were available elsewhere. The Prettos, an African-American couple from Montclair, N.J., also said Dunkin’ lied to them about how much money their stores would make, when in fact their stores in Maryland struggled, leading Reggie Pretto to file for bankruptcy in 2007.
“The Prettos are looking to get damages for the wrongs that were done to them by Dunkin’,” said Jerry Marks, the couple’s attorney. “But more important, they’re seeking corrective damages, so that Dunkin’ not only doesn’t do this in the future, but ensures that there’s equality of opportunity for all Americans, especially African-Americans and women, so that everyone has an opportunity to sell Dunkin’ products as well as consume them.”
Dunkin’ said it was unable to comment because the matter is in litigation.
The Prettos said they approached Dunkin’ Brands in 2004 about opening stores in New Jersey or New York, but were told there were no locations available. Instead, Dunkin’ officials suggested locations in poorer, predominantly black communities in Philadelphia, Baltimore, and Washington, D.C, according to the couple’s lawsuit. Eventually the Prettos settled on several locations in Maryland, including Odenton, based on projections from Dunkin’ that the store there would average weekly sales of $15,500.
But their actual sales at the Odenton and other stores turned out to be substantially less, the Prettos said. Facing mounting expenses, the Prettos claimed Dunkin’ pressured them to unload the stores at “fire sale” prices, which they did, netting Dunkin’ a second round of franchise fees from their successors at the Maryland locations.
The suit alleged that African-American franchisees such as the Prettos are “overwhelmingly” steered toward economically disadvantaged areas as part of a “misguided strategy” by the company.
The Prettos were joined in their suit by Priti Shetty, an Indian woman who claims Dunkin’ Brands refused her request to open a franchise at a particular location because a drive-through window could not be installed there, but then allowed a male franchisee to build a store at the same location without a drive-through.
Shetty also alleged a Dunkin’ Donuts operations manager made “antifemale” remarks during “excessive” inspections of her two other stores, including telling her she was not “servile” enough.
Dunkin’ Brands has had a history of legal fights with its franchisees.
Among the complaints from some store owners was that Dunkin’ would assess ruinous penalties for minor infractions of franchise agreements, according to Jim Coen, president of the Dunkin’ Donuts Independent Franchise Owners association.
Then in December 2008, chief executive Jon Luther was pushed aside in favor of former Papa John’s boss Nigel Travis. Coen said Travis “cleaned house,” and Dunkin’ no longer fights as much with its franchisees.
“There’s no doubt that things have improved,” said Coen. “The management team treats franchisees as more of a partner than before.”
The discrimination alleged in the New Jersey lawsuit took place before the 2009 leadership shake-up. The story was first reported by the New York Post.
Coen said the franchisees who operate 7,000 Dunkin’ Donuts stores in North America are a “diverse group,” but noted that, as is true with other franchise operations, minorities are underrepresented at Dunkin’.