FOR EVIDENCE THAT Fitzgerald was right about the very rich being different from you and me, pull your car up to the swanky Boston Harbor Hotel. Be sure to stop at the main entrance rather than trying to save a few bucks by descending into the concrete underworld of self-parking. As you hand the valet your keys, glance over your shoulder to see how the 1 percenters do it. Driving their six-figure rides right onto the brick pavement outside the front door, they toss the valet their keys, although they know that’s probably unnecessary. Their Bentleys and Benzes will remain exactly where they left them in line. It’s a shining emblem of affluence that simultaneously buffs the hotel’s exclusive image and protects the showpieces from the paint-scratching menaces underground.
On a Wednesday afternoon in August, the row of luxury cars includes a Range Rover, a tricked-out Cadillac Escalade, and a $250,000 Bentley. And there are clues that reveal their owners’ surprising source of wealth. The black Bentley’s plates read DD 2222, and the cream-colored Escalade has two thin racing stripes in orange and pink, accented by a tiny icon of a foam cup labeled DD. Making it even clearer is the lead vehicle in the row, the comparatively low-rent Chevy Tahoe SUV (whose owner had chosen on this day to leave his Ferrari at home). The Tahoe’s plates spell it out: DUNKIN. Capitalism, it seems, runs on it.
For 60 years, owning a Dunkin’ Donuts franchise or two has been the elevator that legions of hard-working strivers have used to lift themselves up out of the ranks of factory workers and into the realm of, if not the rich, at least the pretty comfortable. But even if most regular Joes waiting in drive-through lines have no idea, the Dunkin’ franchisee landscape has been shifting dramatically. As New England’s beloved brand aggressively expands and the price of admission for franchising continues to climb, ever-growing franchisee networks are crowding out the moms and pops. More and more, the elevator is traveling only to the penthouse.
One of the most important shapers of this new landscape is sitting inside the hotel, plotting his next conquest over a detailed map of Florida. Mark Cafua, owner of the Tahoe, is a 40-year-old with light, bright eyes and dark, thinning hair. He pinches a few inches from his stomach to demonstrate his affection for the product. “I like to eat too much,” he says.
Most of Dunkin’s 7,800 US shops look alike, but they’re owned by about 1,000 franchisees who pay fees each month to their franchisor, Canton-based Dunkin’ Brands. Cafua’s Portuguese parents bought their first shop when he was 5, standing him atop two milk crates so he could reach the cash register. Today, the family’s empire encompasses nearly 300 stores, with another 50-plus in development or under agreement, making it the nation’s largest privately held Dunkin’ franchisee network. (Roughly 500 Dunkin’ outlets in gas stations are owned and operated by Hess, a publicly traded corporation.)
After some cajoling, Cafua reports that his family’s private firm, Methuen-based Cafua Management Co., grosses more than $250 million a year. Yet every day he wakes up hungry for more expansion. Now the king of Dunkin’ franchisees has shifted his focus to Florida. He’s completing a 30-store buy there, with plans to double that collection over the next couple of years.
The man who is helping him make these acquisitions is the owner of the Range Rover parked outside. Gary Joyal, who also keeps a $300,000-plus Rolls-Royce at home in Plymouth, is a tall, blond 49-year-old, with a strong chin and a physique crafted by two hours a day of cardio and weights. He allows himself four hours for sleep, then works basically the rest of the time, using his Bluetooth earpiece to convert even his strides through hotel lobbies into productivity. I had earlier seen him trade a fist bump with Cafua after he ended a Bluetooth call with the announcement that he had just persuaded a reluctant owner to sell Cafua five more Florida stores.
Joyal started his climb immediately after graduating from high school in Plymouth, taking a job as a life insurance salesman that found him knocking on doors to collect $1.40 premiums. But three decades later, he has become a Zelig of the Dunkin’ world, one with a fondness for custom Astor & Black suits and mint tea, which Boston Harbor Hotel employees make sure to have waiting when he arrives. Even though Joyal has no affiliation with the corporate brand, he uses his encyclopedic knowledge of franchisees — and often their family situations, income portfolios, and estate plans — to make himself an indispensable player for buyers and sellers alike. By his tally, he’s helped broker half a billion dollars’ worth of Dunkin’ deals.
On this day, at the same time one of Joyal’s deputies is working a deal in the hotel restaurant with a franchisee from Tennessee, Joyal is orchestrating a sit-down between Cafua and a new, deep-pocketed entrant into the Dunkin’ world, Dan Fireman. The private equity firm run by Fireman and his father, Paul — the billionaire founder of Reebok International — earlier this year bought 38 Dunkin’ shops in southern Florida, in territory bordering Cafua’s new stores. For a sneaker guy like Dan Fireman, the previous six months have been an initiation into the pennies-matter world of Dunkin’. For instance, cups cost the operation about 7 cents, so when clerks double them up to protect a customer’s fingertips rather than use a 3-cent protective sleeve, that 4-cent differential quickly turns into serious waste. Joyal had met Fireman just once before, but now he greets him with the familiarity of an old high school teammate. Squeezing Fireman’s biceps, he says, “You’re looking fit! You working your tri’s? Your bi’s?”
Fireman smiles, noting that he’s lost 20 pounds on a new diet where he has liquid meals until dinner.
With that, Joyal gets down to the day’s business. “We have a sandbox we’ve got to divide up.”
LEADING ME AROUND his Methuen headquarters, Mark Cafua ushers me into a small, first-floor room with a coded lock on the door. The room is dark, offering only a dim blue light that reflects off his face. “This,” he announces, “is the money room.” It doesn’t look like much — just several stacks of computer servers, some blue and gray wires, and tiny flashing lights. But those servers are what he uses to connect his sprawling network of stores and central baking facilities.
Cafua is well known among franchisees, even if he tries in other ways to keep a low profile. His headquarters is housed in a tan office building offering no mention of either the Cafua or Dunkin’ name. But for those who know what to look for, there are hints about what happens here. On the plaza’s shared sign, there are entries for two construction and site work companies, called St. Miguel and Azores. The island of Sao Miguel in the Portuguese archipelago of the Azores is the ancestral home of the Cafuas. Because the Cafuas also own these two companies, they are able to build their own stores, saving them time and money.
Cafua leads me into another locked room, this one designed for loss prevention. Soon, he says, they’ll have technology allowing staff to zoom in the security cameras at any one of their shops. Sixty percent of sales at Cafua’s stores are cash, a setup ripe for employee theft. Cafua doesn’t accept that as a cost of doing business.
Among the data points that his accounting department pores over is the number of no-sales rung up on the registers, a signal that the counter help may be reaching into the cash drawer for reasons unrelated to a sale. Also available are algorithms that identify troubling patterns, such as employees who ring up lots of single-munchkin purchases, which can be cross-checked against surveillance camera footage to see if the customer is actually buying — and being charged for — a dozen and the staff is pocketing the difference. “This is a pennies business, so we take theft very seriously,” Cafua says.
On the second floor, I sit down with Cafua’s CFO, Chris Kennedy. When Kennedy joined the operation five years ago, it wholly owned 130 Dunkin’ franchises. That number has spiked to 215 (around 300 when stores that Cafua owns with partners are included). Cafua is not about to stop there. He expects his buying and building spree to result in dozens more Dunkin’ shops in coming months.
Kennedy’s job, in part, is to integrate all the new franchises into the family and, at times, make sure they don’t chase growth recklessly. Right now, they’ve got slightly more than 4,000 employees, with about 20 more added every time they buy or open a store. When Obamacare’s employer mandate takes effect next year, Kennedy will have to find a way to help fund health insurance for a whole lot more of them.
On his oversized computer monitor, Kennedy calls up a spreadsheet that displays a blizzard of data for every one of the Cafua shops. The network’s best-performing stores rake in more than $40,000 a week, the lowest about $4,000. In the previous week, the stores had collectively rung up $4.1 million, a big number that is the sum of a lot of little numbers — the average sale was $4.39. In this business, Kennedy says, “you have to make four million bucks on four-dollar tickets.” When he worked in the front office at Legal Sea Foods, the average check was about five times larger.
Kennedy’s spreadsheet also tracks waste. Since its founding, Dunkin’ has boasted that its coffee is made fresh at least every 18 minutes, even if that requires full pots to be poured down the drain. Although I’ve noticed that policy is unevenly enforced at Dunkin’ stores, Cafua says his shops abide by it. But like his mother before him, he takes it personally when his staffers make pots too liberally. “It’s a sin to waste coffee,” he says. That’s especially true this year, after a drought in Brazil drove up wholesale prices for coffee by some 20 percent.
Cafua runs the business with his brothers, 37-year-old twins David and Gregory. When their parents retired to Florida seven years ago, Mark took over as CEO. To avoid the troubles that can divide family businesses when they pass to the next generation, however, their father created a structure where the sons do not report to one another. Gregory focuses more on the financial side and David on operations, which had been a specialty of their mother, Gilda, before her retirement. Kennedy says the arrangement works well even though, in many ways, hard-charging Mark, who often sends him e-mails at 2 in the morning, “functions as CEO, CFO, and COO.”
Passing by David’s office, Cafua asks about the status of their latest new store, scheduled to open that day in Windham, New Hampshire. That’s the town where Cafua, who is the divorced father of 18-year-old triplets, lives. (He is now engaged to a woman who works in his human resources department.) He was particularly piqued when officials in his hometown denied his request to have a drive-through, a decision that he says will clip sales by about 25 percent from day one. He vows to keep pressing the drive-through issue until he gets his way. “We’ll eventually get it,” he says. “It’s not a matter of if. It’s a matter of when.”
The report comes back that the building inspector is taking his time to give them their occupancy permit, so the opening will probably have to wait a few more days. “This part drives me crazy,” Cafua says as we continue into his corner office. He may own the biggest collection of Dunkin’s in the nation, but the price of expansion often involves enduring grinding small-town bureaucracy. In Stoneham and Burlington, he says, cracking open a can of diet Sunkist, “it took me eight years to get stores permitted.” A delay like that could bankrupt a smaller franchisee, but Cafua can afford to cool his heels, buying up stores elsewhere as he waits for a particular planning or zoning board to blink or an election to broom away a vocal critic.
Occasionally, his voracious appetite for new outlets in unusual places has gotten him into trouble. In South Portland, Maine, his purchase of a Catholic church with plans to raze it for a new shop caused a ruckus with residents that is still simmering. He has similar plans for a church in Pittsfield. The joke about Dunkin’ being considered a religion in New England, critics suggest, wasn’t meant to be taken literally.
And in Laconia, New Hampshire, his plans to raze the historic Hathaway House, a stately but sagging structure built in 1872, set off a bitter fight that has raged for 14 years, even spurring the creation of the town’s Heritage Commission. Dorothy Duffy, a 79-year-old lifelong Laconia resident and a member of that commission, accuses officials with Cafua’s company of being “deceitful.” She says they reneged on earlier promises not to demolish the building and then let it fall into further disrepair, making its fate all but inevitable. “We call it planned deterioration,” she says.
Cafua rejects Duffy’s accusation with a roll of his eyes. At one point, he says, a different activist argued that the building couldn’t be torn down because a ghost believed to be living in it would have nowhere to go. The ghost will have to find alternate accommodations, though. The town finally granted him a demolition permit in August. (As of press time, the Hathaway House and the churches were still standing.)
Cafua has several reasons for shifting his focus to Florida, not the least of which is the fact that historic preservation in that state pretty much means picking the proper hue of blue when repainting the spires on Cinderella’s castle. It’s also a far less saturated market than southern New England, with just one Dunkin’ for every 27,000 people, compared with this region, where that figure is closer to 1 for every 5,000.
Another important reason: Cafua’s father, Fernando, doesn’t golf. Since retiring with his wife to Palm Beach Gardens, the man who started the Cafua empire has kept busy doing what he did before retirement — driving around to identify ideal Dunkin’ locations. Every month, Cafua hops a flight to Florida, and he and his dad go on their version of a hunting trip. They’re in the car by 7 a.m., their laps covered with marked-up maps, real estate listings, and traffic studies. They’ll keep going until 9 at night, compiling a development prospect sheet that Mark Cafua will then turn over to his managers.
The biggest fish, like the Cafuas, know that the real money doesn’t come from selling donuts or even coffee. It comes from owning the land under those orange-and-pink signs.
THE MAN WHOSE family originally brought Cafua’s father into the Dunkin’ business and who also was responsible for opening the DD door for Gary Joyal is now retired. But you’d never know it from the way his eyes perpetually patrol the Braintree shop where I meet him for coffee. Tony Andrade, who is 71, arrives in his white golf vest, fresh from a round he had played at the private club in Sandwich he co-owns with, among others, Bobby Orr. He doesn’t own this store anymore, but old habits die hard. During a break in our conversation, he summons a worker to chide him for not wiping down a nearby table.
Andrade once owned 36 Dunkin’s and a long inventory of real estate holdings that gave him a net worth that he says was “way more than $50 million.” That was before he started selling off stores so he could turn over a more manageable portfolio to his son and daughter. He knew they had little interest in having Dunkin’ consume their lives the way it had his.
He ended up turning over 11 stores to his kids, one in Abington and 10 in Braintree. Why had he opened so many in just one town? Partly, it was a function of different traffic patterns — the Dunkin’ formula is all about making it easy for customers to get to several shops in the course of their day. And part of it was defensive, to keep competitors off his turf. If you’re going to have a store cut into your business, Andrade tells me, it’s better if it’s yours.
Any cut in his business, though, couldn’t have been much. “This store here,” he tells me, pronouncing the word like stow-ah, “does $2.5 million in business a year.” When he bought it, he could fit only a short drive-through lane that was forever backing a line of cars out into the street. So he bought the house behind the store and redrew the drive-through lane around it. The new line accommodates up to 30 cars — the kind of ample “stack” that is critical to keeping a drive-through running efficiently. “People are lazy,” he says. “They don’t want to get out of their cars.”
Although Andrade sold off the bulk of his stores, he kept the real estate. A few lessons in Dunkinomics and it becomes clear why. Lots of Dunkin’ leases are structured as “triple net.” That means the tenant (in this case, the franchisee) pays for everything — utilities, snowplowing, replacing the roof, even real estate taxes. If the tenant doesn’t do a good job with upkeep of the property, the Dunkin’ brand — not the landlord — is the one that plays the heavy. (As part of their agreement with the Dunkin’ brand, franchisees are required to keep up the condition of their stores.) All the landlord has to do is sit back and collect, usually 10 percent of that store’s gross sales for the month. When this Braintree store rakes in $2.5 million a year, Andrade collects $250,000 without having to lift a finger. “Real estate and Dunkin’ Donuts,” he says, “is a perfect match.”
Pros like the Cafuas mastered the real estate side of the business early on, following a path blazed decades earlier by the Andrades. In 1960, at the age of 17, Tony Andrade left his village of Vila Franca on Sao Miguel in the Azores and came to Boston, taking a job at a furniture factory. His older brother Manny was already here. Manny worked in Rhode Island for Dunkin’, which had been founded in Quincy in 1950 and within a few years had adopted the franchise approach being pioneered by McDonald’s and Kentucky Fried Chicken. By the end of the 1960s, Manny bought his first Dunkin’ store and, in 1975, Tony followed suit with a shop in Holbrook. Before long, they each owned multiple stores and had brought other various brothers, brothers-in-law, and cousins into the business.
Then, when they ran out of relatives, the Andrades brought in others from their native village of Vila Franca. Tony would pick one of his hardworking employees and sell him a franchise, loaning him the money through a 10-year mortgage. He’d work out the math so the former worker could make a decent salary in addition to covering all his costs, including making his note payments with interest to Andrade. After busting his butt for 10 years, the former employee would own an investment that today is worth $1 million or more.
At one point, the number of stores owned by the Andrades or people they had brought into the business topped 400 (though they never functioned as a single entity). And almost all of these owners could trace their roots back to Vila Franca. That includes Mark Cafua’s father, who was a baker for Tony Andrade’s brother-in-law (though the two families no longer have any business relationships). Cafua says by his count more than half of the nation’s 10 largest Dunkin’ franchisees are Portuguese families with Azorean roots.
In the early 1990s, as Tony Andrade continued to grow his Dunkin’ and real estate empire, he found himself getting nonstop calls from a man selling life insurance. Gary Joyal had heard about Andrade and had sensed he would be a good client, though he had no idea how good.
One day, Joyal got directly through to Andrade. He asked if he could meet with him to review his life insurance policies. Andrade was tempted to hang up, but he knew that this was an area of his life he had neglected. And he knew if he didn’t meet with Joyal, the guy would never stop calling.
The two men made for an unlikely pair. Andrade is short, with an Old World sensibility that borders on a kids-these-days crankiness. Joyal, who comes from French Canadian stock, is tall, flashy, and sunny enough to refer to strangers as “my friend.” Yet both, as it turned out, shared a searing drive to be successful. Both were motivated by the slights they suffered from people who didn’t take them seriously. (Each separately recounted for me in exquisite detail the embarrassment and anger he felt when he applied for his first mortgage and the bank denied him. Granted, Joyal made his mortgage application to build a house while he was a senior in high school.)
And both had come from nothing. Andrade, who splits his time between Osterville and Florida, first arrived from the Azores with only the hundred dollars his father had given him. Joyal, who owns trophy homes on a golf course in Boca Raton and on the water in Plymouth, grew up in a family of limited means, led by an exceedingly frugal father.
He and his older siblings were required to pay room and board, to use the outdoor shower right up until winter, and to shovel out the septic tank when it got full. “We were allowed to go out to eat once a month,” he says, for breakfast at a local diner after church. And there were rules, including no ordering of bacon or drinks. The family of six brought along a jug of orange juice, which they had made from frozen concentrate at home. “That stays with you,” Joyal says.
Andrade saw something of a kindred spirit in Joyal. Before long, Andrade wasn’t just letting the younger man handle his estate planning. He was opening the door for him to meet lots of the people Andrade had brought into the Dunkin’ world. Joyal then used his hustle and savvy to convert those introductions into new clients, building his business brick by brick, medium regular by medium regular.
AS WORLD WAR I was winding down and the Ottoman Empire was in rubble, British and French power brokers sat in ornate rooms and drew lines on maps of the Middle East, opportunistically carving up territory to create what would become the new countries of Iraq, Syria, Lebanon, and Jordan. A British general and a representative of the Anglo-Persian Oil Co. on their own decided the northern border of Palestine.
For some reason, I’m reminded of that piece of nation-building history as I sit on the refined upholstery of the Boston Harbor Hotel for the meeting of the Dunkin’ titans. Before Joyal can locate a conference room, Mark Cafua and Dan Fireman huddle in the lobby, hunched over a map of Florida. Cafua’s stores there are on the east coast, stretching between West Palm Beach and Miami. Fireman’s are on the western and southern coasts, covering the area from Sarasota down to Miami-Dade and all the way out to the Keys. Still, there’s some overlap, and the men discuss whether they should swap a few shops.
Other Massachusetts guys have also become important players down South. Fireman’s group bought its Dunkin’ stores from David and Ronnie McNulty, who sold their shops in congested Massachusetts a decade ago to stretch out in Florida. The McNulty brothers have now moved into the emerging Dunkin’ market in Atlanta. Last year, franchisee Tim Cloe used Joyal’s firm — and a financial maneuver the IRS calls a 1031 asset exchange — to sell 13 Massachusetts stores and buy 22 new ones in Orlando, plus additional development rights, while avoiding a huge capital gains tax.
But Cafua and Fireman, by virtue of their resources and ambitions to add many more stores, have instantly become the biggest players in the Sunshine State. “With these guys both planting their flags in Florida,” Joyal says, “it’s injected a huge shot of testosterone into the market.”
Joyal has been able to use this new reality to explain to longtime smaller franchisees down there that they now basically have two choices: Either arm up and expand in order to compete or make an exit, taking advantage of the premium prices that Dunkin’ shops are now commanding in Florida.
Joyal says he always represents the seller in these transactions, but through his close dealings with people like Cafua, he’s also working for the buyer. “Is it a conflict?” Fireman asks. “Yeah, but it works.”
Fireman says Joyal’s deep Dunkin’ knowledge saves him and other buyers time by making it easy to tell which franchisees are serious about selling. And by working with Joyal and Cafua directly, he says, he’s hoping to avoid having sellers drive up asking prices by playing him and his deep pockets off Cafua and his.
Joyal can tell who’s serious about selling because of his knowledge of both the overall franchisee landscape and the particular estate plans and family situations of many individual franchisees. “He knows a lot about each one of these families,” says Mitzi Lawlor, a second-generation franchisee whose family owns 26 stores in New England. “He’s able to put the right people together.” But he’s also careful to keep that information to himself, in turn making his role more valuable to both sellers and buyers. “He doesn’t tell me anything about anybody else,” she says. “And I’ve asked!” (Joyal reports that he just orchestrated the sale of a handful of Lawlor’s stores to one of Tony Andrade’s cousins.)
Despite the growing consolidation in the franchisee world, Joyal knows that these networks are still family businesses at heart. So they can be particularly susceptible to the vicissitudes of family life, everything from sibling squabbling to marital splits. It’s a lesson he knows better than he would like. In 2011, he and his wife of 22 years broke up, sparking an exceedingly acrimonious divorce that dragged through the courts for several years. Although the truth about finances is often elusive in divorce proceedings, Joyal’s divorce records are perhaps the only place where he can be found worrying about financial peril rather than projecting lavish prosperity.
Joyal concedes that he often wasn’t there for his daughter, who is now 23 and working in restaurant marketing, and his son, who is 20 and working at his firm. He says he may have been present for more milestone events celebrated by Tony Andrade’s kids than his own. For his daughter’s graduation from a parochial high school in Hingham, he was running late after landing at the airport from a business trip. En route in the car, he called his mother and asked, “Where is her high school?” He’d never set foot there.
He says he and Cafua are both wired for working to extremes. “We’re like damn greyhounds,” Joyal says, “always chasing the rabbit.”
All that work is paying off handsomely for his company (in which his two older brothers are also involved). As Dunkin’ pushes its national expansion more aggressively, moving back into markets like Texas and California where it failed in the past, the ambitions and resources of Cafua, and the knowledge of Joyal, become ever more valuable.
Grant Benson, vice president of franchising and business development for Dunkin’ Brands, stresses that Dunkin’ is still a viable route for small family operations. But Cafua and Joyal say that ever since Dunkin’ went public in 2011, big, well-capitalized franchisee networks have taken on far more importance. Unlike small operators, these big players are able to open lots of new stores very quickly. And all those new stores translate into higher franchise fees for the brand, which help drive up the price of Dunkin’s publicly traded stock.
Benson says that the brand has “no relationship” with Joyal. “Franchisees are free to use whoever they wish as business brokers,” he says, comparing Joyal’s role to that of a real estate agent. “We don’t care who their realtor is.”
But Dan Connelly, who was a business development manager for the brand before going to work for Joyal eight years ago, says of Dunkin’ executives, “I don’t know if they realize how many dots we touch.” In addition to marrying buyers with sellers, Joyal’s operation runs a private equity fund that provides franchisees with financing to develop new stores.
Fireman says his family’s private equity firm likely would have stayed out of Dunkin’ and Florida were it not for some intriguing data trends. With more than 700 Dunkin’s, Florida already ranks as Dunkin’s fourth biggest state, after New York, Massachusetts, and New Jersey. And that trend promises to continue given the increased brand awareness from the growing number of snowbirds settling there, the flattening of food costs because of improvements to the Dunkin’ supply chain, and the increase in the percentage of sales going to high-profit-margin beverages. Although Cafua’s family made two previous forays into Florida years ago, only to retreat, those had been with partners who handled operations. This time, the Cafuas will be calling the shots.
With Cafua and Fireman both on the march, Joyal sees it as his job to make sure they don’t smash into each other. The biggest difference between the operations is that Fireman’s involvement has an expiration date. By virtue of being a private equity investor, Fireman expects to cash out of Dunkin’ in three to 10 years. And when he does, the most likely buyer, if he continues on the same path, will be Cafua, the man sitting next to him in the hotel lobby, hunched over a map.
“If we’re going to get married eventually,” Joyal says, “why not date and have an amazing time and lots of foreplay, rather than talking about divorce?”
For Fireman, Dunkin’ is an investment. “I don’t breathe Dunkin’ the way Cafua does,” he says.
Cafua also eats, sleeps, and bleeds Dunkin’ black, expecting it to define his family for generations to come. Interestingly, though, he doesn’t really drink it.
He tells me he starts his day with a sausage, egg, and cheese on a French roll and an orange juice. Not hearing him mention the drink that his empire runs on, I ask him if I missed something. His face reddens a bit, and then a smile forms at the corners of his mouth. “I’m not much of a coffee drinker.”
Luckily for him, lots of other people are.