Time to Make the Donuts

Introduction

Nothing is brand new. Whether it’s franchising, the Internet, or something else we haven’t even considered yet coming down the pike in the future, basic tenets still apply. My successes came from hard work, borne out of determination and risk-taking, persistence, innovation, vision, and passion.

I can’t tell you the number of times persistence has come up as the most important trait - more than intelligence.

If you really want to be successful, you have to be willing to put in the time and effort. Most of the “luckiest” people I have met are the hardest working and most determined. Winning takes effort.

Yup. Luck is the word the indolent use to dismiss the achiements of their betters.

In 1960, when franchising was in its infancy, most people looked upon it as an outcast or misfit, but I believed it was the epitome of entrepreneurship and free enterprise. Today franchising has proved to be one of the most dynamic economic factors in the world.

There’s a whole second half of the book where he goes off on franchising. It really is his jam. He sets up a franchising organization and preaches the gospel of franchising. I think it’s a great way to have a decent outcome if you’re not innovative. You follow a playbook, and as long as you’re a good operator you can have a decent outcome and retire with 10 million-ish. But I’m not as gung-ho on it as he is.

Life will test you, that’s a promise. It’s what you do with the challenges that determine your failure or your success. I fought lung cancer in 1971. I battled lymphoma six years later. I prepared for my death and got a reprieve. I’ve had three hip replacements. I went through a divorce and remarried.

I really like this guy. It’s hard to read this book and not.

Many times along the way to achieving my goals, I ran into roadblocks and made mistakes. The difference is that successful people learn from their errors. We turn pitfalls into windfalls. As I see it, most people do their job, work hard their whole lives, and wonder why things couldn’t have been better. That’s because a large percentage of the population is full of excuses. They have NMA, or Negative Mental Attitude. These are the naysayers. These are the people who will tell you all the reasons why something can’t be done. They’re the complainers of the universe. Nothing’s ever right for them. Then there’s the 10 percent who overachieve. They’re bursting with PMA, or Positive Mental Attitude. They’re the ones who come to you for a franchise, then come back six months later for another and still another. I’ve always said that it doesn’t take a genius to do what I’ve done, but it takes passion, determination and persistence, and above all PMA.

He really has a great attitude. It’s no wonder that he’s successful.

Attitude is everything. That’s what will determine the quality of your life.

He says this over and over, but he’s just flat out right, so it bears repeating. Have a good attitude. Life will reward you.

My philosophy is this: Don’t reinvent the wheel. Your problem is not brand new. Someone encountered it previously. Find out who solved it best and start where they left off, not where they began.

Mr. Beast says almost the same thing. If you’re making the world’s largest pizza, find the guy who made the second largest pizza and ask him for advice. Stop starting from scratch everytime!

Childhood

In order to go, Betty and I had to awaken at four in the morning, dress, and be ready to leave by five. We took off to the market in my father’s Model-T truck through deserted streets.

Waking up at 4am as a 5 year old is insane.

[T]he one thing that we looked forward to the most was a visit to the diner. That’s where they sold the biggest nickel jelly donuts you ever saw.

[sic]

Those hot cake donuts—man, they were delicious! The memory of them bore into my mind for the rest of my life.

And thus the seed for his life’s work was born.

He broke wild horses and trained them to pull wagons on company routes. According to my father, one of the horses kicked him and split his finger open. He stuck his bloodied finger into the open flame of a gas burner to cauterize it. Another time playing football, he told us he got hit in the face and broke his nose. He just wrapped a handkerchief around his nose, tied the cloth behind his head, and finished the game. Pop never earned much money, yet he was a community leader. From policemen to politicians, he cultivated relationships with people in high positions. He was a thinker, a man of ideas.

His dad was a tough man, and he passed that toughness to his son.

My mother taught by example. Industrious from morning until night, she was a great cook, a great baker, and housekeeper. She managed all the household chores. She hand-washed the clothes on a washboard and put them through a ringer, then hung the clothes out on the line. She cleaned the rugs by beating them with a paddle. You have to remember we didn’t have vacuum cleaners or automatic washers and dryers in those days. She was always busy doing something. She also had the ability to get along with people—no matter who they were.

[sic]

The fishmongers threw away the heads, tails, and bones. My mother would get them for nothing and make fish stew. These are the things my mother learned to do and that I learned to apply in my businesses: Find solutions under any circumstances. I learned from her that it’s possible to create something out of nothing. She was terrific that way, very resourceful and energetic.

Imagine how poor you have to be to do that. Good on his mother for managing in such a situation.

He had strong principles and high moral standards. He used to tell us all the time, “Listen, I always want you to tell the truth. I cannot bear to have anybody lie to me. Don’t ever lie to me. If you tell me the truth, no matter what you do, God forbid even if you commit murder, if you tell me the truth and tell me the story, I’ll go to hell and back again to try to help you. But if you lie to me, I can’t have anything to do with you. I cannot tolerate a liar.” He taught me if you’re dealing with a drunk, keep the whiskey away from him; if you’re dealing with a gambler, keep the money away from him; if you’re dealing with people who have weaknesses, try to keep them away from the weakness; but there’s nothing, nothing in the world you can do to solve the problems of a liar.

His father quickly established a reputation for being a fair man - a reputation that would serve him well.

My father also taught me that reputation, not money, was the most important thing in the world. I heard this over and over in all kinds of situations. If I told a fib or did something wrong around the house or at school, he’d reiterate it. He said, “You know, when you die, the only thing you’re going to die with is the reputation you created as a person when you lived. All the money in the world isn’t going to make you a better person. You’re going to be respected and remembered for the type of person you were and the character you had. So be truthful, be honest, and be a good neighbor.”

Extremely wise words.

But my father had a blind spot. With all his innate ability, his cleverness, intelligence, and salesmanship, he always wanted to start near the top. Consequently, most of the time he was always shooting for what I thought were unreachable goals. He had big ideas for things, but he didn’t seem to want to start at the beginning and work up to those goals. As a result, he often failed to obtain them. From this I learned to set goals that are obtainable. If you start out setting too high a goal in the beginning, you set yourself up for failure. I applied this principle to all my ventures—Industrial Luncheon, Wilrose Farms, Dunkin’ Donuts.

Reading between the lines, his father’s unrealistic goals is a large part of why they were so poor growing up. Rather than making that first thing work, he would immediately jump to the most unrealistic goal.

[W]hen I opened my first Dunkin’ Donuts store, I focused on making that first store a success, then I moved on to the second store, the third, and the fourth. I gave my heart and soul to making that first store a winner. You start and learn and build and keep changing your goals as you achieve them.

He learned from his father’s mistakes.

When I was about eight, one of the McGee brothers wanted to fight me on the sidewalk outside my house. I ran into the house and my father said to me, “You don’t run from anybody, anytime!” I never liked to fight. I wanted to be friends and get along. But my father made me go out and fight. So I fought with Arden McGee. After that my father made us shake hands.

Parenting in the 1920s was wild.

I don’t know how much those guys made that day, but they gave me $71 for my share. I got home and gave $71 to my mother and she cried, “What did you do? Where did you steal this?” She couldn’t believe that an eleven-year-old kid could make that much money in one day. I said, “I made it! I made it!” She couldn’t believe it! Seventy-one dollars was a fortune for us.

He’s clearly talented at selling from an extremely early age. He legitimately earns $71 for selling ice and of course his poor mother thinks the only way to get that money was to have stolen it!

In those days we didn’t have refrigeration. If you wanted a 25-cent piece of ice, you put a card in your window. When you turned the card one way it meant you wanted a 15-cent piece; another way meant you wanted a 50cent piece. Sometimes I had to go to the third floor of a tenement with a 50-cent piece of ice, which was pretty damn heavy for a young kid to lug. Then the water pan underneath the icebox would be full, so the woman would ask if I would please empty it. I’d walk back down with a big water pan, empty it out, bring it back up, and put the pan under the icebox after bringing the ice up. Well, I want to tell you, by the end of the day I was ready to be buried. I mean I was really sore.

This was hard, grueling work.

From an early age these working experiences taught me that if I put my mind to it and worked hard at it, I could do whatever I was doing as well or better than most. I learned to strive for excellence. I learned if I really believed I could do something and had the proper attitude—a positive mental attitude—and was there to serve the people, I could succeed. It didn’t make any difference if I was shining shoes or selling newspapers.

But it builds character.

I said to myself: If he can make that kind of money selling magazines, why can’t I? So that’s how I started selling magazines. If I saw someone shining shoes, and they were doing well or better than others, then I would ask: Why are they doing so well? Do they have a better location? A better corner? Better traffic? So I would say to myself, If that’s the case, I have to get myself to a better corner with better traffic and shine shoes, smile, and make friends. Without really knowing it, I got into the habit of thinking like a winner. I’d ask myself: Can I do this? Sure I can do it. If someone else can do it, I can do it, too. You can have a negative mental attitude and say: They must be lucky. I’m not that lucky. I can’t do it. Or you might say: Not everybody is doing it, or only a few people are doing it. But those are excuses. I used to look at it another way and say: If anybody else is doing it, then I can do it as well or better. I developed this positive mental attitude at a very early age.

This is one of those books that really drives home the power of a positive attitude and a good character. I think this is my biggest personal weakness - I had too easy of a childhood. Even to this day I get angry too easily. I’m always blowing up and swearing.

During Prohibition, the cops used to ask my father why he didn’t sell alcohol. They told him he could have made a fortune selling booze. But he refused because he wanted to protect his reputation, which he valued more than money or anything. Many years later, when I opened Dunkin’ Donut stores, I made our stores hospitable places for the police. This attitude served our company well: It protected the stores and it kept the crime rate very low.

Extremely wise move. Especially since they were one of the few Jewish families in a Christian neighborhood, it’s even more important to have a reputation for being law abiding.

My father had a violent temper. In a rage, he would tear up the linoleum in the kitchen. One time he got so angry with me that he picked me up and threw me through the screen door. It looked like a movie.

Yikes.

[O]ne of the best lessons I ever learned from my dad is what he didn’t do properly. For all his innate abilities and potential, he taught me what I never wanted to have happen to my family. I learned that my first obligation was to take care of and financially support my family. That was probably the thing that brought us the greatest unhappiness, the fact that we lived in such dire poverty and my father never provided for us although he was capable. I never, never wanted my family to go through the sufferings that our family went through because of a lack of money. Sometimes the best lessons you learn in life are from what you discover in the weaknesses of otherwise very good people.

He says it kindly, but man did he resent his father for growing up so very poor. Keep the main thing the main thing. Provide for your family first - even if that means you don’t accomplish your dreams. That’s what it means to be a provider. Sacrifice.

I also learned a few tricks to speed my delivery time. If a truck stopped at a light or an intersection, I grabbed hold of the back, and when the truck started, I raced for as long as the truck would take me. I did the same thing holding on to the back of streetcars. The trolley didn’t go as fast as trucks but it gave me a break from pedaling constantly. After a while, I gained a reputation for riding the bike quickly.

He soon switches to be a delivery driver. All throughout his childhood he’s picking odd jobs.

Wouldn’t you know it? I raced to Royal Arcadian, breaking the record that existed at the time. As a result, we got the account. That was a big deal for me, just a kid on a bicycle. But it taught me that the customer is the boss. It was the customer who decided to hire our company, not the other way around.

And he’s really good at it.

I dressed warmly in a winter jacket and hat and gloves and started to pedal to work. But it was bitter cold. I mean, by the time I got to downtown to report in that morning, the people in the office had to come out and pry my hands off the handlebars. My gloves had frozen to the bars! I was in agony. They took me inside and put my hands in the sink under cold water. I finally got my hands thawed out and went to work. I made a lot of money that day. People were full of Christmas spirit and good cheer. I got plenty of tips—quarter and half-dollar tips and hot toddies. Despite the rough start of the morning, I had a fantastic day. I took in as much that day as I normally would in a week. It made up for the pain of my frozen hands.

Persistence. Persistence. Persistence. Persistence.

On the Milton route, I painted the front of my truck with the letters HERE COMES BILL, and on the back of my truck THERE GOES BILL. The kids used to yell, “Here Comes Bill!” I had a great following. I loved kids and they liked me. I did very, very well in Milton.

He’s a natural born marketer and salesman. I don’t know why UPS or Amazon trucks don’t do this today. People would love to get to know the drivers assigned to their route. I know my two year-old would!

Whatever the reasons—lack of education, the circumstances from which I came—I had a fire in my belly, a determination to succeed, a determination to do as best as I could. The striving for excellence started at an early age and never stopped. The more I achieved, the more I felt I was capable of achieving, the more confidence I gained, all of which helped me reach greater heights.

You want small wins early on in life overcoming genuine hardship. It’s what builds the confidence.

At work, I never did anything halfway. I threw myself into it and gave it my all, always looking for ways to be more productive. I never took holidays.

How can you not love this guy? Any employee that has this attitude is immediately getting promoted to the top.

One day Harry Simberg came in and said, “We use the finest chocolate. There’s something strange about the chocolate syrup. How are you making it?” I said, “Exactly as I’m told. I take ten gallons of hot water and ten pounds of sugar and make simple syrup and mix it together with the chocolate syrup.” “Where do you get the hot water from?” I showed him the hot water spigot. He said, “Can’t you understand what you’re doing? You’re taking it out of stagnant water standing in the boiler! You should take cold water and boil it.” He taught me something that day. He taught me that a minor thing like that could affect quality control and affect the taste of the product. I never used hot water from the faucet again, and I learned to uphold strict standards to ensure top quality in the product. He helped me do a better job.

He takes feedback well and improves! What more can you ask for?

I got so involved in work, it got my mind off the anxiety neurosis. Ultimately I started to get better. That’s when I found out the only way to cure yourself in a situation like that is to get busy with something else. Get your mind off your problems and forget about it. If you’ve never experienced anxiety neurosis, the terror one feels is hard to describe and harder to understand. But that was a bad time. I’ll never forget it as long as I live.

Work genuinely can set you free. He experiences these panic attacks all throughout his life, but the work is what saves him.

As I stood there, I remember saying to myself: I wonder what it would be like to have time off? Look at all those people going away to lakes and camps to enjoy the holiday. I’ve never had that in my life. I’ve always had to work.

He’s in his late teenage years at this time. Imagine being so poor and working since as long as you can remember.

I learned an important lesson about sales: You don’t sell to people, you get people to buy from you. There’s a big difference in what I mean by this. You say to yourself: If I were in their position, why would I buy this product I have to sell? I would start to figure out what would sell me, what would make me want to buy it if I was in their shoes. If I was in their position, why would it be to my benefit? That was my approach and it worked beautifully.

This is the heart of all sales. Focus on the customer, obviously.

My mother, who was approaching fifty, had never, not once in her life, been outside the greater Boston area.

A reminder of just how poor people were back in the day.

For all his smarts and business savvy, Harry believed that you paid people as little as you possibly could. He had the attitude that, after all, employees were going to steal enough to take care of themselves, and they would make sure they got what was coming to them. He never considered putting us on a profit-sharing plan. Consequently, I learned to do just the opposite: to share with people. He taught me a lot of lessons, but the most important one was to share with people.

His first boss is legitimately awful, and he learns as much from Harry as from his father.

Larry and I walked in to Simberg’s office and told him we thought we ought to be more properly compensated, with some sort of profit sharing or incentive program based on results and production. Harry Simberg was very independent. In those days, no matter who you were, it was very difficult to get a job. That put him in a strong position as an employer. So he said, “Look it, if you don’t like it you guys can quit.” We decided to leave. Despite all his strengths and all his abilities, and he certainly had many—he was smart and swift, he had the ability to sell, he was a great salesman, a great motivator—Harry never did learn how to share. As a result, he didn’t build a strong enough organization. The best people left him; he wound up with people who weren’t as good, and ultimately the business didn’t succeed.

Get the best people, and pay them well. Really basic stuff.

What the hell was I going to do? I could barely put a plug in a socket! When I got home from the shipyard that day, I went to my brother Leon, who knew a good deal about electricity. Leon told me I had to have a toolbox. We went down to Sears. I bought a toolbox, a pair of pliers, a roll of tape, and a screwdriver.

[sic]

John saw me with my toolbox, and he must have said to himself: This guy’s no electrician, this guy’s bluffing. He said, “Rosenberg, down on Pier 6, you’ll find a welding machine that’s shorting. Go down and straighten it out, will ya?” I went down to fix it and, let me tell you, I was ready to piss in my pants, I was so frightened. I didn’t know the first damn thing about it. Anyway, I got down to the machine. I stuck my nose in and reached to see what’s going on and BANG! I got the shock of my life! I found out later that it generated 13,000 amps. I sat down on my can. I had some tingle on my nose! It scared the shit out of me.

Too funny. He bluffs his way into a job, but I suppose that’s just what you have to do during the Depression.

On the day of voting, Barney ran up to me and said, “Bill, Bill, they’re stuffing the other ballot boxes because they’re realizing how many votes you’re getting.” We reported it to the union officials. Wouldn’t you know, I became the first Jewish union delegate in the company. I had more votes than all the other candidates combined.

He’s obviously very charismatic.

You can have the greatest system in the world, but if you’ve got the wrong people running it, the system will fail or underperform.

Get good people - it always comes back to the basics.

He wasn’t used to people standing up to him as I did. It wasn’t a matter of what was right or wrong; he simply wanted things done his way. When you start to achieve success, you will find that you will run into these types of situations with people. I’ve come to the conclusion that you can’t do much with people like that. You have to move around them and move ahead toward your goal. It’s the best defense against it. Keep your sights on your standard, stick to what you know is right in your heart, and you will stay the proper course. The good people will gravitate to you.

I really like how plainspoken his writing is. It’s easy to understand and even easier to apply.

It’s important to remember the people who helped you when things were tough. Nobody obtains success solely on his own. Every success story is about good teamwork: people helping each other to reach a goal. It’s a fact that can never be overemphasized.

Be grateful for the people who got you there.

I found if you want to be successful, you have to be willing to stick your neck out. You have to be willing to go where you’ve never been before. You’ll find that you won’t necessarily get what you want every time, but you’ll never get what you’re seeking if you don’t take the risk in the first place.

You have to be comfortable with risk!

That day I learned that everything is comparative. I felt awful about losing my brother Donald, whom I loved dearly. Yet, unsettling as it may sound, it was a relief compared to what I had imagined about my wife and kids.

A very sad truth in life.

I wanted to go into business for myself. I had a fire in my belly—that essential ingredient that all entrepreneurs must have—to go out on my own.

Yup. At the end of the day, every entrepreneur is unemployable.

Achieving a dream is never easy. It takes persistence and focus. You have to make it happen because it won’t just happen to you.

Persistence. How many times does he say it in the book? Maybe over one hundred.

…it came to my attention that my partners were not on the level. They had been going to New York, getting contracts for candy and cigarettes—things that were not available because of the war—and turning around and selling them on the black market. We had been allocated these desirable items because we were serving them to people working for the war effort. When I discovered what was happening, I realized I was in business with the wrong people. Shortsighted and, in my opinion, unpatriotic and dishonest, they weren’t interested in building a long-term business. They were only interested in a fast buck, buying their wives mink coats, and driving Cadillacs. I confronted them, saying, “This is not the way I want to be in business.” Well, they apologized for not cutting me in. They thought I was angry because they were taking in money and not sharing it with me. That was, of course, something to be concerned about. I had had enough of not sharing from my days at Jack and Jill. But more important, they didn’t have the same ideas that I had about building a business. These guys didn’t care about gaining respect, being honest and honorable. I didn’t want to be in business with people of that nature.

Like so many budding entrepreneurs before him, he ends up being kicked out of his own company. And like many others, it’s for the best.

Adversity is a great teacher. Little did I know that this downturn of events would catapult me to higher ground.

Exactly this. Same thing happened to James Dyson.

Dunkin’ Donuts

“How much are you going to charge for coffee?” I told them 10 cents. They said, “Are you out of your mind? You can’t charge 10 cents for a cup of coffee in the Boston area.” Waldorf Cafeterias, the Walton Cafeterias, Hayes Bickford, Childs Cafeterias—all the cafeterias outside the high-class hotels sold their coffee at five cents a cup. I said, “You can’t sell good coffee for five cents.” They said, “We know you can’t, but that’s what people are paying and they won’t pay a dime. People who have tried can’t get it.”

[sic]

“You can’t do it,” the coffee and dairy vendors all said. “Others are selling six ounces of coffee for five cents, but it’s not really coffee,” I said. “It’s flavored water. I’ll give them twelve ounces for a dime.” “You can’t do it,” they said. I said, “Watch me.”

People always pay for quality.

“It’s a pretty lousy-looking thing,” Leon said, referring to the man’s automobile, but the man was getting a nickel for the coffee. “Nobody will pay a dime for our coffee. They won’t even try it,” he said. I said, “Leon. Call them over and say, ‘Here. Take a cup of coffee for nothing, and if you don’t like it, don’t pay me. If you think it’s worth a dime, pay me.’” As a result of that, everybody tried our coffee. Then everybody left the other man and came to us and that was the end of him. Nobody wanted to go to his dirty old car and buy his second-rate merchandise. We had a first-rate outfit with a uniformed man selling the finest cup of coffee you could get in the city of Boston.

I’ve said this a lot, but in food, quality is always the key. Dunkin’ Donuts may have the reputation of being the cheap value chain today, but in the beginning, like every other fast food, it got traction due to quality. When it started, it was the premium option! It was twice the price as the competition.

That’s how we came up with the stainless steel bodies for the chassis and designed what is commonly called the canteen truck. You see them everywhere now. Our trucks opened up on the sides. We were innovators and creators, doing things differently.

And of course, technological innovation is not far behind. You need a way to deliver quality at scale.

Our men knew the price of most items, but sandwiches were difficult to tell apart and had different prices. I thought that since we were already using waxed paper that had two stripes on it (to wrap the sandwiches), why couldn’t we get waxed paper with a blue stripe, a red stripe, a yellow stripe, a black one? Red would represent a 25-cent sandwich, blue a 20-cent sandwich. That way my route man could stand back with his money changer and bang, bang, bang, look at the colored stripes and know the prices instantly.

Really common-sense, instantly obvious fixes to problems. He’s a born operator.

As we pushed these carts through, once again I noticed the lines got tied up, just as they had with the trucks. To remedy that problem we made the carts double-sided and triangular, so that the shelves on the carts stacked wider at the bottom with the replacements. As the men pushed the carts through, people could line up on both sides. That’s how the dual cart got established. It helped the lines go twice as fast.

Over and over, find the obvious problem and come up with the obvious solution. Don’t overcomplicate things.

I came inches from quitting the business that day. Then I said: Wait a minute! I’ve worked so hard. I found a way to get these things done before when everything couldn’t get done. I did things when everybody told me they couldn’t be done. Now I’m going to convince myself that I can’t do it? No, sireee! I picked myself up and went back in, got a cup of coffee, and started to figure out what to do.

Remember that every success has its hard times. Every trillion dollar company today almost went bankrupt multiple times, and every successful founder almost meets their breaking point.

I felt that if I could educate these people as to what our problems were and take them into our confidence, we could catch potential problems early before they mushroomed into something larger. As a result of this approach, we did business with the Teamsters union for eleven years. We had a very good relationship and we never had a strike—never had the men “hit the bricks,” as they called it. Maury Epstein told me that in all his years of experience dealing with unions, he had never seen anyone who had the ability to get along with them as well as I did.

I’m always impressed with people who can deal with ideologues - and make no mistake, unions are absolutely that.

The union at the arsenal kept complaining to the point that I felt we had become the scapegoat for imaginary problems. So I sat down with Sam and said, “This is ridiculous. I know we’re doing a good job here. They love you, but they keep complaining and making you look like a jerk, so here’s what we’re going to do.” I explained to Sam that I would use psychology. “I’m going to go into the meeting, and I’m going to blame you and get angry at you for doing a bad job.” I told him not to worry, the union would come to his defense. He wasn’t sure about that but he went along with me. At the next meeting, the complaints started again. I said, “You know, gentlemen, I’ve been coming here on a regular basis. Some of these items keep reappearing. Frankly, I don’t know what the hell to do. Something is radically wrong here. We buy the best products, the best equipment. We pay our people well, and we’ve got good people working for us. If we can’t satisfy you,” I said, “there’s something wrong. The only thing I can think of to do is replace my manager. Sam Berkeley’s not doing a good job.” “Wait a minute,” the union representative said. “Don’t blame Sam.” “Who the hell should I blame?” I asked him. He came to Sam’s defense, just as I thought he would. Sam and I went back to the office.

Brilliant maneuvering.

He told us we had the best product in the world for yeast-raised donuts but that he knew of a small outfit called Stark that made the finest product for cake donuts in the world. We gave Stark a try and he was right. We started using Stark’s mix for our cake donuts and Joe Lowe Corporation’s mix for all our yeast products. As a result, we were turning out superior donuts.

Quality every single time - especially in food!

…manufacturers had started coming out with automatic wrapping machines with ultraviolet lights on top for sanitation. When the sandwiches went on conveyer belts, they passed under the ultraviolet lights. We purchased this state-of-the-art machine at a high cost—somewhere in the thousands, which was a lot of money in those days—but it was worth the investment from many standpoints. It enhanced our sales pitch, too, because we could sell accounts by promoting our modern and clean commissary.

This was a big part of the appeal for KFC and even In-N-Out. The idea that you could see into the kitchen and it was provably clean. We take this for granted today.

This only goes to prove how people are. They get used to doing something a certain way, and they don’t want to do it another way. Then when you finally convince them to do it another way, and they get used to that, they can’t go back to the old way! People get into habits and resist change.

Absolutely.

I always wanted to serve the finest coffee in the world. But in order to serve good coffee from stainless steel containers, you had to keep it as fresh as possible. We made the coffee in batches, but we couldn’t keep up with demand. So we hired an engineering firm to come up with a solution.

At every step of the way, Rosenberg goes out of his way to ensure high quality.

One day Harry Winokur and Lew Rosen, who was now vice president in charge of cafeterias and canteens, called and said they would have to fire Carl Kemp, one of the best salesmen we had. Carl was handsome, loquacious, and a leader. He was an aggressive man, about my age, and very ambitious—a real go-getter. I said, “He’s the best salesman we’ve got. What’s the problem?” They said, “He’s a troublemaker. He’s leading the men against us.” I said, “You know what you do with a leader? You put him on your ball team. You don’t fire him.” We talked it over and I said, “He’s a troublemaker because he’s on the other side. Put him on your side, and then you’ll have him working for you instead of against you.” “No, no, no,” they said. So I said, “Let me talk to him.” I had a talk with Carl in my office. I told him he was doing a terrific job and that I wanted him to come to work as a supervisor in charge of routes. Carl accepted. Ultimately he became a vice president. Now we had Carl working on our side.

He has such a clear eye for people.

Just as my father had taught me, I came to the conclusion that if a man was a thief, a gambler, a drunk, or a drug addict, it was pretty difficult to correct those problems. The question was whether to live with the problem or do away with its source quickly for the benefit of the business. In most cases, I found I couldn’t correct those kinds of weaknesses. If a person had a problem for a long time, the prospects of correcting it were limited.

We learned this the hard way at Motion.

They called me and I went up to see him. He was heartbroken.

He said, “You know, Mr. Rosenberg, you’ve been so good to me all these years. I’m so sorry for what I’ve done. I know I did the wrong thing.”

I said, “You know you’re going to have to pay this back. You know that, don’t you?”

He said, “I know. I’ll do everything I can.”

“You should be terminated,” I said, “but every man deserves a second chance. You seem like you’re sorry and you realize your problem. You don’t want to destroy your family. You love your children and wife, but you started running around with this woman, buying her gifts. I’m going to give you one more chance, but I want to make damned sure you don’t ever do this again.”

He promised and was profusely apologetic. So we gave him another chance. A year later I got a call telling me he had been found dead. He’d put a shotgun in his mouth and pulled the trigger. He left a note that basically said: “Dear Mr. Rosenberg, I can’t face you. I am sorry for what I’ve done in the past, but I did it again. I realize how nice you’ve been and how good you were to me—” Rather than face me, he killed himself. I felt so sorry that, in trying to be a decent person, in giving a man another chance, I actually cost a man his life.

Never, ever, hire someone with a drug or alcohol problem. These are problems that require real professional help. They cannot be addressed in the course of regular busienss.

I put my faith in the average individual. We took route men and made supervisors out of them, and made supervisors into branch managers, and branch managers into vice presidents. It was management’s job to lead by example and by teaching. It was management’s job to enthuse others, so that the passion became contagious and spread throughout the entire organization. If we got an average person with above-average desire, someone with a deep belief in a cause, who could put that cause before him- or herself, there was no limit as to how far that person could go.

You cannot read this book and come away with a negative attitude. I don’t think it’s possible.

Right from the start, we were different. When we opened the Open Kettle in Quincy, we were the first outfit ever to put seats and beverages in a retail donut store so customers could eat on the premises in addition to purchasing take-out items. We offered coffee, tea, milk, and hot chocolate. The typical donut store had only four kinds of donuts: plain cake, jelly, yeast-raised, and a cruller. Thinking of Howard Johnson who sold 28 varieties of ice cream, I wondered, “Why can’t we make 28 or 52 or 108 varieties of donuts? If we can make a raspberry filling, why can’t we make blueberry, peach, banana—a multitude of flavors—for our donuts?” I figured that with fifty-two weeks in the year, we could run a different special every week. People talked as much about our coffee as they did about our donuts. After all, we sold the finest coffee that people could get anywhere.

Differentiation and quality, from the very beginning.

To serve fresh coffee or fresh products of any kind, we had a rule of thumb: Get the product into the mouth of the consumer as near as possible to the time the product is produced. At Industrial Luncheon Service we had developed a system of delivering fresh batches of coffee to central points—relay points—where the trucks met to pick up the fresh coffee in the early morning and again for the lunch hour. That way our coffee didn’t get old and our customers enjoyed fresh coffee for lunch and the balance of the afternoon. This is why our coffee was far better than what anyone else could offer.

I’m going to say this a hundred different times, so bear with me: look at the focus on quality in every aspect.

[A]ll these donut stores selling only four kinds of donuts and no beverages were not only surviving, they were doing a pretty decent business. I knew I had to get hold of this thing before somebody stole my idea. Traveling around the country I realized we really had something different.

Once you realize the magnitude of the opportunity before you, it is impossible to not act with urgency.

“Bill, do you realize how many ham sandwiches we’re selling?”

I said, “An awful lot.”

“Do you realize,” he said, “if we cut a quarter of an ounce off every one of these sandwiches, how much money it would amount to at the end of the year?”

I didn’t like that kind of thinking. So I became sarcastic and said, “Harry, do you know how much 100 percent of nothing is?”

He said, “What do you mean?”

I said, “You cut a quarter of an ounce, and the first thing you know, you won’t sell any.”

It aggravated me to no end when people thought negatively like that, when they didn’t put the customer first or put profits above good business. I wanted to maximize my profits but not at the expense of my customer. My impatience in this regard was both a weakness and a strength. It caused me to butt heads with people, but at the same time it drove me to improve what we had.

“Why don’t you find a way to give them a quarter of an ounce more and see if you can sell twice as many?”

Quality first! Every founder I respect is playing the long game. This is how you build something durable. Too many employees and MBA-types are only thinking in 1-3 year time horizons.

But how could I defend myself when a man tells me, “You’ve got a lousy sandwich”? I don’t care how cheap it is; if it’s not good, it’s not cheap enough.

Always quality. It’s the only way you can believe in what you’re selling, and ultimately sleep at night. Knowing that you put your absolute best into something and that it’s better than anything else on the market.

Cofounder Split

I wanted to move ahead and franchise, and Harry, taking the more cautious stance, wanted to hold back and wait. He and his wife, Etta, and my wife, Bookie, kept asking why was I never satisfied. Why did I want to keep building? “Why aren’t you satisfied with what you have? What’s your problem?” Consequently, I had a problem. Harry was my partner, but he didn’t want me to franchise.

[sic]

Months went by, a year and more months. I felt that he was inhibiting the company. Either you grow and give people an opportunity to grow or your best employees are not going to continue working for a company that by nature is standing still.

This conflict would ultimately be the undoing of the partnership, and a good thing it was. Franchising is what lets Dunkin’ Donuts really expand quickly - it was the playbook of all major fast food restaurants back in those days.

Harry’s wife was jealous of the attention I was getting. Etta was bothered by the fact that her husband, the businessman who had college degrees, whom she thought had superior knowledge to me, was not getting top billing. She thought I was using him. He told me that people looked upon me as the man responsible for the business, rather than the two of us together.

There’s a good reason why Doriot wanted to meet the wives of the founders he was backing. Entrepreneurship is a team sport, and you cannot win if one of the spouses is sabatoging the partnership or the company. In the Mungerian sense, this is envy in its purest form, and it is a very hard message to not be persuaded by.

Once again the whole article focused on me, the rags-to-riches kid with grit who left school and became a successful entrepreneur. It made passing mention of the fact that I took in a partner named Harry Winokur. This was the straw that broke the camel’s back. It drove his wife wacky. Everybody—all of our friends, family, suppliers, people at the company—were talking about it. As I remember it, I called a meeting among Harry, Etta, and myself. I went to their house. I tried to explain the stupidity of what was happening, that it was crazy. Instead of having the great relationship that we used to have, it had deteriorated. Well, she let go at me.

“You are egotistical,” Etta said. “You want to have all the publicity!”

Now the whole problem no longer rested in common sense and logic; it became fueled with jealousy and envy. Success rather than failure was doing us damage. Success was becoming more difficult to deal with. I still didn’t see any sense to what was happening. I tried to get our mutual friends to intercede, but they couldn’t reason with Harry because of his wife. They came back and said in their opinion the problem was Etta. I couldn’t do anything about her jealousy. Greed and envy are emotions. There’s no logic involved. Amazing as it might sound, sometimes you run into more problems from success than you do from failure. As you become more successful, everybody starts to want to take credit for what happens. I found out that even being a better golfer or dancer created jealousy among people around me. Instead of creating better relationships, success caused jealousies.

Very true words.

I told him he could buy me out for $350,000, the total book value of the company, or I’d buy him out for that amount. In other words, 100 percent of the book value for 50 percent of the business. I told him I didn’t want to get out of the business. If he bought the company, he would have the names, but I would have the right to go back into the business. I would not sign a noncompete agreement. He would have the same rights if I bought him out. He didn’t want to do that. He kept stalling. I finally found out that our real estate lawyer was representing Harry, when he was supposed to be representing us.

Absolute betrayal. Yikes.

Although we were successful, we hadn’t built up a big cash balance because we kept reinvesting to build the company. I had to dig up the money to pay Harry. I went to my friend Abe Wechsler and borrowed $50,000 from him. I borrowed money from some of my suppliers. I got Harry his down payment and agreed to pay him so much over time.

And so the rivalry begins - no doubt who wins in the end.

Harry had the right to compete with me if he wanted to. That’s the deal we made. I then found out that Harry and our former mutual lawyer had formed a company called Mr. Donut, a name that had been thrown out when we decided to change Open Kettle to Dunkin’ Donuts. It was the name that people often used to introduce me: Mr. Donut himself. It was apparent that Harry’s wife and the lawyer wanted “Mr. Donut himself” to be Harry, not Bill Rosenberg.

This is when the envious motivations become really apparently.

We also found out that two outstanding locations—Lynn and West-wood—that our former lawyer had been negotiating for Dunkin’ Donuts had contracts drawn up for Mr. Donut. That was a breach of a fiduciary relationship. Both Harry and that lawyer had been employed by Dunkin’ Donuts. I told Jack Alpert about it and told him I thought we should sue. Jack, being the kind of man he was, wasn’t interested in starting lawsuits. He said, “Bill, for chrissake, forget about it. Let Harry have them. Continue on. Build your business. Go ahead and do it because you could spend all your time fighting in court.” So Harry and the lawyer wound up with two top locations that we were ready to move on. They really belonged to Dunkin’ Donuts, but I took Jackie Alpert’s advice. I let them go.

These are the types of friends you want in your circle. Don’t get hung up on your own feelings; focus on the big picture. The best revent is a successful business that drives them underground.

I didn’t want to lose Carl, but I didn’t want to hold him back from what he felt would be a better opportunity. So I wished him good luck and hoped that we would remain friends. Carl went with Harry and became a vice president of Mr. Donut.

It takes a really big man to do this. I really admire Will Rosenberg.

I was in debt to pay Harry off. I had mortgaged my house, borrowed from friends. To save money I moved out of the Copley Square office, back to the commissary.

I’m so impressed by entrepreneurs of this era. We have it so easy by comparison. What risk are you really taking when you raise VC money?

I instilled in Joe and the rest of the people that the most important thing of all, and the thing absolutely worth spending time on, was hiring the right people for the right position. I was demanding. I wanted people who worked for us to have the same devotion to the organization as I had and who could put the company above their own concerns. I stand firm in my belief that people and their attitudes are the answer to anything. No matter what business you’re in, whether it’s food, dot-com, e-commerce, or insurance, it’s people who make the difference between a highly successful and a mediocre operation.

Hiring is always the highest leverage thing you can do.

I learned that banks simply wouldn’t finance a new venture until you were a well-known or proven entity (and no longer needed them!).

The same can be said for VC’s. :)

Growth

We were succeeding, once again, because we insisted on and maintained high standards in our stores. We sold only the best-quality products. Coffee at Dunkin’ Donuts was truly the finest.

I think this is the millionth time I’ve mentioned quality. Quality is why they win. Period.

We were able to use a far more sensitive, finer-quality coffee because we kept several small coffeepots going at the same time. From the very first store, we decided to make the coffee in smaller batches.

Quality over mass production and potential time savings.

Customers loved seeing the coffee freshly ground for each batch of coffee; consequently, we got the highest-quality taste from the most temperamental coffee beans. The smell was intoxicating. I even considered roasting coffee on the premises but that proved too complicated. All this was theater as well as quality control.

Quality.

Right from the start, our high standards were the reason why Dunkin’ Donuts gained its reputation for great coffee, a reputation it continues to uphold to this day.

Q-U-A-L-I-T-Y.

Everyone working for our organization knew what we stood for: Quality, Service, Cleanliness, and Value. If they didn’t, they didn’t belong with us.

Notice which word came first of the three.

I agreed but after I gave it some consideration, I realized we didn’t have the organization to do that and Dunkin’ Donuts. I went back to Hood and explained my thoughts. Ultimately, Gulp and Gallop wasn’t the way to go and we closed it. I wanted to devote my time to expanding Dunkin’ Donuts.

Stop having optionality and focus. Focus requires going all in.

Whether I was on a pleasure or business trip, the two intermingled. Twenty-four hours a day I was thinking of ways to improve the business.

The best entrepreneurs are like this. All consumed by their business.

As with anything new—and you have to understand that at that time franchising was very much a new and innovative enterprise—the fast-buck artists got involved. Some of the fly-by-nighters had generated negative attention. People of all types were eager to buy franchises, just as people were clamoring to buy dot-com stocks in the late 1990s. If done right, franchising was a cash cow. Those looking for a fast buck would get together and open a franchise—often using famous people’s names. They had Minnie Pearl chicken, Johnny Carson men’s clothing, Joe Namath hot dog stands. They didn’t have any background in the business; they simply sold franchises. For example, they went to North Carolina and sold area franchises for $200,000; in California, they sold them for $800,000. These people didn’t have an organization (as we had) to back them up.

[sic]

In response, the government started passing legislation that was detrimental to the industry. Things weren’t looking good. It got to the point where you couldn’t place an ad in the Wall Street Journal or the New York Times with the word “franchising” in it because it had such a bad name.

He really believes in the power of franchising. After this the book goes into several chapters about the International Franchising Association and his efforts to put that together. He really does view this part as much as his life’s work as Dunkin’ Donuts, but to me it just wasn’t as interesting so I’m going to skip it.

Just having a formal education isn’t everything in the world. It’s more than a formal education that makes you a leader or successful in life. It’s an attitude, your hunger to achieve, your empathy toward people, your ability to meet and get along with people, your enthusiasm and sharing—those are the things that are important.

[sic]

…if I had to make a choice between a formal and an informal education, I think I might take the informal education. I think you learn a hell of a lot more once you get out into the world and really do it. Even if you have a master’s degree or a doctorate, you really don’t know what the world is all about until you get out into it.

Completely agreed. I’m glad to see there’s been a recent movement against the formality of higher education. Starting with Peter Thiel and the Thiel fellowship, it’s really taken off.

Ironically, Mr. Donut had now begun to franchise its stores. Remember I had spent nearly two years trying to convince Harry to franchise, but he had refused.

As the kids say, how the turn tables.

Slater learned from Van Cise that Dunkin’ Donuts and Mr. Donut were not doing things legally correct. We had followed Howard Johnson’s model. Howard Johnson, who was the foremost franchisor in the country at that time, had been charging a markup on equipment and supplies to the franchisees. This was the wrong way to do it. Charging the franchisee a percentage of sales was the correct way, and eventually we made this change. Mr. Donut changed before we did.

Good on him for admitting this. Your competitors will do things correctly from time to time. Learn and adapt.

Frankly, smart guy that I am, I am actually a dummy. I had an opportunity to own 50 percent of Burger King for $150,000 or less, had I negotiated it, and it’s worth multimillions of dollars today.

Insane!

I was always a stickler about the maintenance and operations of the stores. I constantly called my people if quality didn’t meet our standards. It was my belief that you had to be where the cash registers were. That’s where the customers were, and the customer was our boss.

At this point, is this any surprise that he loves quality?

The franchisee came running into the store. He saw what I was doing. He got so upset. He said, “You can’t do that! This is my store.” I said, “My friend, that’s our name up there. You can’t sell this product under that name. You’re doing the thing we told you you just can’t do. There’s nothing wrong with making a bad batch of donuts, nothing wrong with making an error. Anybody can make a mistake. But you never make our customers pay for your error.” He said I had no right to throw out the donuts and called the police. A policeman came and the franchisee told the policeman what happened. I gave the policeman my card. It said: William Rosenberg, President, Dunkin’ Donuts, Incorporated, and I told him the story. “Well,” the policeman said, “you two guys need to straighten this out.” He wouldn’t arrest me.

I’m imagining that policeman just awkwardly shuffling around trying to leave.

“There’s something radically wrong here. It doesn’t taste like it should.”

Finally we called the coffee company. They came down and couldn’t find anything wrong.

I said, “Let me see the cream you’re using.”

He came out with these little artificial creamers—the ones that come in one-ounce plastic containers.

I said, “Wait a minute. Is that what you’re using? That’s not cream; that’s artificial cream.”

He said, “Mr. Rosenberg, do you know the Hollywood Beach Hotel down here? That’s what they’re using. You know the Diplomat Hotel? That’s what they’re using. Do you know the Eden Roc and the Fontainebleau Hotel? They’re the finest in the world. That’s what they’re using.”

I said, “Really? Let me ask you a question. How many rooms do you have to rent?”

He said, “What do you mean?”

I said, “Coffee is not their main product. Why should people leave their hotels and come to your store to buy coffee? You sell nothing but coffee and donuts. If you don’t have the finest product in the world, what reason do you have for existence?”

Absolutely love this interaction. Quality is everything! Stop trying to find excuses for your shitty product.

No matter where I went, I dropped into the stores, tasted the coffee, tasted the donuts, broke them open, and saw to it that our standards were met. I knew I was a pain in the ass, but that’s the way it was.

Everytime Sam Walton went on vacation, he had to visit the nearest Walmart. Everytime Estee went on vacation, she had to sell her creams. It’s a compunction.

Transition

I didn’t want to terminate Joe and I didn’t want to demote him or destroy the organization. So I told Bob to take the title of president. I would move myself up to chairman of the board. That way Joe wouldn’t lose his title. Joe could stay on as executive vice president, answering to Bob, and Bob would report to me. Nothing would change, except for our titles. Titles didn’t mean a goddamn thing to me. Making a business run properly—that was the important thing.

[sic]

As it turned out, Joe got upset and resigned. All the others remained as they were. Joe went to Pillsbury as a consultant (and made the connection for Pillsbury and Burger King).

High ego people just never work out. But this is the beginning of the end for Dunkin’ Donuts. Hiring your son is admirable, and obviously you want to keep it in the family as much as possible. But you need to make sure your son is actually capable.

“I don’t care if you don’t know how to make the coffee or donuts—though you should learn how to do it—” I said. “You must know how they should taste and what our standards are.”

He said, “I don’t drink coffee, Dad.”

“You don’t drink coffee? Are you kidding?” I couldn’t believe my ears.

He said, “No. I drink milk.”

I said, “Bobby, if you’re going to be president of this company, you’d better learn to like coffee. If you don’t start to drink coffee, you’re going to get it in the form of an enema! One way or another, you’re going to like coffee!”

He laughed. Then he said, “I like Hostess donuts.”

I said, “How the hell can you be president of this company and tell me you like Hostess donuts? Don’t you like Dunkin’ Donuts?”

“I buy Hostess donuts,” he said, “and eat them at home.”
I said, “Bobby, you better throw those Hostess donuts down the toilet and start eating Dunkin’ Donuts and learn what a good donut is and what we stand for. You cannot be president of this company and not wholeheartedly believe in its products. You just can’t do it. You won’t have the passion. If you don’t believe in it as I do, if you don’t have the drive and the burning desire to realize that your donuts and coffee are the best and that you’re going to make things better because you’re always striving for perfection, if you don’t have that kind of a feeling and you don’t believe in what you’re doing, you can’t make it happen. Understand what I expect of you,” I said. “That’s not asking too much of you, is it?”

This conversation is the single reason why Dunkin’ fails. How can you hire someone to be the CEO of a coffee company who does not even drink coffee? Dude, you have rose colored glasses, and you clearly love your son, but this is obviously not going to work.

I was so eager, maybe too eager, for my son to take over. I wanted him to carry on the family tradition, to take care of the family and do for the family as I would have done.

Very sad but true. And I can’t blame him.

We had a good group, but they weren’t supposedly “sophisticated.” They didn’t write out reports and sit at meetings to the degree that my son’s group did. But they knew how to go out and make money and build a business.

Warning bells ringing everywhere. The MBAs are coming.

I think I should have listened more closely, but I didn’t. I started to hear this from several sources. Little by little, some people left or were let go. I had put my son in charge, and I stood behind many of the decisions he made. But I was torn internally. I couldn’t turn my back on my principles and what I believed. This conflict of interests between my son and me became a source of many heated arguments in the years to follow.

At least he’s brutally honest about this.

“Bill, I went over this whole thing with our marketing department, and they don’t think the price of $20 is correct. They think you should come out at $15 a share.”

“Are you kidding?” I said. “Nelson, you ought to know better than that. You haven’t done your homework.”

Bob, Tom, and Bill almost had heart attacks. He got insulted and said, “What do you mean, I haven’t done my homework?”

I said, “You ever hear of McDonald’s?” Of course he had, his company had taken them public. “How many times earnings are they selling for?”

He said, “They came out at twenty times earnings.”

“What are they selling for today?”

“Sixty-six times earnings.”

“That’s right. What about Kentucky Fried Chicken?” He said, “Sixty times earnings.”

“So what’s the next food service and franchise organization that’s coming out?” I asked. “Dunkin’ Donuts,” I answered. “And what do you think is going to happen to our stock?”

He started to protest again: “Our people say it won’t—”

“For Chrissakes, Nelson, do your homework and then come back.”

“Do you know who you are talking to?” he asked. “You’re talking to the chairman of the board of Paine Webber. Don’t you think I know my business?”

I said, “I don’t know, but you didn’t do your homework.”

He stormed out. The others in the room said, “Oh my God, you screwed it up. You really messed it up. You insulted the chairman of the board of Paine Webber.”

I said, “I insulted him? He insulted me! He came in and told me a lot of bullshit and I wasn’t going to take it. Who the hell does he think he’s kidding? Everyone’s calling me wanting to buy stock. I guarantee you that that stock will open at more than twenty bucks.”

Bob, Tom, and Bill didn’t think so. “You destroyed the deal,” they said.

Surprise surprise the MBA idiots didn’t know how to price their own company. I’m shocked.

Booth was a very tall man, about six foot three inches. He said the $20 a share that we had all agreed upon was wrong. He thought we should come out at $17.50.

I said, “Listen, I’ve got nothing against you, Mr. Booth, but I can’t stand this shit any longer. I’m sick and tired of this racket. As far as I’m concerned, we’ve agreed on $20 a share. It’s not going to be $19.99; it’s not going to be $20.01; it’s going to be $20.00. Take it or leave it! I spent a lot of money on this, but I’ll walk out of here today and that’ll be the end of it. Make up your mind. Is it going to be $20.00 or not at all?”

“Mr. Rosenberg,” Booth said, “don’t you think we know our business?”

“I don’t know what you know. All I know is that $20 is the price.”

“If you know so much,” he said, “what do you think it will open up at?”

“I guarantee it will open at $25 a share. People are calling me from all over the country, begging me for stock. Based on that, it’s going to sell for more money than what you open it for.”

We agreed once more on the $20 a share. To make a long story short, what do you think the stock closed at on opening day? Twenty-six bucks! More than the opening price!

Nothing more rage-inducing than people like this.

“In view of the fact that I’m always here,” Bob said, “would you mind, Dad, if I were CEO?” I didn’t care about titles. So Bob became president and CEO on paper. I was chairman of the board and treasurer. In reality I was still the man in charge.

And thus the fate of Dunkin’ was sealed.

Within a year our stock was selling for $66 a share. [sic] The stock split exactly in line with where McDonald’s and Kentucky Fried Chicken were selling.

Fuck those bankers.

“I don’t understand. You’re a vice president and a district sales manager for the area. How come you didn’t find what I found?” You know how people get when they realize they’ve been caught. Instead of saying, “You’re right, Bill, I’m sorry,” and that would be the end of the story, they made bullshit excuses. “That’s the problem with the company. Nobody ever taught us the difference between a good and a bad filling.” So I drove to a fruit store and bought grapes and cherries and peaches. I asked them to eat the peach. Then I said, “That’s how peach filling should taste. If that peach were sour, you would know it. For God’s sake,” I said, “don’t try to bullshit me. You can’t win. If you’re wrong, say so and we’ll solve the problem. That’s how you maintain your credibility. Don’t waste time making excuses; that’s not the way we do business. It’s against our principles.”

Naturally, people have asked was I a smoker. Is the Pope Polish? I was a heavy smoker! Since fourteen years of age I had been smoking cigarettes. Ironically, just months prior to finding out about the cancer, I had, in fact, quit smoking.

“Is the Pope Polish” - that’s a new one. Love it.

“I’ll tell you why I’m here to see you. I’m on the board representing thoracic surgeons for Blue Cross/Blue Shield of Massachusetts. We voted a maximum of $750 for a lung operation. We can’t make money on that amount.” Basically he explained that if a patient could afford more, the doctors charged more. He told me about Homer Severenson, the former financial vice president of John Hancock, who was on Dunkin’ Donuts’ board. Overholt had operated on Homer for a benign tumor, and Homer had given him $5,000. Overholt reasoned that since I was the chairman of the board and founder of Dunkin’ Donuts, I should pay him at least $5,000, or better yet $10,000, for the operation, since my tumor was malignant. I said, “You’re a great doctor, Richard, but you’re a lousy businessman.” He asked me why, and I told him that if he had talked to me before the operation, he could have owned Dunkin’ Donuts! We laughed. I paid him the $10,000 and was happy to do so. He saved my life!

I tended to be more hands-on than my son and his executives, although they had promised me that one of them would check all locations personally before going on long-term leases.

Unsurprisingly, the promise was not kept. These people are clowns.

One of our senior executives believed that a manager who had been running the Dunkin’ Donuts House of Pancakes across from the University of Miami was mishandling funds, so we terminated him. Next thing I know, Bob rehired this man to work in the real estate department. Norman Slater thought this guy was smart, too. I told Bob, “I don’t care how smart he is. You’ll never have enough people to watch a crook. A crook is a crook. If he’s smart enough, he’ll cause problems.”

I’m sorry to say Bob might be clinically retarded.

…sure enough, this ex-manager had taken lousy locations, and they weren’t doing well. Bob had put him in competition with Dave Segal, who was in charge of real estate in the East and who adhered to our standards. But this other man just took anything that was available. The damage was done. We had to close 100 stores and get rid of the leases as best we could.

Surprise surprise.

The directors said they felt I needed to replace Bob and Tom because if I didn’t, the stock would not recover for years. I had to make a choice that repeated itself many times over the next few decades. I came to a crossroads with my son where I had to either fire him or let him run the business. I always chose in his favor.

Yeah the directors were absolutely right.

My fortune in Dunkin’ Donuts stock, which was about everything I had, went from $30 million to $3 million. In view of this, even if I was going to be destroyed financially, I allowed my emotions to prevail. I was going to ride it out, and I did.

This is devastating.

I’ve made many mistakes in life, but I believe one of my biggest mistakes was trying too hard to accommodate my son’s desires. Whatever my son wanted to pursue, I backed him up, though many times I disagreed. Harsh as this may sound, if there’s any lesson I can impart to others from this, it is to never assume others will treat you as you treat them. I presumed that my son would do for me as I would for him. But I was wrong.

This is a very, very sad paragraph.

Unfortunately, the Chili’s division of Dunkin’ Donuts posted substantial losses over the next several years. It wasn’t Brinker’s fault. These losses drained Dunkin’ Donuts’ profits, however, and as a result our stock began selling for far less than its true value. Someone from Canada saw the bargain prices and decided to raid us.

[sic]

In 1990 Allied bought everybody’s Dunkin’ Donuts stock for cash.

And so ends an incredible, founder-operated franchise. Dunkin’ lives on, of course, but its soul is no longer there.

Giggles

Women would come to him and say, “Dr. Kempner, I’m not losing any weight.” “Vhat did you eat?” he asked. “All I had was a half grapefruit all day.” He knew they were lying. He’d say, “Und? You gained veight on zat?” “Yes, yes.” “Zen cut out ze grapefruit!” he’d say.

LOL.

My family was of modest means. If modest means poor, then we were extremely modest.

He’s also genuinely funny.

It was a warm day, and the mix started to rise as he was driving on the highway. He kept trying to push the mix down to get the air out. The cops must have thought he was driving funny, so they stopped him, ready to pinch him. Johnny told them about the Natick store opening, and would you believe the police turned on their sirens and rushed him through the traffic so he could get to Natick faster?

So cops really do love donuts.

“Hey, kid. You can’t stay here. You don’t belong to our union.” Tom said.

“Oh, I belong to Local 25, New York Restaurant Workers.”

The tough guy said, “I don’t give a goddamn! You either belong to our union or you can’t come here.” Tom said.

“I already belong to a union. Why don’t you talk to my—”

“I don’t want to talk to nobody,” the man said, cutting Tom off. “Listen to me, kid. If you’re not a member of our union and you come around here tomorrow, you see those submarine sandwiches you got, I’m gonna stick every one of them up your ass and throw you and the truck into the harbor.”

The men listening to Tom asked, “What did you do?”

“I went back to the commissary and told them to make the subs smaller!”

He has a real sense of humor.

“How are you doing?”

“Lousy, Mr. Rosenberg.”

He went on to tell me about how he couldn’t get the right help in Providence, compared to the help available in Boston. I said to myself: Uh-oh, I’m going to get a line of B.S. I’m going to get all kinds of excuses and reasons for why he’s doing a bad job.

“What’s the problem with the help?” I asked.

He could only say that the help available consisted of a bad caliber of people. He went on and on, so I said, “Let me ask you a question? Who hired these people?”

“I did,” he said.

“Who trains them?”

“I do,” he said.

“Who has the right to terminate them?”

“I do.”

“Who’s no good?” I asked.

Savage. But true!

Conclusion

Just as in life, successful businesses have their ups and downs. It’s a question of how an organization meets those challenges. The tough times bring out the tenacity in a company. That’s the mark of a champion. Could we have done better? Sure. I’m a man who is never satisfied. But any worldwide company will meet with obstacles at some point, especially if it’s a company such as Dunkin’ Donuts that has been in existence for more than fifty years. In our case, we survived generational changes, the Korean and Vietnam wars, periods of recession and prosperity.

Challenges are inevitable. Your attitude will decide whether you win or not.

You can always find a way to spend money and give it away, but your first priority is to collect the money and get the income to build the organization. Protecting the principal, building a big-enough capital foundation so that the investments and the return from the investments would finance the operation—that’s the harder task and one that most people find difficult to do.

Wise words.

I’m a financial investor in a major venture capital fund. I study and read, listen and learn—that’s how I decide to invest in certain stocks. I’m not as aggressive as I was because I don’t need to be, but I’ve done very well with my stocks. I wrestle with an array of physical ailments, not surprising for someone in his eighties. My hearing and eyesight are not what they used to be. But I walk three to four miles a day with my two dogs.

Dogs will force you to walk and live a longer life. Get out there and get some steps.

I looked for people who wanted to win, who wanted to put the cause first. Man or woman, it didn’t make any difference because, all by yourself, there isn’t very much you can do. It’s your team that makes you successful. I looked for people who had been captains of a baseball team or a football team or something that showed leadership abilities.

Winners want to associate with other winners.

I know people have human weaknesses. We all do. But the fact still remains that the most important thing in a person is credibility. People who don’t have credibility, who you can’t believe, don’t belong in your organization. They’ll create havoc.

In other words, be serious people.

The goal is to do the best possible job at whatever you’re doing.

Quality in everything.

When Howard Johnson passed on, his son took over and didn’t do well. In my opinion the only thing that happened with HoJo’s is they became cost conscious instead of customer conscious.

Well, let’s not throw stones here. When your son took over, Dunkin’ didn’t exactly knock it out of the park.

The basics are always the same, whether it’s the Internet or anything new coming down the pike. I don’t care how much capital you have, how much marketing—if you don’t have customers to buy your product, you don’t have a business.

Quality first. New fangled technology and innovations second.

Concepts are important, but individuals who make concepts happen are much more important.

I need to be especially mindful of this. I’m closing in on 100 books read, but at the end of the day I don’t want to simply be an academic. I want to get out there and do something with this knowledge.

How does something become successful? It’s because somebody made it happen. You should know that you could be that somebody.

Love this message. Reminds me of the Steve Jobs quote - “everything you call life”.

I always say, “Good enough is never good enough.” It’s a very competitive world. The minute you think something is good enough you stop progress. The danger of success and being extremely successful, as we have been with Dunkin’ Donuts, is you can start to think you’re invincible. Consequently, you start thinking everything you’re doing is fine. So you stay the same and you don’t improve.

Never be satisfied - always strive for better quality.

Bill died peacefully at his home on Cape Cod on September 22, 2002. For weeks leading up to his death at the age of 86, he held court from his bedroom, welcoming friends and family to his bedside for final heart-to-heart talks, hugs, and jokes. On my last visit, I asked: “How are you, Bill?” “How am I?” he said. “I’m dying!” As always, he told it straight.

Rest in peace, Bill. Absolute legend.

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This was an incredibly moving book to read. I came away really loving who Bill was as a person, and feeling quite a bit upset at his son and the MBA class. Since reading this book, my visits to Dunkin’ Donuts have gone up around 200% month over month.