The Colgate Scene
January 1999
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Making dollars out of donuts

by John D. Hubbard
[IMAGE] It is easy to imagine meeting Jack Shafer '66 for coffee and donuts or maybe a sandwich -- even some ice cream. It's his job, after all.

     As President and, since last September, CEO of Allied Domecq Retailing USA, Shafer oversees operations for Dunkin' Donuts, Baskin-Robbins and west coast sandwich chain Togo's Eateries and concerns himself with profits and QER's -- Quick Emotional Rewards. Make that a dozen chocolate glazed, the smoked turkey Caesar sandwich and a double dip of pralines and cream.

     Shafer's is a classic tale of corporate ascension, from a summer internship while in graduate school to the top spot of a family-run business that grew into a pink and orange American icon. Today, Shafer leads the giant that was spawned from a panel truck in factory parking lots and is now an innovative three-headed marketer with nearly a combined $2.7 billion in annual sales and a passionate following.

     A two-pronged strategy is in place to ensure continued growth -- revitalizing and transforming the brands (new products and better retail execution) and complementary daypart branding, which Shafer explains as "combining our brands under one roof."

     Allied Domecq Retailing has the day covered -- Dunkin' Donuts in the morning, Togo's for lunch and a treat at Baskin-Robbins to sum things up, and the convenience of one-stop shopping is the driving force.

     Dunkin' Donuts' ability to launch a new brand can be breathtaking. In 1996 bagels appeared alongside the traditional fare. A year later the world's largest retailer of bagels was Dunkin' Donuts.

     "The most common word our customers use is love. `I love your coffee.' We think we have something powerful upon which to build," says Shafer.

     Dunkin' Donuts was founded by William Rosenberg, who began a post-war industrial catering business in which coffee and donuts quickly dominated. He also correctly envisioned a new world of suburbs where cars ruled -- go cups and crullers for the road. Rosenberg opened his first shop in 1948 and two years later the name was changed to Dunkin' Donuts with the first franchise following in 1955. Rosenberg's son Robert took over the reins in 1963 and ran the company for 35 years.

     Shafer's career with Dunkin' Donuts began one summer with an internship between semesters in business school at the University of Virginia. The idea of an advanced degree was sparked by the war in Viet Nam. "My primary reason for going was to avoid dying in a rice paddy."

     The educational deferment eventually ran out and Shafer enlisted. With great good luck, he was transferred from the infantry to a non-combat branch, where he administered mental competency tests and had to determine who was failing intentionally.

     "There were two big blocks -- those under the draft and the large contingent of inner city kids who wanted to go. I tried to facilitate both groups, helping people explore their options."

     His service behind him, Shafer decided to explore his own options on the West Coast. He travelled, fished and married his high school sweetheart, all while under the spell of San Francisco. There was tension too, however, created by the pull to return east and begin a business career.

     In time Shafer grew disenchanted with the Bay Area and gave up on the social services ideas sparked by his experience in the military. He was hired by Dunkin' Donuts again and shifted focus.

     A series of promotions -- and moves -- followed while the marriage came undone. "We were blowing on dead coals," says Shafer, who found a "grounding" in his work.

     From Michigan to Connecticut, then to Jersey and Chicago, Shafer climbed the ladder, shouldering increased responsibility at each rung. In 1979 he was made vice president and took another big jump in '85 when he became senior vice president in charge of expansion and new unit growth. He was affecting strategy by then and work was the axis of his world.

     By 1990 Shafer was responsible for the marketing, development and operation for all of Dunkin' Donuts. In that same year the company was bought by Allied Domecq, saving it from the "jaws of a hostile raider." The donut shops' white knight is the second-leading spirits company in the world (Beefeater, Ballantine's and Kahlua) and suddenly Shafer was an integral part of a much bigger whole.

     The Rosenbergs were pioneers in multibrand marketing and Shafer has been determined to drive the strategy "to its fullest potential" with benefits flowing to customers, franchises and the corporation. Part of reaching that potential meant filling a sizable gap in the day. Lunch accounts for nearly 50 percent of fast food (called "quick serve" at Dunkin' Donuts) sales. Hence, Togo's, which has been successfully integrated, according to Shafer.

     "There are three different companies with three different cultures. Trying to blend them has been exciting." Shafer also must work to meet the needs of distinct audiences.

     "Customers are looking for products that are fresh and delicious and delivered quickly and with courtesy. Franchisees want a reasonable return. Employees want to be treated with respect and fairly compensated. The shareholder is looking for increased value.

     "It's about hitting the sweet spot from among these four constituents." It's also about often being under attack from one front or another. So Shafer takes to the road, travelling 40 to 60 percent of the time. Granted, some of the trips take him to Allied Domecq's European pubs, but he's also formulating plans at Togo's headquarters in San Jose or putting out fires that spring up in local shops. "Of our 6,400 locations, I'd say I've been in 3,000. I try to be as visible as possible, from Seattle to Miami."

     With it all, Shafer reports his personal life "is on track." He's married again and he and his wife Linda have two sons; Jackson, 15, and Daniel, 13. "Life is exciting and hectic," says Shafer. "When there was no family I was a serious workaholic. It's tough -- there are tradeoffs -- but I'm pleased with how I've struck a reasonable balance."

     Golf is a newfound passion ("I'm lousy but I have become addicted") and Shafer serves on boards for historic and cultural organizations. He became involved, through Bob McCord '65, with Harlem RBI, which is reviving baseball in inner cities.

     The challenge of delivering new product in a fast and friendly fashion is always on Shafer's mind. "We are associated with happy times and rewards, with treating yourself. "It's fun to provide a product that gives people a break.

     "That's what we try to do," says Jack Shafer, "satisfy the customer's needs . . . profitably."

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