125-C03
7/11/16
CHRIS PIERCE AND THE YANKEE DONUT COMPANY
At approximately 7:30 am on Tuesday morning you, Chris Pierce, district manager for Yankee
Donut Company, pull your car out of your parking garage at your downtown apartment and head
towards your offices at Yankee Donut Company’s headquarters. It is one of those beautiful fall
days in New England with the sun shining brightly and a fall breeze blowing. The trip to the
office takes 30 minutes and gives you some time to think about your stores without interruption.
Doughnut and Coffee Industries
America is the largest coffee consuming country in the world accounting for one-third
consumption of the world’s coffee production. Everyday in the United States, 1 out of 2 people
enjoy a cup of coffee. While total US coffee sales have held steady over the past few years,
gourmet coffee sales have consistently increased.
Danna Greenberg, Assistant Professor Babson College and Keith Rollag, Assistant Professor Babson College prepared
this case as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation.
Copyright 2003 © by Danna Greenberg and Keith Rollag and licensed for publication at Babson College to the
Babson College Case Development Center. To order copies or request permission to reproduce materials, call (781)
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holders.
Chris Pierce and the Yankee Donut Company
1XX-C98A
Of the 16 million people in New England, 68% are coffee drinkers. This is approximately 18%
higher than the national average. That means that approximately 11 million people drink coffee
every day in New England with the average consumption being 1.68 cups per person. More than
30% of these cups of coffee are consumed outside of the home.
For all the coffee Americans consume, they consume an almost equal amount of doughnuts.
Americans consume approximately 10 billion doughnuts each year or an average of 40
doughnuts per person per year. There is intense competition in the $5 billion dollar doughnut
industry.
In New England, doughnut consumption is slightly lower than in other parts of the country.
While there are no specific statistics on doughnut consumption in New England, the largest
national doughnut chain has found that in New England 70% of their revenue comes from coffee
and 30% of their revenue comes from doughnuts. In the rest of the United States, 30% of this
company’s revenue comes form coffee and 70% of their revenue comes from doughnuts.
Yankee Donut Company’s History
Yankee Donut Company was founded in 1975 in Weston, Massachusetts. Yankee Donuts sold
coffee, doughnuts and muffins in this store. The company’s slogan was “Always Fresh, Always
Good!” Shortly after the first store opened, fresh baked pastries, muffins, and gourmet coffee
were added to the menu.
Today, the Weston store is still open for business along with more than 200 shops throughout
Massachusetts, Connecticut, and Rhode Island. The majority of these stores are in Eastern
Massachusetts. Yankee Donut Company defines itself as more than just a coffee and doughnut
shop, they are a bake shop as well. When customers frequent a Yankee Donut shop, they can
choose from more than 30 types of doughnuts, 8 types of muffins, and various pastries and
sandwiches. In addition, the store offers both a special house blend coffee and many flavors of
gourmet coffee.
As market demand has changed towards faster service, Yankee Donut Company has focused
their products towards commuters and busy shoppers. Still, the company’s slogan remains
“Always Fresh, Always Good!” as they continue to emphasize high quality products and service.
Over the past few years, the company has undergone tremendous expansion and has received a
great deal of positive press from local papers such as The Boston Globe as well as from national
journals such as Inc. Magazine.
Organizational Structure
There are several different types of Yankee Donut stores. There are full-service stores, satellite
stores, and kiosks. Full-service stores not only sell Yankee Donut products but they also make
the doughnuts, pastries and muffins on site. The satellite and kiosk stores only sell Yankee
Donut products. Yankee Donut stores are located in malls, strip plazas, and downtown areas
with approximately 1/3 of the stores offering drive-thru services.
Each store is managed by a store manager. The number of employees at each store ranges from
5-15. The larger stores may also have an assistant store manager. None of the stores are
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franchised. Store managers report to district managers who typically are responsible for
overseeing 10 – 20 stores. The role of the district manager is to oversee their district of stores by
tracking P&L and sales, coaching individual store managers, and building a strong network
among their stores. In addition, district managers were expected to be business builders as they
focused on identifying new store opportunities in their region and on creating new business
opportunities for the company. District managers reported to Regional Vice Presidents.
Chris Pierce: Who am I?
You began working for the Yankee Donut Company directly after college expecting that you
would work there for a few months until you found a “real” job. However, due to your hard
work and entrepreneurial spirit you found you were quickly rewarded both in terms of financial
compensation and increased responsibility. Yankee Donut Company was also a good company
to work for. They had a good corporate culture, treated their employees like members of a
family, and offered a comprehensive management training program. When you went out with
your friends from college and compared work experiences, you realized you were getting better
opportunities and were being treated better than most of your friends who had gone to work for
Fortune 500 companies and high flying start-ups. After six years and numerous promotions and
awards, you were made a district manager –one of the youngest in the company’s history. You
no longer thought about leaving the company, being a district manager at Yankee Donut is your
“real” job.
In your role as District Manager, you are responsible for overseeing 10 stores each with its own
store manager. Your stores range in size from a minimum of 5 employees at the Kiosk store to
14 employees at your largest full service store. In total, 2 of your stores are kiosks, 5 are satellite
stores, and 3 are full-service stores. To help you with the administrative management of the
stores, you have an assistant, Elizabeth Granger. Elizabeth is doing an excellent job helping you
with ordering, financial reports, and store/employee tracking. For a complete description of the
organizational structure as it relates to your position see Figure 1.
As you began your drive to work that morning, you were in good spirits. The job was going well
and your stores were exceeding their financial objectives. Recently, a new Regional Vice
President had been hired above you, Jane Davies. Jane is a long-time Yankee Donut Company
employee and is well-regarded in the company. Jane never went to college but worked her way
up from a cashier position she held almost 20 years ago. Jane is a well-respected leader in the
company and has a reputation for being tough but fair. You are very excited about working with
Jane but are concerned by a few comments she made in her first staff meeting where she called
you the “college star.” You have made it a priority to work hard to build a strong relationship
with Jane and learn all that you can from her.
The Changing Role of the Store Managers
As Yankee Donut Company has been continuing on their path of aggressive expansion, a key
issue for the company has become attracting and retaining high quality employees. This is
particularly true at the store manager level. As Yankee Donut has expanded and is facing
increased competition from Dunkin Donuts and Krispy Kreme, the store manager job has
becomes increasingly complex. In the current organizational structure, store managers are being
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asked to be more independent, to take control of their own P&L, and to be more entrepreneurial
in their management of their stores. The store manager role has been transformed into an
entrepreneurial manager of a small business and this requires store managers to have more
complex skills. Store managers need to have a strong financial and accounting background, they
need to know how to research and market to their target populations, they have to be creative and
proactive in their responsiveness to customers, and they have to be strong in their interpersonal
competencies so that they can deal effectively with customers and build a strong Yankee Donuts
team in their store.
In an effort to attract, retain, and continue to develop these higher skilled managers, Yankee
Donut Company has changed their training and compensation plan for store managers. All new
store managers participate in a 1 year fast-track advanced business school program which
involves extensive on the job training as well as classroom based training. The classroom-based
training is taught on a college campus by management professors and covers all of the core
business disciplines. The Hay Group also delivers a training module that is designed to help
store managers develop their emotional intelligence. For experienced managers, there is ongoing training courses as well as the opportunity to participate in an Executive MBA program.
Yankee Donuts pays all the costs associated with this training. In the most recent issue of Fast
Company, a feature story has been written about Yankee Donuts’ innovative and comprehensive
training program. With regards to compensation, Yankee Donuts has done a comprehensive
competitive analysis to determine the appropriate compensation structure for store managers.
The average base salary for store managers is now $40,000 a year (range from $32,000 to
$55,000). The average end of the year bonus is $15,000. In 2001, the best paid store manager
earned $90,000.
In prior years, store managers had always been promoted from within. However, it was clear
that this model was no longer working for Yankee Donut Company. Few of the current assistant
managers have the skill set to move into the store manager role. In addition, there just are not
enough experienced employees to support the large number of new store managers the company
now needs. Finally, with the altered responsibilities of the store manager, some of the existing
store managers do not even have the skills (or the desire to develop the skills) to take on their
new responsibilities. These managers may need to be replaced with more qualified individuals.
Yankee Donuts is on the edge of facing a staffing crisis.
Recently, you have hired a new manager from your alma mater, State College, and are quite
pleased with how she is doing. In your last meeting with Jane you mentioned the success you
have had with Katherine and suggested that there might be an “untapped resource pool” on
college campuses. There are a large number of colleges in the Boston area that offer
undergraduate business degrees, Boston College, Boston University, and Northeastern University
to name a few, and you believe these recent graduates might have the exact skill set that Yankee
Donuts is looking for in their new store managers. In addition, you believe that if Yankee Donut
positions the job correctly many students would be very interested in the opportunity. The store
manager is an entrepreneurial position in which the manager is given in-depth training and the
opportunity to run his/her own business. If a store manager stays with the company for at least 2
years, Yankee Donut will also pay for their MBA. What more would a recent college graduate
want? You suggested to Jane that she might want to talk to the senior management team about
the possibility of Yankee Donut Company recruiting from a few of these local colleges.
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When you arrive in at your office, you notice Elizabeth is already at her desk busy with some
financial analysis you need her to finish today for your quarterly report. David Sanchez
reminded you that your quarterly report is already a few days overdue and that he needs to get
Tom Richards the summary of quarterly financials by the start of next week. You sit down at
your desk and turn on your computer ready to start your day.
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Exhibit A
Yankee Donut Company Organizational Chart
Tom Richards
President
Regional
Vice President
Regional
Vice President
District
Manager
Jane Davies
Regional Vice
President
Chris Pierce
District Manager
David Sanchez
CFO
District Manager
District Manager
Elizabeth Granger
Assistant
Kate Davidson
Store Manager
Kevin Lardin
Store Manager
Tim Pantera
Store Manager
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Bert Jones
VP Public Relations
Carol Baker
Store Manager
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