Dunkin' Donuts turned in a strong third quarter, with a 4.2 percent increase in comp store sales growth and 222 net new restaurants worldwide. CEO Nigel Travis said the performance is "even more impressive" when the intense competitive and macroeconomic environments are factored in.
But the highlight from this morning's earnings call came from John Costello, president of Global Marketing and Innovation, who outlined the company's DD Perks loyalty program, set to begin rolling out Nov. 4. On that day, the program will go live in five markets — Dallas, Portland, Maine, Orlando, Fla., and Willsboro and Scranton, Pa. The rollout will be phased with plans to expand nationally in Q1 2014.
The company first launched its Perks loyalty program in 2011, with "Dunkin' Dollars." Since its mobile app launch in August 2012, the company has focused on the development of a digital-based loyalty program and one-to-one marketing efforts. In May, Costello said guests want geotargeted offers and the brand's loyalty program will enable the company to access data through registered DD Cards. Such data will be used to develop individualized, targeted offers, he said.
In July, Dunkin' selected Epsilon, an Alliance Data company, to provide the technology needed to fuel the brand's new initiative. DD Perks is synched with the company's Radiant POS system, which is installed in all traditional restaurants throughout the system.
With the details hammered out and the launch set for early November, Costello said the program has the potential to "drive profits using targeted offers, offers specifically designed to drive incremental sales based on guests' individual behavior."
"We have three goals for the enhanced DD Perks program: Reward our best guests for their loyal business, increase guests' spend through increase ticket and visits, and have the most robust loyalty program in the QSR industry," he said.
Guests enrolled in the program will earn five points for every $1 spent. Two-hundred DD Perks points equates to a free medium beverage. Members will also receive personalized offers based on their spend history with the brand.
As mobile app and loyalty usage increase, Costello said higher average checks should increase, as well, as that has been the trend thus far from digital-savvy guests.
"(The app) is a differentiated product. As we build purchase histories with customers, we'll be able to tailor one-to-one marketing to drive their behavior, which generates the most profitable sales increases for franchisees," he said.
Menu and marketing highlights
Dunkin' Donuts is also getting positive feedback from its newly launched #mydunkin campaign, which leverages fans' social media content for use in the brand's traditional marketing messaging. The effort, Costello said, has driven deeper engagement with customers.
On the menu, the brand's beverage platform continues to drive strong sales growth, Travis said, driven in Q3 by the continuation of the Baskin-Robbins' inspired iced coffee line, the introduction of caramel flavor and the return of pumpkin flavor. Travis added that the donut category is "stronger than it has been in years," due to the launch of the lemonade, key lime and pumpkin pie options.
Another contributor to comp sales during Q3 was the afternoon daypart. Travis said Dunkin' Donuts experienced all-time-high average weekly sales and product mix for this time frame, driven by wraps, chicken sandwiches and the pretzel roll roast beef bakery sandwich.
Franchising and growth
With 222 net new openings year-to-date, there are now 7,500 Dunkin' Donuts restaurants in the U.S., and the company is on track to hit its 15,000 U.S. unit goal. This goal includes an additional 3,000 units east of the Mississippi and 5,000 more in the west.
During Q3, Dunkin' debuted in Denver and added more agreements to expand throughout Southern and Central California, where it will open in 2015. The company is also eyeing growth in Texas.
Currently, Dunkin' Donuts has a joint venture in the Texas market with Jerry Jones and Troy Aikman, and is leveraging their ties to the Dallas Cowboys (owner and former QB) to generate more interest.
"Texas is an area with tremendous long-term opportunity. We believe the brand could potentially have 1,000 restaurants there someday," said Paul Carbone, CFO.
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