Dunkin' Donuts aims for 2.5M loyalty program enrollees by year's end

 
April 25, 2014 | by Alicia Kelso

Dunkin' Brands presented its Q1 earnings Thursday, including a 1.2-percent increase in sales growth at the flagship Dunkin' Donuts U.S. business.

Menu drivers were iced coffee, hot and iced espresso, donuts, and both morning and afternoon sandwiches.

"The combination of core category momentum and limited time offer product news continues to provide a sound platform for long term growth," CEO Nigel Travis said during the earnings call.

Below are some additional highlights from Q1.

Weather's impact

Weather significantly impacted sales at the Boston-based company, which has a large Northeast footprint. CEO Nigel Travis said there were 39 days of snow in the Boston and New York markets, including "disruptive" storms. The volatile weather had a particularly strong effect on Dunkin' Donuts peak morning daypart.

"When our guests' normal morning routine gets disrupted by store closings as a result of snow and bad storms, we lose their visit on that particular day. That visit, in most cases, is not recoverable," Travis said. He said the company plans to have "better programs" in place to navigate future winters.

DD Perks progress

The DD Perks rewards program, introduced in late January, now has more than 750,000 members, and the goal is to have 2.5M members enrolled by the end of this year.

"The rollout has gone incredibly smoothly, from the technology backbone to the operations, to the guest reception," Travis said. "Reaching our year-end target will mean that our loyalty program has grown faster in the first 10 months than the programs of anyone else in our space, and we will have accomplished this with significantly fewer outlets than the robust programs we benchmarked against."

Travis declined to give detailed updates about the loyalty program until it's been in place for a year.

Competition

Following the launch of Taco Bell's breakfast menu, and the ramped up focus from McDonald's, Burger King and other brands, breakfast competition was acknowledged by Travis, as was lingering economic uncertainty and legislative issues. Despite a more crowded morning space, Travis said it's nothing new.

"Ever since I've been here, we've had strong competitive activity," he said. "We've obviously had other people coming on the scene in recent times. We feel they've had very little effect."

Operations

In addition to technology initiatives, improvements are also being made at the operations level, including a new sandwich station that removes bottlenecking. Travis said the process is in test and described one store with the setup as having greater throughput, very high volumes and improved guest satisfaction.

While it's in test, the company hopes to figure out how to include the setup in smaller stores.

Commodities

With dairy and coffee prices on the rise, the company may look at a pricing increase. CFO Paul Carbone said the franchisee-owned distribution co-op has locked in coffee prices throughout the end of the year, however. With higher futures, the franchisees are starting to buy into 2015, but COGS remain lower year over year on coffee.

"We see rising coffee costs as something that we can help the franchisees offset through some pricing, but importantly through better operations and taking other costs out of the system. Having flat national pricing by the end of the year is a huge win for the system," Carbone said.

Development

Sixty-nine net new Dunkin' Donuts were opened in Q1. The full year target remains 380 to 410 net openings for Dunkin' U.S.

The first traditional Dunkin' in California is ahead of schedule and will open by the end of 2014, instead of 2015, as originally planned.

Baskin-Robbins testing delivery

Baskin-Robbins online cake ordering platform, introduced in April, is "off to a great start." The company believes this is a transformative initiative for the brand and hopes it will boost cake sales to 20 million a year globally, from the current 13 million.

Travis, a former Papa John's exec, said franchisees are enthusiastic about the platform and its impact on profitability.

"I've personally seen what online ordering did to revolutionize the pizza industry by driving average ticket up, and I believe we can see the same effect for ice cream cake sales," he said.

In addition to driving these sales through digital ordering, Baskin-Robbins is also testing delivery in some markets outside the U.S.


Topics: Franchising & Growth , Loyalty Programs , Marketing / Branding / Promotion , Operations Management


Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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