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Dunkin' Donuts' U.S. comps were up 3.4 percent in the fourth quarter, marking a nearly 8-percent comps increase in two years. During today's earnings call, CEO Nigel Travis attributed this growth to product differentiation and the brand's LTO strategy.
Dunkin' Donuts introduced more than 40 new products in 2013 and the pipeline is "stronger than ever," Travis said.
"We had healthy gains across the system, driven by a combination of traffic and ticket across the morning and p.m. dayparts. The breakfast and bakery sandwiches were key drivers of growth," he said.
Because the sandwich line has been successful and expanding, executives said a new sandwich station that adds efficiency is being looked at. The aim is to put more capacity in that station, which will then provide even more opportunities to expand the sandwich platform.
"We have learned (from consumers) that the Dunkin' brand has permission to go into almost any category as long as it falls into being great food at a great value in a fast, friendly, convenient environment," said John Costello, president of global marketing and innovation. "We have permission to expand into other dayparts, as long as long as we stay true to those principles. So while we're seeing significant gains in both the a.m. and p.m. dayparts, we expect that to continue in the years ahead."
Costello even said the brand could potentially dip into a grab-and-go category.
"All of our food, starting with our donut heritage, is highly portable," he said.
Digital marketing initiatives
Executives also provided an update about Dunkin's mobile app — which has been downloaded more than 5.5 million times since its August 2012 launch, and is now the basis of the brand's new Perks loyalty program, launched last month.
Activations, downloads and redemption rates are up, including a double-digit increase in activations in December, and Travis said loyalty will be a catalyst for growth in sales and usage of the Dunkin' app moving forward. The loyalty program was tested in 300 locations before full rollout.
"It is one of the important goals on our way to true one-to-one marketing. So far it's been very successful," Travis said.
The test proved to be "very encouraging" for signups, transactions, ticket and product mix, Costello added.
"In addition to the encouraging customer and sales metrics, we were also very encouraged by the in store experience and that it didn't have a negative impact on speed of service," he said.
Dunkin' plans to leverage the loyalty app to slowly drive comps. Costello said this will happen as customers sign up and take advantage of the offers sent to them, which will then allow the company to accumulate their purchase history and gain more insight into which offers are the most relevant and which are the most effective at driving profitability for franchisees.
The loyalty's rollout was made possible, execs say, through the company's standardized POS system, an initiative that began nearly four years ago and is now nearly 100 percent complete domestically.
"The standardized POS gives Dunkin' a major advantage over other QSRs," Travis said, "because it enabled the app and the loyalty program."
Moreover, it offers an operational advantage.
"Operations continues to look through back office, cash management, labor scheduling and inventory (data), all made possible through the unified POS system," said CFO Paul Carbone. "Not only because it has those tools, but also as we go out and train and teach and coach franchisees and managers, we're doing so on one system. It makes it easier for us and for our employees."
"After two and a half years as a public company, Dunkin' is truly and operations company now," Travis concluded.
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