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Dunkin’ Brands sees potential for nearly 20K domestic units

During the company's investor day this week, CEO Nigel Travis said that being a global company is more difficult than ever because of social media.

September 19, 2014 by Alicia Kelso — Editor, QSRWeb.com

It was a full day in Dallas Wednesday for Dunkin' Brands investors, who were versed on the company's menu, marketing, mobile and expansion plans during its Investor Day event. The day kicked off with CEO Nigel Travis conducting a Q&A with NFL Hall of Famer Troy Aikman, who signed on as a Dunkin' Donuts franchisee in 2012.

There were also plenty of highlights about the company's aggressive expansion plans and the challenges that come with them.

Travis stressed that Dunkin' Brands is unique in the intensely competitive QSR space because of its two heritage concepts – Dunkin' Donuts and Baskin-Robbins – and its nearly 100-percent franchised model.

"Everyone seems to be out there trying to copy us at the moment. We have a lean organization, but what sets us apart is that no one else has the growth," he said.

That growth is yielding even more demand, executives said.

"My No. 1 problem right now is franchisees are fighting over territory. Our problem is demand," Travis said.

Since Dunkin' went public in 2011, it's grown by more than 2,000 stores. "We've effectively started another company," he said.

Dunkin' Brands of the future

The company has no plans to ease up on that growth and Travis even suggested the potential to reach a 19,500-unit footprint in the US.

That expansion potential also exists in Europe (from today's near-600 to about 1,800); Asia (5,736 to 9,500); the Middle East (1,044 to 2,000); and Latin America (530 to 1,400)

Dunkin' Donuts will likely make its debut in Brazil this year, contributing to the Latin American objective.

"The Dunkin' Brands of the future is 30,000 restaurants," Travis said.

California

Dunkin's president of US and Canada, Paul Twohig, detailed the California expansion specifically. Dunkin' Donuts currently has five units open in the state, putting it well ahead of its initial 2015 debut estimate. He said the size of opportunity in California is 1,000 units and the demand is strong.

"We've received 2,800-plus applicants and inquiries. We converted 215 of those to candidates," he said.

The East Coast brand is translating well so far in the market, which Twohig attributes in part to the pre-market-entry advertising that created pent up demand. Most of California's units are expected to have a drive-thru, he said.

Other emerging US markets

Twohig added that Atlanta, Florida and Manhattan DMAs are also providing significant domestic growth opportunities for Dunkin' Donuts. In Atlanta, the brand has grown from 78 restaurants in 2010 to an expected 120 by the end of this year. Average weekly sales growth has increased by 25 percent.

In Florida, Miami, West Palm Beach, Naples, Fort Lauderdale and Tampa markets are targets.

"It's how high is high with Florida. It wouldn't surprise me to get numbers in four digits there. It's been a great success story for us. It's the gift that keeps on giving," Twohig said.

Dunkin' has grown in the entire New York City market by 58 percent since 2010, and the brand has honed in on Manhattan specifically for future growth, identifying the borough as a "real opportunity."

Industry challenges

That's not to say executives believe they'll have a constant tailwind as they expand the portfolio.

"Being a global company is tough these days; whatever happens in one part of the world affects other parts of the world because of social media," Travis said, citing the recent supply chain crisis in China as an example.

There also remain consumer headwinds and a highly intense QSR landscape where, Travis said, everyone loves coffee and breakfast.

"We have a business that's hyperactive," he said. "We're always facing challenges and we will try to learn from them."

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