Dunkin

Mar 24, 2022 | Report Announcements

Dunkin’s famous coffee (#1 in drip coffee), donuts & munchkins are legendary in core Northeast markets and a strong coffee value equation includes: bean to grind fresh; brew fresh every time; short hold times; and free flavor shots. The chain’s coffee authority supports its expansion into new geographic markets as well as new demos attracted to its new trendy/upscale menu options including espresso, cold brew, foam & non-dairy. The Dunkin’ way (get in, get out & get on your way) is consistent with its famous “America runs on Dunkin'” tagline and the chain’s high-frequency, low-touch, affordable-ticket business model is well suited to a modern lifestyle. The brand has deep roots with blue collar customers “who help make America run” with a mid-level positioning above c-store and QSR but below Starbucks. Along these lines, Dunkin’ seeks to “democratize” higher-end drinks for a younger demo with its push into espresso/premium options served quickly in drive-thrus (70% of system) at an affordable price. A 22% digital mix (inclusive of Perks, on-the-go, delivery & curbside) further helps Dunkin’ appeal to younger, hipper consumers. Long-term growth drivers include: appeal of DT model; drip coffee leadership; democratization of upscale/trendy espresso, cold brew, foam & non-dairy products; digital & loyalty; Next Gen store design; dining room re-openings; and ops & tech innovation to improve service speed. Although 2/3 of locations are in the NE, growth in the South & West is key for future development. In any case, the chain must still address historic sales pressure in the form of: increasing c-store/QSR coffee competition; PM sales softness which may reflect impact of coffee discounting on a less ritualistic daypart; QSR breakfast all-day initiatives; and cannibalization driven by past development in mature markets. Also, a broad menu, an abundance of promotions and endless customization options continue to pressure operational complexity. Taken together, fundamental challenges translate into a stagnant AUV, which taken together with elevated COGs & labor costs, translates into a system worst EBITDAR margin. In conclusion, Dunkin’s work is to finish executing its move upscale in pursuit of adding the purchasing power from a new, younger clientele to layer onto a stream of loyal sales from the brand’s core base of middle America.

 

Signup
NoBullEconomics
Restaurant Research

Email Sign-up

15 Second Posts

What is the Federal Government’s Job?

A couple of weeks ago we conducted a thought experiment in which the government became a nonprofit, and this week we propose another thought experiment in which the government becomes a public corporation. We suggest that this could provide very useful input into the debt ceiling debate.

The Importance of the Balance Sheet in Financial Analysis

While most investors are focused on sales growth & margins, they would be well served to further consider the strength of a company’s balance sheet. We look at BlackRock’s financial condition as an illustrative point.

The Importance of Free Cash Flow in Financial Analysis

Cash represents the lifeblood of all business enterprises which is why it is important to analyze free cash flow which we define as operating cash flow minus capex, dividends, and stock buybacks. We illustrate DoorDash as an example of why cash flow analysis is so important. 

Lessons From Tucker Carlson

There are many theories about why Fox booted Tucker Carlson, but it may be a very simple reason which can instruct everyone involved in the consumer retail segment.

It is Imperative that Climate Change Regs Incorporate Economic Reality

This week we spotlight efforts by international agencies to lower the earth’s temperature by imposing onerous regulations on energy producers. We suggest it will be better to: begin a process of implementing continuous improvements designed to support both economic & climate progress; and use international organizations to share tech & best practices as opposed to providing them with regulatory powers best left to individual nation-states.   

Part 3 – It’s Nice for the US to Save the Climate, But What About the Rest of the World?

In our last 2 posts, we outlined the probability that the UN’s push to lower the world’s temperature by -2 degrees Celsius could drive significant U.S. energy price hikes & shortages. How is this going to help as Asia ramps up the use of coal? Can humans lower the earth’s temperature anyhow?

Part 2: Who is Left to Make Investments in Fossil Fuels & Clean Energy?

There is not a lot of incentive for profit-seeking companies to invest in demonized fossil fuels or in clean energy projects lacking ROI. This points to substantially higher energy prices and supply shortages that will have a profound economic impact.

Part 1: Ramping Energy Demand Clashes with UN’s Environmental Goals

From 2021 to 2050, ExxonMobil forecasts that 85% of the population growth will be driven by developing countries, which in turn, will drive a +15% increase in energy demand.

What if the Federal Government Was Turned into a 501c3 Non-Profit?

Given all the focus on the debt ceiling, we propose a thought experiment in which all 100 federal agencies must compete for charitable donations. If taxpayers get to choose for themselves what to fund, what might we learn? 

Like Sinatra Croons: “So you see it’s all up to you, you can be better than you are.”

The top-paid hourly workers are currently enjoying the fastest wage growth, indicative of the current challenge to recruit & retain a skilled labor force.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company