Dunkin’ Brands, the parent company of Dunkin’ Donuts, currently has about 7,000 of its 10,000 Dunkin’ Donuts locations in the US. The company recently announced its intention to double its domestic locations to nearly 15,000 restaurants over the next 20 years, largely through a long-term agreement with Dunkin’ franchisee cooperative National DCP (NDCP).
The deal, which is already effective, merged four smaller franchisee collectives into one large cooperative. The performance-based agreement made NDCP the exclusive supply chain provider for all Dunkin’ Donuts restaurants in the continental US.
Dunkin’ Brands hopes the arrangement, which includes a uniform product pricing element, will streamline its franchising system and provide significant cost savings for its franchise community. The savings could be especially important for franchisees opening locations in non-core markets.
In a press release, Dunkin’ Brands CFO Neil Moses said, “This is a huge step forward toward our goal of continuing to drive store level profitability in newer markets and accelerating the expansion of Dunkin’ Donuts across the US.”
Americans might wonder how a chain built on doughnuts could be poised for such alarming growth, given the general economic climate and marketplace concerns over diet, sustainable food sources, obesity, diabetes, etc.
The quick answer is coffee. Besides battling McDonald’s for morning drive-thru dollars, Dunkin’ Donuts has been going head to head with coffee industry heavyweight Starbucks for some time now. While Dunkin’ Donuts now offers espresso, cappuccinos, and lattes, the doughnut chain has really been bringing home the bacon by selling plain old cups of regular coffee to Regular Joes.
Canadian doughnut powerhouse Tim Hortons has been growing exponentially even outside of its native Canada in recent years, largely by building customer loyalty with competitively-priced cups of regular coffee.
Advertising campaigns portraying Starbucks as overpriced and ridiculously fancy were given some street credibility when Starbucks recently raised its prices in the Northeast and Sunbelt regions, citing supply costs. Starbucks has responded to the threat on its flanks by releasing a blonde roast coffee geared towards more “regular coffee” drinkers.
Analysts have predicted a strong 2012 for the coffeehouse segment. Dunkin’s primary doughnut rival Krispy Kreme introduced its own signature coffee last summer, and coffee sales have helped revive the chain’s revenues that had been slumping for several years running prior to 2011.
Lucky for me, Hoover’s editors have an indie coffee shop and an indie doughnut shop sitting side by side directly across the street from our Austin, Texas office. So now that you know a Dunkin’ Donuts franchise is coming soon to a town near you, I’m off for a double espresso and a doughnut.
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Photo by Ellen Forsyth used under Creative Commons License.
Is this music to your ears, Michael? More donuts in this world.
Well yes…dessert for breakfast does make me happy. But Dunkin’ is really a coffee shop in disguise. Lots of “restaurants” out there are trying to sneak a little piece of Starbucks’ very large profit pie.