The afternoons have long been the Achilles heel of the coffee-shop business. The morning? That’s always been great, as groggy consumers on their way to work search for their habitual dose of caffeine. But that force of habit has never quite worked as well when the need for liquified stimulants is not so obvious.
And then a generation of brands figured it out and are taking off. They sell colorful beverages with names like Pixie Stick or Annihilator and are frequently topped with whipped cream or cold foam and there are probably stickers or something else involved. And they lure the social media-savvy, 20-something crowd in droves.
Dunkin’ wants a piece of this. Coming off a strong summer, the Canton, Massachusetts-based chain plans to make a concerted effort to make the afternoon work.
The chain is about to launch a 250-store test of what it calls “Project Chill,” in which a location visibly transforms into a different version of Dunkin’, with menus emphasizing its cold beverages and other menu items. Some of these items, such as avocado toast, may be given different names that appeal to a younger set, like Cowboy Toast. But most of the items are already available.
“Seventy percent of our business is in the morning, and I think we do that better than anyone,” Scott Murphy, chief brand officer for the Inspire Brands-owned Dunkin’, said in an interview. “And then you see a lot of these competitors doing that afternoon business with iced drinks, not a lot of drip coffee. We have plenty of those products.”
“Project Chill showcases those products in a huge way,” he said.
Starting at 1 p.m., the company’s shops will flip. Digital menu boards, those inside and outside the restaurants, will flip to showcase those iced beverages. “All iced beverages, all colorful, Instagrammable, refreshers, iced espressos,” Murphy said. “They have the cool names that the kids like, not the functional names that old guys like us need to know.”
A strong summer
Dunkin’ is on something of a roll. The coffee chain, acquired by the Atlanta-based Inspire Brands in 2020, just opened its 10,000th location, in a Chicago suburb. Sales growth outpaced Starbucks last year, and it has continued to post strong sales this year, according to operators.
“Dunkin’s having a great year, and sequentially, each quarter has gotten progressively better,” Murphy said.
The 10,000th location is a major milestone. Dunkin’ was the fourth U.S. chain to reach that number, after McDonald’s, Subway and Starbucks. But that milestone was also reached without having the benefit of a full national presence.
Dunkin’ remains largely in the Northeast. Seven of its 10 biggest markets are there, and nine of its 10 largest markets are on the East Coast. Only Chicago isn’t in a state that borders the Atlantic Ocean. “We still have plenty of white space,” Murphy said. “Of that 10,000, I think 9,000 are still east of the Mississippi.”
The chain has no presence in the Northwest and in states like Idaho, Montana and the Dakotas. That could change soon. The company recently announced plans to sell franchises in the Pacific Northwest.
“People love the brand, man. I don’t know that there’s a more loved brand than Dunkin’ in the franchise world.” -Raj Patel, Dunkin' franchisee out of the Chicago area
“We don’t have any restaurants up there at all,” Murphy said. “There’s been a lot of demand for that with our [consumer packaged goods] presence and our national advertising.”
Yet while Dunkin’ has focused development strategies in part on California, the company has also found it does quite well in the middle of the country, from Texas to Illinois. “The business is absolutely crushing it” in those places, Murphy said.
All of which makes it fitting that its 10,000th location would be in a place like Chicago. The franchisee that opened the location is Raj Patel, who had just opened his 100th location. Patel joined his father’s business in 2010, when it operated eight Dunkin’ stores.
Today, Patel operates Dave’s Hot Chicken and McAlister’s Deli, among other brands. “I jumped in when [my father] was deciding whether he was going to go or stop,” Patel said. “He was living a good life. He didn’t really need much more. But there’s a lot of fun and growth. So we took off and here we are.”
Dunkin’s strength, Patel said, is in its customer loyalty. Few brands engender the kind of love from their customers, and that’s been proven this year as financial realities hit much of the fast-food world. “Everyone in Dunkin’ doesn’t realize how good they have it,” Patel said. “There’s no better brand in my eyes right now when you look at legacy brands. The marketing handles itself. You’re not having to go out and fight for customers.
“People love the brand, man. I don’t know that there’s a more loved brand than Dunkin’ in the franchise world.”
Dunkin's 10,000th location was in the Chicago suburb of Darien, Illinois. | Photo courtesy of Dunkin'.
Afternoon evolution
That said, Dunkin’ finds itself combating a far more complex and competitive beverage world than when it began.
In relatively short order, for instance, fast-growth drive-thru chains became three of the six largest coffee brands—Dutch Bros (No. 3), Scooter’s (No. 5) and 7 Brew (No. 6)—according to data from Technomic. The latter became a $500 million chain in just a few short years. Those three chains grew an average of 73% last year.
By contrast, the seven older, non-drive-thru legacy brands among the 10 largest coffee chains grew just 3.5% last year, according to Technomic data. That doesn’t include other brands, like the dirty soda chain Swig or several other smaller, aggressive-growth beverage chains.
Many of these newer brands do exceptional business in the afternoons, a time of day those traditional coffee shops typically do not play in. But it may be particularly problematic for Starbucks, which built a relatively successful off-peak business with customized, cold beverages that attracted attention on social media. Now it may be losing those customers to the upstarts, which may be a factor in the chain’s sales struggles, now nearly two years old.
Dunkin’s ability to remain above the fray not only highlights its customer loyalty but, apparently, its inability to get that same afternoon business. “For years, we’ve been trying to figure out the right solution for the afternoon,” Murphy said. Much of that, he said, was with food items—anybody remember Dunkin’ personal pizzas? Or stuffed breadsticks?
"We now flip the menu boards in the afternoon and that looks like a whole new company.” -Scott Murphy, chief brand officer for Dunkin' parent Inspire Brands
In this case, the answer to Dunkin’s afternoon question may already be on the menu. The chain has pushed its share of the kind of colorful, iced beverages that consumers prefer during that time of day. The chain has items like the Coolata or Frozen Chocolate, along with Refreshers and energy beverages, among other things.
Executives are confident in their offerings. And they probably have reason to be. The summer’s success was driven in part by the company’s more forceful push of its cold beverages. That included a promotion with tarte cosmetics, a $1 iced coffee promotion on Dunkin’ Iced Coffee Day, and a promotion with the musician Sabrina Carpenter promoting a Strawberry Refresher.
The company believes it can build on this by simply changing the way its cold beverages are presented to customers.
“I know there’s a lot of coverage, and a lot of people are excited about the new entrants to the category, and all those buzzy new names, but I would say that our dominance, and not just hot but especially iced, is paying off,” Murphy said. “I think we have plenty of those products, and we do it better than anyone. We just haven’t been showcasing it strongly enough.”
Dunkin’ has done this sort-of thing before. The concept was founded by Bill Rosenberg in 1948 as “Open Kettle” and it served premium coffee and doughnuts. Its name was changed to Dunkin’ Donuts two years later.
For most of those subsequent decades it was known more as a doughnut chain, even though it had long had coffee. By the early 2000s, it focused more on beverages, which helped fuel its rapid expansion and then, in 2018, the company removed “Donuts” from its name altogether.
Project Chill, therefore, represents a potential further evolution as more of an all-day beverage concept. "A lot of the drinks are on the menu board now, we just didn’t talk about them, because we were busy showing doughnuts and breakfast sandwiches and all these things,” Murphy said. “And now all of a sudden, you can. We now flip the menu boards in the afternoon and that looks like a whole new company.”