Dunkin’ on Thursday said it plans to close 450 locations inside of Speedway convenience stores by the end of the year, saying it can better serve these markets with the company’s own stand-alone locations.
The company has reached an agreement with Speedway to close the locations, which are primarily on the East Coast and represent less than 0.5% of Dunkin’s U.S. systemwide sales.
Scott Murphy, president of Dunkin’ Americas, told analysts on an earnings call Thursday that the locations have lower volumes and limited menus and the markets would be better served by full-scale locations.
“By exiting these sites, we’re confident we’ll be better positioned to serve many of these trade areas with future Dunkin’ restaurants that reflect the full expression of our next-generation restaurant design,” Murphy said. He added that the closing process is expected to be “materially complete” by the end of 2020.
Kate Jaspon, Dunkin’ Brands’ chief financial officer, said the exit will have a “minimal financial impact” on the company.
Speedway, which is based in Enon, Ohio, owns and operates the Dunkin’ locations inside of its c-stores. The subsidiary of Marathon Petroleum Corp. operates more than 3,900 stores, meaning Dunkin’s decision affects more than 11% of its locations.
The locations have been in the convenience stores for years and were originally opened under an agreement with Hess, which Speedway acquired in 2014.
For Dunkin’, the decision will likely shrink the company’s unit count this year. The 9,600-unit, Canton, Mass.-based coffee chain said it expects to open a net of between 200 and 250 locations by the end of the year, but that excludes the Speedway closures.
The company has been working with franchisees to remodel locations under its “NextGen” image and has also been aggressively upgrading its cold beverage and espresso platforms. This year, the company and its franchisees expect to invest a combined $120 million in a new brewing system for its hot drip coffee.
In addition, Dunkin’ has focused on its loyalty program, DD Perks, as well as mobile ordering.
The Speedway locations do not offer espresso, cold beverages or sandwiches, and they don’t accept the loyalty program or offer mobile ordering. All of these are increasingly popular among Dunkin’ customers—espresso, for instance, represents 10% of Dunkin’s sales mix.
“Guests are continually asking us for espresso, cold beverages from the tap system, sandwiches and even access to Perks and mobile ordering, all of which are available in NextGen,” Murphy said.