Dunkin’ Donuts is following up its strongest same-store sales gain in 15 months with an investment of $100 million in the brand’s repositioning as a beverage specialist.
About $65 million will be spent on new equipment, including cold-drink taps, cup-label printers and espresso makers. The rest is earmarked for home-office support of the new technology, including infrastructure enhancements and additional training.
“I want to make it very clear that this is a part of a unique chapter in our brand’s history,” said Dave Hoffmann, president of Dunkin’ Donuts U.S. and CEO of the brand’s parent company, Dunkin’ Brands.
Hoffmann was the architect of Dunkin’ Donuts Blueprint for Growth, a detailed strategic plan for recasting the doughnut specialist as a “beverage-led, on-the-go brand,” the new mantra of the concept.
Considerable progress toward that goal was made during the second quarter, Hoffmann and other executives told financial analysts Thursday. He noted that 75% of the breakfast sandwiches sold off a new Go2 tiered-price value menu were accompanied by a beverage, a step-up from the percentage of orders that usually include a drink.
Dunkin’ Donuts’ comp sales for the three-month period rose 1.4%, the steepest increase since the fourth quarter of 2016, Hoffmann observed. He attributed the gain in part to the replacement of limited-time promotions with marketing platforms such as the Go2 menu, which enables customers to pick two items from $2, $3 or $5 groupings.
He also cited the impact of “value that leverages a high/low pricing strategy.”
The new beverage equipment on Dunkin’ Donuts’ shopping list was tested in the brand’s first two so-called next-generation stores, one on the East Coast, the other on the West. Franchisees intend to open or convert 50 units to the new design this year, according to Hoffmann.
The April-June period was the first full quarter in which Dunkin’ Donuts had its new streamlined menu in place. Hoffmann acknowledged that units suffered a decline in sales because of the more limited choices presented to customers, but added that the impact was virtually offset by a decline in the cost of goods sold. The chain has found that the simplification has reduced labor costs by slowing turnover—a result of taking anxiety out of counter staffers’ jobs—and has reduced food costs by decreasing the number of incorrect orders that have to be tossed out.
Dunkin’ Brands’ other franchise vehicle, the Baskin-Robbins treats chain, posted a comps gain of 0.4% for the quarter. That brand intends to start testing its next-generation design during the fourth quarter.
Overall, Dunkin’ Brands reported net profits of $60.5 million for the second quarter, a rise of 18.4% from the prior year’s figure, on revenues of $350.6 million, up 4.6%.
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