Dunkin’ Donuts’ ambitious repositioning strategy is already paying off, executives of parent company Dunkin’ Brands stressed in releasing third quarter financial results yesterday. But the returns have come in the form of higher guest expenditures, not an increase in traffic.
Same-store sales for the chain’s 9,141 domestic units rose 1.3%, a direct result of Dunkin’s efforts to re-establish itself as a quick stop for grab-and-go beverages, snacks and products unique to the brand, said Dunkin’ Brands CEO and Dunkin’ Donuts U.S. President Dave Hoffmann. The three factors yielded the strongest jump in comparable afternoon sales in two years, Hoffmann noted.
He cited Dunkin’s new lineup of $2 afternoon snacks, the Dunkin’ Run menu, as a particularly strong sales driver. One component, churros-like Donut Fries, “became one of the best-performing limited-time offer bakery items in recent brand history,” Hoffmann said.
But the company noted that the gains came in the form of a higher average check. Traffic declined, though Dunkin’ did not reveal by how much.
The same dynamic held true for Dunkin’ Brands’ other concept, Baskin-Robbins. Domestic same-store sales for the ice cream brand rose 1.8%, with a rise in the average check offsetting a decline in traffic. The company attributed the gain to higher sales of beverages, particularly shakes and smoothies.
Overall, Dunkin’ Brands reported a net income of $66.1 million, up 60.5%, on revenues of $350 million, up 6%.
Hoffmann and the members of his team were effusive in characterizing Dunkin’ Donuts repositioning as a success. They reiterated plans to shorten the chain’s name to Dunkin’, a key part of the repositioning as a beverage-first, on-the-go concept.
They also repeated a previously disclosed plan to spend $100 million on the transformation, with the installation of new espresso makers set to be completed by the year-end holiday season.
Other components include the installation of an eight-head tap, similar to the systems used for draft beer, to dispense cold coffee.
Hoffmann noted that the repositioning was unveiled about a year ago, and continues to be phased in.
“The journey we are on is much longer than one quarter or even one year,” Hoffman told financial analysts. “Delivering sustainable growth and top shareholder value means we have to evolve both of our brands to be more modern and relevant to consumers, a transformation that won't happen overnight, but will be punctuated by early milestones and key wins.”