America apparently runs on Dunkin’ espresso and plant-based meat.
The Canton, Mass.-based coffee chain said Thursday that its same-store sales rose 2.8% in the company’s fourth quarter ended Dec. 28.
That was the highest level in six years and came thanks largely to the company’s espresso-based beverages and its Beyond Sausage Sandwich, which the company introduced nationwide in November.
Traffic declined in the quarter, however, meaning its sales growth came from customers ordering more expensive items, or from higher prices. Yet Dave Hoffmann, Dunkin’s CEO, said that traffic was the best it has been in five years.
“Obviously we’re not declaring victory,” Hoffmann said. “But we feel the business is moving in the right direction.”’
Dunkin’s biggest move in the quarter was its decision to expand its Beyond Sausage breakfast sandwich nationwide. The sandwich helped lift the company’s average check—orders featuring the product averaged more than $9—while also luring newer customers to the brand.
“It reached a new consumer,” Hoffmann said. “It is important to give our consumers on-trend choices, democratizing trends like we did with plant-based proteins and espresso.”
Customers ordering Beyond Sausage skew “more female than male” and also tend to be younger, and coastal residents are more likely to order the product. And it’s bringing in younger consumers, Hoffmann said. “It definitely skews younger.”
Espresso continued to represent a significant win for Dunkin’, where sales of espresso drinks increased 40% and now represent 10% of the company’s sales. Espresso has been a big win for the company in recent quarters, following a major product initiative kicked off in late 2018.
“We are very pleased with the investment into espresso,” Hoffmann said. “But it wasn’t just one thing. You can’t be so one-dimensional in the marketplace.”
Dunkin’ is hoping to shift some of its momentum to hot coffee. The company said it plans to invest about $60 million in new brewing equipment for its 9,600 locations. Franchisees that operate the restaurants plan to invest at least the same amount.
The brewers “will enable us to expand the variety of drip coffee blends, increase operational efficiencies, reduce waste and enhance the quality and consistency across the system,” Hoffmann said.
He added that the new equipment is helping to simplify operations at remodeled and new restaurants that already use it.
The brewers are internet-enabled, “so we can get all sorts of data on the machines and make sure they’ve got the preventive maintenance and whatnot,” Scott Murphy, president of Dunkin’ Americas, said on the company’s fourth quarter earnings call. “We’re really excited about the operation, the quality, the consistency.”
Dunkin’s expansion also continued to generate momentum in the fourth quarter. The company opened 211 net units in the quarter, growth of 2.2%—all of which came outside of Dunkin’s core Northeast region.
That’s been a major goal for the brand for years, given its heavy concentration in the Northeast. The company’s new locations generated more than $140 million in system sales last year.
Executives expect to open another 200 to 250 locations this year, but that excludes the closure of 450 restaurants inside Speedway convenience stores.
As for traffic, Hoffmann said the company is “maniacally focused on traffic.” He said the best way to improve the key statistic is through his “triangle offense” of premium beverages, food innovation and “compelling value,” along with operations.
“So that is what we’re focused on,” he said. “And we’re seeing the improvements right now.”