Dunkin’ Brands Group, parent company of Dunkin’ Donuts and Baskin-Robbins, is placing its hopes for revenue growth on drastically expanding its footprint, and new Dunkin’ Donuts stores in Arkansas are part of that plan, CEO Nigel Travis told Arkansas Business recently.
Travis was in Little Rock in late March to view Dunkin’ Brands’ operations, part of regular tours he takes of the company’s global operations. Dunkin’ Brands, based in Canton, Massachusetts, has 11,500 Dunkin’ Donuts stores in 40 countries, and Travis had recently visited China, Japan and the Middle East. “I was keen to see some of our developing Southern markets,” he said.
The company has 25 Baskin-Robbins outlets in Arkansas and seven Dunkin’ Donuts and has three more Dunkin’ Donuts and two more Baskin-Robbins in the works, he said at the time.
After our conversation, Dunkin’ announced on April 7 that it had signed a multiunit store development agreement with Hyde Park Ventures, a new franchise group, for 10 new restaurants in Tulsa and four new restaurants in northwest Arkansas. Hyde Park also bought four existing Dunkin’ Donuts restaurants in Fort Smith, Springdale, Fayetteville and Bentonville.
Dunkin’ entered the Arkansas market in 2012.
“We’re kind of excited about the opportunities that we see,” Travis told us. “Franchisees seem very enthusiastic about the future. I can see us developing more stores over time in Arkansas.”
The fast-food market is always brutally competitive, but McDonald’s’ move to offer all-day breakfast has put extra pressure on Dunkin’, which saw same-store sales in the U.S. market fall 0.8 percent during the fourth quarter. Dunkin’ Brands had net income of $105.2 million on revenue of $810.9 million in 2015 compared with net income of $176.4 million on revenue of $748.7 million in 2014.
In addition, Dunkin’ is seeking to take market share from coffee king Starbucks, launching a new mobile phone app last week and a special promotion to let customers earn rewards more easily and quickly. DD aims to take advantage of customer dissatisfaction with recent changes in Starbucks’ loyalty rewards program.
Travis notes that Dunkin’ has always had all-day breakfast, adding, “You can get all our breakfast sandwiches made 2,000 ways, our coffee 1,000 ways all day, every day.”
Travis thinks McDonald’s move has prompted “an all-out value war” among the burger giants, including Wendy’s and Burger King. “We’ve got some great value programs, but we have to balance value with development,” Travis said. “The three major burger chains last year closed 145 stores between them,” he said. “They all had negative store counts. We grew 430” in the United States.
“Franchise economics is so important to us growing new stores,” Travis said. “When you look at the Dunkin’ Brands revenue line, by far the biggest part of that revenue growth line is store growth, and that’s why we’re so focused on unit economics.”
Dunkin’ is looking to expand far outside its base in the Northeast, Travis said, into the Southeast and West. It plans to open 3,000 stores in the Southeast and 5,000 in the West over the next 15 years. “Currently, we have just over 8,400 stores in the U.S., so we’re effectively talking about doubling our stores.”
And that was why he was in Little Rock, “because markets like this are fairly common in the Southeast sector. It’s important that they get supported by people like me, doing interviews like this, and also getting to hear what the franchisees have to say in these markets.”
“We’re a business of small businesspeople,” Travis said. “The average Dunkin’ franchisee has eight stores; the average Baskin has two. … As we grow in the South, we’ve got to support our franchisees.”
Greg Vasey of Boston, a partner in Hyde Park Ventures with Jody Goehring, is excited about the potential for Dunkin’ Donuts growth in northwest Arkansas.
Vasey, a Five Guys Burger & Fries franchisee with four stores in Massachusetts and Vermont and a graduate of the Booth School of Business at the University of Chicago, calls NWA “an electric market.
“The economy there has outpaced the national economy for 20 or 30 years, and the same holds true for Tulsa,” he said, adding that the population also is increasing.
And a lot of newcomers to the region area are already familiar with the Dunkin’ Donuts brand, Vasey said, a familiarity that he wants to capitalize on. Although his agreement with DD calls for four new locations in northwest Arkansas, he expects to exceed that.
Vasey plans to go “anywhere where there’s a convergence of busy people with jobs to get to.”