With digital initiatives in multi-tender rewards and mobile guest checkout, Dunkin’ ended the third quarter with over 12 million loyalty members contributing approximately 13 percent of rooftop sales. The quick-service restaurant (QSR) chain reported earnings that surpassed analyst estimates but fell short on sales for the quarter.
The company announced two significant enhancements to its digital offering in September. It first made DD Perks more flexible by expanding its multi-tender offering to members nationwide. Dunkin’ Chief Executive Officer David Hoffmann said DD Perks members can now earn rewards points “any way they pay,” including cash, credit, debit or with an active enrolled Dunkin’ card. Test results have shown that multi-tender is “driving incremental active enrollment” with no material impact to the margin.
The company also announced the addition of on-the-go mobile guest ordering. The new feature allows any customer – not just Perks members – to place a mobile order via the Dunkin’ app. “Guest checkout is just one more way customers can experience the speed of Dunkin’ exactly the way they want it,” Hoffmann said. The company processed more than 18 million on-the-go mobile orders in Q3, which is a 25 percent increase versus the prior year. Hoffmann also noted that “there is tremendous runway ahead of us when it comes to growing our digital platform.”
Hoffmann noted that the company delivered a “strong third quarter with global systemwide sales growth of 4.7 percent.” The company’s focus around the globe was on delivering a more modern guest experience via operational excellence, everyday value and relevant new menu innovation. Dunkin’ U.S. had 4.4 percent systemwide sales growth and 1.5 percent same-store sales growth. Hoffmann said performance was driven by premium beverages such as espresso and cold brew, as well as national value platform go-to items.
Espresso sales grew over 40 percent year over year, which was led by the strong performance of innovation on Dunkin’s signature latte line. Most importantly, Hoffmann said, the company kept operational speed while growing the espresso category. He noted that it has been almost 12 months since the company relaunched espresso in a big way with new recipes, equipment, training and marketing. He also said Dunkin’ is “a beverage-led brand and espresso is a big part of our future.”
Hoffmann also noted that the company will fight hard to protect its leadership in drip coffee – both hot and iced – which has experienced rising competition in recent years. The company also knows the importance of offering compelling food value that will drive beverage attachment, which is what its go-to national value platform is accomplishing. According to Hoffmann, approximately 75 percent of go-to transactions also include a full-priced beverage, with an average total ticket of nearly $9.
Hoffmann also said that innovation on premium food contributed to Q3 comp performance, particularly with the launch of a BBQ bacon breakfast sandwich and lineup of new breakfast bowls. He noted that the company is excited to be the first nationwide U.S. restaurant brand to begin serving Beyond breakfast sausage starting on Nov. 6, and he believes Dunkin’ can democratize trends as it did with espresso. The company also recognizes that there is an opportunity to do more when it comes to giving consumers great-tasting, on-trend innovations, such as plant-based proteins, at an affordable price.
For the third quarter, Dunkin’ reported revenues of $355.9 million and diluted adjusted earnings per share of 90 cents, compared to analyst estimates of $358.74 million and 81 cents.