Earnings

Dunkin’ Expands Digital Innovation, Focuses On Delivery, Loyalty

With upgrades to its mobile app and new product offerings, Dunkin’ Brands grew its digital and delivery platforms while rolling out menu innovations with broader customer appeal in the second quarter. The quick-service restaurant (QSR) brand added 46 net new Dunkin’ locations in the U.S., with a total of 109 net new Dunkin’ and Baskin-Robbins locations around the world.

Dunkin’ Brands Chief Executive Officer and President of Dunkin’ U.S. David Hoffmann said in a call with analysts on Thursday (August 1) that the company in June announced Dunkin Delivers via Grubhub and Seamless across the boroughs of New York City. He said the company worked closely with Grubhub along with its franchisees to create a delivery system with point of sale (POS) integration. “We’re excited to scale this to major U.S. markets” by year-end as well, Hoffmann said in the call.

The company also launched multi-tender in its app in April at over 1,000 Dunkin’ restaurants across the country, which lets guests earn points regardless of their payment methods. Test results indicate the effort is “driving incremental active enrollments with no material impact to margin,” Hoffmann said. On-the-go ordering saw average weekly sales increase by over 30 percent year over year (YOY) and made up 4 percent of total transactions in Q2. At locations that don’t have drive-thrus, it represented over 7 percent of transactions. Mobile orders exceeded 25 percent of transactions during peak hours in many urban areas.

“Mobile Order and Pay is clearly a winning proposition for Dunkin’,” Hoffmann said. “It enables guests to get in, get out and get on their way.”

In the next few quarters, the company is launching new features such as guest checkout. That functionality lets non-Perks members use on-the-go mobile ordering through the app. The company is also making the Dunkin’ app more convenient to use, with an app refresh completed during the quarter. And a recent improvement to one-step enrollment drove more than one million new members to sign up for the loyalty program in the second quarter. Total membership now sits at 11.7 million guests.

“There’s tremendous runway ahead of us” in regard to growing its digital platform, Hoffmann said. He noted that the latest advances – delivery, multi-tender, guest checkout and app upgrades – all make the Dunkin’ experience “as frictionless as possible.”

Menu Innovation

In April, the company introduced a new type of food innovation to its menu with the rollout of Dunkin’ bowls. Its egg white bowl featured 14 grams of protein with only 250 calories. Hoffmann said the company will continue to innovate to broaden its menu and appeal to consumers of all tastes. Last week, the company announced a partnership with Beyond Meat, for example, which Hoffmann said is “one of the fastest-growing U.S. food companies” offering a portfolio of plant-based meats. He said the company is the first U.S. restaurant chain to serve a sandwich that features 100 percent plant-based Beyond Sausage.

The offering began its rollout last week in Manhattan, with plans to scale it nationally in the future. However, Hoffmann pointed out that the company never forgets its core: On National Donut Day, for instance, its customers enjoyed more than 11 million donuts.

For the second quarter, Dunkin’ Brands reported better-than-expected earnings, but fell short of estimates for top-line revenues. The company reported revenues of $359.3 million and earnings per share (EPS) of 86 cents compared to estimates of $360.2 million and 82 cents per share.

Dunkin’s U.S. second-quarter results were built on solid momentum the company established with franchisees in Q1, according to Hoffmann, with 4.7 percent systemwide sales growth and 1.7 percent same-store sales growth. He noted that performance was driven by double-digit espresso growth, national value offerings and excellent consumer reception to its better-for-you power platform.

With efforts geared toward enhancing mobile ordering and delivery over the quarter, Dunkin aims to reduce friction in its customer experience through digital innovation.

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