Dunkin’ Deepens Digital Delivery Push Amid Espresso Relaunch

Amid a push to relaunch its espresso offering and open Next-Gen stores, Dunkin’ Brands reported better-than-expected bottom-line results, but fell short of expectations for fourth quarter revenues. The quick-service restaurant (QSR) chain reported revenues of $319.6 million and earnings per share of 68 cents compared to analysts’ expectations of $329.4 million and 61 cents.

While systemwide sales increased by over 3 percent during the quarter, Dunkin’ CEO David Hoffmann said in an earnings conference call that the company’s comp store sales remained flat. Hoffmann called the comp sales result disappointing, but noted that “overall sales accelerated out of the quarter.” He also acknowledged that the company’s espresso product relaunch might have impacted short-term sales, but said “we knew it was the right thing to do for our franchisees, crews and our customers.”

To help bring coffee quickly to its consumers through convenient offerings, Hoffmann said the company is teaming up with Grubhub for a delivery pilot that connects directly with its point of sale (POS) systems. “Grubhub is No.1 in the delivery space, and we’re excited to add them to our list of high-quality partners,” Hoffmann said of the partnership. He added that the company was beginning with a small pilot before eyeing an expansion to a bigger market test going forward.

Hoffmann also noted that Dunkin’ was looking to make its app more convenient, with two completed app refreshes last year, and also aims to simplify its on-the-go ordering process. But he added that “there is tremendous power still to be tapped from our digital platform, with mobile orders at 3 percent of transactions.” Hoffmann noted that the company’s CardFree acquisition means Dunkin’ can be more flexible and faster to market with digital initiatives.

In addition, Hoffmann said the company’s franchisees opened 392 net new restaurants around the world during the quarter, including 278 locations in the United States. He also said the company more than doubled its first goal of 50 Next-Gen restaurants, ending the year with 130 new and renovated Next-Gen locations across the country.

The Espresso Relaunch

For the espresso relaunch, Hoffmann said the company put new espresso machines in more than 9,000 stores at a fast clip, and also “trained more than 100,000 crewmembers on both the equipment and the new product builds.” He added that the company created a robust marketing plan, but decided to have a purposefully light marketing calendar to prepare for Thanksgiving week, when espresso “hit the airwaves.”

Hoffmann noted that espresso drives a premium basket when compared to transactions for drip coffee, and also skews toward younger consumers. Since the product’s rollout in late November, he noted that espresso grew 200 basis points as a percentage of overall sales mix. Hoffmann said that going forward, “we believe having a compelling espresso offering sets us up for long-term success by strengthening our beverage portfolio.”

Beyond espresso, Hoffmann noted that the company’s consumer packaged goods (CPG) business saw 5 percent retail sales growth last year, signed four new retail licensing deals and added more than 20 new stock-keeping units (SKUs).

Ice Cream Expansion

Hoffmann said that Dunkin’ is aiming to make its Baskin-Robbins brand more accessible to consumers through a focus on take-home packaged ice cream and expansion of delivery. To further that aim, the company continues to expand its DoorDash partnership. The company now has delivery in more than 70 percent of its Baskin’ U.S. stores, which represents a 40 percent increase in coverage year over year.

Hoffmann also said the company is preparing to open its second “Moments store” in Texas “in the next few weeks.” First launched in Fresno, California, Hoffmann said that “the store design offers a more modern experience, showcasing our high-quality products in a more premium way.” The aim of the concept is to allow diners to create memorable moments with friends and loved ones. In the call, Hoffmann said he was looking forward to a “national rollout of the new store design later on this year.”