The digital shift is coming late to Dunkin’ Brands. The company’s Q2 earnings, announced Thursday morning (July 30), showed an expected drop in store revenue due to the pandemic, but afforded minimal details on the chain’s stated goal of digital acceleration.
By the numbers, global sales for the entire company, which includes Baskin Robbins, declined 20.8 percent due to both permanent and temporary closures as a result of the pandemic. Dunkin' U.S. comparable store sales declined 18.7 percent in the second quarter due to a decline in traffic, and were partially offset by an increase in average ticket size. The company said comp store sales have improved sequentially in each month of the quarter.
In addition to the sales drop, the company also announced that approximately 800 Dunkin' U.S. locations, including the previously announced 450 limited-menu Speedway locations, may permanently close in 2020 as part of a real estate portfolio rationalization. The 800 locations would represent approximately 8 percent of the Dunkin' U.S. footprint.
According to CEO Dave Hoffmann, the drop was also due to changing consumer behaviors. For example, because so few people are traveling to office locations, the traditional morning coffee stop has been replaced by at-home sales or different dayparts for purchases.
“At the end of March and into early April, comparable store sales were down by 35 percent. And more recently, declines are hovering [at] around 25 percent, with customers’ daily morning routines disrupted,” Hoffmann said on the earnings call. “We're seeing a shift in sales … across dayparts, sales volumes in the early morning are down, but [sales have] picked up from 10 a.m. to 2 p.m. as people venture out for a break.”
Details on the digital acceleration were scarce, and questions after the official announcement focused mostly on franchisees’ financial health. However, Hoffmann mentioned that digital channels have increased customer engagement. He also pointed out that the company has added approximately 400,000 members to its loyalty program and has seen unspecified success for its app downloads. Hoffmann also said Dunkin’ has committed to an increase in digital marketing as more of its restaurants open.
“We have scaled back our national media spend and paused on launching new potentially complex limited-time offers,” he said on the call. “We have thoughtfully started to return to media with appropriate messaging, thanking our first responders and our crew members through our raise-a-cup campaign. You'll see a rotating suite of content on our social channels and increasingly in traditional media as well. Our marketing leadership team continues to create, assess and refine a phased approach for relaunching our brand responsibly at the right time. In the meantime, you'll see us smartly rely on digital marketing, as it has proven the most nimble and effective tool.”
The job of fixing Dunkin’s digital acceleration effort now lies with new Chief Digital and Strategy Officer Philip Auerbach. He will join the company on Aug. 10 and will oversee a new Dunkin' U.S. digital engagement team.
"Dunkin' has long been at the forefront of using digital technology to enhance the customer experience – whether through its world-class app, its advanced one-to-one marketing capabilities or its DD Perks platform, one of the first and fastest-growing loyalty programs in the quick-service industry," said Auerbach. "I am delighted to join Dunkin' Brands and excited to build a digital ecosystem that will deliver an even more personalized, frictionless experience across all channels."
Auerbach comes to Dunkin' Brands from expedition travel company Lindblad Expeditions, where he was chief commercial officer responsible for marketing, sales, distribution and strategic partnerships. Prior to Lindblad, Auerbach was senior vice president and regional chief marketing officer for Caesars Entertainment. At Caesars, Auerbach oversaw marketing for the company's Las Vegas portfolio and digital product development, third-party distribution and strategic partnerships.