Dunkin’ banks on menu introductions, digital initiatives to boost sales as 2Q closed: earnings release

Real estate shift leads to potential closing of 800 U.S. stores

As Dunkin’ continues to regain lost sales in the US, its menu rollouts and digital investments is propelling the QSR chain forward, according to a recent second-quarter earnings release. US comp(arable) sales decreased 18.7 percent as the company shifted mainly to takeout, including pickup, curbside, drive-thru, and delivery. Although traffic was down, particularly in hard-hit Northeast urban markets, average ticket increased due to customers purchasing premium products, including lattes and espressos, buying for groups/families, and adding snacking items to orders.

Overall, the Dunkin’ coffee chain saw US sales drop 20.7 percent from last year and revenues decrease by 19.5 percent to $134.1M. The revenue drop was primarily due to reduced royalty income on lower sales. Total Dunkin’ Brands revenue, including international and Baskin-Robbins, decreased to $287.4M, a 20-percent decline. Net income dropped 38.9 percent to $36.5M compared to last year’s second quarter, and diluted EPS decreased 61.4 percent year-over-year to $0.44.

In the United States, the chain improved comp sales sequentially throughout the quarter. April saw comp sales decrease 32 percent, May drop 17 percent and June dip 9 percent. As evidence of the sales recovery, July month-to-date comp sales are in the low single digits, executives report.


Key menu releases during winter and spring factored into the resilience of the product offering, noted Dunkin’ Brands Chief Executive Dave Hoffman on the company’s 2Q earnings call with analysts. As the morning daypart was challenged by a lack of commuter traffic, afternoon, traffic—particularly in the 11 a.m. to 2 p.m. slot—became robust.

New items, including Matcha Latte, Croissant Stuffers, Snacking Bacon and Refreshers enhanced excitement and generated demand in the early afternoon hours, while offering incremental ticket opportunities. Dunkin’ introduced these new products between February and June of this year.

Executives have noted that the ticket has benefited from larger-sized orders—presumably due to family and group ordering during the pandemic. This has also been the case at other quick-serve shops, including Starbucks. Ongoing installations of smart brewers will continue to help franchisees expand their drip-coffee blend variety, improve quality and reduce waste.

Dunkin’ Next Gen, drive-thrus

Dunkin’s real estate strategy has also played out well, bringing the Next-Gen store model in an era in which consumers are craving safety and convenience. Next-Gen Dunkin’ units number 700 now and management continues to evaluate opportunities for conversion and remodel. The low-contact model is built around order-ahead pickup and drive-thru.


Additional enhancements to Next Gen will come in the form of no-touch faucets, removable seating, walk-up windows, and improving the front counter/drive-thru pickup window. Although franchisees have been somewhat more cautious in adapting the remodels due to the pandemic, the crisis has elevated the importance of this low-touch design. In addition, a total of 90 percent of Next Gen have drive-thrus compared to 70 percent of the traditional portfolio.

Drive-thrus have been key in making Dunkin’ a convenient place for consumers to get coffee during the COVID-19 pandemic. And drive-thru stores can outperform traditional store volume by a factor of four. Drive-thrus have been more prominent in newer markets including Texas and California. Those newer markets have outperformed long-standing urban markets as of late.

Drive-thru has also factored heavily in meeting the needs of suburban “work-from-home” customers as many urban markets have seen walk-by traffic plummet. What’s more, the Canton, Mass.-based chain activated 1,400 curbside pickup locations, which represented 2.4 percent of sales in 2Q. Furthermore, adding Uber Eats as a delivery partner and expanding the relationship with Grubhub has led to 5,700 Dunkin’ locations offering delivery.

A culling of low-volume stores, Perks Rewards

Dunkin' could close 800 stores domestically and 350 in international markets. Kate Jaspon, Dunkin' chief financial officer, s working with franchisees to re-evaluate store footprints and eliminate low-volume stores that aren’t able to reflect the brand-forward image that Dunkin’ represents today. Photo by Dunkin' Brands.
Dunkin’ could close 800 stores domestically and 350 in international markets. Photo by Dunkin’ Brands.

Kate Jaspon, Dunkin’ chief financial officer, is working with franchisees to re-evaluate store footprints and eliminate low-volume stores that aren’t able to reflect the brand-forward image that Dunkin’ represents today. Domestically, 800 stores could close, including 450 Speedway convenience mart locations, as part of this new plan. Internationally, another 350 units could close. Drive-thru and Next-Gen stores fare prominently in any relocation of older stores.

New loyalty members have also helped lift the chain in the US. Perks enrollment is up 110 percent year-over-year in Q2. Perks members represented 20 percent of the total mix. On-the-go orders (order-ahead and pickup) represented 7 percent of orders overall, and as much as 17 percent in non-drive-thru locations.


The research for this article utilized audio from Dunkin’s 2Q earnings conference call, an accompanying earnings release and transcripts from Seeking Alpha.

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