App May Offer Doughnuts on Demand ; Dunkin’ is Exploring a Delivery Service

June 17, 2015

8849e1f883b10fbaf86357823c2ecf69Taryn Luna
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At a time when a consumer can use an app on a smartphone to have a bottle of whiskey or an iPad Air delivered to the door in an hour, an instant order of munchkins and a Box O’ Joe might not be far behind.

Dunkin’ Donuts is the latest quick-service restaurant chain to wade into the so-called on-demand economy, acknowledging Monday that it is evaluating delivery services in conjunction with new mobile ordering technology the coffee-and-doughnuts chain is developing.

Dunkin’ is following in the footsteps of two rivals, Starbucks Corp. and McDonald’s Corp., both of which are testing deliveries to homes and offices this year.

Nigel Travis, chief executive of Dunkin’ Brands Group, the parent company, called delivery a “big opportunity” in an interview with CNBC.

The company said delivery might be built into an application currently in development. The app, which Dunkin’ began testing last year, would allow customers to order and purchase coffee and food on a smartphone and pick it up at a store.

Dunkin’ declined to provide details about how a delivery service would work and said it has not begun to test the system.

Dunkin’ Donuts and other fast-food chains face a particular challenge in delivering products: keeping their hot food and drinks at the right temperatures, said Darren Tristano, an executive vice president at Technomic Inc., a Chicago food industry research firm. While things like pizza and Chinese food retain heat during transport, Tristano said, some fast-food products don’t survive as well.

“It might reflect negatively on the brand,” Tristano said. “There’s great risk along with the opportunities.”

Food chains are quickly trying to catch up with the explosive popularity of on-demand delivery services such as Postmates and GrubHub, which can provide nearly anything consumers want, whenever they want it. The chains also hope deliveries will increase sales in a relatively stagnant quick-service industry.

Dunkin’ Donuts’ same-store sales in the United States increased 1.6 percent in fiscal 2014, compared with 3.4 percent the year before. Meanwhile, McDonald’s comparable sales declined 2.1 percent in 2014. Starbucks, the leading coffee and bakery chain in the country, reported a 6 percent jump during the same period.

Earlier this year, Starbucks and McDonald’s said they both planned to work with Postmates, the San Francisco-based 24-hour service, to deliver in select markets. Customers place orders on the Postmates app or website and local couriers pick up the goods from restaurants and stores. An order of a Big Mac and medium fries from McDonald’s, which includes a $5 delivery fee, costs about $11.

Although many consumers already can order a Big Mac or a Frappuccino through the Postmates system, the partnerships allow companies to integrate the ordering process into the food chains’ own mobile applications, control the transaction, and track consumer interests, Tristano said.

Starbucks said it will launch a “Green Apron” program with actual baristas delivering coffee in New York later this year.

Dunkin’s delivery and mobile ordering initiatives are being led by Scott Hudler, global vice president of consumer engagement.

The company said he was not available for an interview.

Tristano said Dunkin’s delivery service would probably increase sales modestly as existing customers shift to delivery. He said the service would appeal to consumers who are physically unable to visit a store, don’t have a car, don’t want to deal with parking, or “are just lazy and don’t want to get up and go.”


Asian Concepts Poised for High Unit rowth this Year

November 25, 2014

New data from Technomic forecasts a 2.3-percent unit growth rate over 2013 among the 500 largest US restaurant chains.

According to a news release, this will be slightly higher than the 2.1-percent growth rate from 2012-13 and much higher than the 0.5 percent rate in 2009.

The unit growth is rising in both the full and limited-service segments. Technomic EVP Darren Tristano said fast casual concepts will continue to show high levels of unit growth, as well limited and full-service Asian concepts. Among full-service restaurant menu segments, Asian will increase units by 5.1 percent, followed by seafood (3.9 percent) and steak (3.4 percent).

Asian/noodle also leads the limited-service menu segments, increasing unit counts by 8 percent, while bakery cafes and coffee cafes will grow units by 5.2 and 4.2 percent, respectively.

Many full-service brands have positioned themselves to expand this past year. The largest growth has been at Buffalo Wild Wings, which will have added 65 units, Mellow Mushroom (32 units) and LongHorn Steakhouse (24 units), according to Technomic.

In limited service, Subway will add 908 units by year-end, followed by Starbucks (443), Jimmy Johns (350) and Dunkin Donuts (291).

Fast casual to continue double-digit sales bump
Additionally, limited-service restaurants are expected to gain a sales bump of 3.5 percent. Fast casual chains should experience a 10.8-percent increase in sales, while quick-service chains increase 2.3 percent.

Full-service restaurants will experience a 2.5 percent sales increase in 2014, similar to the 2.4 percent increase in 2013.

Fine dining is expected to continue its post-Recession rebound, with a 5.8-percent sales increase. Casual and midscale restaurant growth will be nominal, at 2.8 and 0.5 percent, respectively.

Q3 traffic gains at Mexican concepts
Additionally, research from The NPD Group analyzed Q3 consumer traffic at US restaurants, and shows an increase in the fast casual segment, as well as at coffee/donut/bagel concepts and Mexican concepts.

Fast casual restaurants posted an 8 percent gain in traffic across all dayparts compared to same quarter year ago. Visits to Mexican quick service and coffee/donut/bagel concepts grew by 5 percent, according to NPD’s foodservice market research.

Conversely, hamburger quick-service traffic, which represents the largest share of quick service visits at 23 percent, declined by 3 percent compared to same quarter year ago. Visits to both sandwich concepts and Asian quick-serve restaurants were down 1 percent.

Although total industry traffic was flat in the quarter, consumer spending rose 3 percent in the July/August/September quarter due to average eater check gains. Check and dollar gains are in line with food away-from-home inflation. Dealing/discounts are still supporting traffic with visits on a deal up 4 percent compared to a decline in non-deal visits.

“Although total traffic is flat, the visit growth in the fast casual, coffee/donut/bagel, and Mexican QSR shows that consumers still have an interest in going out to restaurants,” NPD analyst Bonnie Riggs said in a news release. “Those restaurant concepts that are meeting the needs of today’s foodservice consumers will win their visits.”


Is the Cupcake Trend Over? Battle for “Share-of-Stomach” Heats Up!

April 18, 2013

Over the past decade, we have seen a shift in the frozen treat and snack category with many short-term category trends gaining steam and eventually showing unsustainable growth in the longer term.

Lessons from the past

krispy-kreme-donuts_150Krispy Kreme’s singularly focused menu of sweet, craveable doughnuts led to rapid expansion for the chain in the later ’90s. Peaking in 2005 with sales in excess of $1 billion, the company has since declined and settled down with annual U.S. sales today of $570 million. Although the chain’s growth over the past two years has been slow and steady, Krispy Kreme has shifted unit development globally by bringing products to international marketplaces; today Krispy Kreme has more than 500 locations outside the U.S. compared to just 239 domestically.

Cold_Stone_150.Cold Stone Creamery was at the heart of a premium ice-cream movement. Its rapid growth in units helped the chain achieve peak annual sales in 2007 of nearly $500 million in a frozen-dessert category of $7 billion. Then premium ice-cream players suffered from the recession as increased unemployment and declining disposable personal income—among other economic factors—prevented consumers from indulging in ice-cream purchases. Today, Cold Stone Creamery has broadened its offering with ice-cream cupcakes and shakes and continues to manage sales of $355 million.

Crumbs_150“Sex in the City” and Magnolia Bakery sparked a cupcake revolution and national craze that led to upstart brands like Crumbs Bake Shop, Sprinkles and Gigi’s Cupcakes adding locations. Independent cupcake shops have also popped up in most major cities in recent years, while supermarkets have expanded their cupcake offerings for in-store bakeries. Although Technomic estimates the retail cupcake shop segment to be in the range of $200 to $250 million annually, this segment appears to be maturing and flattening in the restaurant lifecycle curve as other desserts build greater momentum.

Pinkberry_150It is worth noting that frozen-yogurt brands like Yogurtland, Pinkberry, Menchie’s and Red Mango are still in the high-growth stage of their lifecycle.  Frozen-yogurt chains within the 2013 Technomic Top 500 Leading Chain Restaurant Report as a whole increased their sales by 20%, with net unit growth of over 25%. The high appeal of frozen yogurt’s broad flavors, customization options and “health halo” consumer perception has given other sweet-treat operators (like cupcakes, traditional ice cream and doughnuts) a run for their money. This trend will likely continue to grow in the short term based on the low cost of opening a store and the franchise brand availability and appeal.

So what’s next? 

We could see growth of numerous dessert trends such as chocolate-covered bacon shops, cream puffs, churros or perhaps macaroons.  One thing that isn’t changing is consumers’ interest in craveable sweet and savory snacks.  Health and lifestyle considerations will also remain a consideration but a balance with indulgence will likely provide ample opportunities for both healthful and decadent treats.

In today’s restaurant space, growth has become a battle for share:  as one category grows, another will fall victim.


Donut Shops Have Big Expansion Plans, Especially Out West DUNKIN’ BRANDS GROUP

September 7, 2012

19 June 2012, Investor’s Business Daily, (c) 2012 Investor’s Business Daily  

 The line at the Dunkin’ Donuts cafe in Midtown Manhattan stretched to the door on this June weekday morning.

 Iced coffee, cappuccino, latte — name the java drink, and customers were sipping it down. Donuts and muffins were also going fast.

 Dunkin’ Donuts shops have become popular stomping grounds for Americans craving a cup of joe and the snacks to go with it.

 It’s the top quick-service restaurant chain in America for hot coffee, iced coffee, donuts and bagels and muffins, says Paul Carbone, chief financial officer at the chain’s parent Dunkin’ Brands (DNKN).

 Carbone expects that popularity to continue as Dunkin’ Donuts steps up expansion east of the Mississippi River while moving westward beyond its home base in the Northeast.

“We believe we have the capability of growing in all parts of the country, and by having Dunkin’ Donuts coffee available in grocery stores nationwide we are raising awareness of the brand there before we open stores in that market,” Carbone said.

 Ice Cream Shops

 Dunkin’ Brands, which went public last July 27, also owns the Baskin-Robbins ice cream chain.

 The bulk, or roughly 75%, of annual revenue, comes from Dunkin’ Donuts, which has more than 10,000 stores worldwide, approximately 7,000 of which are in America. Some 60% of Dunkin Donuts’ U.S. franchisee sales come from coffee.

 Dunkin’ Brands is roughly a 100% franchised business model, which essentially eliminates store operating expenses, resulting in higher margins than its peers, says Stephens analyst Will Slabaugh.

 The company’s game plan involves boosting Dunkin’ Donuts’ presence outside its core markets of New England and New York, where it has one store for roughly every 10,000 people.

 The firm’s focus on upping it presence east of the Mississippi could lead to a boost of its one Dunkin’ Donuts store for every 100,000 people.

 It also sees a big growth opportunity in the West, where it has only 130 stores and just one store per 1.2 million people.

 Dunkin’ Brands aims to more than double the total number of U.S. Dunkin’ Donuts stores to 15,000 over the next 20 years.

 The company sees the potential to have 5,000 Dunkin’ Donuts stores in the West, says Carbone. That move is in a “contiguous fashion,” he said.

 It has stores in Dallas, Phoenix and Las Vegas, which, says Carbone, serve as the hubs for its Western development.

 It also recently started recruiting franchisees for markets such as Denver and Colorado Springs.

 As Dunkin’ Donuts expands westward, it will be competing head to head with the likes of Seattle-based coffee giant Starbucks (SBUX), which has a large West Coast operation.

 But watchers expect Dunkin’ Donuts’ business to stay piping hot as it expands throughout the U.S.

 Its low coffee prices, at roughly $1.75 for a regular-size hot coffee in Manhattan, are a big draw, say followers.

“Their value price points and differentiated doughnut offering should provide them with a good opportunity to add stores and be competitive with more expensive brands like Starbucks,” said Darren Tristano, executive vice president at industry consultant Technomic.

Dunkin’ Donuts continues to be innovative with items such as breakfast sandwiches, he adds.

“That, combined with the affordability of its products, has given the company a very good positioning in a somewhat difficult economic climate,” he said.

Slabaugh says Dunkin’ Donuts’ aggressive expansion into new markets presents an “attractive franchising opportunity.”

Dunkin’ Donuts is a well-known brand, he says, and as it enters a new market, consumers are already familiar with the bagged coffee it sells at grocers.

That elevated brand awareness helps push revenue in the new stores to high levels.

So far, so good. Carbone says Dunkin’ Donuts has been successful in leveraging the brand’s strength and existing franchisee base as it’s expanded in new markets such as Pittsburgh and Charlotte, N.C.

“There is a strong national brand awareness and consumer demand for Dunkin’ Donuts,” he added.

That demand showed up in the latest results from Dunkin’ Brands.

Dunkin’ Donuts’ first-quarter U.S. same-store sales rose 7.2% vs. a year earlier as the chain enjoyed nice gains in everything from cold drinks to its steak, egg and cheese breakfast sandwich.

It got a nice jolt from sales of the K-Cup portion packs used with the Keurig single-cup coffee brewing system made by Green Mountain Coffee Roasters (GMCR).

Dunkin’ Donuts restaurants began offering 14-count boxes of Dunkin’ Donuts coffee in K-Cup portion packs in August.

Carbone says K-Cups are driving significant incremental franchisee profit and helping to further expand the brand. “We were pleased with the first-quarter performance of K-Cups, which represented approximately 30% of our comp-store sales growth during the quarter,” he said.

Jefferies & Co. analyst Andy Barish says K-Cups and Dunkin’ Donuts’ increasing focus on breakfast sandwiches have been the key drivers of same-store sales and should continue to do so.

Same-Store Sales

Barish feels “comfortable” with a long-term target of 2% to 4% annual same-store sales growth for Dunkin’ Donuts.

Breakfast sandwiches are a big hit. Internal research shows consumers like Dunkin’ Donuts because they can get breakfast sandwiches anytime of day, says Carbone.

That helps differentiate the chain from other brands in the market, he adds.

Dunkin’ Brands has been enjoying a nice run since its market debut. In the most recent first quarter, earnings rose 213% to 25 cents a share. Dunkin Brands’ revenue grew 9% to $152.4 million.

Systemwide sales grew 10.9%.

Baskin-Robbins’ same-store sales rose 9.4% vs. a year earlier. The chain benefited from new product news around its Valentine’s Day cake bites and its new “More Flavors, More Fun” ad campaign.

Analysts polled by Thomson Reuters expect full-year earnings to rise 33% to $1.25 a share. They see a 16% gain in 2013.

“We have a buy rating on the Dunkin’ Brands’ stock,” said Barish. “It’s a well-positioned business, given the predictable quality of its predominantly franchised business model.”

Tristano places Dunkin’ Donuts in the coffee cafe segment, which includes chains such as Starbucks. He estimates the segment’s sales will rise 5% to 6% in 2012 vs. a 5% gain in 2011.

Dunkin’ Brands expects Dunkin’ Donuts’ U.S. same-store sales to grow 4% to 5% in 2012 and Baskin-Robbins to see a 2% to 4% gain.

It plans to add 260 to 280 Dunkin’ Donuts restaurants this year.

It also expects to open 350 to 450 units overseas for Baskin-Robbins and Dunkin’ Donuts combined this year .

Carbone says international expansion is an important focus. It recently opened the first Dunkin’ Donuts restaurants in India and Guatemala.


The Donut’s on Us Today, Say National Chains

July 13, 2012

Published: Friday, 1 Jun 2012, By: Katie Little, News Associate

There may be no such thing as a free lunch — but if you’re eyeing a free donut today, you’re in luck.

In honor of National Donut Day, Dunkin’ Donuts and Krispy Kreme Doughnuts are running in-store promotions on Friday and taking part in the opening and closing ceremonies at their respective stock exchanges, the NASDAQ and the New York Stock Exchange.

At participating Dunkin’ Donuts locations, customers can score a free donut of their choice with the purchase of any beverage. On Twitter, the company will also post donut trivia questions, and users who answer correctly will be entered for a chance to win one of six $50 gift cards.

Meanwhile, Krispy Kremes in the U.S. and Canada will give away a free donut of any variety with no purchase necessary.

The Nasdaq, whose opening bell Dunkin’ rang this morning, has unofficially changed its name to “NASDDAQ” and incorporated the company’s pink and orange ‘D’ letters along with a sprinkled donut into its logo. Krispy Kreme will stop by the NYSE to ring the closing bell.

In New York City, Entenmann’s Bakery will hand out free donuts at Madison Square Park and present a $25,000 check to The Salvation Army, which will be providing free coffee to celebrants.

National Donut Day was first established by the charity in 1938 in Chicago as a way of honoring the “Donut Lassies” who served soldiers the treats during World War I and helped raise money during the Great Depression.

The events’ organizers will also share a proclamation letter from Mayor Bloomberg in honor of the holiday. The event comes just one day after Bloomberg announced a proposed ban of the sale of sweetened drinks larger than 16 fluid ounces at restaurants, movie theaters and delis. If approved, the controversial plan could be implemented as soon as next March.

Despite their confectionery names, these companies rely on more than merely donuts to fuel their businesses.

“I think what we have seen is chains like Krispy Kreme, Tim Hortons and Dunkin’ Donuts that have shifted from being traditional donut chains to serve broader occasions and day parts,” said Darren Tristano, executive vice president at Technomic.

Despite the strength of the cupcake trend, Tristano said that sales in the donut industry have been relatively stable. He added that this continued donut popularity speaks to the rise of snacking and eating during off-peak occasions.

Dunkin’ has responded to this demand by expanding its line of bakery sandwiches. Michelle King, Dunkin’ Brands’ director of global public relations, said breakfast sandwiches are already popular with customers, who have been purchasing them throughout the day.

“All are familiar with a twist and cater to our busy guests who are snacking more frequently throughout a ‘clockless day,’ ” she said about the new sandwiches.

Although Dunkin and Krispy Kreme carry many similar products, Dunkin has enjoyed stronger sales and location growth compared to Krispy Kreme, according to Technomic estimates. At Dunkin’, U.S. sales grew 23 percent from 2007 to last year while Krispy Kreme sales fell 13 percent during the same period.

Part of Dunkin’s success is due to the popularity of its coffee product.

“In fact, we don’t even classify them as donuts anymore,” Tristano said about Dunkin’. “We have them in the coffee café category.”

Companies place added emphasis on coffee since it typically carries a higher margin than items, such as donuts. Customers who incorporate a restaurant serving coffee into their daily routine often go to that chosen store every day and may purchase additional items while there. “By providing coffee and other products in addition to donuts, industry operators hope to attract consumers to their stores more frequently,” said Agata Kaczanowska, lead industry analyst at the research firm IBISWorld.

In September, Krispy Kreme announced the launch of three signature coffee blends. The company has also stepped up its expansion efforts internationally; it recently announced new development agreements in India and Russia.

This international push follows declines in U.S. store locations in both 2008 and 2009, according to Technomic data. The company added one net domestic location last year.

“The issue with Krispy Kreme was that they broadened so much, you could get them at the grocery stores, the convenience store, so why would you get them at the restaurant?” Tristano said.

In addition to promoting coffee to drive sales, donut shops are reacting to another trend to boost revenue, Kaczanowska said.

“Another tactic that donut stores are using to boost consumer interest is offering smaller donuts, which have fewer calories and less fat,” she said. “These appeal to health-conscious consumers that may indulge more often when smaller portions are offered.”


Love is in the Air

March 6, 2012

Love Is In The Air

Love is in the Air

While most people may associate Valentine’s Day with upscale restaurants and fine wines, dozens of quick-serve promotions, ranging from heart-shaped doughnuts to couples’ specials, are giving operators hope that they won’t be stood up this February 14.

By targeting families and social gatherings, operators say they’re able to attract customers for the holiday. And for some stores, Valentine’s Day is one of the busiest days on the calendar.

Promotions across the industry are varied. White Castle, for example, will once again host its candlelit dinner, complete with table service, at stores across the country. Great American Cookies will roll out special Valentine’s cookie cakes. And Pollo Tropical will offer a $9.99 meal for two at its 90 company-owned stores in Florida, New Jersey, and Georgia. Even Baskin-Robbins is debuting two new flavors—Love Potion #31 and Chocolate Dipped Strawberry—for its new Cake Bites line through the end of the month in honor of the holiday.

In addition, Krispy Kreme will offer its popular heart-shaped doughnuts in grocery stores, convenience stores, and mass merchants this February, as well as in its 678 domestic and international retail stores. The specialty doughnuts feature red and white sprinkles and icing.

Doughnuts may not seem like a romantic treat, but Krispy Kreme’s chief marketing officer Dwayne Chambers says romance isn’t what the company is aiming for. Rather the concept is taking advantage of a widely recognized holiday to pull in larger groups of people, such as families, offices, or school parties.

“Not that many people are eating doughnuts by themselves,” Chambers says. “Usually you get a dozen and you share it with other people. I think over the years it’s continued to really grow in its importance. It goes back to the fact that doughnuts are kind of a shared experience.”

The chain is also advertising a set of 12 free Valentine cards with the purchase of a dozen doughnuts. Each card can be redeemed for a free doughnut. Selling hundreds of thousands of the novelty heart-shaped doughnuts each year helps make Valentine’s Day one of the busiest days of the year for Krispy Kreme stores, Chambers says.

“We will sell as many doughnuts as we can make and box,” he says.

Many customers view Valentine’s Day as an excuse to splurge, says Darren Tristano, an executive vice president of the foodservice research and consulting firm Technomic.

“Consumers are viewing Valentine’s Day as an opportunity to treat themselves and their loved ones. Even when they’re alone, they’ll take the opportunity to treat themselves because they feel they deserve it,” he says.

Tristano says many customers are looking for an upgrade on their usual dining choices, meaning fast food customers might treat themselves to a fast-casual meal, while frequent casual diners might upgrade to fine dining for the night. That means big opportunities for all restaurant owners, he says.

“What that means to the operator is you’re going to have a customer who’s not generally a regular. It’s a strong opportunity to build new customers,” Tristano says.

While customers are mostly trading up, quick serves can also take advantage of families and value-oriented customers who wouldn’t otherwise choose to eat out.

“There are opportunities to steal those full-service occasions and bring people out for a meal,” Tristano says. “You start to think about, how do I treat my family without spending too much money? Anything the quick-service restaurant can do to build that traffic on this holiday not only helps a less-frequent weeknight this year, but also supports bringing people from other businesses to something that isn’t going to break their wallet.”

Papa Murphy’s takes that mindset to heart. The company will again target value-minded customers with its $7 heart-shaped pizza, dubbed the “Heartbaker.”

Valentine’s Day is a busy holiday for Papa Murphy’s 1,300 stores. But because the chain’s take ‘n’ bake pizzas are finished at home, stores will see customers throughout the day, not just at peak times, says chief marketing officer Jenifer Anhorn.

“Valentine’s Day is a big, high-traffic day for us, in part because of our Heartbaker pizza, and in part because it’s an evening where people are out and about and looking for meal solutions,” she says.

The pizza is a great draw for families, especially those with young children, Anhorn says.

“It’s more of a family thing. Parents are buying it and doing something special for the kids,” she says. “If mom and dad are going out for dinner, they bring it home for the babysitter to enjoy with the kids.”

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