DUNKIN' CUTS APPETITE
Hopes simpler menu will improve sales
Dunkin’ Donuts is launching a broader U.S. test of a simplified menu and trimming expansion plans until it is ready to launch a new more modern restaurant design.
The moves come amid a fifth straight quarter of declining traffic at the Canton chain’s U.S. stores and the eighth consecutive quarter in negative territory.
Same-store Dunkin’ sales rose 0.8 percent — missing analysts’ estimates of 1.5 percent — but customer traffic was down about 2.2 percent, a modest improvement from the 3 percent decline in the first quarter, amid a more competitive promotional environment.
“…What was different this time is it now appears that the long malaise is starting to hit unit growth more significantly, and this quarter had a significant reduction in expected net new unit growth in both the domestic and international businesses,” CL King & Associates analyst Michael Gallo said.
Dunkin’ Brands CEO Nigel Travis attributed the traffic drop in part to industry trends and competition.
“We were a bit slow in encouraging our franchisees not to increase pricing so much,” he said.
Dunkin’ is hoping a streamlined menu will help improve franchisee economics and employee satisfaction. It began testing the new menu at 300 locations earlier this year and will roll it out to 700 more by October. The slimmeddown menu is based on research with 10,000 consumers and designed to improve store operations by making it simpler for employees to execute, particularly given a labor shortage.
“We’re taking off some of the afternoon sandwiches, a few muffins and bagel varieties, and some bakery items like Danishes and cookies,” Travis said.
Dunkin’s pared-back expansion plans, meanwhile, will result in 330 to 350 net new stores this year instead of the approximately 385 previously planned — the lowest growth rate in several years. With a large number of remodels on the calendar and more technology and equipment investments required, Dunkin’ wanted franchisees to be more measured in their capital spending.
The more contemporary store model will be focused on convenience, including drive-thrus and making it easier for customers using Dunkin’s “On-the-Go” ordering from its mobile app. It will be introduced late this year or early next year.
But while Travis said slower U.S. sales did not affect expansion plans, Gallo stressed they did, saying, “Dunkin’ cited its desire for franchisees to have enough money to remodel shops and noted that a new prototype will be rolled out ... but clearly sluggish sales were part of the equation as well.”