Dunkin' on U.S Expansion Spree

Dunkin’ Donuts, an operational arm of Dunkin Brands Group, Inc. (DNKN - Snapshot Report), recently penned a multi-unit store development deal with one of its existing franchisees - Sizzling Donuts, LLC. As per the deal, Dunkin’ will unveil 16 new restaurants in Utah in the coming years. The restaurants are due to be opened in Salt Lake City, with the first restaurant slated to open in 2013 and the rest by 2018.

As a point of reference, the move is part of the company’s goal to double its presence in the U.S. over the next 20 years. Dunkin’ is focused on a strategy to seize growth opportunities over its competitors by catering to the consumer needs of individual markets. The company is currently expanding through single and multi-unit opportunities.

The promising restaurant industry in Utah continues to drive the U.S. economy. In 2012, total revenue from the restaurant sector in Utah is projected to be around $3.3 billion. Salt Lake City, the capital and most populous city in Utah, is known for its varied shopping destinations. The peer companies of Dunkin Brands such as The Cheesecake Factory Incorporated (CAKE - Analyst Report) and Starbucks Corp. (SBUX - Analyst Report) have been active in the city for years.

Sizzling Donuts, LLC is a subsidiary of Sizzling Platter, LLC, which also franchises one of Dunkin’s major peers - Red Robin Gourmet Burgers, Inc. (RRGB - Analyst Report). The company first joined hands with Sizzling Donuts, LLC earlier in 2012 to open 11 new restaurants in Denver, Colorado, and eight in El Paso, Texas, in the coming years. Management believes that franchise opportunities still exist in the Utah market, particularly in the cities of Northern Utah and Nevada.

Earlier this month, Dunkin’ inked multi-unit store development deal with new franchisees Dean Kreher and Ted Pierce for three restaurants in St. Louis, Missouri by 2015. Last month, Dunkin’ also joined hands with a franchise group to open two units in Ohio and inked a deal with two other franchise groups to open three units in Illinois. In addition, the company entered into multi-unit store development agreements with several franchise groups for 29 new units in Houston and Waco in Texas.

In order to be competitive and innovative, Dunkin’ offers services through various types of real estate formats including free-standing restaurants, end caps, in-line sites, gas and convenience, travel plazas, on-university campus and others. Recently, Dunkin’ opened its outlets at 10 college campuses across the Northeast, Mid-Atlantic and Southern United States.

Dunkin' is the market leader in the coffee, donut, bagel and muffin categories. The company operates more than 10,000 restaurants worldwide, including more than 7,000 restaurants in 36 states as well as the District of Columbia, and in more than 3,000 international locations in 33 countries.

Dunkin Brands is expected to release its third-quarter 2012 results on October 25. The Zacks Consensus Estimate for the third quarter is currently pegged at 35 cents per share.

We currently have a long-term Neutral recommendation on the stock. Also, it carries a short-term Zacks #3 Rank (Hold).