Dunkin' Donuts of Dunkin' Brands Group, Inc. (DNKN - Analyst Report) has signed a multi-unit store development agreement with franchise group Finely Grounded Inc. to develop two new restaurants in Phoenix, AZ, over the next several years. The first restaurant under the agreement is slated to begin operations in 2017.
Notably, Finely Grounded has been franchisees with Dunkin' Donuts’ sister brand Baskin-Robbins since 2012. The group presently owns and operates five Baskin-Robbins shops across Arizona.
There are also additional franchise opportunities in Phoenix to build up Baskin-Robbins standalone shops. Moreover, to aid additional growth in the market, Baskin-Robbins is offering certain attractive financial incentives which include 50% off on the initial franchise fee along with lower royalty rates for five years.
Meanwhile, with this recent deal, the franchise group aims to expand Dunkin' Donuts' presence in Phoenix.
Notably, Dunkin' Brands ranks among the well-established global quick service restaurant brands. However, the company is experiencing challenges in the international markets due to sluggish macroeconomic growth in emerging economies.
Hence, it plans to continue its full-fledged franchisee model for expansion in both domestic and global markets. The franchisee model facilitates earnings per share growth and return on equity expansion due to lesser capital requirements.
Still, a soft consumer spending environment in the domestic restaurant space along with intense competition from similar food & beverages companies like Starbucks Corporation (SBUX - Analyst Report) , McDonald’s Corporation (MCD - Analyst Report) and Jack in the Box Inc. (JACK - Analyst Report) , might continue to put pressure on revenues.
Nonetheless, the company’s continued expansion strategies, innovation in terms of products along with various sales and digital initiatives are expected to positively support earnings and revenue growth.
Dunkin' Brands currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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