Fast food giant, Dunkin’ Donuts, which is part of Dunkin’ Brands Group, Inc. (DNKN - Free Report) , is geared up to expand further throughout Georgia. The company has signed store development agreements with QSR Group, LLC, and Guzaratti LLC, whereby it plans to build six new restaurants.
QSR Group will develop five Dunkin' Donuts restaurants in Macon, GA, including two multi-brand locations with Baskin-Robbins. The first of these is expected to open in 2018. Meanwhile, Guzaratti will open one Dunkin' Donuts location in a gas and convenience store in the Buckhead suburb of Atlanta, GA.
Notably, these agreements are in sync with the company’s plan to fuel growth in the Greater Atlanta and Macon regions, which are home to more than 190 Dunkin’ Donuts outlets. In fact, the company is offering special development incentives in order to continue recruiting more franchisees.
Apart from foraying into domestic markets, Dunkin' Brands is also looking to expand its footprint internationally in the emerging markets of Asia and the Middle East. Also, it considers the untapped market of South Africa a great potential.
At the end of second-quarter 2017, there were in excess of 12,300 Dunkin' Donuts points of distribution and over 7,800 Baskin-Robbins points of distribution, across more than 60 countries worldwide in Dunkin’ Brands’ fully-franchised system.
In fact, in 2017, the company expects Dunkin’ Donuts franchisees to add 330-350 net new restaurants and Baskin-Robbins franchisees to add 10 net new restaurants in the United States. Moreover, this fast food chain anticipates franchisees and licensees to add 50-100 net new restaurants, internationally.
However, Dunkin’ Brands’ shares have underperformed its industry in the last year. While the stock was up 3.7%, the industry witnessed a gain of 5%.
We note that Dunkin' Brands’ international comps growth has been suffering for the last few years at both its Dunkin’ Donuts and Baskin Robbins divisions. Also, Dunkin’ Donuts admits facing tough competition from McDonald’s Corporation (MCD - Free Report) and Restaurant Brands International, Inc.’s (QSR - Free Report) Burger King that have been cutting into its afternoon traffic. Competition arises from other well-established coffee makers like Starbucks Corporation (SBUX - Free Report) as well.
Additionally, a soft consumer spending environment in the U.S. restaurants space remains a concern.
Although the company is certainly not immune to certain headwinds, we expect it to sustain the momentum, going forward, backed by the continued expansion strategies, along with various sales and digital initiatives. These initiatives include curbside delivery, increased focus on its beverage portfolio, loyalty program and mobile ordering service that are expected to attract customers and support earnings, as well as revenue growth.
Dunkin’ Brands’ currently carries 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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