Restaurants are in ‘fight mode right now,’ Dunkin’ Brands CEO says

When the pandemic hit the U.S., shuttering restaurants large and small around the country, Dunkin’ Brands leaned into its on-the-go model and made quick decisions to cater to evolving consumer preferences. CEO Dave Hoffmann says fast thinking and cutting through bureaucracy that can stall changes at major companies led to an expansion of curbside pickup now in 1,400 locations and delivery in more than 5,000 stores.

Today 96{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of both Dunkin’ and Baskin-Robbins locations are opened nationwide, with customers turning even more to contactless and mobile options.

The coffee company is continuing to update its locations, and may shutter some 800 of its underperforming storefronts. But traffic challenges remain industry-wide, with Covid-19 cases continuing to rise nationwide, disrupting routines and keeping consumers at bay.

“We think there are two major forces we are going to be operating against: health and safety… and access to the brand,” Hoffmann said in an interview Thursday. “Making quick decisions based on the best information you have in hand is what our team has really learned during the crisis.”

Gone, or at least paused, are the breakfast wars that have long gripped the restaurant and fast-food industries, as morning commutes are disrupted for the foreseeable future with so many Americans working from home during the pandemic.

Dunkin’s breakfast and snack menu plays well to consumers throughout all dayparts, Hoffmann said. And its beverage innovation from espresso to Matcha and Refreshers options, which are bringing in a younger female demographic, have the company well-positioned to compete.

“We think the industry is in a fight mode right now, and we are gearing up for that fight,” Hoffmann said. “We are a long way away from waving a big-time victory flag, but we like our offering going into the fall and winter seasons.”

The company just reported second-quarter earnings beating on the top and bottom lines, with same-store sales declining 18.7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in the U.S. Sales were boosted somewhat by higher average tickets — a trend seen across the industry. At the height of the pandemic in April, same-store sales were down 32{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, then 17{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in May, 9{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in June, and now through July 25, this key metric is down by a low single-digit rate.

Despite that progress, Dunkin’ shares were trading lower Thursday, recently down nearly 4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}. The stock, which has a market value of $5.7 billion, is down more than 9{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} since the start of the year. 

Learnings from early coronavirus outbreaks in its two main markets of Boston and New York have the company prepared for a second wave, given 90{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of transactions were some form of takeaway pre-Covid.

“We learned a lot during the quarter on how to operate in a pandemic,” Scott Murphy, Dunkin’ Brands Americas president said. “Whether its drive-thru, curbside, delivery or the facemask shields, we have done a bunch of research and it turns out that people feel safe coming to Dunkin’.”

The company is financially stable as well, Hoffmann added, given Dunkin’ reinstated its dividend this quarter.

Digital will be a big focus moving forward, he added, with 4.2 million active users on its digital platforms over the past 90 days. Dunkin’ recently added Philip Auerbach as chief digital and strategy officer to continue to grow this part of the business, with digital, I.T. and a data science team underneath Auerbach.

“Our full suite of digital assets are yielding 21{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of transactions today,” Hoffmann said. “Mobile order and pickup is 7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of traffic … Everything we have done is to open up that access for customers to access our brand on their terms as safely as possible.”