Is Dunkin’ Brands Ready to Slurp Up Another Franchise Business?
Dunkin Brand Groups (NASDAQ:DNKN), owner of the Dunkin’ Donuts and Baskin-Robbins dining chains, has had a good go of it lately. The company has shown a reinvigorated energy with its new focus on Dunkin Donuts’ beverage segment and its interest in moving West to crack a new market, and the Canton, Massachusetts-based company reported Thursday that sales at stores open at least a year were up 3.5 percent in the U.S. during the fourth-quarter. Same-store sales figured are considered a good indicator of a company’s wealth because the metric doesn’t take into account the volatility of newly opened or closed locations.
Shares of Dunkin Brands rose 3.4 percent to $48.89 at the close in New York Thursday, and they sat down 0.47 percent at $48.66 as of midday Friday. Following its earnings release, Chief Executive Officer Nigel Travis had several interesting things to say in his phone interview, but one statement that investors especially took note of was one that Bloomberg also highlighted him saying, “We could take on another business if it’s a franchise business with growth. We would be extra cautious in whatever we would take on and it has to fit our mantra of a great brand with franchising potential.”
Until now, investors were not in on the possibility of Dunkin’ Brands buying a franchised restaurant company, and thus, the chief executive’s statement Friday proved to raise some speculations, although Travis maintained that, “It’s highly unlikely to be soon.” With more than 18,000 locations worldwide and $256.9 million in cash and cash equivalents as of December 28, Dunkin could benefit significantly from a new franchise business, but as Travis pointed out, the company would need to pinpoint the right one.
According to Bloomberg, a number of other U.S. eateries have already done what Dunkin’ Brands may hope to do, and that is investing in and buying other brands to help boost its sales. Chipotle Mexican Grill (NYSE:CMG) is one example of a chain that has already acquired another brand, Pizzeria Locale, and Buffalo Wild Wings (NASDAQ:BWLD) last year invested in a dining chain called PizzaRev.
Still, the difference between Dunkin’ Brands and these aforementioned chains is the food and drink items they are known to serve. Though Dunkin’ Donuts is significantly expanding its specialty beverage and pastry and breakfast sandwich options, many consumers still think of the chain as primarily a coffee brand, and that could hurt the company as it works to grab hold of other businesses.
Of course, it’s still unclear if Travis will even make any moves to acquire another franchise business, as he merely mentioned it in his interview and then switched gears. Many investors may have an interest in the company expanding its presence, especially now that Starbucks (NASDAQ:SBUX) has such a tight grip over the coffee industry, but it’s still too soon to tell what the Dunkin’ Brands CEO has in mind.