Dunkin' Donuts Readies for Takeoff

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Dunkin' Donuts Readies for Takeoff

Dunkin' Brands Inc. plans to rely on multiple formats -- ranging from gas stations to carts to Dunkin' Donut Stores inside supermarkets -- to rapidly expand to nearly 15,000 U.S. locations by 2020, up from about 5,000 today, the Boston Globe reported.

Pushing multiple formats comes as new owners take the reins of Dunkin', based in Canton, Mass. Bain Capital and Thomas H. Lee Partners, two of Boston's largest buyout companies, and the Carlyle Group of Washington, D.C., bought Dunkin' and sister brands Baskin-Robbins ice cream and Togo's sandwich shops for $2.43 billion earlier this year.

"We think there's a runway ahead," said chief executive Jon Luther, referring to the ability of the Dunkin' brand to take off.

Dunkin' isn't just expanding its geography, but also its menu offerings. In April, it introduced a new smoothie yogurt drink, backed by heavy advertising. It is the biggest product launch since the chain added espresso drinks to its menu in 2003.

Another product on the test list is iced tea. According to Nation's Restaurant News, Dunkin' is developing a new specialty iced-tea line for its more than 6,700 quick-service units. Possible flavors include raspberry and peach, in addition to the classic regular tea flavor. Dunkin' currently plans to use sugarcane syrup to sweeten the tea. The freshly brewed teas also may be used in new Coolatta offerings. The chain declined to divulge details, but provided samples to reporters during a recent media day.

Two-thirds of the new Dunkin' locations will likely resemble a prototype store that the company opened in Rhode Island last November. With a smaller footprint and a warmer color scheme that includes tans and browns, as well as the brand's signature pink and orange, the hope is that the prototype becomes the workhorse of the company's nationwide expansion, according to the Boston Globe report.

The store features a more open design to better showcase newer products -- such as breakfast pizza, and gourmet cookies and brownies. Cookies and brownies are supposed to give a jolt to Dunkin' Donuts' afternoon business. About 65 percent of the $3.8 billion in sales of U.S. Dunkin' stores last year came before noon.

For Dunkin', the new prototype store represents a chance to boost profitability by shrinking the store size to 1,850 square feet instead of the typical 2,250 square feet. Some of the new stores could even be smaller at roughly 1,200 square feet.

The Pawtucket, R.I. prototype also features a fix-your-own coffee station where customers so inclined can add milk or sugar themselves. Currently coffee is prepared by Dunkin' Donut employees.

The store also has a drive-through lane with two windows. That means, during rush hour, customers stop at both windows, paying at the first and getting their order at the second. That can knock 20 seconds off a 150-second drive-thru transaction, a big deal for a brand that emphasizes speed and convenience, said executives.

And while many Dunkin' Donut stores in New England have televisions turned on to CNN, the Pawtucket store doesn't have a TV, but has soft rock music piped through with songs by the likes of Michael Jackson and U2. Music, said Dunkin' chief Luther, "was the number one request we had from customers."

In its bid to go nationwide, Dunkin' faces fierce competition from java giant Starbucks, as well as McDonald's, which introduced gourmet coffee last year. Dunkin' is heavily concentrated in the Northeast. There are 1,100 Dunkin' Donuts within a 50-mile radius of Boston, or one for every 5,600 residents in that region, the company claims.

Dunkin' expects to open 650 new stores in the United States in its next fiscal year, 50 more than in its current fiscal year. In the near term, expansion will focus on markets in Cincinnati; Nashville; Jacksonville, Fla.; and Indianapolis, executives said.

To fuel growth in new markets, the company hopes to recruit entrepreneurs with franchisee experience, as well as existing Dunkin' franchisees who have the capital and expertise to operate 10 to 25 or more stores.