Dunkin’ Brands $34 Fair Value: Unveils Fall Menu, Plans New Locations In Texas

by Trefis Team
+9.92%
Upside
43.95
Market
48.31
Trefis
DNKN
Dunkin Brands
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Dunkin’ Donuts, owned by Dunkin’ Brands (NASDAQ:DNKN), is offering a limited time autumn menu based on pumpkin and apple flavors. Menu items such as Apple Orchard Donuts, Apple Crisp Muffin, Pumpkin Cream Cheese, Pumpkin Muffins will be offered. Even the K-cups will be made available in the pumpkin flavor. K-cups have added to the restaurant sales at Dunkin’ Donuts since they were introduced earlier in the year. In the last quarter, they added 1.5 percentage points to the comparable sales.

Similarly, the restaurant chain is expanding its breakfast offerings by adding Quakers Oatmeal to its DDSMART menu. Dunkin’ boasts the DDSMART menu of containing healthier items and already part of the menu are egg white flatbread sandwiches, wake-up wraps, small latte lite, freshly brewed teas and iced teas. [1]

Earlier in the year, the restaurant chain added breakfast burritos and other items such as Undercover Black Cocoa DonutChocolate Lunarmax Donut and Black Cocoa Crème Iced Coffee to its menu as well. Adding new menu items regularly is important for a restaurant to keep increasing its footfalls. It also serves as a basis to gauge customer response to certain experimental items which can either be permanently added to the menu or on the basis of which new items can be developed.

See full analysis for Dunkin’ Brands

Meanwhile, Expansion Continues

Dunkin’ Donuts will add around 100 new restaurants in Texas in the next several years. Dunkin’ Donuts recently signed an agreement with Jerry Jones Family and Troy Aikman which will see the group opening up 50 new restaurants throughout the Dallas/Fort Worth area in the next five years. Similarly, 521 Interest LTD will open up 16 new restaurants in Houston by 2018. All this is part of Dunkin’s strategy to double the number of restaurants in the U.S. in the next 20 years. [2]

The company still has no presence in California where it is working on building the infrastructural requirements needed to support its operations. The western part of the U.S. represents a significant growth opportunity for Dunkin’ since its penetration is only 1 store for one million people (as of 2011 end). Compare that to its core market of New England and New York, where its penetration is 1 store for 10,000 people.

We have a $34 price estimate for Dunkin Brands, which is about 15% above the current market price.

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Notes:
  1. Dunkin’ Donuts Introduces Oatmeal To DDSMART® Menu Of Better-for-You Food And Beverages, September 5, 2012, heraldonline.com []
  2. Dunkin’ Donuts Expands In Texas, August 28, 2012, csdecisions.com []
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