Dunkin’ Donuts Plans A Wave Of Expansion In California

Staying on track with its strategy of expansion across United States, Dunkin’ Donuts, owned by Dunkin Brands (NASDAQ:DNKN), announced its entry plan for California, where it has no presence currently. While the restaurant chain is working on building infrastructural requirements needed to support its operations, it won’t open in the The Golden State before 2015. By 2020, the company plans to have 150 to 200 restaurants in Southern California. The management believes they could eventually have 1,000 outlets in Southern California alone. ^[1]

With the bigger business plan in mind, Dunkin’ plans to double the number of its outlets to 15,000 in the next 20 years. It opened 291 new restaurants in 2012 and plans to add another 330-360 in 2013.

See full analysis for Dunkin’ Brands

U.S. Expansion

In its traditional core market such as New England and New York, Dunkin’ has one store for every 10,000 people. ^[2] Further establishing presence in the eastern part of the country, in cities like Chicago, Philadelphia and South Florida, Dunkin’ already has more than one store for every 25,000 people.

Thus, the western part of the U.S., presents a significant growth opportunity for Dunkin’ since its penetration is only one store for one million people (as of 2011 end). Dunkin’ plans to add around 100 new restaurants in the state of Texas in the next several years. Last year, the company signed a limited partnership with Dallas Cowboys football club owner and General Manager, Jerry Jones, and Hall of Fame quarterback Troy Aikman as the brand’s newest franchise partners. This venture with local public faces will see the group opening up 50 new restaurants throughout the Dallas/Fort Worth area in the next five years. Texas growth plan is also part of the company’s expansion goal. ^[3]

Dunkin’ has also developed attractive franchisee strategy to support the growth opportunities and consumer needs of each individual market. The company offers franchisees flexible design concepts like freestanding stores, in line sites, kiosks and gas stations, as well as other retail environments. Also to lure franchisees, Dunkin’ is making special incentives available, such as reduced royalty rates initially, and a $10,000 store marketing contribution for select franchisees. ^[4]

We have a $35 price estimate for Dunkin Brands, which is slightly lower than the current market price.

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1. Dunkin’ Donuts moves into Southern California, January 15, 2013, nrn.com [↩]
2. DNKN 10-k [↩]
3. Dunkin’ Donuts Expands In Texas, August 28, 2012, csdecisions.com [↩]
4. Dunkin’ Donuts Targeting Southern California, January 16, 2013, cspnet.com [↩]