Can The Launch Of Mobile Order And Pay Boost Dunkin’ Donuts’ Revenues?

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DNKN: Dunkin' Brands Group logo
DNKN
Dunkin' Brands Group

Recently, the Dunkin’ Donuts division of Dunkin’ Brands (NASDAQ:DNKN)  rolled out its new mobile app across the U.S., which enable the company’s regular customers to order and pay using their mobile devices, skipping the regular lines to  pick up their orders directly. Dunkin’ Donuts now joins Starbucks, which launched a similar app across its U.S. company-owned stores last year. This initiative is an indication of Dunkin’ Donuts’ commitment to leveraging technology  to provide consumer conveniences.  It also reflects the wish to keep up with the competition. In December 2015, over one million Starbucks customers used its “Mobile Order and Pay” capability and in Q1 2016, 21% of its total transactions were paid using the mobile app. This signifies the importance of this capability and its impact on revenues and customer service. We believe Dunkin’ Donuts should see a significantly positive impact on its revenues after the launch of its new mobile by attracting more consumers through faster and error free service.

See full analysis for Dunkin’ Brands

Faster Service And Fewer Errors Can Attract More Consumers

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According to Dunkin’ Donuts management, the new mobile app is the biggest service change the company has introduced since drive-thru. It allows consumers to order and pay remotely so customers can skip lines to collect their orders   Customers can place orders on the go up to 24 hours in advance and pay automatically using the Dunkin’ Donuts card through the app. Dunkin’ Donuts management believes that their existing service is already faster than competitors.  By improving the speed further, this app will give them a real competitive edge. The app will also ensure that orders are placed accurately with no scope for human error.  Favorite orders can be saved for quick repeat placement. Given the two key benefits of speed and accuracy, along with other conveniences such as saving frequent orders and personalization, Dunkin’ Donuts should see significant traction with the app. Starbucks processes nearly 6 million mobile order and pay transactions per month, indicating the potential of this capability.

According to our estimates, Dunkin’ Donuts’ average revenue per outlet will increase from around $0.93 million in 2016 to around $ 1.03 million by the end of our forecast period.

Mobile apps and other technology initiatives are one of the key drivers which will boost these revenues. The company is making its new mobile app available only to its loyalty program members currently and the convenience offered by the app can attract more consumers to its rewards programs. It currently has around 4.6 million loyalty members compared to the 12 million number for Starbucks. If Dunkin’ Donuts is able to increase its revenues through technology initiatives and reach and average revenue of $ 1.1 million per outlet by the end of our forecast period, there can be a nearly 10% upside to our price estimate.

Dunkin’ Donuts believes that the new mobile app is the beginning of the several other technological conveniences the company plans to offer its consumers. It is also testing delivery and curb side pickup in selected markets.  The new mobile app definitely brings the company in line with key competitors and future technology innovations will give it a competitive edge in the long term.

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