How Dunkin Brands’ Move To Double Its U.S. Store Count For Dunkin’ Donuts Could Drive Value

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

Recently Dunkin’ Brands (NASDAQ:DNKN) announced an ambitious target of  18,000 Dunkin’ Donuts restaurants in the U.S, in the long term. This is double the number of existing restaurants (around 9,200 at the end of 2017) and calls for aggressive expansion. However, this expansion can lead to a significant upside in Dunkin’ Brands’ valuation, given that Dunkin’ Donuts U.S. is the most important segment of the company.

Our interactive model which you can access here analyzes the impact of doubling Dunkin’ Donuts’ store count on the company’s valuation.

Dunkin’ Brands’ total divisional valuation can be impacted by nearly $2 to $3 billion by this aggressive expansion.

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This impact on the valuation is primarily due to higher revenues generated by expansion, assuming that the company would be able to maintain its margins at our estimate levels despite the expansion.

Accelerated expansion is likely to be a key value driver for Dunkin’ Brands. However, in order to execute this expansion the company needs to have a strong cash flow, a simplified menu which can ease restaurant operations, and a strong leadership team.

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