The Profits Run on New Dunkin’ Donuts Products

It can be tempting in times of economic crises to batten down the hatches and wait out the storm.  Dunkin’ Donuts’ president and CEO, Nigel Travis, decided to take a different tack.  A slate of new products were behind much of the company’s 10.9 percent sales growth in the first quarter of 2012.  These numbers continued the upward trend from the end of 2011.

 

Travis believes that much of the growth resulted from an increase in customer traffic and spending.  New offerings, such as breakfast and bakery sandwiches, limited time selections, and K-cups to be used at home raised revenue without affecting the sales of products traditionally purchased in store.

 

Increased Revenue = Increased Expansion Opportunities

 

With a goal of doubling the number of Dunkin’ Donuts storefronts in the next 20 years, the numbers seen in the first quarter of 2012 are encouraging.  Existing franchise holders appear eager to expand their businesses and there is plenty of interest among potential new franchisees as well.  It all paints a very positive picture for the future of this popular chain.

 

Innovation at Dunkin’ Donuts goes beyond the kitchen and into the marketing department as well.  The new flavor of the month, 3-Point Chocolate, was introduced during March Madness capitalizing on annual basketball fever and samples of the new cake products lead to an increase in cake sales.

 

The Future of Dunkin’

 

Dunkin’ Brands continues to dedicate itself to growth and has just signed a new agreement that will supply its distribution network.  The contract with National DCP would help to drive down product costs in sparsely populated territories in order to encourage potential franchisees to tackle new areas.  The company hopes to see 260-280 new units by then end of 2012.

 

Sister company Baskin Robbins also saw good growth in the first quarter of 2012.  Sales were up 7.2 percent, although some of that increase may be attributed to warmer than normal weather throughout the period.

March Numbers Indicate Good Sales

With numbers matching those from December 2011, the first quarter of 2012 has shown continued strong growth.  Restaurant owners reported higher same-store sales during March.  The Restaurant Performance Index, RPI, a standard used to evaluate the health and future of the industry, indicated a 0.3 percent rise over the numbers posted in February.

 

5 Months of 100+

 

March’s numbers follow four other months where the RPI was reported to be over 100.  This indicates that the foodservice industry is expanding in key areas.  Customer levels held high throughout the month and improved traffic and sales numbers implies that customers are spending more then they have in the last four years.  It is expected that these positive trends will spread to companies who supply restaurants as well.

 

Understanding the RPI

 

The RPI measures two different pieces of the financial puzzle.  The first is the Current Situation Index which evaluates trends within a particular venue by measuring sales, expenses, and traffic.  The second piece is the Expectations Index.  As the name implies, this evaluates the outlook of the business over the next six months.  Put together, the RPI gives a reasonably accurate look at how the food industry is doing and how it will be doing in the near future.

 

Good News for the Bottom Line

 

One of the potential advantages of continued profits is the likelihood of increased employment in the sector.  Only a small percentage of restaurateurs expect to decrease their staff in the upcoming months.  Additionally, may are expressing a degree of optimism in regards to growth and improved sales for much of 2012.  In fact, many operators are feeling quite positive about the improving economy, with nearly a third expecting an uptick in profits in the coming half year.

 

The main areas of concern which may put a damper on the upward movement are fuel and commodity costs.  Fuel costs traditionally rise during the summer months.  Commodity prices have also been creeping higher, forcing restaurants to increase prices.