Dunkin’ looks to unlock growth outside U.S.

by Eric Schroeder
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CANTON, MASS. — While operating profits in its Dunkin’ Donuts and Baskin-Robbins businesses in the United States are strong, Canton-based Dunkin’ Brands Inc. remains vigilant in its quest to generate similar success in its international operations, said Nigel Travis, chief executive officer of Dunkin’ Brands and president of Dunkin’ Donuts.

In the fourth quarter ended Dec. 29, 2012, operating profit within Dunkin’ Donuts International fell 20% to $2,174,000, down from $2,701,000 in the same period a year ago. But Mr. Travis said during a Jan. 31 conference call with analysts that the company in 2012 “put the foundation in place for Dunkin’ to become a contributor to our growth in the next five to seven years.”

Mr. Travis said the company is “hard at work” to find an international foundation for growth, as well as addressing issues. To that end, the company recently ended its franchise agreement in Taiwan and will close 19 Dunkin’ Donuts shops in the country during the first quarter of fiscal 2013. Even as it exits Taiwan, though, the company is expanding elsewhere. Dunkin’ on Jan. 30 unveiled plans to enter Vietnam through a franchise agreement with Vietnam Food and Beverage Co. Ltd. The agreement will bring the first Dunkin’ restaurant in the country to the Ho Chi Minh area, and stores will be developed across the country over the next several years.

“It is not about the number of countries we are in, it is about being in the right countries with the right franchise partners and offering our customers the best global experience,” Mr. Travis said. “Yes, some countries do need a fix, and generally this is through changing our supply chain models. I feel we’re making great progress in this area, but it will take more time. It may also take more investment by Dunkin’ Brands to ensure that we are successful in the highest potential countries. Combined with the potential savings opportunities from our refinancing, we may accelerate some of our investments into 2013. The fix may not be overnight, but we believe we have significant long-term potential for our international businesses.”

Mr. Travis said he also sees great potential for Baskin-Robbins International despite a 34% drop in operating profit and a 36% decline in revenues during the fourth quarter of fiscal 2012. Specifically, he said Dunkin’ is “intensely focused on driving Baskin-Robbins cake sales,” which the company sees as “a real brand differentiator.”

“Our franchisees and licensees sell more than 30 million cakes around the world annually, and that is at an average price of approximately $25 each,” he said, adding that in Korea the company sold nearly 300 cakes per store on Christmas Eve.

From a regional perspective, in terms of core markets, Mr. Travis said Baskin-Robbins Korea had a “phenomenal year,” Baskin-Robbins in the Middle East was “very strong,” and Baskin-Robbins Japan had “a tough year.”

Dunkin’ added 299 net new Baskin-Robbins restaurants outside the United States during 2012 for a 7% growth rate, and the company on Jan. 31 announced it has signed five new franchise agreements to expand the Baskin-Robbins presence in China.

“The new franchise agreements include plans to open 249 additional Baskin-Robbins stores across China over the next 10 years, more than tripling our presence in the country,” Mr. Travis said.
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