CANTON, MASS. — Dunkin’ Donuts completed the conversion of a simplified menu in 100% of its U.S. units in the first quarter ended March 31. The menu change should increase afternoon sales and make value campaigns more effective, said David L. Hoffman, president of Dunkin’ Donuts U.S. and Canada.
“This massive undertaking resulted in a 10% reduction of required menu items as well as the elimination of another 23 optional products, most of which were slow moving, complex and off strategy,” he said in an April 26 earnings call.
Dunkin’ Donuts expects to see an impact to comparable store sales of about 100 basis points in the coming months, which would be similar to results in test markets, he said.
“We continue to believe that over the long run, the simplified menu is an investment in a better environment for our people by taking complexity out of the restaurants,” Mr. Hoffman said. “This, in turn, will enable the crew to deliver a better guest experience, improve order accuracy, drive franchisee profitability and, ultimately, increase restaurant-level margins.”
Dunkin’ Donuts U.S. continues to see erosion in the p.m. daypart, he said.
“It’s a different need state than the a.m.,” Mr. Hoffman said. “It’s a different occasion for the consumer. We still believe that we will absolutely win on the consumer that’s looking for a pit stop: get in, get out, get on their way at Dunkin’. That's what we're built on.
“Simplification eliminated a lot of complexity, and a lot of that complexity came from the slow-moving p.m. food items … However, going forward, we created room for growth with simplification.”
He also associated the menu simplification with Dunkin’ Go2s, a national value menu featuring three breakfast sandwiches at $2, $3 and $5 price points.
“Now that we have the simplification scale, again, I'll say it's no coincidence that we introduced our $2, $3, $5 value campaign in April, and that's because simplification was all about creating room for growth, not just on some of these other initiatives like value but also for menu innovation and what we want to do around p.m.,” he said.
Canton-based Dunkin’ Brands Group, Inc., the parent company of Dunkin’ Donuts and Baskin-Robbins, reported net income of $50.2 million, or 58c per share on the common stock, in the first quarter, which was up 13% from $44.3 million, or 48c per share, in the previous year’s first quarter. Revenues of $301.3 million were up 1.7% from $296.4 million.
“These results were delivered against a tough backdrop, which included the national roll-out of menu simplification, continuing intense competitive activity as well as adverse weather,” said Nigel Travis, chairman and chief executive officer of Dunkin’ Brands Group.
Dunkin’ Donuts U.S. reported revenues of $139.9 million, which were up 2.8% from $136 million in the previous year’s first quarter. Segment profit of $105.1 million was up 3.3% from $101.7 million. Comparable store sales declined 0.5% as a decline in traffic offset an increase in average ticket. The introduction of Girl Scout cookie-inspired coffee flavors and afternoon break value offers drove sales.
Dunkin’ Donuts International posted first-quarter revenues of $5.4 million, up 11% from $4.8 million. Segment profit of $3.2 million was up 125% from $1.4 million.
Baskin-Robbins U.S. recorded first-quarter revenues of $10.5 million, down 0.6% from $10.6 million. Segment profit of $7.2 million was down 2% from $7.4 million. Comparable store sales declined 1%.
“Average ticket was up for the quarter, but traffic declined largely as a result of the cold, wet weather across the country,” Mr. Travis said. “Weather accounted for approximately 300 basis points of negative impact.”Baskin-Robbins International reported first-quarter revenues of $25.9 million, down 1.5% from $26.3 million. Segment profit of $7.4 million was down 9% from $8.2 million.