NANTUCKET, MASS. — A business situated midway between two popular industry segments may be viewed by investors as poorly positioned. But that is not the way that Dunkin’ Brands Group sees it.
“Some say that being in the middle is really not a great place to operate, but we’ve actually capitalized on it,” Katherine D. Jaspon, chief financial officer of Dunkin’ Brands, said during a June 18 presentation at the Jefferies Consumer Conference. “So we believe we’ve got the right to compete with the c-stores and McDonald’s from a value perspective and somewhat from the speed perspective if you look at drive-throughs. And then, also, with the high end obviously are Starbucks and the Caffè Neros, etc., with us getting into espresso, really becoming a player in that market.”
Ms. Jaspon said Canton, Mass.-based Dunkin’ spent much of 2018 focused on setting a foundation and working with franchisees to prove there is such a thing as “smart value.” She described “smart value” as the ability to offer food at value prices and still come away with a margin if no beverage sale is attached.
She said Dunkin’ has built in brand value in its Go2s value menu, which gives customers the opportunity to choose from three of the brand’s breakfast menu items priced at $2, $4 and $5.
“(The second quarter of 2018) was the first time we had national value on Go2s,” Ms. Jaspon said. “We had a 2 for $2, a 2 for $3 and a 2 for $5 offer, showing our franchisees that it drove tremendous ticket through mix, the average ticket on that being around $8. But more importantly, that the consumer is actually attaching a full-price beverage and training themselves in the ritual of the beverage.”
She said franchisees asked for other constructs around value, and although Dunkin’ executives felt some of the requests probably would fall flat, they went through the testing exercise to prove it during the third and fourth quarters of 2018.
Once 2019 got underway, Dunkin’ and its franchisees felt they had established the right construct for the value menus. Now the company has sold the Go2s platform into all its franchisees for full fiscal 2019.
“So that’s nationally sold-in value, and it has national media supporting it,” she said. “It’s the first time ever in the company’s history that we have that, and we believe that helps us play in all sites.”