Dunkin’is a tiny company compared to McDonald’s, both in store count and revenues. But it shares with the franchise giant an important competitive advantage: location.
Exploiting this advantage could help it replicate McDonald’s success in in adopting and adapting to emerging consumer trends.
An early mover, Dunkin’Donuts acquired prime real estate locations for its stores — train stations, airports, and city landmarks. Sometimes, side by side with McDonald’s.
So, all it takes is for Dunkin’ to come up with the right business model to exploit its location advantage — even if this model means the franchise has to drop the Donuts from its corporate logo.
This has led to the company’s next advantage – the ability to adopt and adapt; in essence, new product menus and new services to capitalize on emerging trends and deal effectively with competition.
To compete with Starbucks, for instance, Dunkin’ has been broadening its drinks menu by adding new lines of fruit juices, ice coffee, and mixed espresso drinks.
To compete with McDonald’s all-day breakfast, Dunkin’ has been broadening its breakfast menu. In addition to bagels, added years ago, Dunkin’ has added Donut Fries, Ham & Cheese Roll-ups, Pretzel Bites & Mustard, Waffle Breaded, Chicken Tenders, Fudge Brownie, Egg White Bowl, Scramble Bowl.
While adding new products to the menu to address new consumer trends, Dunkin’ has been taking products off the menu, too.
That’s how the company has managed to have the smallest menu, compared to McDonald’s and Starbucks—see table.
|Company||Number of Stores||Number of Items on The Menu|
A lean menu, in turn, provides the company an added advantage when it comes to training its employees and in using the store facilities (e.g., ovens, storage space, refrigeration, etc.).
Dunkin’s strategy has been paying off. This week the company beat estimates by a decent margin.
Jeff Yastine, senior equities analyst at Banyan Hill Publishing, likes the stock. “There’s a lot to like of this company for future growth and taking away some market share from Starbucks,” says Yastine.“It continues to protect its core product groups, like its breakfast foods, with innovations like its ‘power breakfast sandwich while offering discounted menu items and high-profit specialty drinks like ‘Irish creme coffees’ to its patrons.”
Dunkin’s strategy in adopting and adapting to change is very similar to McDonald’s. In its early days, McDonald’s adopted a fast and convenient menu to address the food service needs of the baby-boomer generation.
Later on, it adopted a global menu, transferring the American way of life to many countries around the world. And, more recently, it adopted a more “healthy” and “more natural” menu.
Always, capitalizing on its location advantage; always coming back, from a brief pause during the transition; and rewarding long-term investors handsomely.
That could turn out to be the case for Dunkin’.
Disclosure: I own Dunkin’ shares