Dunkin' Donuts Announces Development Deal In Raleigh-Durham

Fast food giant Dunkin’ Donuts, which is part of Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) , is geared up to expand further in the Raleigh-Durham area of North Carolina. The company has inked a multi-unit store development agreement with Coastal Franchising, Inc. whereby it plans to build seven new restaurants therein.

Franchisee group Coastal Franchising, which is led by George Ross, currently operates 39 outlets throughout the Carolinas, including five in Raleigh-Durham itself. This addition of seven units will more than double the franchisee’s presence in the area. The first of these is expected to open in 2018.

Notably, this agreement is in sync with the company’s plan to fuel growth in North Carolina, which is home to over 200 Dunkin’ Donuts outlets.

Meanwhile, apart from foraying into domestic markets, Dunkin' Brands is also looking to expand its footprint internationally in the emerging markets of Asia and the Middle East. Also, it considers the untapped market of South Africa a great potential.

At the end of second-quarter 2017, there were in excess of 12,300 Dunkin' Donuts points of distribution and over 7,800 Baskin-Robbins points of distribution, across more than 60 countries in Dunkin’ Brands’ fully-franchised system.

In fact, in full-year 2017, the company expects Dunkin’ Donuts franchisees to add 330-350 net new restaurants, and Baskin-Robbins franchisees to add 10 net new restaurants in the United States. Moreover, internationally, the company anticipates franchisees and licensees to add 50-100 net new restaurants.

Notably, the Dunkin’ Brands’ shares have outperformed its industry in the last year. While the stock rallied 9.7%, the industry witnessed a gain of 4.9% in the same time period.

However, Dunkin' Brands’ international comps growth has been suffering for the last few years at both its Dunkin’ Donuts and Baskin Robbins divisions. Furthermore, a soft consumer spending environment in the domestic restaurants space along with intense competition from similar food & beverages companies like Starbucks Corporation (NASDAQ:SBUX) , McDonald’s Corporation (NYSE:MCD) and Jack in the Box Inc. (NASDAQ:JACK) might continue to put pressure on revenues.

Although the company is certainly not immune to certain headwinds, we expect it to sustain the momentum going forward on the back of continued expansion strategies along with various sales and digital initiatives. These initiatives include product launches, increased focus on its beverage portfolio, the ongoing loyalty program and mobile ordering service that are expected to attract customers and positively support earnings as well as revenue growth.

Currently, Dunkin’ Brands’ has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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