Over the next 15 months, 100 franchisee-owned Dunkin’ Donuts locations will be closing. The announcement follows a recent decline of 11.9% in the price of company shares. Further, during a recent analyst day presentation Dunkin’ Donuts representatives projected a profit of between $1.87 and $1.91 per share, whereas analysts had previously predicted a profit of $1.92 per share. Uncertain Wall Street investors are now left wondering if the drop in share price and the multiple store closings are a sign that the company is on the decline.
One explanation for Dunkin’ Donuts’ slower growth is the extensive competition among fast food restaurants for business from the breakfast crowd. McDonald’s has announced plans to add an all-day breakfast menu to its restaurants, while Starbucks will be offering a larger assortment of breakfast pastries. Other fast food restaurants are following suit, as well.
Even though Dunkin’ Donuts locations are open throughout the day, business has always been especially busy during mornings as customers stop in for coffee and donuts on the way to work. Fierce competition for that morning crowd is now putting a dent in sales for Dunkin’ Donuts.
Despite these recent downturns, including a 7% drop in customer store visits last quarter, Dunkin’ Donuts remains optimistic about its future. The company has plans to open more than 400 new Dunkin’ Donuts restaurants through the U.S. The new locations will be full-service stores, whereas the 100 locations that are closing are merely self-serve Dunkin’ Donuts kiosks operated by Speedway, a convenience store chain. Donut sales from Speedway locations account for just 0.1% of total Dunkin’ Donut sales.
The closing of self-serve kiosks in some Speedway stores presents a new growth opportunity for Dunkin’ Donuts. With those kiosks gone, the company can now open full-service stores in those areas. Had they done that previously, they would have been competing with themselves. For some customers, freestanding Dunkin’ Donut restaurants are more convenient than self-serve kiosks. Many full-service Dunkin’ Donut restaurants have a drive-thru, so that customers do not even need to park and exit their vehicles to grab their morning coffee and donut.