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Dunkin’ Brands Group (DNKN) IPO as Hot as Its Coffee
This week’s biggest IPO offered some hot trading Wednesday as shares of Dunkin’ Brands Group, the parent company of Dunkin’ Donuts, soared well past its $19 IPO price, to close at nearly $27.85, based on the company’s recognized potential for still unrealized domestic expansion.
Founded in 1950 in Quincy, Massachusetts, the company began franchising in 1955, and is now approaching 10,000 stores worldwide. About 2/3 of Dunkin’ stores are in the U.S., the vast majority of which are in the East. The lack of stores in the West is viewed as a prime opportunity for increased domestic branding and growth, with the chain looking to roughly double the number of U.S. stores over the next two decades.
Dunkin’ feels it’s in a strong position to take on Starbucks and McDonald’s, both of which are now considered focused more on the international market. Surprising to many is the fact that Dunkin’ Donuts is America’s largest retailer of coffee-by-the-cup, serving nearly a billion cups each year. Although the company also sells bagels, breakfast sandwiches, danishes, and, of course, all kinds of donuts, coffee provides the majority of its revenue, including grocery sales. The original proprietary coffee blend recipe used in 1950 is still the one used today, the foundation for a customer brand loyalty exceeding that of its competition.
Although planned growth is impressive, the strategy is to be careful, to ensure successful franchises as it expands on its largely working-class customer base. Its target market, in contrast to Starbuck’s target for higher-priced offerings, could stand it well during tough economic times. In addition, Dunkin’ Brands other major brand, Baskin-Robbins, is now under new management, and is seen as already undergoing a turn-around.
For additional information, visit the company’s website at www.DunkinDonuts.com
