Dunkin' Brands Group (DNKN) announced today that it has signed a deal with two franchise groups to bring Dunkin' Donuts to the United Kingdom. The two agreements will bring 50 Dunkin' Donuts locations to London within the next five years. In its press release, the company also said it is in advanced discussions with other franchise partners to bring an additional 100 locations to the U.K.
Sisterly success
Baskin-Robbins, the sister brand to Dunkin' Donuts, currently has more than 100 locations in the U.K. It has added 10 locations recently and management expects to open an additional 80 stores by 2015. The success of the brand has allowed for existing franchisees to open new locations and to draw in new franchise groups. Having another brand thriving in the market is very important to note, because management has been able to monitor consumer trends and master how to draw customers in.
Krispy success
Dunkin' Donuts' planned journey to the U.K. is actually its second attempt in this market. It left in the mid-1990s after sales were not as high as the company expected. However, Krispy Kreme Doughnuts (KKD) entered the U.K. market in 2003 and has experienced immense growth since. Krispy's small presence has grown into 46 locations, and its management expects to have more than 90 by 2015. Using this success as a gauge of consumer demand, and with a revamped menu, Dunkin' Donuts is ready to take the U.K. by storm.
Although the product mixes are similar when it comes to coffee and doughnuts, Dunkin' also offers bagels and sandwiches; this will help draw in additional customers who are looking to pair their coffee with something other than a doughnut. The new offerings also provide protection against the issues the company faced in its last stay, when consumers did not flock to the sugary treats. I believe the company now has the recipe for success.
The bottom line
Dunkin' Donuts' return to the U.K. will be a catalyst for earnings growth. If Krispy Kreme's success is the slightest sign of things to come, Dunkin' will experience incredible growth as soon as its first stores open. I have been long this stock for quite a while now, and will continue adding to it on any weakness the stock market provides.
