Running head: FUTURE OF DUNKIN’ BRANDS GROUP, INC.

The Future of Dunkin’ Brands Group, Inc.: Case Analysis

FUTURE OF DUNKIN’ BRANDS GROUP, INC. 2

I. Executive Summary

Some might say America runs on freedom. Others might say America runs on innovation.

Dunkin’ Brands Group, Inc. (Dunkin’ Brands) will tell you: America runs on Dunkin’. According

to its website, Dunkin’ Brands is famous for its combination of high-quality coffees, espresso

beverages, baked goods, and breakfast sandwiches served all day with fast, friendly service.

Dunkin’ Brands’s 100 percent franchised business model currently includes more than 12,500

Dunkin’ restaurants and nearly 8,000 Baskin-Robbins restaurants [Dun1].

Dunkin’ Brands boasts itself as one of the world’s fastest quick-service restaurants

(QSRs), specializing in coffee, baked goods, breakfast foods, and ice cream. Dunkin’ Brands is

the parent company of two recognizable brands: Dunkin’ and Baskin-Robbins. Dunkin’ serves

fresh, hot coffee and other specialty beverages in over 40 countries all over the world. It is also

famous for its delicious doughnuts and other baked goods. Baskin-Robbins serves ice cream,

frozen dessert, and beverages in 52 countries and serves more than 300 million customers each

year.

Dunkin’ Brands faces fierce competition from several other companies, including Krispy

Kreme Doughnuts, Starbucks, and Tim Hortons. Although much smaller in size, Krispy Kreme is

held with high esteem for their tasty doughnuts and other baked goods. Starbucks is arguably the

most popular coffee brand in North America and possibly the entire world. Tim Hortons

dominates the Canadian market and was purchased by burger behemoth Burger King in 2014. In

addition to these top competitors, other large QSRs, such as McDonalds and Wendy’s, are

ramping up their breakfast sales and offering more coffee beverages on their menus, which

threatens to overtake market share currently held by Dunkin’ Brands.

FUTURE OF DUNKIN’ BRANDS GROUP, INC. 3

Dunkin’ restaurants and Baskin-Robbins both operate under a franchise model of

business. According to the Motley Fool, nearly 100% of Dunkin’ shops are franchised as the

company operates only 36 of the over 10,100 Dunkin’ and Baskin-Robbins restaurants in the

United States and none of the 8,000 international locations [Mer14]. Dunkin’ Brands has five

primary sources of revenue: royalty income and fees from franchises, rental income from

property leases, sales of ice cream and other food products to international Baskin-Robbins

franchisees, revenue from the few company-owned stores, and miscellaneous licensing fees. This

model of business mitigates risk associated with individual restaurant failures and allows

Dunkin’ Brands to easily, aggressively, and cost-effectively expand into markets all around the

globe.

Dunkin’ Brands is led by its Chief Executive Officer, Mr. Dave Hoffmann. In 2018, he

succeeded Mr. Nigel Travis, who served as Chief Executive Officer and President of the

company since 2009. The remaining executive team is comprised of eight individuals, ranging in

age, expertise, gender, and ethnicity. Prior to 2018, Dunkin’ Brands was lacking diversity

amongst its top executives. The company was scrutinized for this and has since added two

women (one serving as Chief Financial Officer and the other as Chief Communications Officer)

and one African American. Another criticism of the company was the dual role of Mr. Travis as

President and Chief Executive Officer. Now, Travis serves as the Executive Chairman, while Mr.

Hoffmann serves as CEO.

The advertising model behind Dunkin’ Brands has proven to be quite successful.

Franchisees pay a fee of approximately 5% on top of their royalty fee that is invested in an

advertising fund managed by Dunkin’ Brands. These funds are used to pay for marketing,

advertising, research and development, and public relations. Dunkin’ has invested in several
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 4

different types of promotion in its history. One notable promotion was the opportunity for

customers to create the next new doughnut for Dunkin’. The orange and pink label is highly

recognizable by its devout followers. Dunkin’ also invests in print advertisements, television

advertisements, and is active on both Facebook and Twitter.

The current strategy of Dunkin’s Brands is fixated on growth and increased franchisee

profitability. According to the “Blueprint for Growth” provided at Dunkin’s 2018 Investor and

Analyst Day, the company is focused on five main areas that they believe will increase

profitability for their franchisees for the next three years: menu innovation, unparalleled

convenience driven by digital leadership, broad accessibility to their brand though restaurant

growth and new channels for their branded packaged goods, restaurant excellence, and brand

evolution [Dun18]. Dunkin’ Brands plans to introduce new beverages and breakfast sandwiches,

including the Sweet Pepper Bacon Breakfast Sandwich and other bacon-centered offerings. To

increase convenience, Dunkin’ expects to include a drive-thru lane in more than 75% of new

restaurants moving forward. They will also become the first QSR in the United States to feature a

drive-thru lane specifically dedicated to customers who want to order on their mobile device.

Finally, Dunkin’ wants to continue to expand outside of its restaurants by growing its consumer-

packaged goods revenue by boosting its $400 million in retail sales in 2014 to over $1 billion by

2020. Dunkin’ introduced a ready-to-drink bottled Iced Coffee in 2017 and sold over $150

million worth of merchandise in the first year.

The purpose of this report is to identify the current strategy of Dunkin’ Brands and

evaluate the potential success if these strategies are implemented. This report will review and

optimize the current vision and mission of Dunkin’. This report will include several matrices to

help evaluate proposed strategies listed in the preceding paragraph and potentially offer alternate
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 5

strategies. Finally, this report will highlight the most important objectives and strategies and

provide critical feedback on ones that are not necessary for the company to pursue. The goal of

this report is aligned with the goals of Dunkin’ brands: to facilitate growth of the Dunkin’ Brands

brand and increase top- and bottom-line revenues for franchisees.

II. Comprehensive Written Analysis

Vision and Mission Statements

The vision and mission statement of an organization can have a sizeable impact on the

success of the firm. The vision and mission statements convey the plan and purpose of the

organization to shareholders, employees, consumers, and the general public. The vision

statement points to the future and should communicate what the company wants to become. The

mission statement tells the purpose of the company and displays the values of the organization.

The current vision statement of Dunkin’ Brands is “Serving Responsibly—To be

recognized as a company that responsibly serves our guests, franchisees, employees,

communities, business partners, and the interests of our planet.” This statement is far too broad.

It does not reveal the type of business in which the business is engaged. It does not center around

the customers of the business. It does not provide a “vision” or a long-term goal for the business.

To improve the effectiveness of the vision statement, this report recommends the following be

implemented for Dunkin’ Brands: “To be recognized as the premier choice for coffee, baked

goods, and specialty ice cream by our outstanding Dunkin’ and Baskin-Robbins fans.” This

statement emphasizes customer importance and describes the company’s product offerings.

The current mission statement is labeled as “Our Priorities” on the company’s website. It

includes four parts: Our People, Our Guests, Our Neighborhood, and Our Planet. Dunkin’ Brands

does an excellent job in explaining their commitment to each of these priorities. The current
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website has a full page of information, highlighting each priority with specific examples. To

show their value for customers, they list a commitment to offer guests authentic, high-quality

menu items. In the “Our Neighborhoods” section, the company shows its passion for

volunteerism and franchisee generosity. The only criticism of this information is the difficulty in

finding this information in a complete, concise statement. The mission statement should be

displayed prominently on the website, include links to each of the existing pages, and include

specific statements from each of those pages to read: “We strive to be recognized as a company

that responsibly serves our guests, franchisees, employees, communities, business partners, and

the interests of our planet. We will always offer our valued guests authentic, high-quality coffee,

ice cream, and baked goods that they expect from Dunkin’ and Baskin-Robbins. We are focused

on creating a camaraderie amongst our employees where they can learn, grow, and follow their

passions. We are committed to offering equal pay, diversity in franchising, and investing in ways

to streamline our business using the latest technological advances. Our restaurants are part of the

fabric of so many communities around the globe and we will do our part to strengthen those

communities. We confidently run our business with these things in mind, knowing that these

values will lead Dunkin’ Brands down a path of long-term success and impressive returns for our

shareholders.” The new mission statement takes into account nine necessary components in a

concise statement that speaks to all stakeholders of the business.

SWOT Analysis

A SWOT Analysis was performed and the results are listed below. Study the results of

this analysis and use it to build on your strengths, improve on your weaknesses, take advantage

of your opportunities, and defend against your threats.

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Strengths. According to QSR Magazine, Dunkin’ ranks second in America’s fastest

drive-thru restaurants [Kle18]. Their average time per order was 200.74 seconds and 89.6 of

those orders were completely accurate. Dunkin’ also ranked high in other categories of the study,

including eye contact (90.6%), smile (75%), and pleasant demeanor (83.1%). Dunkin’ is hoping

to move into the top spot after they roll out their Next Generation Concept in select stores. These

stores will feature a modern design, faster-than-ever drive-thru experiences, greater grab-n-go

selections, and increased energy efficiency. Another notable strength is the recognizable brands

behind Dunkin’ and Baskin-Robbins. The familiar orange-and-pink logo is almost as familiar as

the ever-popular tagline, “America runs on Dunkin’.” Both Dunkin’ and Baskin-Robbins have

been featured in the Franchise 500 list, published by Entrepreneur Magazine, in the last 39 out of

40 years [Fie19]. The always-changing variety of ice cream and the commitment to quick service

are two reasons why brand equity has been compounding for Dunkin’ Brands in the last several

decades.

Weaknesses. Despite the fact Dunkin’ is almost 100% franchisee owned, Dunkin’s

relationship with franchisees has been historically strained. Dunkin’ has been known to bring

lawsuits against its franchisees much more frequently that other franchise companies. In fact,

fifteen lawsuits were brought against Dunkin’ franchisees in 2010 alone. In the same year, only

six lawsuits were brought against McDonalds franchisees [Gul11]. This is especially alarming

considering that McDonalds is the largest franchise company in the entire world. It has also been

reported that becoming a franchisee is a cumbersome process. This discourages new franchises

and inhibits growth, since virtually all of Dunkin’ is franchisee-owned. Dunkin’ must review its

requirements for new franchisees and ensure that existing franchisees feel supported and

empowered by their parent company. Another weakness is Dunkin’s historical inability to

FUTURE OF DUNKIN’ BRANDS GROUP, INC. 8

capitalize on expansion in developing countries. Dunkin’ has the capital and resources to expand

their international reach, but it has not done so at a rate that will maximize its global market

share. Failure to move into these developing markets has given competitors an opportunity to

start a rapport that will be hard to overtake if Dunkin’ decides to later enter into those markets.

Opportunities. There are many opportunities for Dunkin’ to continue its success, but this

report will only cover the top three. Market expansion is the most promising opportunity for

Dunkin’ at this time. Dunkin’ must pursue an aggressive growth plan that involves franchising

opportunities in developing countries and unserved markets. While it is not this report’s

responsibility to point Dunkin’ into specific countries, it would be beneficial for Dunkin’ to

consider a more aggressive global expansion plan. Another opportunity related to products is a

commitment to better nutritional offerings. Dunkin’ recently removed all artificial dyes from its

baked goods, inciting positive feedback from stakeholders. Similar moves, such as adding vegan

options to the menu or offering lower-calorie foods, will benefit the company by increasing its

product offering, marketing to a new niche, and boosting its public image. Finally, Dunkin’

should consider adding more lunch and dinner options to the menu to encourage customers to

visit later in the day. A large majority of customers visit Dunkin’ in the morning hours, which

conveys that more attention on later times in the day is necessary to grow profits. Most Dunkin’

and Baskin-Robbins are open late or 24 hours. Adding a small menu of easy-to-make meals

would be an excellent way to bring in customers for lunch and dinner.

Threats. Competition. Dunkin’ faces competition from multiple sides. Coffee sales face

competition from Starbucks, Peets Coffee, and local coffee shops. Doughnut sales threatened by

Krispy Kreme and thousands of local doughnut shops. In addition to the direct competitors, large

chains such as Burger King and McDonalds are expanding their breakfast and coffee options in
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 9

an attempt to attract more customers in the morning hours. These moves have a significant

impact on Dunkin’ because of the lower-cost options from these large chains. Burger King

recently acquired Tim Hortons in Canada, which could lead to Burger King becoming a strong

competitor in the future. Another threat is possible stagnation due to barriers to franchising with

both Dunkin’ and Baskin-Robbins. Dunkin’ Brands must establish a streamlined, customer-

centered process that encourages new franchise opportunities in both the United States and

international locations to both grow and retain market share from competitors.

Matrix Analysis

It is crucial to review multiple aspects of a company to determine the optimum strategies

that should be undertaken by a business. Matrix analysis allows us to look at multiple sets of data

and form a clear picture of where that company stands in a variety of areas.

Internal Factor Evaluation (IFE) Matrix. This matrix is an important management tool

used to evaluate the internal strengths and weaknesses of an organization. The matrix assigns

values and scores to the internal weaknesses and strengths of an organization in various

functional areas for the purpose of strategic decision making. The IFE matrix below provides an

evaluation of the internal strengths and weaknesses of Dunkin' Brands Group.

Key External Factors Weight Rating Score

Strengths:
Skilled workforce and employee training 0.10 4 0.4
Expertise and innovation in food business 0.08 4 0.32
Good returns on investment/financial strength 0.07 4 0.28
Operational efficiency and product
0.06 4 0.24
development
Effective customer service 0.05 4 0.20
Strong brand image 0.04 3 0.12
Convenience and customer experience 0.06 3 0.18
Savvy marketing initiatives 0.05 3 0.15
Weaknesses:
Poor relations with franchisees 0.10 4 0.4
Poor financial planning and efficiency 0.06 3 0.18
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 10

Profitability ratios below industry average 0.08 3 0.24

Limited product range/lack of choice 0.07 4 0.28
Poor integration of work culture 0.05 3 0.15
High level of days inventory 0.03 3 0.09
Poor in forecasting market demand 0.04 2 0.08
Low marketing efforts 0.06 2 0.12
Total 1.00 3.43

The IFE matrix above shows that the company’s internal situation is strong because it is

far above the recommended value of 2.5. Any value below 2.5 shows that the company has a

weak internal environment, while any IFE figure above 2.5 shows a strong internal situation. The

company’s internal situation has been enhanced by its ability to utilize the skills and experience

of workforce to meet the changing needs of consumers.

Competitive Profile Matrix. This matrix provides important internal strategic

information. It allows one to compare strengths and weaknesses between competitors in the

industry. This analysis provides two major benefits: it shows which factors the company should

improve and it provides insight on which factors are most important for success against

competitors.

Dunkin' Brands Starbucks Krispy Kreme

Rating Score Rating Score Rating Score
Critical Success
Factors Weight
Quality of Goods 0.22 2 0.44 4 0.88 3 0.66
# of Locations 0.12 3 0.36 4 0.48 1 0.12
Price 0.18 3 0.54 1 0.18 2 0.36
Global Expansion 0.12 2 0.24 3 0.36 1 0.12
Market Share 0.12 3 0.36 4 0.48 2 0.24
Range of Products 0.09 4 0.36 3 0.27 2 0.18
Advertising 0.15 4 0.6 3 0.45 2 0.3
Total 1.00 2.90 3.10 1.98
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Strengths-Weaknesses-Opportunities-Threats Matrix (SWOT). Strengths,

weaknesses, opportunities, and threats were mentioned earlier in this report; however, the intent

of this analysis is to match up strengths and weaknesses with threats and opportunities. The

purpose of SWOT analysis is to generate feasible alternatives, not to select or determine which

strategies are best. No firm has sufficient capital or resources to implement every strategy

formulated [Dav].

Strengths Weaknesses

1. Rated #2 in fastest service in all 1. Relationships with franchisees are

drive-thru restaurants in America. strained and negative.

2. Superior customer service and staff 2. Failure to capitalize on expanding

development. into emerging markets globally.

3. Excellent Franchising Model (99+% 3. Some sources indicate that the

franchised) company's current and liquid asset
ratios indicate that the company doesn’t
4. Strong brand and advertising ability. use its cash efficiently.

Opportunities SO Strategies WO Strategies

1. Expansion of market into developing

countries and unreached areas, such as 1. Add 1,000 new stores through
India. 1. Plan to update 25% of all stores to
franchising, focusing on India, China,
the next-gen model by the end of 2020.
Indonesia, and Thailand (S3,O1)
2. Development of a program showing All new stores will be built using the
commitment to better nutritional new model (O4, W1)
2. Invest in heavy advertising to stress
product offerings. Dunkin's goal to add salads,
2. Use cash to advertise in new
sandwiches, and Vegan options to the
3. Adding (more) lunch and dinner markets, which will also encourage the
menu and highlight the added options
options on their menu to encourage opening of more franchises (O1, W2)
(S4, O3 & O2)
sales later in the day.

4. Technology improvements- Next-

Gen stores
Threats ST Strategies WT Strategies
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1. Run advertising campaign in USA

highlighting our quick service and 1. Create a team of 100 existing
1. Competition from existing coffee,
excellent staff. List the quality of our franchisees to help implement ideas for
doughnut, and premium ice cream
product vs. new competition (S12&4, increasing franchisee satisfaction (T3,
QSRs.
T1&2) W1)
2. Competition from new entrants to
2. Run incentivization campaign to 2. Offer perks to customers at the
the coffee and breakfast industry
encourage new franchisors to open a expense of Dunkin' parent company
(Mcdonalds, Burger King).
Dunkin' or Baskin-Robbins location. (such as a coupon program or loyalty
Run a promotion, such as a 50% initial rewards) to both increase customer
3. Barriers to franchising with Dunkin'
fee to open a store for new franchisees loyalty and improve relationships with
has potential to stagnate growth.
or new equipment for existing franchisees (W1, T1&2)
franchisees (S4,T3)

External Factor Evaluation Matrix. This matrix examines social, cultural, political,

legal, competitive, and other external factors that can affect an industry or business. Information

from this matrix can help Dunkin’ pinpoint specific threats that must be addressed to guarantee

success. It also lists opportunities so that companies can focus their efforts on maximizing their

success by taking advantage of opportunities. It’s important for this report to be quantitative in

nature. Due to the extreme amount of research that goes into examining the external environment

in all areas in which Dunkin’ operates, data has been pulled from previous research and cited

below.

Number Weighted
Opportunities Weight Rating
Score
150 million Americans over 18 years of age drink coffee daily
1 0.15 4 0.6
with 30 million drinking specialty coffee.
Disposable income will continually increase 2.9% per year
2 0.1 4 0.4
from 2017 to 2022.
Global economic growth expected to rise from 2.4% in 2016,
3 0.05 3 0.15
to 2.7% in 2017, and 2.9% in 2018.
4 87% of millennials drink tea. 0.05 4 0.2
The United States is the 3rd largest importer of tea in the
5 0.04 3 0.12
world, buying 288 million pounds.
Coffee had the largest sale share with 45.9% in 2016 followed
6 0.04 4 0.16
by one single-cup coffee.
59% of coffee cups consumed daily in 2017 are now classified
7 0.03 4 0.12
as gourmet, compared to 42% in 2012.
Sales of packaged and ready-to-drink coffee was up to 10% at
8 $13.5 billion in 2015, and estimated to be at $18 billion by 0.02 2 0.04
2020.
Number Weighted
Threats Weight Rating
Score
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The location that people drink their coffee is strongly

correlated to age; people 65 years and older are 2/3 likely to
1 0.11 2 0.22
drink coffee at home, while coffee drinkers under 35 years old
are nearly 1/3 more likely to drink coffee from a café.
A large cup of coffee at McDonalds costs an average of $1.49,
2 while a large cup of coffee at Dunkin' costs an average of 0.08 1 0.08
$2.09.
40% of daily consumers are drinking coffee prepared at home,
3 reflecting a continuing trend in behavior as lifestyles become 0.07 3 0.21
increasingly more health conscious and mobile.
Of the more than $200 billion revenues generated in the
coffee industry in 2016, farmers only received $15 billion.
4 With the average age of coffee farmers being 55, younger 0.07 2 0.14
generations are straying away from farming due to the low
profitability.
66% of consumers are concerned with limiting their caffeine
5 intake but only 16% of consumers report hearing information 0.05 1 0.05
about the health benefits of coffee, down from 23% in 2015.
The world price of coffee grew to an annualized rate of 2.0%
6 from 2012 to 2017; it is estimated to rise an additional 1.2% 0.03 3 0.09
annually for the next 5 years to 2022.
As the world price of coffee increases, per capita coffee
consumption will steadily decrease from 9.54 pounds per
7 0.03 2 0.06
person in 2017 to 8.88 pounds per person in 2022, as more
consumers will choose to brew their coffee at home.
The quality of coffee and coffee technology is growing with a
8 0.03 3 0.09
trend of fully automated machinery increasing.
China's market conditions contain 30% more regulations than
9 0.05 2 0.1
the United States.
TOTAL 1 2.83
Note. Reprinted from Strategy Club’s analysis on Starbucks and Dunkin’. Retrieved from strategyclub.com/wp-
content/uploads/2017/12/StarbucksProject.docx. Minor changes were made to more align with this report, but the factual data remains the same.

SPACE Matrix. This is a tool used to analyze the best strategy to be undertaken by a

company. It mainly focuses on the competitive position of a company. The SPACE matrix has

four quadrants which include aggressiveness, conservativeness, defensiveness, and

competitiveness [Gur13]. The Space Matrix for Dunkin Brands Group, Inc. can be presented in a

diagram as follows:
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Dunkin Brands Group, Inc. has a strong competitive position due to its well-recognized

reputation, high customer loyalty, high industry experience, growing revenue, and effective

marketing and advertising strategies. As such, Dunkin Brands Group, Inc. can use its strengths to

develop new products, acquire its competitors, or even integrate with other firms.

BCG Matrix. The BCG matrix classifies the business by its market growth and the

relative market share. The business products are then classified into four quadrants including

cash cows, the stars, question marks, and the dogs [Han82]. The company's fast-selling products

include burgers, iced tea, and coffee. These three products appear in the star category. The

doughnuts are highly popular but do not make as many sales as the three products in the star

category. Doughnuts, therefore, appear in the cash cow category. Problem child products

including shakes and the wraps generate very little revenue and might soon face extinction. They

fall under the question mark category. The dog category contains the products that were

introduced into the market but did not perform well and became extinct. The BCG matrix for the

company is presented in a matrix below:

FUTURE OF DUNKIN’ BRANDS GROUP, INC. 15

QSPM Matrix. This is a tool used to evaluate the possible strategies for high-level

strategic management decisions [Dav09]. The QSPM Matrix for Dunkin Brands Group, Inc. is

presented below. Dunkin Brands Group, Inc. should focus on an aggressive expansion strategy

both in the foreign and local markets.

Alternative Alternative 2
1 (SO) (ST)
Expand the Maintain
market share Market share
Attract Attractiveness
Weight Weight
Score Score
Key factors
Strengths
Reputable brand name 0.207 4 0.01 2
Customer loyalty 0.01 3 0.2 2
Industry Experience 0.02 4 0.027 3
Product variety 0.01 3 0.01 2
Effective advertising and
0.08 2 0.03 1
marketing
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 16

Quick Service 0.24 4 0.29 3

Acceptable pricing 0.001 3 2
Weaknesses
Lower expenditure on marketing
0.02 4 0.01 1
compared to competitors
Increasing price of raw materials 0.03 2 0.04 2
Opportunities
Expansion strategies 0.12 4 0.01 2
Possible market share for Youth 0.02 3 0.14 3
Online marketing 0.05 4 0.04 2
Threats
Avoidance of high calories food
0.002 3 0.001 3
due to healthy eating habit
Low Entry barriers 0.03 1 0.004 2
High cost of materials 0.02 2 0.01 1
Local Competition 0.14 4 0.15 1
Totals 1 1
Sum total attractiveness score 50 32

Internal/External Matrix. This matrix looks at the individual sectors or areas of a

company and evaluates whether you should grow, maintain, or divest a certain part of the

business. In Dunkin’s case, this report found that Dunkin’ Donuts USA was the strongest sector

of Dunkin’s portfolio. Followed closely is the U.S. Advertising Fund, which are funds from U.S.

stores for advertising and brand strengthening. Since the U.S. Dunkin’ sector is the strongest,

naturally the Advertising Fund is going to follow closely behind. Most stores give about 5% of

revenue to the fund. Baskin’ Robbins isn’t nearly as strong as Dunkin’. In fact, Dunkin’ might

consider divesting its Baskin-Robbins USA locations and investing more heavily in Dunkin’

USA or Baskin-Robbins International. The matrix also indicates that Baskin-Robbins

International must be held and maintained.

FUTURE OF DUNKIN’ BRANDS GROUP, INC. 17

The Grand Strategy Matrix. The final matrix in this report is the Grand Strategy

Matrix. This matrix categorizes companies (or company segments) based on their position in the

market. Firms in Quadrant I have both a strong competitive position and expect rapid market

growth in the industry. Companies in this quadrant should consider strategies related to market

development, market penetration, and forward and backward integration. On the opposite side is

quadrant III. Companies in this quadrant have a weak competitive position and expect a slow

market growth. Appropriate strategies for organizations in this quadrant should consider

strategies such as divestiture, liquidation, or related and unrelated diversification. Research

indicates that Dunkin’ falls in Quadrant I of the GSM. The coffee industry is booming, attracting

new entrants and becoming increasingly popular to most developed and developing countries. In

additional to expected rapid market growth, Dunkin’ is well positioned to increase its market

share if it continues to develop its market by increasing its presence in unreached areas of the

world.
 FUTURE OF DUNKIN’ BRANDS GROUP, INC. 18

III.Strategies/Long-Term Objectives

Basing on the above analysis, the following specific strategies can be adopted by the

company to improve its performance and overall competitiveness:

1) Extend penetration to the existing market

2) Further expansion into new markets
3) Continued marketing and branding
4) Improvement of Franchise relations
5) Debt payment and improvement of liquidity levels
6) Hedging of commodity prices

The company can achieve the following long-term objectives when it applies the above specific

strategies:

Actual Strategies Recommended strategies

Offer higher incentives for Customers Reduce the loyalty fees up to $5,000
through reducing the loyalty fees up to $5,000 without a time limitation
for three years
Transform its marketing strategy Specify the marketing actions for each
element of its marketing mix i.e. place,
product, price and promotion.
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 19

Introduce new products to offer in the Extend its product portfolio in the
new market existing market and offer new products in
new markets
Planning to diversify its products for Design products for people with obese
sale in the high street supermarkets and online and diabetic customers
customers
Launch huge campaigns in all its Consider sponsoring international
outlets games such as those that takes care of
children needs.

The long-term Objectives can be achieved as follows:

Long term objectives Suggested actions for

implementation
Increase rental revenue to $150 Through opening more stores and
million by 2022 renting larger spaces. The company can also
consider building its own stores in countries
where the cost is low and sub renting the
extra space.
Increase income from license fee to Through expanding the franchise
$20 million by 2022 network in US and in the international market

Increase sales revenue on Ice cream to Through diversifying the Ice cream
$150 million by 2022 portfolio by introducing new ice cream
flavors with different tastes
Reduce the litigation cases by 60% Through reducing the loyalty fees and
increasing incentives for its franchise partners
Reduce the debt level by 50% by 2022 Through utilizing profits for
expansion and growth or issuing shares
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 20

Significantly protect the operating Through currency hedging through the

results from currency fluctuations use of Currency swaps, futures or forward
agreements

Forecasted Income statement for Dunkin Donut

Item 2018 “000” 2019 “000” 2020 “000”

Income from 555,206 610,727 666,247
royalty and Franchise
fees

Income from 470,984 518,082 565,181

advertisements
Rental income 104,643 127,322 150,000
Income from 96,388 106,027 115,666
sale of Ice creams
Income from 48,330 53,163 57,996
restaurant sales
Total revenue 1,275,551 1,415,321 1,555,090
Amortization (21,335) (23,469) (25,602)
Other (878,999) (966,899) (1,054,799)
operating costs
Interest (101,110) (75,833) (50,555)
Expense
Loss on debt (6,996) (5,247) (3,498)
refinancing
Net profit 289,201 343,873 420636
before tax
Net profit 229,906 273,379 334,406
after tax

The forecasting is done using the sales method and a 20% overall growth is expected.

If the company implements the above strategies, the following ratios can be forecasted:

Ratio 2018 2019 2020

Current ratio 1.51:1 1.7:1 2
 FUTURE OF DUNKIN’ BRANDS GROUP, INC. 21

Long term 1.31:1 1.21 0.8

Debt to capital ratio
Net profit 17.4% 18.5% 25%
margin

The current ratio is expected to improve to 2 while the long debt to capital ratio is

expected to reduce to 0.8 by 2020. This will lower the leverage risk of the company. With the

suggested strategies, the company is expected to increase its revenue streams while at the same

time reduce its overall operational cost. This will result in a general increase in the net profit

margin.

In order to achieve these targets, the company needs to achieve the following annual

objectives:

1) Purpose to achieve a 10% increase in annual revenues

2) Clear a minimum of half of the existing disputes with the franchisers
3) Reduce the overall operating cost by 5% annually

It is recommended that the company should have a quarterly evaluation policy. The

performance of the company should be evaluated after every three months to assess its progress

in achieving the annual goals. Rewards should also be attributed to the departments which

achieve their targets to encourage a committed workforce.

IV. Christian Worldview

FUTURE OF DUNKIN’ BRANDS GROUP, INC. 22

V. Conclusion

This report recommends six major strategies that can be undertaken by Dunkin Donut

group to improve on its competitiveness. The first recommendation is that the company should

focus on penetrating the existing market further. Dunkin Donuts has not invested enough in the

Northeastern corridor of the US where it is well established. The company operates only one

store per 9560 people and has little presence in the Eastern U.S yet it is highly renowned for its

high quality. Penetrating such markets as Mid Atlantic, the Great Lakes, the Eastern and

Southern part of the US will help the company strengthen its local presence and generate more

sales without too much cost. The company will also gain a greater market share and this builds

up its ability to compete even in the international market.

The second recommendation is that the company should focus on external expansion to

acquire new markets. Dunkin Donut still has ten thousand of stores less when compared to some

of its competitors like Mc Donald and Starbucks. The competitors still command high market

share in different product categories and have a high international presence. Dunkin has well a

well-established brand name and a renowned quality. The company should expand to the external

market not only to gain more market share and profitability but also to diversify its markets. The
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 23

industry is highly competition and some strong competitors can venture and compete for market

share in the existing core markets of the company. As such the company should, therefore, enter

into other new markets to minimize the risk of losing core markets. Dunking Donut can also

copy the strategy adopted by Coca Cola, McDonald and Yum in their own international growth.

Dunkin Donut can generate more sales by customizing its products to the local needs of the new

markets.

The company's marketing strategy should also focus on conveying the message of its

superior quality. Dunkin Donut group can probably consider adopting a strategy similar to that

adopted by Pepsi which tries to describe its quality as more superior than that of Coca Cola. The

sales of Baskin –Robbins in the US has been observed to indicate an irregular trend. The

company should also consider rising its local advertisement to promote sales in the domestic

market. Continued local and international marketing is key in accelerating the sales revenue and

increasing the market share for the company.

It is also recommended that Dunkin Donut should also try to improve its relationship with

its Franchisers. As of 2008, the company had a total of about 350 lawsuits while some of its large

competitors like Mc Donald had less than half. Franchisers possess a great threat to the company

is they decide to take actions that compromise the quality of the products or fail to promote their

products. Dunkin group should implement its current plan of reducing the royalty fees for its

Franchisers as such efforts are likely to build up a strong relationship between the company and

its Franchisers. It should change the approach to solving issues in a more cooperative approach

with the Franchisers.

Another recommendation is that the company should also focus on enhancing its liquidity

and paying down its debts. The current ratio of the company of 1.5:1 is below that of its
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 24

competitors (Macro trend, nd). Its debt to equity ratio also raises concerns for the company's

ability to meet the huge interest burden in the future. It is recommended that the company should

embrace a highly efficient working capital management approach so that the company can gain

high financial flexibility. Lastly, the prices for the Arabic coffee beans used by the company

varies depending on the harvests, crop yields, and economic and political situations. The

company sources its coffee beans mainly from Brazil, US, China, and India. To minimize the risk

of unfavorable price fluctuations, Dunkin Donut can consider the use of swaps, futures and

forward agreements to mitigate against such currency fluctuations. Such efforts will save the

company from experiencing unnecessary losses from the international market.

The existing plan bears some similarities to the recommendations made in this report.

One of the similarity is that the company has already started working on its relations with the

Franchisers which is one of the key recommendations made in this paper. The company's

existing plans are also focused on expanding both the local and international market. The

existing plan, however, does not include initiatives on hedging strategies, differentiated

marketing approach, and strategies to improve the company's liquidity and leverage level.
FUTURE OF DUNKIN’ BRANDS GROUP, INC. 25

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