By Carolyn Assa
My morning workout is one of the few things I
do for myself each day. The other is stopping
at Dunkin’ Donuts for a healthy, low-calorie,
breakfast on the way home,” says Sherri Horlink. The
slender blonde, soccer mom from Natick, Massachusetts,
enjoys an egg-white veggie flat bread sandwich when her
busy schedule allows time for it.
Horlink is exactly the kind of customer Dunkin’ Donuts
is courting—not just in New England, but across the
brand’s growing footprint. The strategy is simple: Offer
fresh, hot coffee paired with one of a myriad of choices at
virtually any hour of the day
“Our current focus is and has been coffee. Traditionally
people come to us for that first cup of coffee. People
want coffee and breakfast together. That puts us in this
space,” says Chris Mellgren, owner of Surfside Coffee
Company, a Dunkin’ Donuts franchise group with a
network that stretches from Miami to the Keys, and
from Sarasota to Fort Meyers.
More than just a cup of coffee
Breakfast is the meal of champions, and there is plenty of
competition for those morning meal dollars. In today’s
busy world, where everyone is overextended, starting the
day off right is about more than just a getting a good cup
of coffee, it’s about getting an enjoyable breakfast at a
reasonable price.
“Obviously there’s been a progression toward a healthier
option—egg whites, low-fat turkey. We will continue to
provide that as well as other options for customers,” says
Mellgren. “The other trend we’re seeing, and Taco Bell
is all over this, is portability of product. We are looking
for more creative ways to come up with options, ways to
create food you can carry with one hand while driving
down the road—flatbreads and wraps, for example.”
Dunkin’ Donuts builds customer loyalty with its prod
-ucts, but there’s more to it than that. “Value, speed,
quality, and convenience are the top priorities at
Dunkin’ Donuts,” says Addison Ames, a former owner
of 100 Dunkin’ Donuts/Baskin Robbins combo stores in Central
Florida.
Mellgren agrees: “We are always looking to provide speed,
quality and diversity of breakfast sandwiches. We are constantly
rolling out new offerings on an almost quarterly basis.”
Consumers want a friendly face, healthy options, reasonable
prices, a clean restaurant, and fast service—ideally, with a drivethru
window. According to Ames, 70 percent of sales take place
at the window for franchises that have a drive-thru.
DDIFO Restaurant Analyst John Gordon, who is president of
Pacific Management Consulting Group, agrees that the drivethru
option gives Dunkin’ Donuts an edge especially when those
drive-thrus are open 24 hours—something conventional restaurants
do not generally offer and many Starbucks don’t offer.
“At Starbucks—one out of every three coffee transactions has some
food transactions added on. Dunkin’ Donuts has similar numbers,
they just don’t track them. Part of the economic goal and motif
going forward is to increase sales—once you have a store, rent and
overhead to cover, you need to make money,” says Gordon.
Breakfast when you want it
“Lots of consumers look for a 24-hour-a-day option. The fact
that Dunkin’ offers that gives the company a very unique place
in the market,” says Ames. “It also helps that all menu items are
available 24-hours-a-day.”
“People’s patterns are changing. The notion of very narrow
eating times has ended for most people. People are working from
home. Everything is dispersed every which way. Kids, especially,
like breakfast food. Kids tend to be up later. Their time clocks
are different. This trend to breakfast is big,” says Gordon who
emphasized that being able to get breakfast all day is a plus.
Gordon adds, that McDonald’s, long known as the industry
leader in the breakfast wars, is losing a lot of customers because
they don’t serve breakfast after 10am. Even so, breakfast still
accounts for 25-percent of all daypart sales for McDonald’s.
Breakfast is the most profitable meal of the day for any restaurant,
so the opportunity for increased revenues is huge.
“If you are interested in making money it (breakfast) is the place
to be,” says Ames, now based in Orlando, FL, and working as the
Director of Marketing and Communications for Barnie’s Coffee
Kitchen. “There’s a lot of opportunity to expand with breakfast.
Whenever we offered new or limited time products—sales went
off the charts for that item.”
“As much as we like to think of ourselves as clever, we are not the
only ones that have identified breakfast as profitable. Especially
in Miami, but everywhere there is one of our competitors within
a mile of us,” says Mellgren, who operated Dunkin’ franchises
in the Washington, D.C. area before relocating to Florida a few
years ago.
Options in product and location
Ames says that Dunkin’ Donuts does a good job of creating new
and better products that consumers readily accept and are willing
to pay more to purchase. He says that consumers vote with
their dollars, and their money says breakfast is what they want.
New York City native Eva Kant waited years for a Dunkin’ Donuts
to open in her neighborhood on the Upper West Side of Manhattan.
A therapist who routinely walks to work, Kant says she
makes a regular stop at DD in the morning. She loves the coffee
and the various breakfast options. “I was happy to learn that
Dunkin’ Donuts has a variety of breakfast choices,” she says.
With greater competition from other quick service restaurants
and mom-and-pop shops across the country, Dunkin’ Donuts
franchisees are always on the look-out for new opportunities to
entice morning customers.
“We had the breakfast sandwiches. We would make combos
with muffins, coffee, sandwiches, etc. We always tried to keep it
under $5. We sold a lot of sandwiches. I did that on my own and
built those areas,” says Kathy Anczerewicz, a former franchise
owner in Chicago. She and her husband owned several Dunkin’
stores for more than three decades before retiring earlier this
year and selling their last two restaurants.
“Going into more breakfast sandwiches is one way of reaching
consumers. Dunkin’ always watches out for competitors,” says
Anczerewicz, who found the battle for breakfast with McDonald’s
extra challenging because the Golden Arches are headquartered
in Chicago.
To beat the competitors, she says, she made sure to get involved
– and stay involved – in her community, hiring local people to
work in her shops and featuring community messages on her
bulletin board.
According to the research firm NPD Crest, a leading global information
company in Purchase, NY, U.S. consumers cut back on
restaurant visits at lunch and dinnertime last year, but increased
their visits at breakfast. It was the fourth straight year of that
trend. There was a gain of three percent to over 12.5 billion for
breakfast visits last year in the U.S. Fast food, which accounts for
about 80 percent of total revenue for morning meals, showed the
strongest increase at four percent.
After Dunkin’ Brands’ third quarter earnings report delivered a
two percent increase in comparable store sales and year-overyear
revenue growth of 3.4 percent, media reports cited pressure
from strong competition in the breakfast and coffee environment
as a chief cause of the brand’s failure to meet Wall Street’s
expectations.
Bloomberg Businessweek wrote, “The only coffee and doughnut
company that is having a solid year on Wall Street is Canadabased
Tim Hortons – and that’s mainly because Burger King has
agreed to buy it,”
Franchisees see competition for breakfast dollars wherever they
look.
“Taco Bell is doing a good job with breakfast. Of course Denny’s
has always had breakfast too,” says Anczerewicz, “Just look at
the economy… people aren’t spending money. Fast food is what
people can afford, so, everyone’s trying to grab that business.
Plus, people are on the go. They want things quick, and they
want quality. You have to give quality. I feel a lot of chains
are going to look at breakfast. It’s the best area; it’s the most
profitable.
And of course, “coffee is universal and can be had at any time
of day or night,” says Gordon. “It’s true that coffee companies
and fast food restaurants do compete in the [4:00 a.m. to noon]
daypart known as breakfast – McDonald’s, Burger King, Wendy’s,
Taco Bell, Tim Hortons, Peete’s Coffee, and Tea Leafe – but the
value of this market share extends beyond breakfast.”
Gordon says that leveraging affordable breakfast, sandwiches
and snacks in addition to beverages, helps franchisees generate
sales during traditionally quiet periods. “Breakfast enables a
stronger 10:00 a.m. to 11:00 a.m. hour which builds up the lunch
crowd—breakfast consumption has been rising, and is very well
reported. In the restaurant space it’s the only daypart that is
growing. Lunch and dinner are down. The reason is that there
has been emphasis on breakfast. Breakfast also enables a more
robust overnight presence—from about 2:00 a.m. to 3:00 a.m.
people start to desire breakfast food. Overnight food offering
becomes viable. Utilizing your asset again.” The goal, Gordon
says, is to satisfy those customers so they return over and over
again.
Chuck Fries, an east coast transplant who works as an engineer
in Chandler, AZ, has become a Dunkin’ regular now that the
brand has established itself in Arizona. Fries likes the options
on the DD Smart Menu. “My family and I moved here from the
Northeast for a healthier life-style. It’s nice to know that Dunkin’
Donuts is here too, and that healthy food options for breakfast
and other meals is a priority for them as well.”