Dunkin's preps for a deal fight as customer visits slip

NEW YORK, N.Y. – Dunkin’ Donuts, feeling sidelined by a discounting fight in the fast-food industry, is planning to jump into the game with its own deals.

The coffee-and-doughnut chain said Thursday that customer visits slipped at U.S. stores open at least 18 months in the last three months of the year. Dunkin’ CEO Nigel Travis blamed the loss on aggressive promotions at burger chains, which he said were sparked by McDonald’s highly anticipated rollout of all-day breakfast.

Wendy’s, for instance, launched a “4 for $4” deal in October, which Burger King later one-upped with a “5 for $4” offer. McDonald’s more recently introduced its “McPick 2” deal that lets people pick two items for $2.

To win back customers, Travis said Dunkin’ is planning three national value promotions of its own for 2016, and meeting with franchisees next week to finalize plans. He compared the situation to the political system, noting that presidential candidates such as Donald Trump and Bernie Sanders, if elected, would need to get Congress to go along with their plans.

“We have to figure out how to bring franchisees along,” Travis said.

His remarks were a reference to the tensions that pricing can cause between fast-food companies and their franchisees. Companies make money by getting a percentage of sales at restaurants, while franchisees have to think about whether the prices they charge will cover costs like food ingredients. As such, franchisees don’t always like discounts.

Subway Chief Advertising Officer Chris Carroll, for instance, said he got support for a $6 Footlong promotion this month by telling franchisees it was a one-time offer to “kick traffic into restaurants.” He said it wouldn’t be a recurring promotion like the chain’s famous $5 Footlong, which was introduced in 2008 and was last advertised nationally two years ago.

For Dunkin’, finding the right national price promotion could be tricky because the popularity of its menu items varies more by region. In the Northeast, the company sells more drinks, while other markets rely more heavily on doughnuts.

Some offers around the country could provide clues on what Dunkin’ has in store. The chain has been offering sandwiches for $2.99 in the afternoons in Boston. In Chicago, it has been advertising an “All Day Value Menu” that features 99-cent hash browns and a muffin for $1.49. It has also been offering two egg-and-cheese sandwiches for $3 in the city.

Travis noted that even in the afternoons, Dunkin’s breakfast sandwiches outsell its lunch sandwiches.

“Breakfast is something people are willing to have all day. Not many people are willing to have a hamburger at 6 a.m.,” he said.

For the last three months of the year, Dunkin’s sales at established U.S. stores fell by 0.8 per cent. The chain forecast sales would rise up to 2 per cent for 2016.

Dunkin’ Brands Group Inc. reported a loss of $8.9 million, or 10 cents per share, for the fourth quarter. Excluding one-time items, earnings were 52 cents per share.

The company, which also owns Baskin Robbins, said total revenue rose 5.5 per cent to $203.8 million. The figure was boosted by new store openings.

Shares rose $1.66, or 4.1 per cent, to $42.52 in afternoon trading.


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