Dunkin’ Donuts Looks North Next

By Jon Peterson

The Bay Area, Sacramento and Redding are the obvious next California expansion targets for Dunkin’ Donuts, the vice president of development told The Registry.

Dunkin Donuts The Registry real estateMassachusetts-based Dunkin’ Brands Group Inc. said Jan. 18 that after pleas from area residents and internal planning over the last seven or eight months, it is recruiting franchisees to open locations in California’s Los Angeles, Riverside, San Diego, San Bernardino, Ventura and Orange counties by 2015.

Over six years, the company hopes to open as many as 170 Southern California locations, with one of its first expected to be at Camp Pendleton in the San Diego area.

But, said Grant Benson, vice president of development for Dunkin’ Brands, “Once we get an established operation in the south, we would look at the northern parts of the state in places like San Francisco, Sacramento and Chico-Redding.”

“From a population and economic perspective the California market is one that has been attractive to us for a long time,” he said. “You have a population of 36-plus million people and a diverse economy that is a fit for our stores and the franchisees that we will be doing business with.”

Southern California is an especially natural fit for the company to move first. “We already have an operating presence in some markets in the Southwest like Arizona and Las Vegas,” he said.

Dunkin’ Brands Group is a franchisor not only of the Dunkin’ Donut brand of coffee houses but also the Baskin-Robbins ice cream store brand. At the end of September, Dunkin’ Donuts had not quite 10,300 points of distribution internationally and Baskin-Robbins had not quite 7,000. The company had reported revenues of nearly $500 million, while its franchisees reported collective sales of $6.6 billion in the first nine months of the year. The Dunkin’ Donuts franchisees represented $4.6 billion of that total.

Last year the company opened 291 net new U.S. Dunkin’ Donut stores and has plans to open up to 360 this year.

It is offering incentives to Southern California franchisees, including reduced royalty fees in the early years and a company-financed, $10,000 local-store marketing contribution for some. Last year it signed multi-store agreements in 32 U.S. markets. In Southern California, it cites real estate know-how as a crucial franchisee attribute.

Franchisees finance the “vast majority” of the cost of new restaurant development and fund “substantially all” of the advertising for both brands, the company says in its filings with the U.S. Securities and Exchange Commission. For the nine months that ended in September, franchisee contributions to the U.S. advertising funds were not quite $230 million.

Dunkin’ Donuts operate as stand-alone restaurants or “end-cap” locations on shopping centers with 1,100 square feet to 2,000 square feet. The company also exploits nontraditional locations such as colleges and universities, casinos, military bases, supermarkets, airports and travel centers.

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