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Dunkin' Donuts (DNKN) to Expand Presence in Sacramento

Zacks Equity Research

Dunkin’ Donuts, which is part of Dunkin’ Brands Group, Inc. DNKN, is geared up to expand further in Sacramento, CA. To this end, the company has inked multi-unit store development agreements with two franchisees to build nine restaurants in the region over the next several years.

The first agreement is with existing franchisee, Shiva Developments, which is expected to develop four new Dunkin' Donuts restaurants. The second agreement is with a new franchisee group, NorCal Grub, which plans to develop five new outlets. Notably, the first restaurant under each of these agreements is slated to open in 2019.

Currently, Dunkin’ Donuts possesses more than 50 locations in California and is continuing to recruit franchisees in the Sacramento area. These agreements are thus in sync with the company’s plan to drive growth in the region.

Apart from foraying into domestic markets, the company is also looking to expand its footprint internationally, especially in the emerging markets of Asia and the Middle East. Globally, the company has more than 12,400 Dunkin’ Donuts restaurants in 46 countries and is on track to achieve its long-term goal of opening 17,000 restaurants in the United States.

In the last three months, Dunkin’ Brands’ shares have outperformed its industry. While the stock rallied 16.7%, the industry

gained 8.1% in the same period.

However, Dunkin' Brands’ international comps growth has been weak over the last few years at both its Dunkin’ Donuts and Baskin Robbins divisions. Furthermore, a soft consumer spending environment in the domestic restaurants space along with intense competition from food & beverages companies like Starbucks Corporation SBUX, McDonald’s Corporation MCD and Jack in the Box Inc. JACK might continue to exert pressure on revenues.

Nevertheless, we are positive on the company’s continued expansion strategies along with various sales and digital initiatives. These initiatives include product launches, increased focus on its beverage portfolio, the ongoing loyalty program and mobile ordering service that are expected to draw customers and drive earnings as well as revenue growth.

Dunkin' Brands carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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