Dunkin Donuts SWOT Analysis

SWOT Analysis of Dunkin Donuts

 

Dunkin Donuts is among one of the leading Quick Service Restaurant brands of the world with its more than 20,000 points of distribution operational in more than 60 countries globally. The brand serves hot and cold coffee as well as hard serve ice cream. The hundred percent franchised business model offers some exclusive strategic and financial benefits. The company franchises restaurants under the Dunkin Donuts and Baskin Robbins brands. It faces stiff competition from a wide variety of restaurants and convenience stores selling similar products. Its hundred percent franchisee model allows it to focus upon things like menu innovation and reduces the pressure on the brand. This business model delivered strong results in 2016. This performance was a result of its high margin coffee and beverage menu offerings. The brand continues to grow domestically and internationally with impressive growth in store sales in US. This is a SWOT analysis of Dunkin Donuts analysing its key strengths and weaknesses plus the opportunities and threats to its profitable growth.

Main competitors: Starbucks, McDonalds, KFC, Dominos and other QSR brands.

Dunkin Donuts SWOT Analysis
Dunkin Donuts SWOT Analysis

 

Strengths:

Impressive presence locally and internationally and growing – 317 net new units added outside US in 2016, 415 net new Dunkin Donuts added in 2016 in US by franchisees.

Innovative menu with high profit margins – High margin coffee and beverages menu offerings.

Focus on marketing and better customer experience – the brand has focused on marketing and customer service to grow its sales and popularity.

Focus on franchisee profitability – helping the franchisees make better informed decisions by providing analytical data around pricing and guest purchase decisions.

Supply chain management – Centralized production designed to support growth for the Dunkin’ Donuts brand.  franchisee-owned and -operated facilities for the centralized production of donuts and bakery goods deliver freshly baked products to Dunkin’ Donuts restaurants daily. designed to provide consistent quality products and simplify restaurant-level operations.

Weaknesses:

Substantial debts – As of December 31, 2016, Dunkin Donuts had total indebtedness of approximately $2.5 billion under our securitized debt facility, excluding $25.9 million of undrawn letters of credit and $74.1 million of unused commitments.

Poor franchisee relationships and lawsuits against franchisees: While the franchisee model has an upside, it has a downside too. There are issues with management and  control. In the past, Dunkin Franchisees have also faced a high number of lawsuits against them.

Slow expansion in fast developing or newly developed economies: The pace of Dunkin’s international growth is still slow. In the newly developed economies it might benefit by expanding at a faster rate. Its lousy growth rate in the emerging economies is a major weakness.

Opportunities:

International Market expansion: International market expansion can be a great source f revenue and growth for Dunkin and Baskin Robbins. There are several parts of the world where Dunkin Donuts does not have an impressive presence.

Health friendly menu to attract the millennial customers: A more health friendly menu can be more attractive for the health conscious millenial generation. This will help drive sales and revenue.

Digital technology for better and more innovative customer service: Digital  technology has helped brands create a better reputation through marketing and customer service. Dunkin can also exploit these opportunities for better results. `

Threats:

High level of competition from the other QSR brands: The other QSR brands like Starbucks, McDonalds and KFC pose a major competitive threat. Most of them have expanded internationally and enjoy a larger market share. Dunkin needs to catch up faster.

Currency fluctuations and stronger dollar rate affects the brand’s revenue. Sluggish economic growth in several  key economies also affects the profits. A stronger dollar means less revenue from international sales.

Conclusion and recommendations:

Dunkin Donuts has achieved smart growth during the past year. It added 317 new restaurants internationally in 2016. The brand has an innovative menu of coffee and beverages that provides high profit margins. However, the brand has also collected substantial indebtedness. Its focus must now be on international expansion and making its customer experience better to beat the competitive threat. The brand faces high competition from the other QSR brands and its revenue is also affected by the currency fluctuations and sluggish economic growth in several regions worldwide. The hundred percent franchisee model offers some strategic benefits but also has some inherent risks. However, a centralized manufacturing has helped the brand maintain quality. It has got some critical strengths and the brand has also managed a very good reputation  in the market. Both the Dunkin Donuts and Baskin Robbins brands have managed a good brand image. However, these strengths can better be exploited by faster expansion in the emerging economies.

Sources:

http://files.shareholder.com/downloads/ABEA-68SCR9/4813695684x0x934850/40E9878A-FEB4-44A9-A565-996CDFE165B6/DB_2016_Annual_Report_Final_.pdf

https://files.shareholder.com/downloads/ABEA-68SCR9/0x0x883107/32BF1764-3E53-45CF-9824-D8753F797D37/DNKN_Annual_Report_Final_.PDF

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.