Dunkin' Brands to Expand in Los Angeles


Baskin-Robbins, the well-known brand of Dunkin' Brands Group, Inc. (DNKN), is set to expand its presence in the flourishing California market. In this regard, Baskin-Robbins penned three multi-store development deals with existing franchisees for opening four restaurants in Los Angeles, California.

The restaurateur has signed the first deal with its longtime partner – Binoy Kothari – to unveil two Baskin-Robbinsoutlets in Orange County. The upcoming outlets will add to the five Baskin-Robbins locations already operated by Kothari. Apart from this, Baskin-Robbins signed other two agreements with franchisees – Andy Chesler and Farid Ahmed – for opening a unit each in San Fernando Valley and Chino Hills in Greater Los Angeles. The franchisees’ proven track record and superior knowledge of the local markets helped clinch the deals.

The company is also hiring new franchise partners to open Baskin-Robbins units in California. In this regard, Dunkin' has decided to provide several incentives like lower royalty fees and 10-year franchise fee payment plan.

We believe, the latest alliances reflect Dunkin' Brands’ intent to make California one of the prime states for expansion considering its potential to generate about $67.4 billion in restaurant sales in 2013, per the National Restaurant Association. Further, expanding in an existing market will provide the company with support infrastructure and an improved distribution model which, in turn, is expected to facilitate supply chain management.

Last month, this Zacks Rank #3 (Hold) company partnered with three new and existing franchisees to launch a total of 27 Dunkin’ Donuts as well as Dunkin' Donuts/Baskin-Robbins combo restaurants in South California in the coming years. As a point of reference, the openings are in line with Dunkin’ Brands’ goal to double its presence in the U.S. over the next 20 years.

Other Stocks to Consider

Some other players in the restaurant industry which look attractive at present include Red Robin Gourmet Burgers Inc. (RRGB), Cracker Barrel Old Country Store, Inc. (CBRL) and Bob Evans Farms, Inc. (BOBE). All these companies hold a Zacks Rank #2 (Buy).

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