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Dunkin' Donuts CEO on wages, coffee and expansion

Kevin Chupka
Executive Producer/Writer

10 billion doughnuts will be made in the United States this year. They will feed a $13 billion industry and tens of millions of American appetites. Reminding us all of the ubiquity of the fluffy, sugary diet buster is National Doughnut Day. What originally began as a way to thank the women who handed out doughnuts to World War I soldiers is now an opportunity for American consumers to get a free treat from giant doughnut slingers like Dunkin’ Donuts and Krispy Kreme, as well as a chance for those companies to remind us of their brand. That day is today.

So to celebrate Yahoo Finance welcomed Nigel Travis, CEO of Dunkin’ Brands (DNKN) to our New York studio for a wide ranging interview on several different external forces weighing on his industry.

Jobs and the economy
In addition to National Doughnut Day, today also saw the release of the much watched May employment report. The U.S. economy added 280,000 jobs and saw the unemployment rate tick up a tenth of a point to 5.5% (thought by most to be a sign that many who had given up returned to the job search last month).

Broadly speaking Travis says he considers the country to be “basically at full employment.” After speaking with several of Dunkin’ Brands’ franchisees, Travis notes that finding the best employees is becoming harder to do as more people are employed higher up the corporate food chain.

Still, one statistic that concerns him is youth unemployment. Citing Massachusetts (where Dunkin’ is headquartered) Travis notes the unemployment rate of those between the ages of 18 and 24 is a whopping 17.7%. The overall state figure was 4.7% according to the Bureau of Labor Statistic April numbers.

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The problem is something Travis thinks Dunkin’ Brands and companies like it can help solve. “Our industry is doing it. It’s creating jobs, it’s creating experience and I think that is something we need to think about seriously.”

The wage debate
As companies, states and the nation continue to explore the merits and faults of a higher minimum wage Travis notes that while the corporate office doesn’t track the pay its franchisees offer their employees he does know the trend is higher. Still, he argues, “we believe the minimum wage should be set on a state level because Alabama has a different set of economics from Massachusetts.”

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Cyber security
The safety of our personal information is in the news yet again this week after the Obama administration announced that a hack of the federal government’s systems compromised the data of four million current and former federal employees across almost every department.

Of course it’s not just the government being victimized. High profile hackings at Target (TGT), Home Depot (HD) and JPMorgan Chase (JPM) have put every consumer and business on alert.

Travis says Dunkin’ Brands is no different.

“We discuss it every single board meeting. I discuss it every single week at our leadership meeting and we try and learn from what happens to other people. We will discuss this week what happened at the federal level and say ‘is there something we missed?’ We could not put more emphasis on it.”

Coffee competition
While many think of sweet pastry as Dunkin’ Donuts’ main product, 60% of its business is tied not to food, but to beverage.

“Coffee and breakfast are still growing so that’s going to attract more people,” Travis says of the key area for his business. He didn’t seem concerned about competition from the likes of Starbucks (SBUX) and McDonald’s (MCD), instead focusing on Dunkin’s recent deal to start selling K-Cups (GMCR), packaged coffee and creamers in supermarkets, online and in other retail outlets.

“I think that is going to build our brand relevance and will continue to grow not only Dunkin’ Donuts but the whole coffee market,” he says.

Expansion
For years before going public in 2011 Dunkin’ Donuts was a Northeast-centric brand. Travis sought to change that. Now the company is in 41 states and 36 countries.


Last year the company opened its first seven stores in California, a locale where many thought it would never thrive. Travis says the haters, so far, have been mistaken.

“Everyone said we were going to struggle with real estate. Wrong. Everyone said we were going to struggle with drive-thru. Wrong. Everyone said we weren’t going to do well. We’re doing spectacularly in California.”

The company hopes to add 14 more stores in the Golden State this year on the way to doubling the more than 8,000 outlets here in the states.

One way Dunkin' may do it is with doughnut innovation. While the big city craze for artisanal doughnuts may have peaked (at least here in New York where Yahoo Finance is based) back when the Cronut took over in 2013, Travis says finding ways to surprise customers has been key. “We continue to look at the trend and try and make our products different,” he notes, pointing to things like a partnership with Chips Ahoy! (MDLZ), testing out mini doughnuts, or marrying the doughnut and strawberry cheesecake.

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