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Dunkin Donuts Continues to Expand in U.S.

Zacks Equity Research

Canton, MA based leading quick service restaurant chain, Dunkin' Brands Group, Inc.’s (DNKN) subsidiary Dunkin’ Donuts is all set to launch its new restaurants in Northern Utah. In this regard, Dunkin’ has entered into a multi-unit deal with its existing franchisee, Sizzling Donuts, LLC.

Under the terms of the agreement, Sizzling Donuts will introduce 7 new restaurants in Northern Utah over the next 7 years with the first unit slated to open for business in 2013.

Since Washington County in Utah remains relatively under-penetrated, management is focused on expanding in the region. As a result, they have not set any minimum limit on the number of units and are going with both single and multi-unit opportunities.  .

As per the National Restaurant Association, total revenues from the restaurant sector in Utah are projected to be around $3.5 billion in 2013. Various other restaurateurs including The Cheesecake Factory Incorporated (CAKE) and Starbucks Corporation (SBUX) have been active in the city for years.

As a point of reference, this unit expansion is part of the company’s goal to double its portfolio in the U.S. over the next 20 years. Dunkin is focused on a strategy to seize growth opportunities by catering to the consumer needs of individual markets. In 2013, Dunkin will introduce 300-360 Dunkin Donuts units in the U.S., resulting in an annual new unit growth rate of 4.5% - 5%.

In 2012, Dunkin signed an agreement with Sizzling Donuts, LLC, an operational arm of Sizzling Platter, LLC, to open 36 new restaurants across Salt Lake City, El Paso and Denver. in the coming years. As of now, Sizzling Donuts has started operating 5 Dunkin’ units in El Paso.

Dunkin' Brands currently retains a Zacks Rank #2 (Buy). Another restaurant chain worth considering is Red Robin Gourmet Burgers Inc. (RRGB) with a Zacks Rank #1 (Strong Buy).

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