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Dunkin' Donuts to Expand Further in Alabama & Mississippi

Zacks Equity Research

The fast food giant, Dunkin’ Donuts, which is part of Dunkin’ Brands Group, Inc. DNKN, is geared up to expand further in two southern states. The company has inked multi-unit store development agreements with two franchisees whereby it plans to build a total of 17 restaurants in Alabama and Mississippi over the next several years.

The first agreement is with existing franchisee group, Birmingham Donut Holdings, LLC, which currently operates 34 outlets throughout Alabama and Florida. Per the agreement, the franchisee is to develop nine new Dunkin' Donuts restaurants in Birmingham, AL, with the first one planned to open in 2017.

The second agreement is with a new franchise group, Lagunita Franchise Operations, LLC, which recently acquired five existing Dunkin' Donuts restaurants in Alabama and Mississippi. Per the agreement, the franchisee is to develop five new outlets in Mobile, AL and three new in Biloxi, MS.

These agreements are in sync with the company’s plan to fuel growth in these states. Currently, the states are home to about 29 Dunkin’ Donuts outlets. Moreover, the company is offering special development incentives like reduced royalty fees and marketing support in order to continue recruiting more franchisees in these states.

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. Currently, the company has more than 12,200 restaurants in 45 countries globally and is on track to achieve its long-term goal of opening 17,000 restaurants. However, it is set to face tough competition from other food & beverages giants like McDonald’s Corporation MCD, Starbucks Corporation SBUX and YUM! Brands, Inc. YUM that intend to follow similar strategies.

Nonetheless, going forward, Dunkin’s focus on improving its beverage portfolio, ongoing loyalty program, mobile ordering service and other sales-boosting initiatives also bode well for the company’s top line.

Recently, the company posted strong fourth-quarter 2016 results, wherein both the bottom line and top line beat the respective Zacks Consensus Estimate. We note that the bottom line has surpassed estimates in each of the trailing four quarters with an average beat of 3.56%.

Notably, shares of the company have gained over 16% in the last one year against a 2.6% decline recorded by the Zacks categorized Retail-Restaurants industry. The dip for the industry as a whole reflects the somber sales environment in the restaurants space. Nevertheless, given its focus on capturing increased market share in addition to multiple initiatives being undertaken by the company, the stock should keep performing well.

Dunkin’ currently 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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