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Dunkin' to Re-Enter United Kingdom

Zacks Equity Research

The Dunkin' Donuts brand, a part of Dunkin' Brands Group, Inc. (DNKN) and one of the world's most sought-after coffee and baked goods chains, is set to re-enter UK. This is Dunkin’s second attempt to serve the UK market as it had left the region in the mid-90s after having failed to generate enough business.

The company recently inked a deal with two franchise groups – The Court Group and DDMG Ltd. – to set up 50 Dunkin' Donuts restaurants in Greater London over the next five years.  

The Court Group and DDMG Ltd will build 25 stores each in East and North London. Given their local market knowledge, the franchisees also hope to contribute meaningfully to their partnership with a global brand like Dunkin' Donuts. Apart from its signature menus, these new Dunkin' shops will also be offering some local variations to cater to the British taste.  

The coffee-maker is also in talks with potential partners to develop a total of 150 restaurants in the next five years across the UK. The efforts affirm management’s intent to make UK one of the prime markets for international expansion, considering that the region is leading the way in the broad European recovery. This Zacks Rank #3 (hold) company presently operates more than 100 locations across several European countries like Bulgaria, Germany, Russia and Spain.  

Dunkin' Donuts is not completely new to the UK market as its sister concern Baskin-Robbins already has 100 locations in UK. The brand has been widely accepted and this made the restaurateur open 10 new units in the last 18 months with both existing and new franchisees.

However, Krispy Kreme Doughnuts (KKD), Starbucks Ltd. (SBUX) and McDonald’s Corp. (MCD) will likely pose stiff competition for Dunkin’ in the UK market.

Krispy Kreme ventured into the U.K. market with similar offerings  in 2003 and currently operates about 50 shops while Starbucks has about 750 locations in the region.  On the other hand, consistently stronger performance in UK kept McDonald’s afloat in the continent even when the world’s biggest burger chain was reeling under pressure in most parts of Europe.

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