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Why Dunkin' isn’t playing in the fast-food breakfast 'discount swamp'

·Anchor, Editor-at-Large
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Nowadays, Dunkin’ Brands Group is OK with simply being a cold brew coffee serving company called Dunkin’.

So if investors are looking to the donut chain – set to release a new line of discount espresso drinks – to wade into the breakfast price wars with McDonald’s, think again. “We like this niche we have carved out, it’s about being the best Dunkin.’ We are not in this discount swamp, we are building a better experience on the coffee side,” Dunkin’ Brands Group (DNKN) CEO David Hoffmann told Yahoo Finance when asked if the company would get into a renewed battle with McDonald’s (MCD) in breakfast soon.

McDonald’s said this week it will unveil a host of new breakfast sandwiches to reignite its stagnant U.S. sales. McDonald’s third-quarter U.S. same-store sales slowed for the second straight quarter. The company also signaled it would return to offering sharper price points on breakfast food to win back diners.

Hoffmann would know a thing or two about McDonald’s offering cheaply priced breakfast sandwiches.

Prior to joining Dunkin’ in 2016, Hoffmann served in various leadership roles at McDonald’s. He began his fast-food career as a line cook at the Golden Arches. Hoffmann was the key architect of Dunkin’s new three-year growth plan unveiled at an analyst day earlier this year.

As part of that plan, Dunkin’ began removing unprofitable sandwiches from its menu in 2017. This year, it has pivoted to marketing snacks like packaged brownies, simple egg wraps and an array of new coffees. The effort stems from Hoffmann’s belief that consumers want quicker service these days – and not to wait 12 minutes for an iced coffee (we see you, Starbucks). Coffee continues to be a hot category with lucrative profit margins, too.

Dunkin’ has said new restaurants will just be called Dunkin’, a nod to the new coffee push. Cups with the new branding will hit stores soon.

So far so good for Hoffmann’s repositioning.

Dunkin’ shares are up 11% year to date, outperforming the S&P 500’s modest advance. Dunkin’ reported Thursday that third-quarter earnings came in at 83 cents a share, beating forecasts of 73 cents a share.

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Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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