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Dunkin Remains on Growth Track

Zacks Equity Research

Dunkin’ Donuts, an operational arm of Dunkin Brands Group, Inc. (DNKN), recently announced that it has entered into contracts with two franchise groups to expand in Illinois.

As per the agreement, the company will open three new restaurants in the region. This particular move is a part of the company’s goal to double its presence in the U.S. over the next 20 years.

Illinois is the fifth most populated state in the United States and is a major transportation hub. The promising restaurant industry in Illinois acts as a major driving force to the U.S. economy. In 2012, total revenue from the restaurant sector in Illinois is projected to be around $20.7 billion.

Dunkin’ Donuts has inked a deal with an existing franchise, Aziz Nathani, to open two new restaurants by 2014. One unit will be unveiled in LaSalle in 2013 and the other one will be opened in Ottawa in 2014.

The company has signed the second deal with a new franchise, Sujal Patel, to open a restaurant in Pontiac. This unit is scheduled to be unveiled in 2013. Management believes that tremendous franchise opportunities still exist in the Illinois market, particularly in the cities of Decatur and Champaign.

Dunkin Brands will also face stiff competition from peers like Yum! Brands, Inc. (YUM) and Starbucks Corporation (SBUX), which have been enjoying a presence in the state of Illinois for years.
Dunkin’ Donuts remains focused on its strategy to seize growth opportunities and cater to consumers needs in individual markets. The company continues to expand through the development of single and multi-unit opportunities.

In order to be competitive and innovative, Dunkin Donuts offers services through various types of real estate format concepts including free-standing restaurants, end caps, in-line sites, gas and convenience, travel plazas, universities and others.

Last week, the company also inked deals with four franchises - Daily Grind LLC, MM Donuts, LLC, Yes Partners, LLC and Medallion Donuts, LLC – to open four restaurants in 2013 and the rest by 2019 in Texas.
Dunkin' Donuts is the market leader in the coffee, donut, bagel and muffin categories. As of now, Dunkin' Donuts operates more than 10,000 restaurants worldwide, including more than 7,000 restaurants in 36 states as well as the District of Columbia in the U.S., and in more than 3,000 international locations in 33 countries.

We presently have a long-term Neutral recommendation on Dunkin Brands Group. However, the company carries a Zacks #2 Rank, which translates into a short-term Buy rating.

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