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Dunkin Strengthens Foothold in Ohio

Zacks Equity Research

In a bid to expand its presence in Ohio., Dunkin' Brands Group Inc.’s (DNKN) subsidiary Dunkin Donuts and Gilligan Oil Company LLC. has recently entered into a multi-unit store development contract. Under the terms of the agreement, Dunkin will launch 13 new restaurants in Dayton, Ohio. with the first unit slated to open in 2014.

With these openings, Dunkin will be extending its coverage in Toledo, Lima and other southeast regions of Ohio. The company has chosen Ohio because of its promising growth opportunity. As per the National Restaurant Association, total revenues from the restaurant sector in Ohio are projected to be around $17.4 billion in 2013.

These moves are part of Dunkin’s strategy to increase its footprint in the U.S. over the next 20 years. Dunkin is also keen on seizing growth opportunities by catering to the consumer needs of individual markets through augmenting its restaurant efficiency.

Dunkin recently posted fourth-quarter 2012 adjusted earnings of 34 cents per share, beating the Zacks Consensus Estimate by a cent and the year-ago quarter’s earnings of 30 cents. During the fourth quarter, Dunkin' Donuts U.S. revenues increased 3.4% annually to $128.1 million on the back of a high royalty income, rise in other revenues and company-owned restaurants’ sales.

In 2013, Dunkin will introduce nearly 300-360 Dunkin' Donuts units in the U.S., which will represent an annual new unit growth rate of 4.5 - 5%. Currently, Dunkin expects that its annual development rate will be 5% in the long term. Further, the company intends to open nearly 15,000 restaurants under Dunkin' Donuts brand in U.S. in the next 3-5 years.

Dunkin' Brands currently retains a Zacks Rank #2 (Buy). Other restaurant chains which are active in Ohio for years include Krispy Kreme Doughnuts, Inc. (KKD), Burger King Worldwide, Inc (BKW) and Red Robin Gourmet Burgers Inc. (RRGB). Both Krispy Kreme and Burger King have a Zacks Rank #2 (Buy) while Red Robin carriers a Zacks Rank #1 (Strong Buy).

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