In a bid to boost business, several U.S.-based restaurateurs are focusing on unit expansion. Canton, Mass.-based quick service restaurateur, Dunkin' Brands Group, Inc. (DNKN) is no exception and is keen to expand its presence in the lucrative domestic market.
Recently, the restaurateur opened an outlet in Hampton, Va. with its franchise partner, Restaurant Services of the Outer Banks. The new outlet boasts a “drive-thru” facility to cater to customers on the go. The strategic positioning of the restaurant at the 2002 Nickerson Boulevard coupled with its contemporary ambience will likely drive sales.
Over the past few years, the restaurateur has signed several single and multi-unit development agreements with franchisees in order to seize growth opportunities and cater to consumer needs in individual markets. Recently, the company unveiled an outlet in Charlottesville, Va. in association with its franchise partner, Norson Inc.
The restaurant industry in Virginia acts as a driving force for the U.S. economy. Per the National Restaurant Association, the state’s emerging restaurant industry will generate total revenue of nearly $13.9 billion in 2013, which justifies the company’s decision to expand in the state.
To cater to the various market-specific needs, Dunkin' Brands has been undertaking a series of initiatives such as menu innovation and improvements in food presentation. Although the industry is improving and the restaurants are witnessing higher traffic, the pace of overall economic recovery is relatively slow and consumer spending remains low. Government budget cuts, high tax rates and still-tightened credit availability continue to hurt consumer discretionary spending.
Moreover, the recent implementation of the Affordable Care Act may adversely affect the company’s business, going forward. Also, food cost inflation remains a matter of concern.
The company presently has a short-term Zacks Rank #4 (Sell). Investors interested in the restaurant industry may consider stocks like Buffalo Wild Wings Inc. (BWLD), DineEquity, Inc. (DIN) and Brinker International, Inc. (EAT). All these companies hold a Zacks Rank #2 (Buy).
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