Dunkin' Brands Group, Inc. (DNKN) announced that it has inked a franchise agreement with the Mexico based subsidiary of Sizzling Platter, LLC – a franchisee of Dunkin' Donuts – in the U.S., to develop restaurants in Mexico. Per the deal, almost 100 Dunkin' Donuts restaurants will be opened in the Distrito Federal, as well as the states of Hidalgo, Mexico, Morelos, Jalisco and Queretaro, in the upcoming years.
The restaurants in Mexico will offer its selection of hot and iced coffees, espresso, cappuccino, lattes, teas, frozen drinks, bagels, muffins, croissants, donuts and sandwiches. The restaurants will also serve certain locally popular menu items. In fact, Dunkin' Donuts is famous for its different doughnut varieties and coffees around the globe.
After reporting disappointing third-quarter results, and warning that it might struggle to achieve its long-term growth targets, Dunkin’ is looking to diversify its footprint in the international markets. The company’s top line was hurt in the last-reported quarter by a saturated fast food restaurant segment coupled with a sluggish macroeconomic environment and reduced consumer spending in the domestic market.
Currently, Dunkin' Donuts has more than 11,000 restaurants in roughly 33 countries, including nearly 8,000 restaurants in North America, Aruba, the Bahamas, Canada, Guatemala, Honduras, Panama and the United States.
The company’s expansion in Mexico is a strategic fit as the increased consumption of coffee drinks such as lattes or cappuccinos has considerably boosted the per capita consumption of coffee in the region, according to Euromonitor International — a leading market research firm. Further, by 2015, Euromonitor expects per capita consumption of coffee in the country to be nearly 2 kilograms.
Such high demand for coffee-related products will support growth for cafés in the country. We believe that the Massachusetts-based quick service restaurant operator will stand to gain from this spurt in demand for coffee in Mexico.
Dunkin’ Brands currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the same industry include Brinker International, Inc. (EAT), Chipotle Mexican Grill, Inc. (CMG) and Darden Restaurants, Inc. (DRI). All these stocks carry a Zacks Rank #2 (Buy).
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