Dunkin' Brands Group, Inc. (DNKN) recently announced that it has inked a long-term master franchise agreement with Golden Cup Pte. Ltd. – a joint venture between Jollibee Worldwide Pte Ltd. and Jasmine Asset Holding Ltd. The agreement — Dunkin’ Brands’ biggest development deal — will expand its footprint in China.
Per the deal, Golden Cup will operate as a franchisee and more than 1,400 Dunkin'-branded restaurants will be unveiled across China over the next 20 years. The first restaurant is expected to be opened in the fourth quarter of 2015.
Jollibee Worldwide — a wholly owned subsidiary of Jollibee Foods Corporation — operates more than 2,200 stores in the Philippines. Jasmine Asset — a wholly owned subsidiary of RRJ Capital Master Fund II, L.P., — was established by Asia-based investment firm RRJ Capital and invests in food and consumer business in China.
Per the deal, the Dunkin' Donuts restaurants will be opened in cities like Beijing, Chongqing, Fujian, Guangdong, Guangxi, Guizhou, Hainan, Hebei, Heilongjiang, Hong Kong, Hunan, Jiangxi, Jilin, Macau, Shanxi, Sichuan, Tianjin and Yunnan.
These restaurants will offer Dunkin' Brands’ varied selection of hot and iced coffees, espresso-based beverages, teas, signature frozen drinks, bagels, muffins, croissants, donuts and sandwiches. Dunkin’ will also focus on offering regional menu items to cater to local tastes, including a selection of Mochi Ring Donuts.
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, China is one of the largest and most dynamic markets for U.S.-based quick service restaurateurs. Fueled by the growing affluent middle class, demand for such food in China is rising, which justifies Dunkin’ Brands’ decision to increase its presence in the country.
The international market is a key component of Dunkin’s growth trajectory and China has been a major market for this Massachusetts-based quick service restaurant operator. In fact, in 2013, Dunkin' Donuts signed a master franchise agreement with Fast Gourmet Group to open around 100 restaurants in Shanghai, Jiangsu and Zhejiang.
Earlier this week, the company announced that it has entered into a franchise agreement with a subsidiary of Sizzling Platter LLC to develop the brand to Mexico. In 2014, Dunkin’ Brands stated it would expand in Brazil, Sweden and Austria.
Key Picks in the Sector
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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