Baskin-Robbins, a unit of Dunkin' Brands Group, Inc. (DNKN), recently announced its plan to expand in the state of Kentucky. The brand, which plans to drive growth through both new and current franchisees, is looking to open a unit in Louisville by 2015-end. Further, the company also expects to open units in Lexington. Notably, Dunkin’ has already entered Shelbyville at the end of 2014.
These units will be developed under Baskin-Robbins' franchise incentive programs. These programs offer 0% royalty rate for the first two years and a reduced royalty fee for the next three years for those franchisees that entered into agreements in 2014 and are committed to develop the shops within a specific time frame. In fact, franchisees that build shops within the stipulated time will be able to enjoy reduced royalty rates of 0% to 4.9%, over the first five years, considerably lower than the usual 5.9% royalty rate.
Further, the company is offering new franchisees a 50% discount on a 20-year initial franchise fee of $25,000 and a payment plan whereby the reduced fee can be amortized over 10 years. These benefits have led to strong franchisee demand for Dunkin' Brands.
After reporting disappointing third-quarter results on Oct 23, 2014, and warning that it might struggle to achieve its long-term growth targets, Dunkin’ is looking to diversify its footprint in the domestic markets. The company’s top line was hurt in the last-reported quarter by a saturated fast food restaurant segment, a sluggish macroeconomic environment and reduced consumer spending in the domestic market.
Stocks to Consider
Dunkin’ Brands currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Brinker International, Inc. (EAT), Denny's Corporation (DENN) and Darden Restaurants, Inc. (DRI). All these stocks carry a Zacks Rank #2 (Buy).
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