Dunkin' Donuts (NASDAQ: DNKN) has been working to revamp operations at its namesake brand. It simplified its menu, beefed up its beverage offerings, and is even toying with dropping the "Donuts" half of its name.

Recently, the coffee-and-pastry chain made public its next planned steps along those lines, revealing a formal three-year growth plan that it hopes will grow revenue by low-to-mid single-digit percentages and operating income by mid-to-high single-digit percentages.

It also expects to add 1,000 net new Dunkin' Donuts locations in the U.S. by the end of 2020. More than 90% of those will be outside the company's traditional stronghold in the Northeast.

"Our Blueprint for Growth, which is rooted in extensive consumer research, is focused on five main areas that we believe will collectively grow top- and bottom-line franchisee profitability: menu innovation; unparalleled convenience driven by digital leadership; broad accessibility to our brand through restaurant growth and new channels for our branded packaged goods; restaurant excellence; and brand evolution," said Dunkin' Brands U.S. President David Hoffmann in the press release detailing the plan.

The menu matters

A key part of the Dunkin' growth plan is an effort to increase sales before 11 a.m., a daypart that already provides 60% of its sales. The chain plans to do that in part by innovating its menu:

  • New beverages: Dunkin' will continue to focus on cold brew, iced coffee, and frozen coffee, but also plans to extend its premium tea and frozen beverage lines, and introduce more espresso products.
  • New breakfast sandwiches: Dunkin' will continue to debut limited-time-offer breakfast sandwiches like its recently reintroduced Sweet Black Pepper Bacon Breakfast Sandwich.
  • Special doughnuts: The chain will regularly rotate its offerings of seasonally themed doughnuts.

The chain's more recent maneuvers included giving its menu a trim, removing slower-selling items and dropping some combination meals.

Will this work?

Dunkin' faces intense competition both from similar chains and from fast-food players that are putting more emphasis on coffee. The changes it's making should help give lapsed customers more reasons to visit, and increase how much its regular patrons spend. It's by no means certain that the company will hit its goals, but early results from testing these initiatives have been positive.

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The author(s) may have a position in any stocks mentioned.

Daniel B. Kline has no position in any of the stocks mentioned.

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