Dunkin’ Donuts is putting cash in the hands of its franchise owners to equip stores to better serve customers accustomed to ordering on mobile devices.
The coffee and doughnut chain plans to unveil 50 U.S. test stores this year that aim to make it easier for customers to grab coffee on the run with dedicated pickup areas, digital kiosks and expanded drive-through windows that prioritize orders via mobile app.
The company will invest about $100 million in the effort, said Katherine Jaspon, the finance chief of parent Dunkin’ Brands Group Inc. DNKN 1.63%
“We believe this is a unique chapter in our brand’s history,” Ms. Jaspon told CFO Journal in an interview. “Which is why we are contributing significant capital alongside our franchisees for the first time.”
Dunkin’ is launching the redesigned store concept to keep pace in the hot competition over coffee. McDonald’s Corp. and Starbucks Corp. also have attempted to cater to on-the-go customers ordering through mobile apps. More than half of Dunkin’s $100 million investment will go toward store equipment to aid the on-the-go beverage strategy. The rest will go toward technology infrastructure and training.
The first new-concept store opened this year in Quincy, Mass., the city where the company’s first store opened more than 50 years ago.
Dunkin’ doesn’t have any company-owned stores, and despite the planned company investment, that strategy isn’t changing. “We remain committed to our asset-light business model,” Ms. Jaspon said. Franchisees have invested more than $1 billion over the past three years between opening new storefronts, remodeling established locations and term renewals, she added.
The changes follow a trend in the quick-service restaurant sector to spur traffic with digital ordering. McDonald’s and Starbucks, among Dunkin’s top coffee competitors, have increased their digital ordering options, as have chains such as Domino’s Pizza and Shake Shack . McDonald’s recently announced a plan with franchisees to spend $6 billion to remodel most of its stores with features that include kiosks and curbside pickup.
Dunkin’s new store design aims to improve order speed, accuracy and convenience, in the hope of boosting sales, Ms. Jaspon said.
Dunkin’ Donuts U.S., which provides about 75% of total sales to its parent company, saw sales rise 2.8% in 2017 compared with the prior year. Comparable-store sales, however, rose a lackluster 0.6% compared with the previous year, down from a 1.6% climb in 2016. The company also licenses out the Baskin-Robbins ice cream brand.
Dunkin’ is tracking average weekly sales, digital-order and drive-through data, among other metrics, to measure the impact of the redesign, Ms. Jaspon said. She said it was too early to share the company’s findings.
“Ultimately, our guests and our franchisees are our guide in whatever we do, so we will be looking for their feedback over the year as we finalize our next-gen store before we roll it out to all our locations,” Ms. Jaspon said.
Dunkin’ had 9,141 branches across the U.S. as of Dec. 30, according to company filings. The company said it wanted to add 1,000 net new restaurants by the end of 2020.
Mark Godward, a productivity consultant in the restaurant industry, said chains typically focus modernization efforts in three areas: image and environment, food production and delivery, and guest ordering and interaction.
“The definition of what makes a new investment in a facility profitable and acceptable to a guest is changing,” said Mr. Godward, who also is the owner of 12 Dunkin’ Donuts franchises in North Carolina. “It’s not just the building. It’s the different ways the guest tries to use you. The brands that do not exploit their online, mobile and off-premises opportunities appropriately will be at a significant competitive disadvantage. This trend is irreversible.”
—Julie Jargon contributed to this article
Write to Ezequiel Minaya at [email protected]