Dunkin Donuts (2024)

Final Project: Dunkin Donuts: You’ve Become The Leader

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History & Core Business

Dunkin Donuts was founded by Bill Rosenberg in Quincy, Massachusetts, in 1950. It primarily focused on its signature product, donuts. Dunkin Donuts gradually gained its position as the fast food chain, which has the best and largest selection of donuts. In the early 1990’s, fast food breakfast business of McDonald’s and Burger King started to mature, and Dunkin Donuts lost the business to those two companies in terms of breakfast sales. In the following few years, Dunkin Donuts shifted product focus from donuts to coffee, and the promotion strategy was heavily geared towards coffee as well. After nearly two decades of repositioning efforts, Dunkin Donuts now has more than 60% of its domestic sales contributed by its coffee, and it begins to compete side-by-side with Starbucks. The campaign “America Runs on Dunkin” introduced the idea that Dunkin coffee is the everyday essential fuel for the American workforce, and it has been going successfully since it was introduced. Nonetheless, from 2012 to 2014, Dunkin Donuts has won several awards of “The Fastest-growing Business” and “The Best Franchise”, etc.

The core business of Dunkin Donuts, on the surface, is selling donuts, coffee, and other fast food. However, a deeper look at the Dunkin Donuts’ value proposition reveals where the “real business” is. First of all, Dunkin Donuts is a global brand, which means consumers of most parts of the world can find a Dunkin Donuts store locally. There are more than 11,300 stores worldwide; the accessibility of Dunkin Donuts offers what makes them an extremely recognizable brand. Some stores in the U.S. even operate 24 hours, providing consumers second-to-none convenience. Secondly, the brand position makes sure the company targets the “average Joe”, as the company put, “make sure the brand fits into people’s lives.” Lastly, the great price of Dunkin Donuts food wins many hearts. Affordability has always been ensured by the company, which in return gets itself on most consumers’ radar.

Market and Competition

As per the ranking of all the top beverage and snack brands on the basis of revenue generation after McDonald’s, Starbucks, Yum! Brands and Burger King, DD stands on the 5th position with less than $3 billion of revenue. Revenue is being generated within the company but only with marginal proportion. This is why the growth of the brand is going down. DD has cash cow products, which does earn them profit by those customers who do not find Starbucks at any corner or some lost customers of Starbucks and McDonalds. DD is standing at a stagnant position where they are not innovating and/ or coming up with a survival strategy. They are dependent on the existing customers. They are not aware of the environment, which reflects that the consumers are shifting to a healthier lifestyle. To reduce the problem of obesity in the United States, consumers are reducing the level of sweetened products and other snacks. They are moving towards an organic diet. As per the research on Mintel the largest population wants to try innovative coffee/tea or some international brand. This population represents the Millennial. The research also shows that consumers will shift to other brands if the prices are less. Furthermore, parents are the main earners of the family who are ready to spend daily on a coffee but children under 18, rely on homemade drink due to may be low allowance. The technology trend is affecting the beverage and snack industry as well. Innovative coffee and snack machines with low fat content are also being introduced in the market and are being bought by the affluent classes to be displayed in their modular kitchen. Even for the average income population it will be a better option to buy a machine and make coffee everyday instead of spending a lot. Despite the prevalence of coffee shops in the market there is still opportunity for reaching consumers through innovative drinks, and food options. While teashops remain small segment of food service, the increased interest in tea as an alternative to CSD’s (carbonated Soft drinks) means these brands can easily capitalize on this trend.

Customer Segmentation

Dunkin Donuts company targets the “Average Joe” making it the value and convenience brand. Its global presence makes its target geographic as worldwide. Moreover, because of its competitive advantage it targets adults (Male or Female) who are 21 years and older with an annual income ranged $45,000 – 100,000 that makes it available and affordable for white and blue-collar workers. Dunkin Donuts designed its store to attract crowd and consumers who don’t tend to use their laptop while drinking coffee, this gives the chance for more networking and socializing. On the other hand, many of its outlets have limited seats and that goes back to its convenience competitive advantage in terms of attracting the working class and those consumers who are on their short lunch break and prefer going to a place with accessibility and to go feature rather than seating area. Dunkin Donuts consumers tend to be loyal to the brand and it is very hard to switch them to it’s competitor, Starbucks and that is based on a research that was conducted and the outcome was that consumers didn’t like the sofas that Starbucks offer nor the naming it gives to its coffee sizes. Moreover, they tend to be loyal as they seek for convenience yet economy benefits that they get it in DD.

SWOT Analysis

Dunkin Donuts has a strong recognizable brand that is well known around the world, it also has loyal customers that support the business in revenue and profits growth. Moreover, it has a good distribution channel especially in those areas where it is closer to its target customers and it enjoys a value and price Final Project – Dunkin Dounts (1)as value proposition that makes it superior than its competition. On the other hand, Dunkin Donuts atmosphere seems to be a weakness to the business hence, there is no consistency across its outlets that affects the customer service as well. Not to mention, they are way behind marketing efforts comparing to its biggest competitor Starbucks.

As an opportunity, DD can introduce healthy food option since the trend is moving towards that direction and consumers are more diet cautious today comparing to few years ago. Moreover, it can introduce the same menu of food internationally hence currently in their international market, they just focus on selling coffee and donuts. On the contrary, DD should be aware and keep an eye on the strong competition around it and also the coffee industry is low barriers to entry which means firms can easily decide to sell coffee that can take market share of DD. Also, the market is moving fast towards the new habit of eating healthy, that means if DD didn’t introduce the healthy menu option fast enough, it might lose its customers.

Critical Issues Faced By Dunkin Donuts

There are many flaws that can be identified in operations and culture of DD, which become the reasons for the slow growth of the company.

Work Culture – DD hires part time employees for their stores all across the globe. Customers always look forward to a wonderful experience during the purchase of a snack or beverage, because even the smell of a coffee sometimes helps as a stress reliever however; if the person serving is not welcoming, the whole relaxation mood goes off. DD employees are not sensitive towards their customers unlike those of Starbucks or its other competitors. There have been maximum complaints and dissatisfaction because of the “I do not care attitude” of the staff working there.

Unhealthy Content – As per the studies, the consumers are shifting towards a healthy lifestyle. They no longer enjoy the frozen old donut or highly caffeinated drinks. Therefore, DD is facing the preference change shift of the consumer as the biggest issue.

Lack of Visibility– DD stores are located in less visible corners comparing to its competitors and sometimes they need to hire someone to hold their signs in the crowded corners to direct them through to the store. Therefore; this store location might be critical as it might shift some its consumers to competitions due to their unawareness of availability DD at that area.

Small Target Market – DD targets the average Joes and focus on the working class rather then taking the opportunity of the market and targets families whom might want to spend their time together over coffee.

Low Marketing and Promotion Efforts – DD has been collaborating with many famous athletes as their brand ambassadors, but not many people know about this, as it was not communicated well to the audience. Their presence over social media is no close to their competitors like Starbucks. They do not run any campaign as such to lure the customers.

Store Atmosphere – DD has no consistency when it comes to its store atmosphere hence; you will not have the same feeling when you enter stores as some would have a certain smell and cleanliness, the other might have larger seating area space, etc. Moreover; the store is not very strict when it comes to its cleanliness, which can shift the customers to other coffee store as this should be tackled strictly especially with a brand that sells sensitive product like food and beverages.

First month as a new leader!

As a leader, it is important to understand what is going on in the business, and to make a good first impression that will support in gaining employees trust from the very beginning when joining a company, therefore; the following lines will explain how we will act during our first month at Dunkin Donuts:

Understand the company’s context: this is an important step as by this we will be able to understand the mission, vision, and strategies that DD is following. Not to mention that this step will also help us identify how the company is doing and its growth potential through looking at the previous annual reports and also it will help us in knowing our customers and target segments.

Get to know the people through meeting: this is key step as this will help us know our management team, their work structure, their goals & objectives, and most importantly we would like to ask them about the type of support they will need to get from us. By doing this we will be able to anticipate and to manage our schedule accordingly. Moreover; our meetings won’t stop at management team, but will extend to meet with the support teams and employees to understand their work, the systems they use, and also the support they require. By doing this step, we are hoping to be able to gain and build trust with our employees and to set a cultural impression that we are available to support them and to make them comfortable.

Observe and analyze what’s happening in the company: we do understand that meetings is essential, however; that should be followed by our own observation to the company and what’s happening around to be able to see the way employees and managers act, this will help us in identifying the culture of DD and will ultimately support in building and modifying the business strategy. This step will be done, through walking around the DD offices as well as stores to see how each area of the company look to determine the consistency. Moreover; we will be able to see how employees are focused or stressed, and how customers are acting during the purchase journey.

Analyze the findings: after being an observant and listening to the management and employees, it is time to start analyzing the situation and what we have seen to identify what is working for DD and what needs to be changed. Moreover; at this stage, we will start thinking of employees’ perception towards change and how to make it strategic yet acceptable by all.

What Business/ Industry is Dunkin Donuts in?

Although Dunkin Donuts is well known in selling coffee, donuts, and snacks, it is considered more than just a business in restaurant, and food and beverage industry. Dunkin Donuts provides a competitive customer value proposition; as we mentioned earlier, the core business of Dunkin Donuts is providing Accessibility, Adaptability and Affordability (3As) to their target customers. In other words, the company satisfies customers’ needs of convenience, rapidity, and economy. Therefore, based on the descriptions, Dunkin Donuts has created a culture and a positive image that the brand and its products belong to everyone in the community, city, country, and all over the world.

What is the brand’s current strategy?

Expend DD U.S. stores: There are numerous franchisees of Dunkin Donuts in the United States. The franchise costs $250,000 to $1,700,000 USD, which is not a high threshold for some investors. The ease of being a franchisee causes troubles such as inconsistency of environment in the stores, lack of employeetraining, etc.

International Focus: Dunkin’ Donuts is performing well in the Middle East, and the company expects that with time it will be able to establish both brands in China. The international segment comprises nearly 10% of Dunkin’ Brands valuation, as per our estimates, and a faster growth in this segment could lead to an upside in its valuation.

Targets “Average Joe” persona: as mentioned earlier, DD targets the Average Joe, which means the working class of white and blue collar occupation and this goes behind its value proposition of value and convenience which makes it a brand of choice for those segment.

New Strategies

After analyzing the existing strategies, we came to a conclusion that some of those are unable to contribute to the growth of the brand, therefore; DD needs new strategies in order to stay competitive in the market and become the leading player. The following are some new strategies that tackles different area of the business:

Company Culture: Change the company culture and turn it into customer centric in terms of giving better and consistent service to customers in order to retain the existing ones and attract new ones. Moreover; when having a consistent service, consumers will be able to anticipate what they are expecting from DD even before they enter the store and also they will be able to refer to it during their visits to different region, country or state. That way, DD will be able to meet or exceed customers’ expectations, which is essential for the company’s growth and sustainability.

People: since the company would move towards customer centric approach, the employees needs to be capable to doing that, therefore; for new recruits, the recruitment process should be modified to test the customer service level and for the existing employees, training and development workshops should be planned and in place for each employee to ensure that they are developed to provide consistent and great customer service to its customers. Not to mention, that this should not be only for store employees but to be addressed to all employees within DD whether they are leaders, managers or line employees as providing excellent service is the responsibility of each person in DD which will ultimately lead to providing consistent “WOW” service to consumers.

Customers: DD is currently targeting the “Average Joe” who are normally the office-working customers and the average population of the society. However, we are proposing to expand the target to include kids and families. Moreover, we would expand to also target the students, especially college and university who spend long hours on campus to prepare for their exams, projects and reports.

Product: As the trend is moving to healthier food, we at DD would have to take that into consideration and propose an introduction of new product line such as variety herbal tea, gluten free donuts, sugar free donuts and other healthy snacks. Moreover, since we would like to expand our segment to include kids, we will be introducing mini cartoon shaped donut to attract the kids and also provide variety of mini milkshakes and flavored milk for them.

Process:

1. To enable us to serve the kids better, we will introduce a donut making small machine consisting of different kind of shapes patterns that will allow kids to select for their donut shape. This machine will provide instant small-customized donuts for the kids for $1. This will be done through the same process of Build a Bear workshop process whereby, the kid will choose the donut flavor then move to choose the pattern, after that they will put it into the machine, then once the donut is ready they will be able to add the topic and finally it is ready to enjoy! After they are done, and on the cashier we will take the parent email address and then send them certificate of completion for their kids. By doing this, we will be able to get and compile a customer database and also we will be able to make those kids happy.
2. To be able to provide fresh donuts to consumers and especially our corporate, we will establish a tab in our website to order now! Here the consumer will order and then the pick up will be within 15 minutes (this is similar to Domino’s Pizza process).

Store: since value is one of our value proposition and we are expanding to target students, we would propose to expand our stores and open in colleges and universities campus to be the student’s coffee and snacks choice. Moreover, we will change the look and feel of the store to be consistent and have strict rules of the cleanliness issue.

Marketing: since we are currently behind in terms of our marketing efforts, we would suggest doing the following:

1. Introduce brand ambassador for DD, that will be a cartoon character who will always resemble the company and will carry the tagline “America runs on Dunkin” to represent the average joe personality and also to attract our new segment who are kids.
2. Collaborate with corporate offices to provide them with regular snacks and coffee, this can be done through allowing them to order online and also providing a free delivery if they order for $50 and above and the office area should be within specified distance to the DD store.
3. Provide special discounts to students when presenting their school ID, by doing this we will always have students by our side whether they are on or off campus, they will always have DD in their mind.
4. Marketing and promotion strategies to be incorporated through using various channels such as digital platforms (Facebook, instagram and snapchat), magazines, radio and TV commercials.

Society: focusing on corporate social responsibility and adding it to be part of our culture and norms will support in building customers trust and gain their loyalty. To encourage this behavior, we will allow each state/region/country to come up with their creative idea of CSR concept and share it through the DD intranet after implementing it. After that, we will evaluate it and select three winners every year. Therefore; we will suggest that this activity to be implemented and completed during the month of March every year as we took into consideration the weather in every country we operate in and March will be the perfect time in all locations.

To implement the above strategies, the entire employees workforce should be involved in building and structuring the implementation and suggestion process, as everyone will have a task in making this strategy happen and a success. Moreover, those are our ideas as leaders however; we have our people who are in direct contact with consumers daily who know exactly what they desire, therefore; we will involve those employees who work in the store to actually come up with strategies that they think might work for consumers by allowing them to come up with creative ideas and those achievable ones, will be added to our new strategy. Not to mention, that this activity will not stop and will be a continues as we know that the market is changing fast in todays world and we should be able to cope with all the changes happening around before the competition. To communicate all the change, we will have breakout sessions and meetings with all employees and we will hold each one accountable to support in delivering the promise and making building a consistent customer experience.

Conclusion

In conclusion, in this report we have identified the current situation of Dunkin Donuts and where it stands in comparison to its competitors’ and market share, it current strategy and our recommendation and suggestions to modify it to support it in sustainable growth. To summarize, Dunkin Donuts should continue its International expansion strategy and touch base those countries, which it still doesn’t have presence at however; it has to modify some of its strategies such as atmosphere, customer service, store, etc to provide consistency to its consumers and support it in the market growth.

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