Non-Traditional: The Unsung Hero in Dunkin's Massive Growth Plans

With 1,000 openings slated for the next two years, Dunkin’ Donuts tells a powerful growth story. The more than 12,500-unit chain reiterated its long-term goal of 18,000 U.S. restaurants at the company’s February 8 Investor & Analyst Day.

Perhaps an unsung hero in this equation is Dunkin’s non-traditional strategy. In 2017, the chain debuted 86 stores outside the typical four-wall storefront—from resort locations to casinos to travel centers, hospitals, sports stadiums, colleges, and more.

Non-traditional has been a staple component in Dunkin’s growth for over a decade, and will remain vital to its future goals—not just from a unit-count standpoint, but from the perspective of spreading brand value across new and familiar markets, and finding fresh ways to fit Dunkin’ into consumer’s lives.

Chris Burr, Dunkin’s director of non-traditional development, says the company sees non-traditional stores as billboards capable of returning millions of customer impressions.

“You create exposure to new customers,” he says. “You create exposure to customers who may have been previous customers or are lapsed customers. Perhaps they’ve lapsed from the brand. But then they may see us in an airport and say, ‘I didn’t know Dunkin’ Donuts had maple bacon.’”

“And the other thing that these non-traditional places do,” Burr adds, “as I like to say, is that they create an emotional connection to our customers, where they work, where they enjoy life. It gives them a sense of place, and offers a spot in their daily lives where they can make memories with Dunkin’.”

Burr says there is power in opening a unit where the primary purpose of a guest’s visit isn’t Dunkin’ focused. Take a waterpark location for example. Dunkin’ can enhance the experience with its products, and thus create a circular branding effect that benefits the entire system.

Burr offers another way to look at it: In Dunkin’s growth projections, the company said it expects more than 90 percent of those 1,000 net new locations to be built outside of its Northeast base.

Dunkin’ had about a dozen restaurants in California before leaving in the late 1990s and staging another attempt in Sacramento in 2002. Yet as the chain experienced early, uneven results, it had three nontraditional locations in the state, including a hotel and railroad-themed stop next to Interstate 15.

“We have some great flexibility and we can use the non-traditional platform to lead into a market,” Burr says. “When we first went to California, some of the very first openings in California were non-traditional spaces. And then in our core markets, like the East Coast, we can use it as filler where we may not have room to build a traditional restaurant, but we may be able to fill into a subway station and an urban environment for example, and still have a store at street level.”

As Dunkin’s brand value grew it was able to spread on the West Coast more effectively and currently has a solid, and growing, presence in California. The company started offering franchises in 2015 and said it wanted to open 1,000 units across the state in time. In fact, its latest next-generation unit hit the Corona, California, market in late March. A Pasadena store is also one of the company’s five to have dropped the “Donuts” from their name.

"What’s interesting about us is that the Dunkin’ brand has the ability to flex a little bit. We can offer self serve. We can do limited menus. We can do full menu. And we can really tailor the brand to the needs of a specific location.” — Chris Burr, Dunkin's director of non-traditional development

Burr says the non-traditional focus has been split nearly 50–50 over the last few years between its traditional franchisee base—those who have stores on the streets, in shopping centers with endcaps, and find lease opportunities in their local communities—and those “non-traditional franchisees,” as Dunkin’ calls them. In that case, it’s operators who own and operate a facility, and then also own the Dunkin’ inside. Additionally, some commercial foodservice companies, like Aramark, Sodexo, and Compass, as well as airport concession groups, have opportunities typical Dunkin’ franchisees might not.

This past year, leading travel retail company Hudson Group opened two non-traditional Dunkin's in the Hard Rock Hotel & Casino, Dunkin' signed a three-unit deal with grocery Price Chopper in Kansas, and debuted 12 reststop and travel center outposts around the country. Dunkin’ plans to develop an additional 20 locations with Pilot Flying J Travel Centers in 2018 and expand its partnership with Great Wolf Lodge (10 locations are currently open), with plans to open at two new resorts this summer—one in the outskirts of Atlanta and another outside Chicago. Hudson Group expects to open four in 2018.

Dunkin’ opened its first non-traditional location at the University of Hawaii in October as well, rounding out eight total college and university campus units in 2017, including George Mason, Binghamton, and its second Air Force Academy restaurant in Colorado Springs.

What Burr finds opportunistic about this growth is Dunkin’s ability to evolve its brand by the opening.

“What’s interesting about us is that the Dunkin’ brand has the ability to flex a little bit,” he says. “We can offer self serve. We can do limited menus. We can do full menu. And we can really tailor the brand to the needs of a specific location.”

At a family fun park location, where Dunkin’s non-traditional store was serving extremely high volume, the brand simplified offerings by selling six packs of Munchkins and just beverages.

“The key for me is making sure you’ve look at each of these locations through a little bit different lens than you would a street store. You still have to maintain the quality and the brand presence that the customer is going to expect, but you may have a little bit different menu,” he says. “But still, that cup of coffee has to be the same. If you’re only going to serve coffee, the cup of coffee you get in the stadium has got to have the same quality standards as the cup of coffee you’re going to get in the restaurant. No matter what the product ends up being, you can’t skimp on it.”