Dunkin' is going fancy (and private)
Dunkin' is officially going private. Arby's owner, Inspire Brands, is snatching up Dunkin' for $11.3B (including debt). This is the opposite of a regular private equity (PE) deal which typically involves finding a struggling company, revamping it, and flipping it for more. Dunkin' has not been struggling. It managed the pandemic well & its stock is at an all-time high. So why is Dunkin' going private, and are there synergies with Inspire Brands?
Dunkin' has been freshening up its image and brand for years. It wants to be in the same league as Starbucks. It dropped "Donuts" from its name - not surprising considering drinks make up more than half of Dunkin's revenue- invested in new brewing systems, and got its employees "espresso certified". It also added drive-thrus and flashy items to its menu - green tea refreshers, non dairy milks, and vegan options (Beyond Meat sandwiches). It also put in a lot of money into its digital business (mobile app and online orders) and a deal with with TikTok star Charli D’Amelio. All of this meant that when the pandemic hit and work patterns shifted, Dunkin' was very ready. Investing in its digital business before the coronavirus outbreak helped to smoothly transition it to contact-free takeout. Shifting work patterns mean more orders come in later in the day, boosting premium products like espresso and specialty beverages, which diners may have bought from smaller, independent coffee shops before.
This boosted Dunkin''s sales during the pandemic relative to other chains such as Starbucks. Its sales dropped 19% last quarter whereas Starbucks' dropped 40%. This helped Dunkin''s stock climb much more than Starbucks this year, and it hit an all-time high just before the deal was announced. Going private will certainly allow Dunkin' to double down on its efforts to "fancify" itself more, be more aggressive and take more risks. It will also get a lot of support from Inspire Brands. Inspire’s strategy has always been to improve companies’ digital operations while keeping their brands separate - Inspire's CEO has said he wants to model Inspire Brands like his previous employer Hilton.
In my opinion, Dunkin' will not stay private for long though. Owning a dominant chain like Dunkin' will likely be the final touch Inspire Brands needs before going public.
Bottom line: going private could shield Dunkin' from the scrutiny and obligations of public companies & give it the freedom to truly transform its brand. It will certainly get a lot of support from Inspire Brands - whose bread and butter has always been about transforming companies' digital operations. Inspire Brands inevitable trajectory toward going public won't keep Dunkin' in the private sphere long, though.
Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.
Dunkin' has been freshening up its image and brand for years. It wants to be in the same league as Starbucks. It dropped "Donuts" from its name - not surprising considering drinks make up more than half of Dunkin's revenue- invested in new brewing systems, and got its employees "espresso certified". It also added drive-thrus and flashy items to its menu - green tea refreshers, non dairy milks, and vegan options (Beyond Meat sandwiches). It also put in a lot of money into its digital business (mobile app and online orders) and a deal with with TikTok star Charli D’Amelio. All of this meant that when the pandemic hit and work patterns shifted, Dunkin' was very ready. Investing in its digital business before the coronavirus outbreak helped to smoothly transition it to contact-free takeout. Shifting work patterns mean more orders come in later in the day, boosting premium products like espresso and specialty beverages, which diners may have bought from smaller, independent coffee shops before.
This boosted Dunkin''s sales during the pandemic relative to other chains such as Starbucks. Its sales dropped 19% last quarter whereas Starbucks' dropped 40%. This helped Dunkin''s stock climb much more than Starbucks this year, and it hit an all-time high just before the deal was announced. Going private will certainly allow Dunkin' to double down on its efforts to "fancify" itself more, be more aggressive and take more risks. It will also get a lot of support from Inspire Brands. Inspire’s strategy has always been to improve companies’ digital operations while keeping their brands separate - Inspire's CEO has said he wants to model Inspire Brands like his previous employer Hilton.
In my opinion, Dunkin' will not stay private for long though. Owning a dominant chain like Dunkin' will likely be the final touch Inspire Brands needs before going public.
Bottom line: going private could shield Dunkin' from the scrutiny and obligations of public companies & give it the freedom to truly transform its brand. It will certainly get a lot of support from Inspire Brands - whose bread and butter has always been about transforming companies' digital operations. Inspire Brands inevitable trajectory toward going public won't keep Dunkin' in the private sphere long, though.
Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.
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