Photographer: Victor J. Blue/Bloomberg

Dunkin' Donuts Fights to Reclaim Breakfast in McDonald's Battle

  • New menus add all-day choices, echoing Golden Arches' language
  • Doughnut chain's revamp also will push higher-margin beverages

Dunkin’ Donuts, facing declining sales and tougher competition with McDonald’s Corp., is fighting to reclaim its turf: breakfast.

The chain is revamping its menu boards to emphasize coffee and “all day” breakfast foods, a bid to remind America that it served eggs and sausage during afternoon hours long before McDonald’s got the notion. As part of the changes, which will overhaul counter menus and drive-thru windows at 8,400 U.S. shops, Dunkin’ Donuts is no longer touting combo meals.

The stakes are high for the company, which is owned by Canton, Massachusetts-based Dunkin’ Brands Group Inc. Its domestic same-store sales -- a closely watched measure -- fell 0.8 percent last quarter, marking the first such drop since Dunkin’ Brands went public in 2011. The chain also said customer traffic declined in the period.

Dunkin’ Brands Chief Executive Officer Nigel Travis has cited “revitalized burger players” as hurting the chain. The entire fast-food industry is getting more aggressive -- with deeper discounts and other promotions -- but McDonald’s decision to start selling breakfast all-day is causing particular hardship to rivals. Since the Golden Arches made the change in October, chains such as Jack in the Box Inc. have said the move took a toll on their sales.

‘Getting Fiercer’

Dunkin' CEO Nigel Travis.
Dunkin' CEO Nigel Travis.
Peter Foley/Bloomberg

“The competition is fierce and getting fiercer,” Travis said on a conference call this month. “Many of our guests want something more. They have plenty of options from which to choose to get their morning coffee and afternoon pick-me-up.”

That’s why Dunkin’ has to re-establish itself as the breakfast specialist. The chain had been focusing on introducing new sandwiches and wraps to its menu -- items like black-pepper bacon croissants and guacamole flatbreads. But that distracted the company from selling its core breakfast fare, as well as coffee drinks, which are more profitable than food. The new menus will put a bigger emphasis on beverages, especially iced- and espresso-based ones, aiming to entice customers to drink more java.

“It’s an area we want to grow,” said Scott Hudler, the company’s vice president of global consumer engagement. “Owning the coffee space is going to allow us to drive more transactions.”

Dunkin’ Brands shares are down 3.5 percent over the past 12 months, compared with a 24 percent gain at McDonald’s and a 25 percent increase at coffee rival Starbucks Corp.

Beverage Focus

The new menus use cursive font and have photos of products such as dark-roast coffee, Coolatta drinks and egg sandwiches. The changes, which have been in the works for 18 months, also will add calorie counts.

The doughnut chain has revamped its menus to promote beverages and all-day breakfast fare. Source: Dunkin' Donuts
The doughnut chain has revamped its menus to promote beverages and all-day breakfast fare. Source: Dunkin' Donuts

“Our menu boards were due for a redesign,” Hudler said. “The menu board helps clear up any confusion on how to order, and shows that our entire menu is available all day.”

Before the revamp, about 60 percent of the menu board was dedicated to combo meals, despite the fact that they accounted for a small percentage of sales, he said.

At the very least, the shift should help sell more drinks, said BTIG LLC analyst Peter Saleh, who published a note in November about a test of the new menus.

“Beverages are higher margin -- they definitely want to highlight them,” he said. “This menu board does a better job of that.”

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