Dunkin' Grows in Southern California - Analyst Blog

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Coffee and doughnut maker Dunkin' Brands Group Inc. ( DNKN ) has inked three multi-store development deals with new as well as existing franchisees to expand its footprint in the flourishing Southern California market. The move is consistent with the goal of the owner of Dunkin' Donuts and Baskin-Robbins brands to double its presence in the U.S. over the next 20 years.

The company has penned the first deal with its longtime partners, Harry Patel and Parag Patel to unveil 18 Dunkin' Donuts restaurants across North Orange County and the Central Inland Empire in California. Per the deal, the first outlet is slated for a 2015 opening.

Patels already operates 11 Dunkin' Donuts/Baskin-Robbins locations in Baltimore, Maryland and three Baskin-Robbins units in Orange County, California. The franchisee group's proven track record as a Dunkin' Donuts franchisee and its superior knowledge of the local market helped it to clinch the new deal.

The restaurateur entered into the second agreement with new franchisees - Jeff Shady and Jordon DiBiase - for opening eight Dunkin' Donuts outlets in North Inland Empire, California. The first unit is expected to open in 2015.

Dunkin' Brands also partnered with the owner of Embassy Suites San Diego hotel in California to open a Dunkin' Donuts/Baskin-Robbins combination restaurant in the hotel premises. The outlet is expected to come up in 2014. This opening will increase the visibility of the company's new Dunkin' Donuts/Baskin-Robbins combo format.

Dunkin' Brands has been eying on the California market for quite some time now and has a long-term plan of opening more than 70 units in the region. Moreover, in keeping with the company's agenda to further expand in the markets of Los Angeles, Riverside, San Diego, San Bernardino, Ventura and Orange counties, it signed its first agreements with four franchise partners in July to open 45 restaurants in these areas.

We believe, the latest alliances reflect Dunkin' Brands' intent to make California one of the prime states for expansion considering its potential to generate about $67.4 billion in restaurant sales in 2013, as per the National Restaurant Association. Further, expanding into an existing market will provide the company with support infrastructure and an improved distribution model which, in turn, is expected to facilitate supply chain management.



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