Dunkin' Donuts to Revisit the Golden State - Analyst Blog

Dunkin' Brands Group, Inc. ( DNKN ) intends to debut Dunkin' Donuts traditional restaurants in California before the end of 2014. The restaurants will be located in Downey, Long Beach, Modesto, Santa Monica and Whittier and construction will start this month.

While the restaurants in Downey and Whittier will be operated by franchisees Danny and Coby Sonenshine, the Long Beach restaurant will be operated by Frontier Restaurant Group. The Santa Monica-based restaurant will be operated by an existing Dunkin' Donuts and Baskin-Robbins franchisee which already operates seven restaurants in New Jersey. The Modesto restaurant will be operated by Sizzling Donuts, LLC, which already operates Dunkin' Donuts restaurants in Colorado, Texas and Utah.

Dunkin' Donuts has completed almost 200 restaurant development agreements with franchises, since 2013 in California. The company intends to have almost 1,000 restaurants throughout the state on a long-term basis. The company has already opened three non-traditional Dunkin' Donuts restaurants in the state, with the latest Dunkin' Donuts/Baskin-Robbins combination restaurant unveiled inside the Embassy Suites San Diego Bay Downtown Hotel.

The company also signed multi-unit store development agreements with four new franchise groups to develop 54 restaurants throughout Southern California in the coming years. These franchisees are Burton Restaurants LLC, Good Treats LLC, The Tasty Group LLC and a new franchise group led by Mike Stout and Neal Wichard.

Burton Restaurants, Good Treats and Tasty Group will open their respective first restaurants in 2016. While Burton intends to open around 14 restaurants in San Diego over the coming years, Tasty Group intends to develop a couple of restaurants in Santa Barbara and eight restaurants throughout Ventura County over the upcoming years. Good Treats plans to build 14 restaurants throughout Glendale, Burbank and Santa Clarita Valley in the upcoming years.

Finally, the Mike Stout and Neal Wichard led franchise group intends to unveil 16 restaurants in Northern San Diego and Southern Inland Empire with the first scheduled for a 2015 opening.

Dunkin's decision to revisit California in 2013 comes after the chain left the state in 2002 due to dwindling sales. With plans to open around 330 to 360 stores in the United States this year, the brand is looking to significantly expand its presence to high demand markets in California. Additionally, the brand seeks to capitalize on the booming breakfast trend within the fast food industry. We believe Dunkin's affordable pricing will put it in a better position than Starbucks Corporation ( SBUX ) - which has an extensive presence in California - and McDonald's Corp. ( MCD ).

Dunkin' currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Buffalo Wild Wings Inc. ( BWLD ), sporting a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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