Dunkin' Brands (DNKN) hopes that its California dream will become reality as it battles for the hearts, minds and stomachs of increasingly fickle diners.
The operator of nearly 11,000 restaurants in 33 countries has opened its first full-service locations in the Golden State in more than a decade in Santa Monica and Modesto over the past week. According to local media reports, people living in California, especially those who moved there from other parts of the country where Dunkin' Donuts is synonymous with coffee, donuts and breakfast sandwiches, were glad to see the return of the chain.
More than 200 people lined up outside the Santa Monica location before it opened at 5 a.m. local time today, according to CBS Los Angeles. Franchisee Gary Haar told the television station that he was "blown away by the number of people." Johnny Hoops, the first person who entered the store, won free Dunkin' Donuts coffee for a year while the next 99 people got gift bags, the station says.
The Modesto location opened on August 26 and also received an enthusiastic welcome. Boston native Mariah Medeiros and her family arrived at the shop at 2:30 a.m. so that they could be first in line when it opened at 5 a.m., according to the Modesto Bee.
"I'm so pumped up for this," she told the paper.
So is the Canton, Massachusetts-based company. Breakfast is the most lucrative and fast-growing daypart for the restaurant businesses, which is why companies such as Yum Brands' (YUM) Taco Bell have been adding menu items in order to attract the morning crowd. California, however, won't be a cake walk for Dunkin' which will have to compete against a plethora of local donut shops, some of which have been around for decades.
Shares of Dunkin' have slumped more than 9 percent this year, hurt by disappointing same-store sales and fierce competition from a myriad of players including Starbucks (SBUX). The chain, which also owns Baskin Robbins ice cream shops, gets about three quarters of its revenue from U.S. Dunkin' Donuts shops.
"It's a bit of a fistfight," said Dunkin' Brands Chief Executive Officer Nigel Travis after the company's disappointing second quarter results in July. The company also slashed its 2014 earnings outlook.
Dunkin' has ambitious plans for California where it aims to open 200 new restaurants in the state over the next few years and expects to have 1,000 locations there "over the long term." Locations are coming to Whittier, Downey and Long Beach in the coming months. The company had about a dozen California locations before they were shuttered in the 1990s and closed down a store in Sacramento in 2002 after attempting to make a comeback in the state, according to theLos Angeles Times.
More Dunkin's Donuts are headed to other parts of the U.S. The company is recruiting franchisees in other states such as Colorado and North Carolina and is offering incentives such as reduced royalty rates.
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