The coffee wars are on, and Dunkin' Donuts is confident a beverage-led strategy, slimmed-down menu, and focus on speed and convenience will help set it apart from competitors ranging from McDonald's and Starbucks to convenience stores.
On the heels of Dunkin's fourth-quarter earnings that beat expectations and its investor day in Boston, CNBC sat down with Dunkin' Brands chairman and CEO Nigel Travis on Friday at its next-generation concept store in Quincy, Mass. In the exclusive interview, Travis discussed the company's three-year plan, fierce competition for consumer dollars, and the volatile moves the stock market has made in the past week.
At its investor day Thursday, Dunkin' had revealed its three-year strategic plan featuring menu innovation, accessibility and an improved guest experience. The company just had its best quarter ever for beverages but is facing slower traffic in the afternoons.
"We are putting out a new range of snacking options, increasing our beverage mix," Travis said. "Cold brew has done really well, [and] we continue to have great flavors for our iced coffee. I think our products will be different in the morning; we'll do things like change the menu boards after 11 a.m. to make the afternoon experience different."
The concept store features cold beverages on tap and Dunkin's first-ever mobile-only drive-thru lane for customers who have preordered and paid with their smartphones. Drive-thru lanes account for 75 percent of sales at stores that have them, Travis said. This is meant to entice more people to join the DD Perks Loyalty program, which has 8 million members, adding 2 million in the past year.
"People are always time-crunched. Our view is to give them the right product at the right price and make it very convenient," he said.
Skilled labor remains a challenge for Dunkin's franchisees, and Travis emphasized the need for immigration reform. "We need more people. Talking to Democrats and Republicans, there seems to be a fair amount of agreement that it needs to be split between the amount of security and letting all people come into the country and becoming citizens — all we're asking is to increase the labor pool."
Travis added that market swings and future interest rate hikes won't affect Dunkin's strategy moving forward.
"Yes, we have a lot of cash on the balance sheet right now, but our view is that we were always considerate about what's best for shareholders," Travis said. "I can't say whether we are going to do a buyback or not, but we've had a tradition of returning capital to shareholders, and we've always taken our dividend very seriously."
As for future succession plans, with Travis' contract running through Dec. 31, the CEO said David Hoffman, president of Dunkin' Donuts U.S., was brought on as a potential successor and that there's a plan and process in place at the board level.
"Dave and I have a great relationship; we make decisions together," Travis said. "We will divide and conquer and keep talking to the board about the future."