Strategies to expand a restaurant’s revenues
A company can expand its revenues through various strategies. There are different strategies including:
- introducing new menu items—like Tim Hortons (THI)
- opening new restaurant locations and re-imaging existing stores—like Burger King (BKW)
- running effective marketing campaigns
- implementing digital strategy—like Starbucks (SBUX)
SBUX is included in exchange-traded funds (or ETFs) like the Consumer Discretionary Select Sector SPDR Fund (XLY). Any or all of these strategies can lead to an increase in same-store sales.
Breaking down same-store sales
Same-store sales are driven by two components:
- The number of customers visiting the restaurant—traffic
- The amount customers spend at the restaurant—transaction
Transaction is driven by pricing and products offered to the customer—or mix. For Dunkin’ Brands (DNKN), transaction contributed to more than half of same-store sales growth. The transaction grew 0.5% due to an increase in prices. High prices can put off customers and affect traffic. This is why Dunkin’ Brands worked to attract more customers.
New menu items and offers
To increase the traffic, the company introduced the Chicken Apple Sausage Breakfast Sandwich. It would be offered any time of the day for a limited time. The company offered discounts and item trials like iced and hot espresso, iced tea, iced coffee, and Coolattas. The franchisees also implemented offers during the coffee break. This helped the traffic.
Unit growth, penetration, and remodeling
In terms of unit growth and penetration, 75 net new Dunkin’ Donuts and 12 net new Baskin-Robbins units were opened in U.S. In total, the company opened 151 net new restaurants. As for international markets, the company ventured into two new markets by opening a Dunkin’ Donuts in Luxembourg and a Baskin-Robbins in the Philippines during the quarter. On a year-over-year (or YoY) basis, net new restaurants grew 4% to 18,405 units. The company also remodeled 94 restaurants in the second quarter.
The company stated that its digital strategy was a key growth driver. Let’s look at this in the next part of the series.