The acquisition of Dunkin’ Brands by Inspire Brands for about $11.3 billion including debt, announced last week, will reshape the restaurant landscape as consolidation continues.
The purchase builds on Inspire’s shopping spree—the holding company formerly known as Arby’s Restaurant Group and currently owned by private equity firm Roark Capital has acquired four brands in as many years. In late 2017, the company inked a $2.9 billion deal for Buffalo Wild Wings. A year later, it bought Sonic for $2.3 billion, then in September 2019 it picked up Jimmy John’s for an undisclosed amount (though the sandwich chain was said to have $2.1 billion in sales at the time).
Adding Dunkin’ and Baskin-Robbins will increase Inspire’s systemwide sales to $26 billion from about $14.6 billion and expand its restaurant locations from 11,000 to more than 31,600 around the world.
Currently, there are more than 12,500 Dunkin’ and nearly 8,000 Baskin-Robbins restaurants globally. Both Dunkin’ and Baskin-Robbins will be operated as distinct brands within Inspire.
“By joining Inspire, these brands will add complementary guest experiences and occasions to our current portfolio,” said Paul Brown, co-founder and CEO of Inspire, in a statement. “Further, they will strengthen Inspire through their scaled international platform and robust consumer packaged goods licensing infrastructure, as well as add more than 15 million loyalty members.”
Though restaurant businesses have been under pressure due to the pandemic, including coffee chains, Dunkin’ managed to fetch a 20% premium over its closing stock price on Oct. 23, which was before news of the deal first broke, according to Eric Gonzalez, a restaurant analyst at corporate investment firm KeyBanc Capital Markets.
“Under the leadership of former McDonald’s executive David Hoffman, Dunkin’ Brands’ focus has been on improving franchisee profitability and reinforcing its heritage as a beverage-led, on-the-go brand,” Gonzalez wrote in a report.
He lauded Dunkin’s performance during the past few months, crediting the company’s success to initiatives such as menu simplification, new espresso equipment, new drive-thru tools and digital app improvements.
One opportunity for Dunkin’ going forward as a private company is it may be more willing to invest in growth via the remodeling of stores and expansion into the western U.S., according to Andrew Strelzik, a restaurant analyst at equity research firm BMO Capital Markets.
While analysts saw a lot of positives in the deal, it may have implications for Dunkin’s numerous vendors, namely its creative agencies.
A potential agency shake-up
From an advertising perspective, the most notable aspect of Inspire’s purchase is the implications it may have for Dunkin’s media agency Publicis, hired more than two years ago to handle media planning and buying.
Inspire announced in early August that it is conducting a review of its national media agencies, inviting incumbents to participate in the process. It tapped Jones Lundin Beals + Partners to assist with that search.
The company said it was seeking a primary agency partner to work with its in-house media team “to provide strategies and tactics that collectively benefit the brands.”
“As a multibrand company, we see an opportunity to better align our media approach with a focus on custom targeting, digital business and CRM efforts alongside optimizing media delivery and impact. This review of our media agency assignments will help sharpen our competitive and innovative edge,” said Brian Pruitt, vp of media strategy and planning at Inspire, in a statement at the time.
According to a spokesperson for the restaurant group, the media agency review is currently underway. As for the purchase of Dunkin’, Inspire is not providing further comment as it focuses on completing the transaction, the spokesperson added. Dunkin’ also declined to comment.
The Canton, Mass.-based coffee and doughnut chain confirmed that in addition to media agency Publicis, its agency of record is BBDO Worldwide, while ARC/Leo Burnett is responsible for retail and in-store marketing, and Jones Knowles Ritchie assists with ongoing branding. RF Binder, meanwhile, is the company’s public relations and marketing agency.
It’s still unknown is what will happen with these agencies once the deal for Dunkin’ is completed.
One positive for the current roster is that all of Inspire Brands’ restaurant chains employ their own agencies of record. WorkInProgress (WIP) has been AOR for Jimmy John’s since early 2019; Arby’s hired Fallon in 2014; a little over a year ago Sonic named Mother as its agency of record; and two years ago Buffalo Wild Wings selected The Martin Agency.
Dunkin’ delivers a large, loyal customer base to Inspire
No matter what happens with its agency relationships, Dunkin’ was an attractive purchase for Inspire for several reasons—namely its large, loyal customer base and the opportunities it presents for both expansion and collaboration.
A rebranding two years ago broadened the scope of the business by dropping ‘Donuts’ from its name and putting an emphasis on its other categories, such as coffee and sandwiches. And potential for expansion not only within the U.S. but also overseas underscores the chain’s growth prospects once the pandemic ends.
Dunkin’ has also been aggressive on the marketing front, such as a campaign to transform National Coffee Day into National Dunkin’ Day, boosting sales and traffic.
Other initiatives include a partnership with TikTok star Charli D’Amelio, launching a cold brew beverage in her honor called The Charli; increasing its plant-based milk alternatives by rolling out oat milk to its locations across the U.S.; and teaming up with Harpoon Brewing to create beers such as a Jelly Donut IPA and a Boston Kreme Stout. For Halloween, the chain introduced the Spicy Ghost Pepper Donut to appeal to diners’ craving for all things spicy.
“This is the testament of a strong brand as a relationship,” said Thomas Ordahl, global chief strategy officer at brand consulting and design firm Landor & Fitch.
He pointed out that the acquisition also lets Inspire own different occasions, adding breakfast and coffee to a mix of restaurants that serve other parts of the day.
Ordahl emphasized that the deal is a growth play by Inspire in its potential for combination with other restaurants in the portfolio. He could foresee the holding company opening up locations that might include both a Dunkin’ and an Arby’s, for example, similar to a strategy employed by Yum Brands, operating locations that feature both a KFC and a Taco Bell. Or perhaps the merger will lead to the creation of new innovative products through collaborations or mash-ups akin to Taco Bell’s Doritos Locos tacos.
“There was a time where brands tried to do everything and diluted their meaning,” he said. Partnering with other brands, however, avoids that pitfall and can be a powerful source of innovation, he explained.