Dunkin’ CEO talks coronavirus bounce back amid suspended dividend program
90 percent of Dunkin’ restaurants are still open during the coronavirus pandemic
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Dunkin’ Brands reported a two percent drop in comparable sales for its Dunkin’ restaurant chain in the U.S., of which approximately 1,000 of which are closed due to the pandemic.
The negative comparison hits after the 3.5 percent growth the company received in the first 10 weeks of the first-quarter, which was offset by a 19.4 percent dive it received in the last three weeks of the quarter. Moreover, the company announced it is suspending its regular dividend program to save around $33 million for the second quarter.
CORONAVIRUS SQUASHED DUNKIN' FIRST QUARTER US COMPARABLE-STORE SALES
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This Thursday, July 28, 2016, photo shows a Dunkin' restaurant in Edmond, Okla. (AP Photo/Sue Ogrocki)
The coronavirus pandemic has hampered sales for a variety of American companies, especially restaurants, as millions do their best to not leave their homes. FOX Business’ Liz Claman spoke with Dunkin’ CEO Dave Hoffman to get his input on why the suspension is necessary amid the coronavirus.
“This is just, unprecedented times,” Hoffman explained. “We know we’re being overly cautious right now. We’ve got a tremendous balance sheet and we just felt like this was the prudent and responsible thing to do at this time.”
“It was a difficult decision for us but we felt it was the right thing to do,” he added. “And I would say, just broadly speaking, our capital allocation philosophy hasn’t changed through all this, but with everything that going on, the idea that cash is king right now and there’s uncertainty in the future.”
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Hoffman did not share what favorable condition would bring the dividend back when asked, but he did remark that the company will make an evaluation at some point.
So far, Dunkin’ Brands is focused on safety and brand accessibility during the pandemic.
“We accelerated into this crisis very early,” Hoffman said while citing the crisis management experience he’s garnered overseas.
For brand accessibility, 90 percent of Dunkin’ restaurants are still operating amid the coronavirus pandemic. The company has added 1,000 curbside pickup locations to address the social distancing and grab-and-go needs of its customers.
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“Before this crisis, 90 percent of our transactions went out the door in some form of takeaway, so it was easier for us to flex into that. And 70 percent of our locations have a drive-thru,” Hoffman added.
The brand’s digital acceleration has grown exponentially as well as its retail channel, which makes about $1 billion of retail sales. In groceries, the Dunkin’ is up 20 percent to 30 percent.
“We are hovering around minus 20 percent of sales. That doesn’t work in anybody’s book, but it’s certainly better than what it was in March,” Hoffman said. “We are pleased that we are starting to see whether that’s stimulus checks or whether that’s some of the markets opened up a little bit more. We are starting to see a bit of optimism out there.”
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When it comes down to franchisees who are considered small independent business owners that employ about 150 people, loans from the Paycheck Protection Program have been helpful.
“That’s who that program was built for. So many of them have taken advantage,” Hoffman said. “We’re very grateful and appreciative of the federal government and the governors and everybody else that was involved in putting this program together to keep America working.”
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Outside of the gratitude franchisees are feeling regarding their PPP loans, Dunkin’ operated restaurants are a different story.
“Dunkin’ Brands, [as] a publicly-traded company, we have not applied for nor will we take any PPP money. Our focus and what we thought, we believe our obligation has been to keep America working,” Hoffman explained. “So, we are focused on: we have done no furloughs, we are focused on people over profits at this time and just doing the right thing.