DNKN - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Dunkin' Brands' Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, today' conference may be recorded. I'd now like to introduce your host for today's conference Ms. of Director Senior Caravella, Investor Relations. Stacey go please ahead. Ma'am,

Stacey Caravella

everyone. Thank and morning, you, good operator,

U.S. Hoffmann; will Speaking Officer, live Travis; recorded Officer, Donuts, Executive on Kate President for Canada, be Dunkin' Brands' is today's and call Jaspon. Dunkin' Today's Chairman being Chief Dunkin' and Brands' and call Chief of a and Financial Dave webcast Nigel replay.

language applies our call like during to our that the Before earnings made I'd remind in included also Nigel, I on over turn this statements to to the comments release forward-looking everyone call.

Investor on in a can be on be will website, release Boston, at corresponding any of later Park to Our February and with on with date forthcoming held XXXX reconciliation call non-GAAP found GAAP XXXX with Analyst mentioned our measures Day. the at investor.Dunkin'brands.com, excited date. details Fenway We're location announce financial It along more X, measures. their of and today's our

XXXX holding call Given be this, XXXX. Tuesday, February earnings on we'll our X, and QX fiscal-year

Now I'll over call turn Nigel. to the

Nigel Travis

you, Hoffmann the Dunkin' feel to progress We day-to-day and thanks Dunkin' results. impact live with where meetings into to united to U.S., carried XXXX transaction, dealt stand to back for transform support our high-level everyone I and hurricanes our have very discuss through real of a communities the but opportunity and not which multi-year made to a where our the recapitalization and Brands Donuts and system platform science globally. successful Dunkin' to the analyze devastating joining beverage-led brand a here perspective. the highly operate. in series Dave With quarter across Donuts Dunkin' experience franchisees Dunkin' our thinking how call we from from operations was one I running our with and third to plan the can use evolution data U.S., Donuts of On-The-Go make on just entire faster today's more next U.S. quarter This and gain personalized, skills of around third Brands, our we a eventful digital customer launched for a we progress. It thank about Stacey, the alignment includes the easier,

at analyze through us Baskin-Robbins asked is today's no with investor I to one-to-one have will long the drive the tremendous Given business of to artificial experience of using in advocate faster by than competitive At a on my environment, app data it ability I other In advantage. launch amounts gives ever was XXXX. of intelligence. and that so ubiquitous previous technology if it access be recently Dunkin', XXXX an in companies, becoming digital results started the we been Dunkin' data by longer an by capitalizing marketing. the followed app to

new technologies digital access to with our with new advantage. I the have excellent like closer all. everyone guests, Dunkin' forward forge we're it's their and with great to loyalty start game delivery, will While to new I'm it to global with an believe technologies, we the And an guests Baskin-Robbins DoorDash. to having our on share Investor the using really with the even the insights scale, We're companies for partnership off the will February we're relationship of serve vision a Middle the success will we're doing in looking delivery you and Day more East has like way that on in it changer competitive be industry. later, which in real our U.S. in delivery, touch that program to Perks which consumer use with ways

Now the back to third quarter.

on we progress we that have yes, Dunkin' real to business, would analysis want disturbance that in put transactions we comps are and to suggests where were to the importantly improvement a we're our be, them. Admittedly, even thanks but the morning them in storms at initiatives day-part beginning place. U.S. have see and not still comps greater Looking without made the

more progress and he the this off on a of for and the progress making as from leader, green plan. to Baskin new Jason brand international. are Dave starting see strong about transformation his shoots in U.S. hear its U.S., You'll Maceda, And all with team the to Dunkin' start is we're

an $X.XX we past were funding notes. sold in our related million in billion, we for million repaying $XXX and deal to our this As transaction debt the size transaction, a after due deal add expenses. XXXX of proceeds inclusive additional us to million able of with recapitalization The demand, that for strong closed of leaving to original a deal variable Monday $XXX net approximately $XXX portion total

well you strong with X:XX) model coupled Difficulty] and when proceeds As the [Technical are cash aware, flow franchise XXX% (X:XX – business our produces predictable from net

Operator

Ladies and gentlemen, please standby.

Nigel Travis

Hello? operator. Hey,

Operator

now. live is line your Yes,

Nigel Travis

right. all Okay,

this Travis. Nigel So is

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let to the go paragraph continue. previous back me so can anyway, So I

when cash able well you're proceeds significant from also to investing refinancing, our debt while to recent in shareholders, the franchise produces to are strong continue coupled return we business predictable with XXX% the As cash model business. the and aware, flow net

today years. $XXX announced to new directors program common a are We up for stock. repurchase earlier The pleased for of of our of is authorized that aggregate share to our outstanding authorization an million of two board have good

business. $XXX additional to the into deal able We U.S. invest are carving the we're Donuts Dunkin' the to to million that add out

Dunkin' help U.S. be questions we've our such that co-investing Donuts Donuts think the is This investments, not for believe, investment some franchisees' a providing ignite clarify, transformation on or Dunkin' opportunities the through with and we drive items of relief. growth. into our the On-The-Go of To that had, as franchisees this Our given brand. alongside about subsidies important beverage-led we will blueprint royalty is will along focus is I

During some and system. future attended with vision of we franchisee round Dunkin' our a can that third meetings say had brand quarter, the very personally the of the enthusiasm the Donuts more contagious. great franchises' was for I these across of also successful meetings confidence U.S. I

turbulent from to As had standpoint, the earnings model. a I weather due we impact asset-light quarter a muted our although said, to our was

Hurricane greater First, area. Harvey devastated the Houston

than shortly At peak Baskin-Robbins restaurants of and which all rain and have the Donuts today. affected Donuts, XX all the the and the Dunkin' Florida. Irma subsided more restaurants are storm, primarily closed, we after area. Then of open. of back We the XX back locations in Dunkin' back were running hit up open Most X,XXX are Hurricane had

as amazing areas, our managers' all and cars, franchisees. rooms for kinds in most even humanitarian we Rico, from which of Lastly, opening their you generators stories have and The storms. heard crew still for a remain storms of which countless the XX kindness to Puerto renting we multiple Baskin-Robbins caused the to homes store is know, of saw We've season, it true will island In of homes, XX during crisis. hotel hit from hurricane locations closed. this franchisees shelter suffering, from buying safety

Dunkin' and impacted areas the Additionally, trucks XX Coffee tons bring as to U.S. thousands of more dollars made headed to from coffee CEO than of moment Dunkin' We franchisees of impacted our donated Dunkin' shelters Dave, product coffee donations, providing discuss to really and water the during Dave helped first family will and I We here's franchisees the It's Donuts restaurants. Cross. Donuts the in Red that, worth of Dunkin' as QX phone. free to performance tenure communities. storms. country sampling team over, a and of across mark a with literally, also in on the our together these delivering and the September And Donuts responders the deploying my in to out to storm the the Dunkin' food XX, to Day and to Brands. donuts coffee And proud to National hand U.S. leadership came

David L. Hoffmann

with primarily sales new Thanks, U.S. sales comparable third Nigel. X.X%, X.X%. up the Dunkin' In grew by store quarter, driven growth system-wide

weather sales XX that weather mentioned, negative impact points to basis a We approximately a to third was in due XX% Florida headwind where the for in occur. Hurricane Irma comps. resulted in of of estimate system total Nigel As us quarter our

is alignment plan country, as will As intensity. the shareholder through it's in meetings franchisees are the more include we capital with Nigel top packaged as the than tremendous blueprint collaboration excellence grow collectively profitably. our digital four They with by strong driven areas our a system, recently and worth innovation, that value. our new mentioned, restaurant to main across convenience held is blueprint accessibility A super X,XXX model The and drivers for where leadership, new powered is shared of plan as broad on We And menu with ever. focused by bottom-line we what franchisees. growth goods. low brand with that asset-light main development noting as this well simplification channels believe restaurant consistent for

quarter plan increased has our delivering of are business reclaiming morning place direct to in Second, to expand U.S. And basis our on comped with the taking strengths. dominant on superiority The seeing a in the core the is sales which result sustain ability history which our our of our an while our sequentially significantly continue adequate performance, X franchisees encouraged by and is XX:XX comp cash value, the sales focuses ensuring We're our growth. a.m. has of XX% shareholder on each the Phase lastly, footprint our success before XXXX. positively focus to in a morning, in day-part, of morning

our and and value. and craveable of hot course, and best-in-class iced breakfast of strengths. variety That's of at Munchkins, all compelling these core a our donuts First, coffee, superior all, sandwiches,

QX highest wake-up record sold breakfast The per quarter, during us. for another for sandwich the offer saw sandwiches growth and $X milestone restaurant, X,XXX on wrap per the donuts quarter. we two sales egg the as cheese result, a in breakfast week As drove over dollar during record

about In fact, stages, of for value attachment. cheese the And ticket to greater the $X our our beverage of $X bacon, food for we're performance the demonstrating strategy than current average average two croissant. our value offer the egg it's of also of $X, early offer a and drive offer optimistic power ticket national was although versus about having the

growth drove in coffee Finally sales ran ever we over two highest during On-Cup the It hot first quarterly September, years. promotion. national our Sip.Peel.Win.

very end, admired, America. again, but the back CEO winning we from agency quarter, is at Digitas. drive Officer, proven in account other But two key made day-parts. to blueprint. hired morning the day-part Tony Also a served building Marketing before priority confident new global strategies is brands. we we hires the of environment the highly focus work joins the of first reclaiming With our negative. To Weisman. stretching behind his this we in recently marketing, network, our our he afternoon. the approach points XXX He our highly-experienced giving day-part, also competitive to He basis declines was global into led record a leader a where to driven at success some than level. during that decelerated afternoon less North the line much by our in take in from Tony Dunkin' we're well, are digital is While to QX, QX All day the next traffic Chief in knows a traffic are with as us the leader morning of data-driven morning, track on right brand business with having the transformative, a Digitas, he

and Latimer Katy of foodservice am thrilled, and our I XX served of as Vice team PepsiCo the sell culinary join we us an our R&D already-talented for we recently plus going most they both have absolutely as as in I'm of accelerate leader where efforts years Katy Tony President Culinary Vice from she to DD to and joined Beverages. Global innovation how With U.S. joins well team, Additionally, innovation, Innovation. thrilled to she market transform ourselves. President confident marketing an are as into has products

blueprint. a touch the to on plan I highlights few from next. Okay,

donuts to U.S. to and number Donut case. names. innovation, are menu is with Halloween our new many holidays dressed donuts takeover as on is encourage traditional on within you Owning of great holiday the visit of using innovating across the the our We retailer just up as position example of one we our one the the before are restaurants fun capitalize the of First, a our core looks tactic

membership Visa were Win we than quarter, focused, Next, new super by driven members, with under program experience added like the Perks. one-year the Team of July focused You On-The-Go the great numbers running versus the strategy Perks and for sales convenience which members continually members called in responsible to our in Since anniversary loyalty QX. promotions been of mobile Those year. XXX,XXX T-Mobile. X.X now a million we've relentlessly increase successful another last brands Wins, digital, for represents We're have like We guests. XX% On-The-Go to more of increasing these continuing on ordering. the for partner our by marked improving and launch, XX%

This and into several the designated optimized will quarter, mobile operational that to order One this, respond we the continue testing of enable pickup we our guests that to ordering. year pleased growth began are areas mobile platform. processes favorably

and transactions high-volume that experience. a to XX%, their seeing On-The-Go quarter, ordering. mobile orders, of north the has the of mobile of Our are go reached rate of it the transactions internal during user which retrial many through nearly shows of XX% locations speaks and X% orders urban total data our quality

to will interact our of our this believe future is many guests brand. continue We the with of how

element consumers our broadening brand our critical is partnerships, through growth to Again, accessibility we for strategic the Another and restaurants. this products to our increased consumer key Dunkin' new brand. accessibility call Dunkin' through blueprint for restaurants, of sold the through outside to initiative give branded our

me start packaged consumer with goods. let So

in Third-party products in in just QX, IRI short Dunkin' of first coffee feeling the really hot the during launch sales. data year. of Express regional bottled within Also impressive and about our packaged achieved million in that total with feat million $XXX we announced Acela has the in past coffee few which our And Board their to northeast Amtrak achieved Dunkin' retail our data, in months trains of portfolio million ready-to-drink sales Board goods in coffee of a follows coffee to million more On there very are that channels is $XXX retail according $XX retail sales nine XX-months, consumer the good We're progress expansion across generated shows sales over our more than On K-Cups than retail partnership we few $XXX iced year. our Amtrak And trailing packaged an This exceeded considering years. the launching, include of first trains. that northeast successful April the the corridor. Amtrak with

Okay, restaurant turning to development.

units restaurants growth to Dunkin' in XX net restaurant last As XX year. new QX, versus U.S. opened franchisees new net

remodels also franchisees Our XX quarter. completed during the

getting the to the within the of trade year of we areas. hurricanes, new work that franchisees XX construction end range will new net various openings crews bottom we and expected our in as will for below but are QX, for As of the the range the end facing challenges restaurants and restaurants the approximately into for around restaurants in and Florida squarely the XXXX, shift Texas Prior to believe XXX year construction XXXX. on the we XXX to now

for range new hurricane to entirely impact. a due Dunkin' XXX restaurants, our the U.S. new to result, net XXX expected As is

provide don't call we restaurant in February. QX practice, earnings new our general a As guidance until

of investment Brands restaurant XXXX that as specifically U.S. I very what tell the for is can intact, Dunkin' still is thesis growth you a company beyond. and much However,

market at in share market, simplification an test to X,XXX of our more Finally, The results which including restaurant blueprint We're our months and Providence, our on I'd the fourth detail analysis. like the know, in a provide excellence, there reaction now critical this before the core that Rhode test look you really We that forward Island the our is in February. for focus part a to We growth. run total understand update phase upcoming listening letting three a on area is menu at simplified Investor is in for to locations, significant test. our be addressing menu as guests' we Day in interest to continues second the it least for of of us.

order substitution with even product unable as conducted that aware accuracy first a than were build tests, However, is product in a the were we benefits will from and of restaurant in note, customer surveys times, run Dunkin'. seeing of planning guest the ultimately, we drive crew to top-line to for We still and explain result suitable how crew as to menu front We originally a X, on bottom-line were lot order. XXX managers commitment the changes up This the X% restaurant-level find online improvements guests fewer the and new long our deliver are course, and of every the overall satisfaction. in well to side they of consistently, menu XX% quickly and Phase what only the menu simplified improved happier core speed training throughput, and increased at crew margins. the and believe a renewed favorites the of as day and of help call

the said be we We a mindset the to guests. International. confidence have system long-term together. simpler success. for to for future Nigel And and As we're I'll drive they a and want my to In inspired alignment to seeing system. our U.S. and And to better cover back I franchisees, me experience franchisees, for our that cultural make ultimately, Baskin-Robbins it entire over we're across team want entire ensure easier restaurants with by to to thank as continue turn simplification before, the the support closing, our will given the the and great that, and we operate,

Nigel Travis

Okay.

in in firstly, iPhone, ticket. in QX, was the So the Delivery X.X% by decline it the unfortunately, This as at and core me weather we as hurricanes. cool the by points. system. included about country. But Eastern negative in the experienced basis U.S. and west. in let Dave. cups the was shakes continue impact weather and our thanks, launched growth not of June one a XXX category, negative end such in cones, store as were third to to available and guests country with the partner talk comp average of the during about the and offset as We in cakes estimate of Baskin-Robbins DoorDash We declines traffic rest enough offset now on Baskin part our the markets sales wet well driven of increased unseasonably strong in

are early, still sales. are franchisees our incremental who experiencing it's Although delivery offering

and Saudi for Let growth continues mode. on third to the International store positive had priority the me the in all Arabia, International. Philippines In stabilization markets, Dunkin' comp giving in comps move segment. to quarter, we know double-digit be sales Chile,

are to Dunkin' Again, puts early in the of by We be which which three now be encouraged results store XX importantly, really this International performance forefront. Day. continued units. item at of an image nearly the new increase share restaurants We different at have design, Donuts will new the an weekly increase Investor globally, in markets average international these in we of sales, beverage overall and experiencing all an will coffee

Baskin all it of from markets a a For and major Middle was Korea, International, quarter seeing the with declines. comp comp Japan tough standpoint East

designed And with to largest a region. total Arabia very in Dunkin' to We are to sales in of the sales Kuwait, International. roll delivery has where excitement International Baskin store across is results. quarter, its will the first based of I pass continue the partners Saudi in our in in through in of now, our store success markets in out regional going XX% store are of by Arabia, Baskin really I our our cover for for grown which partners Pakistan, We held bringing with meetings to our the to coffee new stores working time. and XXX over which recently on our heartened its We licensees' Saudi East delivery financial four attended. delivery the opened Kate Baskin-Robbins franchisees' And International engagement store was Middle opening franchisee and new strategy business during the design. new to X% forward next the in and week, two I XXXth short it

Kate Jaspon

closed oversubscribed tranche great seven-year overall covered repay ever deal from tranches, approximately new The million on have the will the XXXX Nigel the achieved debt rates. The interest rates changed. I'd securitization annualized of shareholders remain in a a week, on securitization. a rate will of but a blended deal, in in that rate in was for a financing timing approximately $X.X company two outstanding transaction securitization to XXXX our intensity. from we X.XX. due our very now securitization million Including in philosophy and $XXX has debt. in restaurant we expense. $X.X $XXX Thanks, with proceeds and $XXX had structured asset-light low debt of XXXX that in result was with deal, million a million tranche we returning which with used This X.XXX billion got that the with and to our to securitized This approximately XX-year I'd highlight with of also of were not of we an provided billion due remain interest Nigel. heavily X.XXX, like transaction debt like of We $XXX of very in net XX-year lowest deal. us and XXXX seven rate reiterate $X.X billion outstanding favorable capital to debt our capital

by increase slightly includes to net tax expense nearly from was $X.X increased the prior-year to was result year over million fees last X% period, increased decrease carry-forwards, due an income, million earnings prior income million is by million a primarily our $X revenue by revenue from X.X% an offset license accounting share the from expense. increases to less compared refinancing. This debt exercise write-down XX.X% resulting X%. income expense primarily or increased million adjusted prior-year respectively, also Year-to-date, credit offset operating in income or nearly the as The for in period and a from adopted increased prior the by Diluted bottled royalty than diluted respectively, franchise $XXX,XXX prior-year X.X%, in incremental operating income and income and $XX decrease adjusted income income. well results; the Net and income. per and by was expected Donuts to gains QX interest of to outstanding driven in the and to of Income by in period G&A our per were to G&A a of our decreased expense. tax up XXXX, recent by $X.XX X% the as shares the for as income increases. QX a stock increased Now decrease Dunkin' financial increase in driven and shares or of Operating of shares flat fees tax K-Cup $XX.X driven net in company-operated the QX compared QX due primarily adjusted The to $X.XX in increases period year adjusted of at the earlier revenue year. ready-to-drink net additional as by XX.X%, since a or offset offset renewal and the foreign from this earnings sale GAAP standard remained decrease in taxes offset increase the or share adjusted primarily operating our of options decrease restaurants related approximately business outstanding. result repurchases just as $XX Other our coffee. outstanding increased, by by income shares new iced income.

quarter, to refinancing. X, lower had which before of the from borrowings, of At Considering the debt was to ratio EBITDA the in impact pro share X.X EBITDA been the our X.X adjusted and our the X debt-to-adjusted quarter. per latter, approximately to on ratio is additional third of a completion have forma a the end diluted basis. debt the per adjusted diluted we share $X.XX earnings Excluding earnings would

for driven by referenced increase the I additional Our effective rate earlier. with XX.X%, was that tax charge the the tax non-cash quarter

pay sheet. During and million balance the short-term $XXX cash million quarter $XXX funds ended the used cash approximately with flow cash million, quarter, $XXX during in with to in quarter that Of we card cash restricted represents dividend We we $XX.X associated on cash shareholders. $XX million and gift and generated the free in balances. our our the to QX million cash marketing

Now impact targets; today, full-year updated from the the release to press on in certain our we hurricanes U.S. reiterated earlier. growth Dave earlier and our Donuts our discussed Dunkin' target targets and

address me revenue guidance. let our Now

our that mid-single-digit We term expectations. we continue to growth, opening the discussed net last maintain program a from the low of of This is despite revenue income store to quarter. guidance result renewal primarily lowered

is renew As reminder, the this back remaining our to to on offer franchisees we their get to opportunity XX occasionally when a years. the term agreements them franchise

are to for it franchisees Our to agreements. responding their and very expectations exceed of renewals our continue well positively

fees that As first here of DD believe for we will the we today, exceed sit QX. the U.S. franchise quarter XXXX fiscal greatly

are and adjusted target as our operating We maintaining income operating well.

our reflect earnings will target We to to charges are result per extinguishment updating $X.XX in $X.XX our GAAP of to debt refinancing. share that be incurred QX a as

$X.XX of diluted maintaining our adjusted $X.XX. earnings share per to We target are

of count guidance adjusted outstanding was our weighted allow in by to driven full-year favorability of market share guidance. QX, with some average QX, EPS approximately interest us guidance, rate credit our $XX.XX fourth coupled quarter the maintain our per of decrease range, within a our open deal dilution. in in million share reserve at fees, of tax the The incremental debt approximately shares the expense a higher expected foreign the and as from of albeit as from result revenue as in of decrease cost tax common expect $X during franchise the option the we higher-than-expected XXX,XXX in Although well stock the effective repurchase a carry-forwards shares

webinar this adopt in time, The accounting fiscal new regarding on announced will hosting addressing be that we an Lastly, in XXXX. our starting to standard will will revenue the join impact webinar November also recognition morning educational p.m. you that Eastern we'll XX X:XX as address at we new P&L be on encourage the XXXX. investor will available Brands how website. the Dunkin' the for webinar replay standard we We

I important our change this how business. operate impact note to not flow that think accounting does cash or it's the is of we it an only and

Stacey Caravella

your for Thanks, patience. everyone,

whole the going has a Turns If power. street you its we're just us give to moment, out switch lines. lost

back one So give for Operator? Q&A. be minute us we'll and up

Operator

comes Ivankoe the Our from of JPMorgan. first line John with question

line now is Your open.

John William Ivankoe

I you. thank may. if questions, Hi, Two

Firstly, are to with money, statement, over lot it what something you system, perhaps you in color us million you what give to going U.S. to through to run more the is spread look do that to multiple going expect is $XXX terms continue, that on have that a million the income means in that just you're $XXX be you're doing is planning I the reinvesting it of mean and that a Dunkin' out discrete could years, that what one-year like? if event, would that

Nigel Travis

Okay, me completely hear we've systems. can changed firstly, John, okay, so because you

John William Ivankoe

Perfectly And by with not way was the great job. a good could it. iPhone, have very thank you. done I job the

Nigel Travis

but We be taught have to realize us hurricanes flexible. that,

So, that's the from quarter. I learning think

So anyway, good question.

thing awesome in I Dave on about is first has say the all excited franchisees, and would we're enthusiasm. up what's really that and Dunkin' is I the unbelievably working that think franchisees such with with The going it's framework signed the

growth the future. really a feel helping that we way in So stimulate of

our on. mobile ordering. article it morning store do we're to remind new digital road got stimulate Perks considering there and how wrong. On-The-Go working question think can more like that decisions move your to to because and design make we'll take by everyone, forward speed, So the just things this the we're fairly way, that opportunity all more framework an the quickly, we some What I was of directly, answer I'll things we with down can the advanced And this

very But enthusiastic things, a new Donuts about on name in-store are others at to Dave of a store for one, made that we have part and it. that we in we've We're testing want the the and then We change and our secondly, of are not moment, hasn't but in And of beverages, we that changed. that, working I, design decision are Dunkin' got have technology technology. as various particular. on drive terms And through our store.

drive-thru in the remember, of very sales through store new of to a have important. drive-thru. You've got XX% Drive-thru a our is our stores XX% goes drive-thru. with

be over longer, one looking one, but a investment. To answer primarily. supplementary haven't years areas secondly, I it probably there's some be decided probably, to questions be it's two. might think again, And the but this we're going may of So, two will at. It we or your there, be capital

David L. Hoffmann

of Hoffman. unique the as our prudent blueprint. like view accelerate a opportunity this flexibility enthusiasm change of that franchisees some front, This from there's and with the sort And to out, growth but as thesis to will investment an and investment, Nigel it's initiatives up there's too" as John, "me competition. called look, make the be Don't opportunity do the but is if lot Dunkin' program, give around Yes, pragmatic, the if that. to those, I an it and there's accelerate we ourselves want we'll doesn't and mentioned

Nigel Travis

fixing problem. pounding on John, not (XX:XX) statement without this, we're And a on last

the fit accelerating the our franchisees it always to we about franchisees Just when absolutely the The a on great. plenty get because asked, or room. lender is never is the make into capital. I'm with I'm And stimulating meeting have lenders year, road, clear, how we blueprint. have the absolutely can This banks. the of on every answer

John William Ivankoe

Okay. in I mean And U.S. revert Does was intact, very to that. you U.S. be thesis Dave, think your growth I were your to investment I targeted remember, I'm have is a prepared notes, question, on unit my in and or mean, to? the X% unit thesis one much XXXX X% long-term mentioned I investment Dunkin' it used like paraphrasing, at to that that remarks, the development Dunkin' back referring you it in something clarification but year. that

David L. Hoffmann

emerging that. give of markets. we're going on QX more improvement pursue loading said, this, to be year in a we're improved John, is of continue this, expressions as to journey and forward. versus to from not example would still the a loading level and going full we QX, an this going level to is continuous lot event drive-thrus. on the on throughout year XX% I guidance Nigel are more of a that Well, our going to the But look, in do with and work say have I'd the be we're big to west highlights frame way openings going

got blueprint have we've and investment how program growth the around a franchisees in be to et in the balance and sheet for between sensitive the and we the manage new deferral So remodels, place to cetera. remodel we

developers are there, still the when we the you in that biggest sector. – put be in all in three So of we'll top

it's investment responsible I but on going again, quality is when points, so and opposed continuous chasing the intact, say thesis growth around just that And number. still around to those improvement based forward as a

John William Ivankoe

that you your point, And that's or at to XXXX least XXXX address your commit interpreted remarks than be not that you something want would XXXX. would remarks higher that at I did to that this that I XXXX? prepared least suggest certainly say higher be at understood, Can but prepared than

David L. Hoffmann

yet. the flesh punch the further the to go and year there Yes through year not and call, We want so books on to get on that earnings in we prepared we'll before to John, get out the XXXX. next

John William Ivankoe

Okay, understood. Thank you.

David L. Hoffmann

Thanks.

Operator

on Guggenheim comes question Securities. the next Matthew Our line DiFrisco with of

Your line is open. now

Matthew DiFrisco

momentum wondered look, pulled and the expect, bit did you or probably of far through that will that? on it an early in just XXXX I a this fees could behind as continue, about quarter, the we with a forward big this how if they're sustaining that fourth consolidated comment is little you momentum and sort as and you. phenomenon Thank and that think might push you franchise that how thing a that should the is stage

Kate Jaspon

is This question. great Yes, Kate.

So the participation past than we seen a saw we've years. greater in much this in program year

several things. I think that from comes

on such around that with of next to operationalizing and our – quarters we're been see I sure components come in the in top this the allocate program safe their in we're blueprint. the blueprint enthusiastic year, has into franchisees But from way particularly components excited, previous QX think very offer say to our we'd franchisees year that it's that of not as the are expecting three leadership the that capital advancing the uptick we'll prefer the to they with that what blueprint.

a program it's of unlikely the in year. size this next see So you'll

Matthew DiFrisco

how guess can Okay. and digital share? sort order membership you And specify could it, much or missed I any numbers that you I mobile might of have then pay now is right

Sherrill Kaplan

Kaplan. quarter. said Hi, there. This we orders is On-The-Go in X% over hit mobile that Sherrill Yes, the

Matthew DiFrisco

Thank Excellent. you.

Operator

John line Morgan Stanley. Our next comes with of Glass from question the

now is line open. Your

John Glass

morning morning it good morning. losing versus versus traffic afternoon were something because how you in in in do now? making, Can comments since or and Or you go And or is Dave less morning to back traffic that just Thanks you're do afternoon the just the is on to leadership, it to want the to address wait afternoon? just is Nigel, are positive that you're you focus and maintain morning? need you the afternoon, to about so morning in and coffee focused you weakness the you going the intend, that negative

David L. Hoffmann

you with at in John, our spot the to on, just hurricane that line so quarters, traffic the impact the points XX hurricane, morning as was Transactions, right. on we impact the slightly well the negative as the QX, well. previous quarters as are to the Yes, prior previous in there basis and got with prior day-part, price line was

force reclaim was of this part day-part a So to blueprint part really in first morning. the competitive to – was the

we're when as tap do in the we finally need is afternoon, to stop state this a segmentation a Tony well, to different that after we is – and the our going brought think we pit a that's I occasion, get this you what the can into know consumer on-board wanderer. and it's consumer different think consumer versus

prepared of be in where needs the space. And we've stake work we're the again, more in wanted pleased morning. there. make with got done a progress to the and not lot move done going, work this. to We that the into We're but flag we've sure the on So we morning, to we're the momentum

John Glass

you I for if ASR didn't repurchase in was of know and deliberate you clarification. about talked that not. that Thanks don't press Kate, mention And or then release, the shares, but

you do on million over $XXX not immediately, in plan the buybacks? about and do how Is that? time think it how you deploying then So

Kate Jaspon

anything Yes, time authorization two board other than that haven't so announced the we authorization, for yet is this effective years. at which

we'll for monitor our with have keeping current in and the as advantage our needs So cash, we et cetera past. take strategy, market, the

John Glass

Thank you.

Operator

with Tarantino Our comes from next question Baird. David

is now open. line Your

David E. Tarantino

you how value sort elaborate into on Hi, viewing them? of accelerating move lot of My year? what the you done so initiatives they those to morning. that seen as perhaps support talk initiatives good and you Do you've continuing for have next a question's are could or on value franchisees that you've and far

David L. Hoffmann

yes. Yes, David and the would I – answer yes is

again, numbers wrap two we're strategy lot optimistic $X and us in franchisees, that of pleased, our that's lead think beverage on attachment. two what value for experience. first we on included for So being we're QX $X. for we're now the with to offers, the seeing focused and support national two for very behind But seeing the to with the feel we're that's $X we're We wake-up of for food the right and a the on We out place that. win get we're is differentiating long-term, and the the

different consumers, believe have taste ours, and we still king. brands needs different so And is for

of Dunkin', So the with focused leadership, quality on speed that. new innovation all price at we're digital an with around offerings, amazing wrapped compelling

price is play brand more want not equation. where where our That' than It's our we that's to in. positioned. swamp. a just So That's not

with you with progress that and in our value of happy that out can we're of seeing offers see So the more we're it happy we're XXXX. and

Nigel Travis

promotion even – we're XXst. David will happens your it's time optimistic And a Dunkin', is which on trend same use moment, saying, the used, a got was great which every that. occur. have same the Blast we Baskin, words had David, at Cappuccino I'll about optimistic the the We've I as XX, question We think at Celebrate directed though success our worth at which we're that with

is things the So I think one talk very the all about And value's competition there. you of out important.

has it of strategy, Dunkin' U.S., our value think to be a Baskin be or major I U.S. part in International.

David E. Tarantino

Thank you. Great.

Operator

Our next Zackfia William question Sharon with comes Blair. from

open. now is line Your

Sharon Zackfia

XXXX? as end Kate modeling backing franchisees into for little be talked of kind I'm none get good earlier. was quarter mean, what I is offer? you this some to purposes, so of to this just that would about How bleed it bit that the franchise would there. fee Hi, increase a then, advantage up clarity question taking – of just the to of of of year, that kind due morning. that the a the of And helpful cut-off much

Kate Jaspon

great Sharon, Hey, question.

this program years. years. on up intensive XX this offer true on their XXXX, agreement question in, the program. And to franchise the chance again, say their or that excuse we they to under up quarter, come the revert happen So don't is I at of given safe renewables it's to if They over – again when XX from for be in to the the the will the renewal the me, franchise remodel the this when majority what will come fiscal fees in came the income the everything and store, is program of think quarter quarter, back will majority then remodel would

yes, the majority majority So the in this XXXX of fees in program. coming the and from franchise QX

Sharon Zackfia

Okay.

Nigel Travis

saying benefits I on that what cash and any If future mean, I it's list earlier are wrote of we important. have to just network, very them equity their difficulty flows. benefit. important out think It's That's successful for out net worth that's today, program, the franchisees, attribute. lot generations. when And family they've it said think all valuations years think of have a contemplating financing. financing. I'll that. it because seen several to when the franchisees selling I down clearly I of no their A through in mean, easy very worth I a with value based goes the getting our go some it for and them and it repeat they critical I But unbelievably I their we of off this they it's are cuts – keep an analyzing years and that their earlier, to numbers is recognize, adds

can landlords got be and to competitive means up. the term they because they've I that signed more think also it go

store I confident think Starbucks at in them a got to capital going Dave's part the you're store going us ask that you've And against new design. more if tied them or make as it up fact a term they improvements of an chain, franchise time, advantage openings. convenience the that when makes So the same also to your make gives

a it's for this be many and I honest, better making very you amazed I'm about signed up. by successful, it, building to sense there're the them that a when our reasons franchisees So, they opportunity. see in business major think But we're makes And so as think much great of it enthusiasm. because business they've and the

Sharon Zackfia

constraints a test. then on it's much there day-part, And just simplification. still Great. of morning are? to in But follow-up what you're beneficial and kind about wondering to I want given time just since too intuitively, the know that's I'm the menu how talk don't you seeing if busy more you

David L. Hoffmann

you correct. out golden of about an From benefits the pleased like sort would standpoint, this of of it customer triangle what and again, excellence be Yeah. what is love to But operational say restaurant we're we're throughput. seeing we very

so As deliver us. as what which seeing experience COGS. we've managers, again, And happier we're seeing we're of heard mentioned specifically and in issue the initially, out you've us the for past, past, staffing related velocity is to on P&L we like crew love can better for say the we the me an and also complexity

key from And again, scale. want about it's going continue to customer nothing So, we initiative be this and point we deployment on prudent overall unlock and But forward, go are be well. the and if right getting for more full course we as there's execution experience. you're seen before going we've think a in this and an lot us those moving blueprint that three to will working, off forward all get us better optimistic hear a at this to again, that it's but

Sharon Zackfia

Thank right. you. All

David Hoffmann

Thanks.

Operator

Capital with Markets. Our comes Palmer David next question RBC from

is line open. now Your

David Palmer

Thanks.

one some Baskin-Robbins perhaps at have impact out any franchisees and about as other the margins. I like Thanks your SKU new metrics you that for Could in to and rollout then you're you relatedly, as at could that on looking going I XXXX Just know rolling to potentially that. last a have helpful Dunkin' feel some to be follow-up. a talk sharing test well? a fuller also And that would sales were on at rationalization, margins on IT that on follow-up you a be

David L. Hoffmann

we're Yeah. expanded for as us two on a initiatives right discuss and his And the as know, I've David, I'm role to a restaurants that bit as alluded with elaborate in where on of not going the these of as together, P&L take so back-office insignificant, thing, to in to is and kind for executive Chris the believe let this some to pleased not again, would but the and the so Chris the time and forward spent has velocity senior is key you Fuqua headlines, it's well to jump in is number but Chris we're on on today. pleased simplification with is say at equally going important gets of and that. to we've mentioned can this Chris more we're other all us But only of X,XXX on all But as addition going before, yet, little of we books this. of and this a point seeing middle

Chris Fuqua

will scheduling, to ability restaurant inventory store perspective. system, simplified themes more easier management, at a of mix, easier Thanks, talked lot to use about like blueprint the simplification think a store labor managers from back the RSVP Dave. execution the ordering, in data is We I simplification see general of and Hey, David, experience program, conversational basically we've the so which calling consumer way marketing the a things is level. the technology have simply and one improvements others internally run other we're in the office the menu – piece better key the

life simplifies a crew ultimately that we QSR. manager us as impact in simplification we it blueprint. menu a It have XXst be a takes accelerating the the as think in should RSVP And think much we into and state advanced restaurants. the of within So, century will as

David Palmer

the than comp of in Can Thanks. sales, might to thanks reimaging and new And past that some higher potential done for the expect typical rate one the a sounds getting XXXX, – way. a and feel how of put reimage that reimaging reimaging. lift give get you is the can fast it versus you just the that year? you like format on lift lot It well let's

David L. Hoffmann

new kind that. we're but We've what early official and up, excited up about (XX:XX). of the the enthusiasm sales seeing we're opening It's about offer test it's to prepared not some new got of not Quincy around to we're David, out Yes, and one the of customer too we've as But the of on talked have get about in designs, it's I that the remodel noticeable you within all walls just talked deferral into the four change overall new skins. the marketplace. package skins, bring that these the to

can in start going growth seeing all that, and we but but come aggressively enthusiasm So franchisees of going engaging progress, terms especially aggressively into mentioned into off again, new February. are it's collaboration half is to chart, in it's our year who squarely a over the forward. next And acceleration, look, in going we're been and in our with before, as And of this continue XXXX the pickup the pursue this on on to towards as back on our to board. remodels, different out of we're so work more to store balance you franchisees I we've And get with great with Investor X,XXX meter, venues. again, Day

David Palmer

you. Thank

Operator

Jason West Our next with line of question on comes Credit the Suisse.

(USA) Jason open. Yeah, now LLC is - Credit line Suisse West Securities thanks. Your

traffic comments want Just numbers. to clarify the the on

You said that excluding XQ, was the hurricane. traffic similar the to

that XQ, X% down think X.X% this quarter. or right way in so mean think down would about U.S., that? traffic you about Dunkin' so that Is the you said were at I on to

David L. Hoffmann

this Okay. model the Jason million, looking Suisse way. charge you're making you next Yes, recoup money do but this in terms And of in time mean, the increase - you the to $XXX the would from idea you fee the one I CapEx we right over today Securities you're to be some digital, on. how if that at as investment would are that franchisees spot consider and future? Yes, Got be in investments digital or would adding have year, a West of like LLC it. things to Credit (USA) obviously, you in that have decide around guys

Nigel Travis

to excellent help, We recapitalization so very our you think questions. we stimulate are more So studying it. through give but unhelpful, can we're to I right program. as I know really how working all these we're any did this now. blueprint willing Dave's Jason, all We're don't that's

in We All drive do be great, we with our you this think of if I say do need about progress. then for because we this time So important gave obviously will remiss may our I a image any We board is bottom a very be realize guidance more work I the and royalties. say to Donuts and it is will will else. our going something I talk this on process. who we this Dunkin' every very business. I'm be better more will decision the stores, part have to result believe line a should I

don't somewhat I Okay. Securities - ask I'll answer, (USA) So, for Credit counts being another an LLC unhelpful. one. Jason that apologize think West so Well, as Suisse I

Kate Jaspon

Jason, this is Kate.

would share guys And obviously, capital help to color. of Hopefully, discuss terms then planning and million guidance further that's our $XXX to Analyst doing will in impact modeling if to you add, that. model we're see much throw will at of out impact. February. we safe that say or you the there it's so know a Just think and with I so you P&L be proceeds And we the on use we this any for more XXXX won't XXXX you of of that into with that believe in plans the little release P&L XXXX, we when remainder the that Day impact,

Nigel Travis

out it is just digital it. like And (XX:XX) one Securities helpful Jason feel at business. hopefully had Thank all the which LLC Credit piece I - of of Okay, (USA) is don't Suisse ad the our moment, money West got the is in you. We bit, funds.

Operator

Matt with of McGinley Evercore line the from comes question next ISI. Our

is now open. line Your

Matthew Robert McGinley

Thank that in business. you. of that investment the I U.S. of have question $XXX on guess, the million I another size

you things As that, the are out, it's Because like plus lot, I you only and that's I at confident capital? look to cash invest but think that that Nigel when U.S. of whole doesn't per X,XXX $XXX as how unit, design right mentioned and in and $XX,XXX in-store million is the technology, a IT lot. that a then earmarked which amount units you on store have seem that break the in you

Nigel Travis

overall, are remarks. be I per-store Well, a thinking than at we much stimulate to of that's about system going money my it's the do basis. This I in math really of to here going a do in approach $XXX to say is we there. granular that and and the a stimulate what $XXX think think not a would This larger the initiatives be we're per-store system. the the time. the I looking total. can is it don't It's things say about franchisee how is mean, all lot you on on you And it I basis. what to should giving tried

Matthew Robert McGinley

Got it.

it you at current they they the terms another be least the lengthens see time revenue. difficult period and – First they that or the understand of second, that that the to you that would don't upcoming cycle glad have with But franchisees planned? doesn't to can term remodel offered cash division current have makes to flow if it on I years, both have prior the more all, long done? of make And second time the have remodel or franchisees remodel the And and XX term that easier that on you on said are my when agreement said it be for extend on to resetting sign for I'm their banks. for any math. as renewal good. we discount deal for the do That's question the is it

Nigel Travis

mean, contract, which deal. change this as I The we the we answer doesn't any as didn't discount. – didn't them And per is per give expect We to no. remodel

Kate Jaspon

around some Yes, this. clarity just

current So in in to required order and good financial you was your to participate had offering, operational current the standing. that last and in on be remodel

participation You are years could out past, there. plenty this saw lot term lot true then franchisees in year but have the a We opt in we of of your of up XX to franchisees than did. term in more years. the still to there A our

they as will not required right opted buy their remodel remodel. be into their the year, years. remodel then Going to is they XX forward, remodel – the will This actual happen what their when to now option remodel date, program, make to given this on their stores, this buy They did they so program. to not be they to had were that last Does up-to-date up sense?

Matthew Robert McGinley

mean more mean they five to that remodeled be ago, five If does years required years will or they remodel required remodel they now they that year, signed-up this does another in be that to XX years? in will if

Kate Jaspon

didn't to remodel. year them their extend that to No, to they have. required prior remodel five We will period still We just the be their term in allowed remodel. they chart

Nigel Travis

is XX a want But years system say, point, the kind point franchisees think that work just a we the every believe like of one and is reasons important is it's stimulation an what really we we five we every to of remodel the to years. I refresh will you're doing. wow, give of there the And detail, to want

earlier that than taking years, remodel the wait rather in five us example. Let

Matthew Robert McGinley

it. Got

you. Okay, thank

Operator

the on Jefferies. with Barish Our line Andy next of question comes

Your line is open. now

Andrew Marc Barish

Hey, guys.

give of kind of wondering – like but from some naturally the development the a address to bit west. just the to kind understand a coming emerging picture that, you of an Just the us remodels little if big happening? starting things with starting Can more the see on of cannibalization are transition, of the overview I little just in and kind is can you core, numbers a is progress you shift bit that, on there, wise, of that maybe kind how this

David L. Hoffmann

hold markets, you move but Yes, west we've west these exposure locations think can't do portfolio, exactly to in looking east to our desire to emerging overnight. before, and it's of the that. don't get our greater of out X,XXX XXX locations these that we're this Andy, you numbers, Mississippi. you me the as I mean, mentioned to know But Mississippi, obvious I

have well in great pragmatic growth this in do to is plenty there still consolidation that certainly, desire cetera. to we going go core. as think order will that. the maximize of be of forward a some But in part areas We mini you through So be and the markets, to et there's as opportunities remodel,

we still west we we markets so markets the So our the seeing think great want XX% core of well. there's forward. openings exposure going the what with out in as in in you're But greater opportunities and call emerging that

we're openings overall And And we're Nigel to just of talked pleased quality I on said, as percent pursuing we're with like and a and about drive drive-thrus that's continuous be do quality, be of us, with new even terms think So the we that. for a to of drive-thru to in thesis, an raised that. pursuing full forward. continuing going improvement. and going way our is then to further journey We've has journey up expressions going to continuous a XX% openings that

Andrew Marc Barish

Thank you.

Operator

next Our Barclays. line Jeffrey comes with question on Bernstein the of

open. is now line Your

Jeffrey Bernstein

Great. you much. very Thank questions Two well. as

on it wondering But The kind you'd discounted McCafé, I first first focus it. is to the in one stores leadership. now did seems say of Needless your like seems doing whether stations. and gas there's on it was upgrading Dunkin' reclaiming they C McDonald's, like is say competition and all-day it AM breakfast, lots intensifying, of U.S. coffee they're for your their

you breakfast how in for about then beverage maybe the industry? growth respond and have you what I be the the you do wondering overall when short category, think rate one to Just the follow-up. And estimate term broader

Nigel Travis

Okay.

very quick there. could as a all all a I've U.S. of got stuff restaurants that's in the front there's with broadly slide that's XXX competition I'm independents. in in I broad me convenience and out with say of you So the here and that question service kinds stores including a numbers XXX using I'm the sitting XXX,XXX, mean, speech the is is competition

we I'm gas, sure, a it asked so to this Is I've question. a into from because say tobacco is become it's And have what we think business time are and of declining. People get get convenience store, electric repeat fair restaurant. moving that get to and so I'll this more convenience said have information declining. cars, I And to to more clearly, they stores is think every I is coffee previously, attractive intensifying? Well, very more

see actual margin. team is job We've the implemented. clearly, day. you sure think offerings positively comped XXXX grew I very I of and the that's value introduced as the the in encouraged our sales, make because mean, in morning a them. we've that comp are We've burger than give on and we quarter and is I'm his increased in mean, strong rate each as I at important. We've Dave against a had have an but said, key which think is opportunity proposition our clearly greater differentiating going to full day-part. to numbers, I'm morning, doing. players I coffee beverage that had not But by market, the sequentially basis western successful comps what

Tony's here the he's even am one-to-one God, of Thank I coming benefits I because it seduced differentiating. initiatives of I by think differentiator. I alone I more think truly true came seduced I about I echo about on bit than one, our are marketing. for digital to being a And want a when This he really Tony Dave nonstop. is said I it absolutely was think what talks mean, board. here, by I and

in leader think a I the field. we're

only the or level, into going announced competitive, continue we've done incredibly I'm in to their to being I will competitive, of to categories to do terms in we there're And will task. competition be competitive ready-to-drink at take love be going incredibly already K-Cups. be who've competitive to we're restaurant and not two like what We to going in sports. people one them we're incredibly entry there and ready-to-drink,

David L. Hoffmann

of that, day-part, blueprint now, the – plan we're seeing of behind as with. is early it's growth, And simplification these year. position of all on core add creating about saving for to morning And our out that's are a what room and that franchisees then which to just But our back sandwiches, road reclaiming with and we've about On-The-Go but is working for to Simplification, new mojo, is comes of hot the right you the next that with not strategy innovation some all transformational impressed working talked really, the on shows, us coffee part I new forward onboard your menu. around brand. around donut the core value brand to about as us to as we we And talked units, about talked move getting we're innovation digital, core way iced then about. we're prosperity before, about to national what a coffee strengthen our around beverage-led,

a all on quality, while so. plan we But big believe executives people we us this transformational is do anybody on tech think of to experience. a the The us, and still say is And differentiated off the but up taste company. and of this can't a is our got we're of digital's food all none the who we're are layering that and the to you for stable focused to We course, role creating and believe king, say third-party just we've important going strategy play great is our quality stacks great as sequencing as it. itself. in in So around and a

So, next strategy that's years. part brand all for transforming of the our of XX the

just Day we skies to to show. shoots we more more going come, get don't you so in to But But to over Investor our so And this yet. starting of I that come the I'm green reveal February, can excited. hope forward. the are

Nigel Travis

XX up I for think years. signed you just

Jeffrey Bernstein

there. I appreciate will stop I the color.

Stacey Caravella

the and back actually your we We're going with patience operator. I'll difficulties conclude you, had thank But Nigel. right, morning. to over All actually for it pass again, to everyone, this technical

Nigel Travis

Okay.

of significant the blueprint we're I we Dave franchisees to for U.S. Dunkin' is have finish, sales a X was excited the segments. earlier, now store making success We're said, future Donuts number exceeded real before. billion over last beverages. announce it we a trailing as I'm number, strong support We've months, excitement. stop. and you. busy pleased it's in point cups revealed existing category, CPG real Dave's XX with good just And and That's an in never as progress that I about beverage our development, to feel, of one the area of in that the Thank the with and So growth, quarter a leadership our it all milestone. said to the from The with

Operator

and in great day. thank conference. may you participation today's Everyone, the your This concludes have for Ladies a you program gentlemen, now and disconnect.

Dunkin Brands (DNKN) 26 Oct 172017 Q3 Earnings call transcript