I was not allowed to ask a question on the conference call, yet I heard the tone that acknowledges I was in the queue.  I will try again next quarter.


Dear Mr. Travis,


Congratulations on the successful IPO of your company Dunkin’ Brands.  I know the process can be long and taxing answering what seems to be the same questions over and over again.


I wanted to take a moment to introduce myself and my firm.  I have been a sell-side analyst on Wall Street since 1990 and over the years have covered Food, Beverages, Tobacco, Restaurants and selected small cap companies.  For what it is worth, I have been ranked #1 by the WSJ and Intuitional Investor in multiple categories. 


My firm, Hedgeye Risk management (www.hedgeye.com) features some of Wall Street’s best regarded research analysts - united around a vision of independent, un-compromised real-time investment research as a service. Our research teams have buy-side experience, which adds uniqueness in our approach to delivering value-added research, insights and ideas to our clients.


Maybe there was a technical problem, but for some reason I was not able to ask a question on your conference call.  As part of my research process, I don’t feel the need to ask questions on every company’s earnings call but this was my one chance to get a few questions answered since I was not involved in the road show process. 


In addition, I have reached out, on several occasions, to the company through your IR department and did not get any response.  I assume that is also because of the SEC regulations regarding “quiet periods.”


Today’s conference call was helpful but I have some questions that have not been answered.  In particular, I’m focused on the future growth model and a few other issues.

  1. Can you talk about how the system developed in New England (i.e. who was responsible for building  the CML’s)
  2. How important are the CML’s to the franchise economics?
  3. How many stores does a CML support?
  4. Do you need more CML’s in the East to support future growth?
  5. How many CML’s are west of the Mississippi?
  6. If you build a CML west of the Mississippi, who will fund the building of the facility?
  7. What types of incentives are you offering to franchisees in the Greenfield markets?

Depending on how the previous questions are answered and looking at the data from the S-1, it appears the future growth west of the Mississippi will incorporate a different growth model from that which made the company so successful in the New York and New England. 


As you have said in the S-1, ‘in newer markets, Dunkin’ Donuts brand restaurants rely on donuts and bakery goods that are finished in restaurants. We believe that this “just baked on demand” donut manufacturing platform enables the Dunkin’ Donuts brand to more efficiently expand its restaurant base in newer markets where franchisees may not have access to a CML.’


What market can you point to where the “just baked on demand” model has worked successfully and for how long?


To date, the company expansion plans west of the Mississippi have been less than successful.  There was some big fanfare in the Minneapolis market a few years ago that has not panned out.  In addition, Phoenix and Las Vegas markets might even be called “franchising failures.” 


I’m looking to better understand the growth model and the implications on the company’s earnings and returns.  As you said on the conference call, a move to open more stores in Germany and Russia would help to improve average unit volumes in The Dunkin international division.  Isn’t the opposite true for the USA?  The more stores you open away from the core market in NY and New England will lower the average unit volumes in the USA?


If DNKN is truly in a growth mode, the returns on the new incremental growth will be the key metric that sustains the company current valuation and investor’s long-term support for the current business plan.


I have other unanswered questions but I guess they will have to wait.


Again, congratulations on the successful IPO.




Howard W. Penney



Howard Penney

Managing Director



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