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Dunkin' Donuts CEO on Growth, Volatility, and Helping America Run on Dunkin'

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You judge an IPO in two ways. Can you guess what they are?

Dunkin' Brands (NASDAQ: DNKN) has been having a terrific month. After pricing its IPO at $19 per share, the stock soared; today, the company closed at $28.39.

CNBC reporter Nicole Lapin scored the first interview with Dunkin's CEO, Nigel Travis, who spoke about the success of the company's IPO.

“You judge an IPO in two ways: one is demand,” Travis said, adding that the demand has been great. “But we also want to have shareholders who will stay with us for some time. I must say that I've met some incredible people over the last two weeks. I hope so many of them are shareholders for a long time.”

Lapin, whose brilliance and expertise enabled her to chat one-on-one with Dunkin's chief exec before the rest of the media, was quick to ask about how the company plans to use its new funds.

“We're gonna pay down debt,” Travis said, adding that Dunkin' Donuts would also use some of the money to expand. “We're moving further west, but principally we're growing in the center part of the country.”

“I don't think we're going to be going to the west coast too soon,” Travis continued. “We've got some outposts in Las Vegas, Dallas and Phoenix. But we could actually build the next 3,000 stores in the U.S. staying east of the Mississippi. We're very focused on continuous expansion.”

Travis said that Dunkin' Donuts is a well-disciplined corporation. “We want stores to open that are going to be successful,” he said. “We want our franchisees to be successful.”

One of the wonderful things about the franchise system is that it creates a degree of insulation, Travis revealed. “We have very few stores,” he said. “One of the problems with owning stores yourself is that you get the volatility of costs going up and down. Because we don't have that, we're excluded from that volatility. Having said that, we work with our franchisees to make sure that they aren't adversely hit by, say, coffee prices going up, and other prices going up.”

Travis also said that the franchisees have done a great job of managing coffee prices. “Our franchisees have been very slow to increase prices, because at the end of the day, Dunkin' Donuts is all about value,” he said.

Internationally, Travis refers to Baskin-Robbins as a “jewel.”

“We think Baskin can be everywhere,” Travis boasts. “It's a wonderful ice cream brand. Everyone talks about our 31 flavors. We actually have 1,000 [flavors] in our library. It's a brand that's so vibrant.” Travis added that the Baskin-Robbins brand is particularly strong in Japan and Korea.

With regards to coffee, Travis said that the company is “very fortunate, and our franchisees are fortunate.”

“If you look at margins, you will see that our beverages are the highest,” Travis said. “But we also have some great margins on breakfast sandwiches.”

Travis concluded the interview by telling a story about a guy he met who visits Dunkin' Donuts 17 times a week. “I said to him, ‘What do you do at Christmas?' He said, ‘I make sure everyone has Dunkin' gift cards.' We've got lots of fans. It's an unbelievable brand. In fact, we've got two unbelievable brands. Baskin has fans like that on the west coast as well.”

 

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