Dunkin Donuts: Adios Combo Meals
Dunkin Donuts is testing a way to boost the check average by unbundling sandwiches, sides and coffee. The test, underway in a franchised unit in northern New Jersey, features new digital menu boards that list items and prices a la carte, according to BTIG research analyst Peter Saleh.
Saleh, who describes the changes in a new report, writes: “We note this new menu structure is not just about presentation but rather a significant change in the offering, as the combo meals are no longer displayed or even offered at this location.”
About 20 Dunkin Donuts — all franchised stores — do business in and around Middletown Township, where the test unit is said to be. Apparently, no other Dunkin Donuts stores in the area are involved in the test.
Bundled (or ”combo”) meals are ubiquitous because they offer fast-feeders a way to serve customers quickly for a set price. Even better, sales and profits climb due to the bundle’s nominally priced extra item — typically hash browns at Dunkin Donuts. The report estimates prices will jump 10%-12% in “the new structure,” which includes menu items from 16 combo meals. The meals account for roughly half of the unit’s sales, Saleh notes.
“It’s tough to say for sure, but Dunkin Donuts may have cured an issue,” says consultant Mike Lukianoff of Fishbowl, a pricing expert who works with chains. He believes the new pricing format may be an attempt to strike a balance between speed-of-service and getting the up-sell while avoiding what he terms “value-perception barriers.”
A table in Saleh’s report, for example, shows the unbundled price of Ham, Egg and Cheese on an English Muffin, hash browns and medium coffee is up 11.2%, to $6.77(vs. $6.09). The report also notes pricier egg sandwiches move to front-and-center on the refreshed menu boards, which feature new graphics. “This de-emphasizes the donut and bagel options which are traditionally the first 3 combo meals,” Saleh writes. Dunkin Brands didn’t respond to our request for more information about the test.
Lukianoff, however, cautions the report assumes no change in how consumers will react to the a la carte pricing model. “There will almost certainly be some change in purchase behavior,” he adds, predicting hash brown sales are likely to plummet 15%-20%.