Dunkin’ Brands: Franchisor of Quick Service Restaurants Coffee, Baked Goods, and Ice Cream

Jeff Auxier presented his in-depth investment thesis on Dunkin’ Brands (NYSE: DNKN) at Best Ideas 2016.

Dunkin’ Brands is a franchisor of quick service restaurants serving hot and cold coffee, baked goods, and hard serve ice cream. The company’s nearly 100% franchised business model includes 11,300 Dunkin’ Donuts and 7,300 Baskin-Robbins locations that operate roughly 81% in the US and 19% internationally. Playing off their 60 years of experience, market knowledge, and strong employment trends, DNKN is well positioned to take advantage of crashing energy prices as travel increases and consumers eat out more frequently. Their well-developed supply chain is also benefiting from the lower cost of raw material purchases and transportation. The geographic expansion south from DNKN’s strong New England presence will service the baby boomers migrating to the East Coast and Florida. DNKN’s franchise model is very attractive, as it enjoys the royalty on sales and is less capital intensive. The stock is currently priced at one of its lowest P/E Ratios since coming public. Management is focused and working hard on developing new products with compelling value as it faces fierce competition from Starbucks and McDonald’s.

About the instructor:

Jeff Auxier began lessons in finance early–at age 11, mowing the lawn of Robert Pamplin Senior the former long-time CEO of Georgia Pacific and recipient of the “World’s Top CEO Award”. Mr. Pamplin tutored Jeff on living a life of ethics. As Jeff puts it, “Mr. Pamplin always put his shareholders first and believed business should be transparent. He said the language of business is accounting, and that if you can’t speak the language, you can’t make money.” In 1981, Jeff graduated with honors from the University of Oregon with a degree in Finance and an emphasis on accounting. Immediately, Jeff began calling or personally meeting with some of his investment heroes, long before they became today’s financial rock stars. Names like Warren Buffett. Not yet known as the Oracle of Omaha, Mr. Buffett graciously took several of Jeff’s calls and offered advice, most notably, “Number one don’t lose your principal and number two, never violate the first rule.” To this day, the cornerstone of the Auxier Focus Fund is respect for the power of compounding.