Here's What Dunkin' Donuts Is Doing to Solve One of Its Biggest Problems

Dunkin Brands' Group (DNKN) gave spreadsheet loving Wall Street analysts several new things to digest on Thursday.

The owner of Dunkin' Donuts and Baskin-Robbins said it will start to significantly reduce the number of items on its menu in a bid to improve wait times and more effectively manage labor. Executives didn't say specifically on a conference call what items would be slashed, except to point out that slower-selling products are the main focus.

"We have thousands of combinations of drinks and sandwiches on our menu, in some cases more than McDonald's (MCD) and other competitors -- we have perhaps gotten too complex," acknowledged Dunkin' Brands Chairman and CEO Nigel Travis in an interview with TheStreet. Travis believes simplifying the menu will help speed up lines both in stores and via drive-thrus.

To be sure, Starbucks (SBUX) may want to follow Dunkin's lead on menu simplification given its new challenges with uber long lines.

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As for the other fresh tidbit -- the historical growth juggernaut that is the Dunkin brand will open 383 new U.S. restaurants in 2017, a slower pace than the 397 opened in 2016.

Travis says Dunkin remains a "development machine", but that recent years of increased regulation and higher state minimum wages may have weighed a bit on how many locations franchisees would open this year.

Dunkin' sees full-year earnings in a range of $2.34 to $2.37 a share. Analysts were looking for $2.42.

Wall Street cheered the sharper menu focus as well as a U.S. business that ended last year on a good note from sales and profit perspectives. Dunkin' shares rose 4% on Thursday to $54.10.

Dunkin' fourth-quarter earnings came in at 64 cents a share, beating Wall Street forecasts for 61 cents. Net sales clocked in at $215.7 million, up 5.8% from the year earlier, and ahead of analysts' estimates of $215 million. Operating profit margins rose to 55.3% from 51% a year ago, excluding one-time items.

Among the company's two chains, it was Dunkin' Donuts that showed the most encouraging signs amid a new push toward higher-priced hot and cold beverages. Same-store sales at Dunkin's U.S. business rose 1.9%, relatively in line with Wall Street projections. The company saw strength in its higher ticket offerings such as the new Sweet Black Pepper Bacon breakfast sandwich and cold brew coffee.

TheStreet talked with Travis about the quarter and what he has planned for 2017. What follows is a condensed and edited version of our conversation.

Dunkin' wants to make its lines even faster

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