Dunkin' CEO: Wages Should Go Up, But Not So Quickly

One of the nation’s most recognizable coffee chains, Dunkin’ Donuts, is expanding in the United States and abroad.

Dunkin’ Brands announced today that it opened 80 new Dunkin’ Donuts stores in the U.S. and 154 worldwide in the second quarter. The company is making a push into the coveted West Coast market, where the competition is brutal.

Meanwhile, the entire fast food industry is engaged in a nationwide debate over raising the minimum wage. New York is expected to move forward on a measure that would force fast food chains to raise their minimum wage to $15 an hour within a period of years.

As part of our View From the Top series, CEO Nigel Travis speaks with Here & Now‘s Jeremy Hobson about the company’s strategy and industry trends.

Interview Highlights: Nigel Travis

On the toughest markets in the U.S. for Dunkin’ Brands

“I think we have some excellent markets. I think probably some of the markets that are recovering from the recession still. Around the Detroit, Buffalo area has been difficult, we’ve got some strong competition there. But I’m very enthusiastic about what we’re doing in those markets. They’re lagging the success we’ve had elsewhere, but I’ve got family connections with Detroit, I’m very excited about what’s happening there, and I was out with the franchisee from Buffalo only last night, and he has a great plan that he’s working on, and I think we’re going to see success there. So even though they’re lagging, one thing we’ve been very successful with over the last few years is taking markets that aren’t quite as successful and turning them around.”

On New York increasing the minimum wage to $15 for fast food workers

“The first thing I would say is that, clearly in this country there are several issues that need to be faced. Income inequality is clearly one that’s on everyone’s mind. I think minimum wage, take my personal view, should increase, and I think you’ll find that virtually all of our franchisees believe that as well. We have constant discussions about this. I think what we support is a gradual increase of the minimum wage. What we’re concerned about in New York is that, there was a process that went away from the norm, they didn’t involve the legislature, they didn’t consult with our industry, it was only focused on the fast food industry, which seems very strange. So it’s a very strange process, and I think that the movement to $15 by 2018 is actually a more aggressive rather than has been campaigned by many of the people who want to move it to $15. So it does seem to be a strange decision. It’s one that didn’t follow a proper process, and I think the results are, I’d be concerned about employment, and there were various surveys done about the effect of increasing minimum wage too quickly – so it can affect employment.”

“We’re going to obviously respond in terms of mitigation, because we’re focusing on franchisee’s unit economics, so we will make sure that our franchisees stay whole. We’ll obviously have to look at price increases, we’ll look at reducing costs, we’ll look at reducing the cost of the restaurant in terms of their supplies, but it does seem a strange decision. And I think because we have some of the best unit economics in the industry, Dunkin’ Donuts will be OK. But I think we will lose some of our competitors, which you could argue is actually good for us. But I think the increase was too much too soon.”

How the company is addressing health concerns

“We’ve already focused on beverages. Most of our beverages are pretty low in calories and sugar and everything else, and people can decide whether they put sugar in or not, so that’s a personal choice. We’ve also for many years been a leader in giving people choice in terms of the menu, we have the DD Smart menu, and on the Baskin-Robbins side, we have Bright Choices, which is our low-calorie options. So we fully support giving people the choices as to what they have in their food.”

“I think one thing that we’re kind of excited about is the smoothies I touched on earlier. Our smoothies are made of real fruit, and this is our move to higher-quality, more natural products. I think when you look back at some the products that we’ve had in recent times, I think that also supports that trend. Our recent bacon guacamole flatbread sandwich was another one, and that had not only guacamole but it also had avocado, tomato, onion, salt, lime juice, cilantro, et cetera, all in the product. So we’re moving more and more to natural ingredients, and we’re looking very hard at the ingredients we have. So I think we’re doing everything we can, but the key thing is to give our consumers choice, and I think by our results that you saw in the quarter, our consumers are responding well to it.”

Guest

• Nigel Travis, CEO of Dunkin’ Brands Group.

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