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Valley coffee war deepens, one dunk at a time

PHOENIX — Jason Duffy sips a latte as his staff sets up bakery racks for a new Dunkin’ Donuts shop in northeast Phoenix. In the background, one of his business partners is munching on a blueberry muffin and chattering on his cellphone. He eyes every item on the menu, double-checking how it will appear to customers.

For years, Dunkin’ Donuts was symbolized by the tired little old man who came in at 5 a.m. and muttered, "Time to make the donuts." Coffee-related beverages were a hot ticket but a marketing afterthought.

Now the 58-year-old brand is changing its battle plan. It will focus on caffeine and healthier breakfast sandwiches that feature flatbread, egg whites and turkey sausage. And tomorrow, the company will kick off one of its largest market pushes ever when it opens seven stores Valleywide.

Its five-year plan calls for opening 150 locations in the Valley, Duffy says, even as Starbucks throttles back, shutters 600 locations nationwide and re-shapes its brand.

Duffy and other Dunkin’ franchisees smell a coffee-like opportunity. He points to the company’s 96-percent recognition rate, consumers’ growing interest in tasty, inexpensive coffee and the fact that much of the company’s caffeinated beverages are about 20 percent cheaper than those offered by competitors.

Despite the ongoing economic turmoil and its effect on competitors, Duffy says he likes his chances. His Anthem-based investment group, Olympic Fields Associates, plans to open 19 locations across Phoenix, Paradise Valley and Scottsdale over the next five years. [Duffy is also exploring opening a location inside the new Downtown campus for the Cronkite School of Journalism and Mass Communication.]

The big dunk in the Valley is part of the company’s larger effort to expand West over the next five years in markets where residential growth has been phenomenal, Duffy says. The Phoenix-Metro area was an obvious choice.

"It’s a top-tier market," he says.

Although the timing isn’t exactly ideal, Duffy says, it’s only a small speed bump in the company’s long-term plan for Phoenix. Paul Travis, a OneAccord partner who focuses on food-service marketing and franchising, says Dunkin’ Donuts may survive and thrive.

"They may not be playing ‘lead’ between McDonald’s and Starbucks, but they have done a decent job competing with bagels and premium coffees," Travis writes in an email. "While they cannot compete on a gross-sales-per-foot basis, they hold their own.

"The soft economy," he adds, "will affect all businesses, but low price point items will always survive — indicating they will be more competitive than Starbucks and other ‘premium’-positioned brands."

Another franchise expert, Dick Rennick, applauded the company’s one-day, multi-opening bonanza but says consumers shouldn’t expect stores to be on every corner in the Valley. Rennick, a 40-year veteran of the franchising industry who has hung out with Wendy’s founder Dave Thomas and McDonald’s founder Ray Kroc, says Dunkin’ Donuts is too smart to be the next ubiquitous coffee chain.

"I don’t think you’ll see a Dunkin’ on every corner," Rennick says. "I think they’re learning from the mistakes that others have made before them."

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>>Email the editor at aklaw@zoniereport.com.