Johannesburg - South Africans wanting hot, glazed doughnuts with a gulp of coffee can now choose between two US brands - Dunkin’ Donuts and Krispy Kreme.
Dunkin’ Brands Group opened its first outlet in Cape Town on Thursday, the first of five scheduled to start in the coastal city by the end of 2016. That’s according to Alan Keet, chief executive officer of South African leisure company Grand Parade Investments, which will run the stores as a franchisee.
Dunkin’ intends to open in Johannesburg in the first half of 2017, where the company will compete directly with rival Krispy Kreme Doughnuts, which already has a presence in the country’s most populous city.
“When we go to any particular area we want to go with a bit of a bang and not just open one remote store,” Keet said in a phone interview.
Yes please! 🍩 (📸: @theblondeconfetti)
A photo posted by dunkindonuts (@dunkindonuts) on Jul 16, 2016 at 6:04am PDT
Drawing on the experience of operating Burger King restaurants in South Africa, Grand Parade plans to open clusters of stores to make the new brand more visible, Keet said.
Dunkin’, based in Canton, Massachusetts, wants to have 250 stores in South Africa in 10 years, Keet said, and Grand Parade has the rights to expand the brand into six more countries in the region.
Dunkin’ follows other US chains such as Yum! Brands’ Pizza Hut and Starbucks, in entering South Africa in the past two years, seeking to tap consumer demand for popular US fast-food brands. Krispy Kreme, which opened its first Johannesburg store in November to lengthy queues, has five South African outlets. Grand Parade also plans to open the country’s first Baskin-Robbins ice-cream store, another Dunkin’ brand.
Spreading awareness
Challenges for the company include making South Africans aware that it sells more than just doughnuts, according to Keet. Grand Parade needs to “make people understand, despite the name, it’s a coffee and bakery offering”, he said. The coffee is imported and a medium-sized cappuccino costs R26 ($1.81), while six doughnuts cost R70.
Krispy Kreme’s South African franchisee Fournews didn’t immediately respond to requests for comment on the company’s performance in South Africa to date.
Grand Parade has hedged against the fluctuations of the rand, Keet said, without specifying the forward cover rate. That means that “for the first 12 months whatever the rand does is not going to impact us at all”, he said.
A photo posted by dunkindonuts (@dunkindonuts) on Sep 10, 2016 at 10:40am PDT
The South African currency on Tuesday weakened against the US dollar by the most since June after Finance Minister Pravin Gordhan was summoned to appear in court on fraud charges. The currency has strengthened about 8 percent this year.
Dunkin’ Brands shares have climbed 21 percent this year and declined 0.7 percent to $51 as of 9.40am in New York, valuing the company at $4.7 billion.
Grand Parade fell 0.3 percent by 3.40pm in Johannesburg. Krispy Kreme is closely held.
A photo posted by dunkindonuts (@dunkindonuts) on Apr 6, 2016 at 11:53am PDT
BLOOMBERG