Dunkin’ Donuts has introduced a new $3.99 grilled chicken flatbread , following Starbucks’s move last month to test seven new hot lunch sandwiches in some cafes. It’s a part of an effort to boost afternoon sales and entice the lunch crowd after the morning java business subsides.
Fast food chains like McDonald’s has attacked the coffee business, increasing pressure to fire back at traditional fast food bastions. At the same time, coffee chains are challenging sit-down restaurants by revamping their décor, and in Starbucks’ case offering alcohol and tapas. At coffee and doughnuts shops, about 65 percent of the customer traffic happens in the morning, according to NPD Group Inc. During Lunch and afternoon snack hours the traffic reduces to a third of a traffic seen in the morning hours, while dinner is just 2 percent.
- Warning! GuruFocus has detected 2 Warning Signs with SBUX. Click here to check it out.
- SBUX 15-Year Financial Data
- The intrinsic value of SBUX
- Peter Lynch Chart of SBUX
Managing the Décor
Dunkin’ Donuts embarked on a more café style store re-design last year, complete with earth toned walls, jazz music and cozy booths, to encourage diners to hang out in the afternoon. In the past year, they also added non breakfast food items, such as bacon-ranch breaded chicken sandwich, and a nationwide loyalty program.
Starbucks is also gunning for the lunch customers. It began offering new sandwiches in 178 cafes in Phoenix, Richmond and Virginia on May 6. The test includes a grilled-chicken sandwich, topped with bacon and swiss for $5.95, a grilled cheese for $5.25, and a beef brisket and cheddar baguette for $6.95. The sandwiches are pre packaged and heated in stores, similar to the Seattle-based chain’s Panini lineup. Starbucks plans to introduce new lunch sandwiches nationwide in fiscal year 2015, which starts near the end of September.
Coffee selling chains have long experimented with ways to draw out more customers after noon with softer seats, free Wi-Fi, and hot foods. The results so far have been mixed. About 40% of the sales at Dunkin’ Donuts are generated after 11 am. Starbucks, however, has been more successful in shifting some dollars to the post breakfast slump. Now around 60 percent of the sales come after 11 am, compared with about 50 percent that the company reported a year ago. Starbucks, which first began selling sandwiches in 2003, bought the owner of La Boulange bakery in 2012 to improve its selection of scones, muffins and cookies. Earlier this year, it retooled its breakfast menu with ham and swiss crossiants, and turkey-bacon sandwiches. The chain has struggled with getting its food right over the years.
Dunkin’, meanwhile, aims to impress its customers with the marinade on their new chicken sandwich. The 360 calorie sandwich is topped with cheddar cheese and ancho chipotle sauce. Dunkin’ also tested ranch and honey mustard. Starbucks is taking its food a step further. The world’s largest coffee shop operator is coming up with a new restaurant in Los Angeles this month that will serve dinner items such as burgers and cocktails.
The new competition between the two famous fast food chains is a tough one as awareness is one of the biggest challenges that will come their way. Then they need to have proper equipment as well as a deep pocket to make large amount of investment to strengthen its channels. It’s now time to wait and watch which coffeehouse chain pleases our palate more.