Dunkin’ Brands: How a Business ‘Built on Ritual’ is Getting More Digital

There are two varieties of innovation at Dunkin’ Brands: donut and digital.

Scott Hudler, Chief Digital Officer at the Canton, Mass. company, is responsible for the latter — though earlier in his tenure he was responsible for starting the food and culinary innovation group, which focuses on the former.

But both exist because in a chain with nearly 20,000 locations worldwide — 11,500 are Dunkin’ Donuts, and 7,600 are Baskin-Robbins ice cream — keeping the operations humming is top of mind for almost everyone.

Whether headquarters employees worked on the food side of the business or the tech side, Hudler says, “the innovation part of the job was just falling off the table, because you constantly have supply chain issues, operational issues, franchisee issues.”

And in 2017, “the innovation piece of our business is becoming more and more important to us,” Hudler explains, “because we’re fighting some incredibly well-capitalized competitors in McDonald’s and Starbucks. If the analogy is ‘Moneyball,’ then we’re the Oakland A’s. We’ve got to be smarter and faster. Consumers don’t give anybody second chances from a tech standpoint.”

DEFINING THE OBJECTIVE

Dunkin’ Brands is a publicly-traded company with $828 million in 2016 revenues and 1,100 employees. Nearly 100 percent of its locations are operated by franchisees.

“We’re a brand that is about busy people who have busy lives,” explains Hudler, who joined the company in 2006. He reports to David Hoffman, the President of the Dunkin’ Donuts brand in the US and Canada. “Our goal is to be the most-loved, on-the-go beverages brand.”

Illustration by Jason Schneider for Innovation Leader.

When Hudler was Vice President of Brand Marketing, he created the food innovation team, which develops new products like frozen coffee, fruit teas, and pretzel croissant breakfast sandwiches. Based on that team’s track record and impact, “we made the case for a digital innovation team,” Hudler says. “It’s a very replicable model, because on the digital side, you have very similar needs and tension points with people. If someone here on the IT team is really just laser-focused, as they should be, on the [current] mobile [app] and its performance, they’re not going to have as much time to think about what’s next.”

That digital innovation team started as a “one-man band,” Hudler says, but has since grown to six people. “They’re not involved at all in the day-to-day product discussions,” he explains. That lets them focus on how, for example, voice technologies like Google Home or the Amazon Echo might change the ordering experience in a consumer’s apartment, or at a restaurant’s drive-through.

What helped Hudler make the case for the new team? “The breakneck pace of technology, and how retailers are seeing technology impact their businesses, both positively and negatively,” he says. “We realized that we have to be nimble, and we have to be fast. All retailers are feeling this — it’s exciting and nerve-wracking at the same time.”

RUNNING TESTS

Much of the digital innovation team’s work has focused on making the customer’s stop at a Dunkin’ Donuts location speedier and more convenient.

“We’re a brand and a business really built on ritual,” Hudler says. “So whatever we can do to make that relationship easier tends to pay off.” Being a leader in digital, he adds, often involves removing friction — like waiting in line at a counter or drive-through.

Dunkin’ rolled out mobile ordering nationwide in mid-2016, but it isn’t yet widely used. Hudler says the percentage of customers ordering in advance with the Dunkin’ app is still below 5 percent, but that those who do “have higher satisfaction. We give them the gift of time back.”

As with any technology, the mobile ordering feature of the app has its early adopters — and others who are aware of it, but haven’t yet tried it. “We’ve been really focused on getting people to try it that first time,” Hudler says. Among the tactics that have worked so far are offering bonus points in the Dunkin’ loyalty program for using it, or a discounted coffee if a local team wins.

“In Philadelphia and Boston, they’ve done promotions around team wins/you win,” Hudler says. If the Philadelphia Flyers win a hockey game, for instance, and a customer uses the app to place a mobile order, they can get a medium hot or iced coffee for 50 cents.

“The rewards program and special offers are both big drivers,” he explains, in getting customers to download the Dunkin’ app and begin using mobile ordering.

In December 2016, Dunkin’ began testing curbside delivery at one location in the Boston suburbs, as a way to make it easier for customers to stop by a location that doesn’t have a drive-through. When the customer parks in the lot, an employee dashes out with the order. “We jokingly refer to it as the mom or dad with kids in car seats,” Hudler says. “They really want a coffee, but they’re not going to undo the car seats or leave their kids in the car. They might also not want to leave a pet in the car. It’s a great way to give people the opportunity to use us the way they want to use us.” The curbside delivery test rolled out to more Boston-area stores in July.

Dunkin’ Brands CEO Nigel Travis has described delivery to homes and businesses as a “holy grail” for the company, and starting last year, Dunkin’ has been testing that with partners like DoorDash and Favor.

“Every day, there’s another whitepaper published about how delivery is going to disrupt the entire restaurant business,” says Hudler. “We’re continuing to look at how we unlock the growth in that channel.”

One possibility may be allowing franchisees to build so-called “ghost restaurants” that don’t need space for cash registers, counters, or tables; they’ll only produce and package up orders for delivery.

In testing these new offerings, Dunkin’ needs to take into account how they will affect a store’s operations. “We constantly are asking, how does everything we’re doing integrate with our operations team, in terms of making Dunkin’ a better experience,” Hudler says. He says that franchisees, in general, “are very eager to test with us.” But ensuring that they remain eager means being sensitive to the dynamics of the fast-paced, high-stress store environment.

WHAT’S NEXT

Illustration by Jason Schneider for Innovation Leader.

Hudler says that it’s important to understand changes in the way consumers use their smartphones — and look for the opportunities that creates. “Consumers are on their phone 23 hours a day,” Hudler says. “A lot of it is information, work-related, or social, but it’s also a great tool to make the restaurant experience better.”

Dunkin’ is also considering testing an older technology: the touch-screen kiosk. “One analogy we use a lot is flying on an airline,” Hudler says. “To get your boarding pass, you could get it on your phone or your laptop. You could go to the self-serve kiosk. Or you could go wait in line and talk to someone. We want to be able to offer all of those options.”

Dunkin’ Donuts President David Hoffman likes to observe that the drive-through of a typical quick service restaurant hasn’t changed much since it was invented in the 1940s. “That’s something that seems ripe for disruption,” Hudler says. What if Alexa- or Siri-like speech recognition technology could be used to take orders, verify accuracy, and relay them to kitchen workers? “We think there are some things that can make the drive-through experience much better,” he says.

With Starbucks aggressively promoting its own mobile ordering service (see our 2017 interview), and McDonald’s planning a nationwide roll-out later in 2017, Hudler says that Dunkin’ executives feel that “we have to out-punch our weight class a bit. We’re eager to try things, learn, fail.” But the overall objective for his team, he says, is that “we need to be sure that we’re building solutions that all ‘ladder up’ to being the most-loved, on-the-go beverage brand.”

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Editor’s Note: After spending 11 years at Dunkin’ Brands, in July Hudler announced that he would join Dick’s Sporting Goods as Chief Marketing Officer.

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