Coffee Buzz

Money :

By the time the doors opened at 5 A.M., nearly two dozen people were waiting in the sultry late August heat. Their mission: coffee and doughnuts. That’s what happens these days at the grand opening of a Dunkin’ Donuts, in this case at a shopping center in the Nashville suburb of Franklin, Tenn.

Electricians, office workers – even the town mayor and athletes from the local NFL and NHL teams – piled in throughout the morning. By the time the stampede subsided, customers had purchased 600 dozen doughnuts in a little more than five hours. That’s about 1.4 million calories, give or take a cruller. The crowd would have bought more, but the store ran out well before noon. Who’d have thought a frumpy regional chain from outside Boston – best known for a somnambulistic TV spokesman mumbling “time to make the doughnuts” – could be sparking a frenzy in suburban Tennessee? Even more striking has been Dunkin’s transformation from a musty doughnut house that sells coffee into a blue-collar-chic coffee retailer that happens to sell doughnuts. CEO Jon Luther admits that Dunkin’ has considered removing “Donuts” from its name (he’s mum on potential alternatives) now that sugary confections represent a mere 15 percent or so of its sales.

Caffeine is delivering a jolt to the company. Sales have surged more than 40 percent during Luther’s nearly four years as CEO, and Dunkin’ claims its coffee-drink market share is up from 15 percent to 18 percent. Meanwhile, the company has been expanding at top speed, opening 550 outlets in the past year.

That’s only the beginning for Dunkin’, which was bought for $2.43 billion in December by private equity firms Bain Capital, the Carlyle Group and Thomas H. Lee Partners. They’re supporting Luther’s plan to stretch Dunkin’ beyond its Yankee roots to the Southeast, Midwest and eventually the West Coast, with the goal of tripling Dunkin’s U.S. locations to 15,000 by 2020. To grab more sales in the slack afternoon hours, the company is also remodeling drab stores and expanding the menu beyond baked goods to include items like Dunkin’ Dawgs (tiny pigs in a blanket).

Dunkin’s plan faces myriad obstacles. The company has failed in the past when it tried to expand beyond its home market. And the menu alterations risk alienating, say, Boston Kreme loyalists who are turned off by the espresso crowd.