Starbucks vs Dunkin: Business Models, Branding & Quality Compared!!!

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Starbucks vs Dunkin: Overview

Like you know already, the two major coffee-based restaurant chains in the United States are Starbucks Corp. (SBUX) and Dunkin’ Brands. Basically, both businesses have similar overall aims and offer similar coffee selections (but distinct food options). Also, their business approaches differ significantly in terms of scale, shop ownership, and branding. But then, despite the fact that Starbucks started 20 years after Dunkin’ Donuts, it has grown rapidly and is now a far larger company. In 2020, Starbucks earned over $23.5 billion, while Dunkin’ Brands, on the other hand, earned $1.3 billion. Furthermore, Starbucks has a stronger global presence, with approximately 30,000 locations vs 13,000 for Dunkin’ Brands.

This goes a long way to show how different they are regardless of certain similarities they possess when it comes to product offerings.

The ensuing paragraphs cover a couple of other touchpoints that will help you understand the disparity in the Starbucks vs Dunkin business models.

Starbucks vs Dunkin: Meaning

What is Starbucks?

Starbucks markets itself as a beverage company that also provides a more traditional coffee house dining experience. Customers’ comfort is prioritized in the design of Starbucks establishments. The pleasant decor and free Internet connection are intended to make it a more appealing alternative for individuals looking for a place to read, relax, or communicate with friends. Going to Starbucks becomes a potential social activity as well, transforming the establishment into a destination rather than a mere distribution point. Customers looking for a high-end experience would like this.

Furthermore, customers with higher discretionary incomes are more likely to pay a premium for higher-quality goods. People with smaller disposable incomes are more inclined to change their consumption habits during economic downturns than those with higher financial reserves. But while the macroeconomic environment has an undeniable impact on Starbucks, the company is well-established with a more resilient and less price-sensitive consumer base, which helps to mitigate the effects of economic cycles.

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Starbucks has also adjusted its focus to include additional products geared toward customers in the afternoon and evening. As a result, small dishes and sandwiches, as well as wine and beer, are often available.

Starbucks, like Dunkin’ Donuts, overhauled its management in mid-2018. Howard Schultz announced his exit from Starbucks in 2018. Mellody Hobson was named vice-chair of the Starbucks board of directors, while Myron E. Ullman was named chair. Ullman stepped down as chair in March 2021, and Hobson took over.

What is Dunkin’?

Dunkin’ Donuts promotes itself as a coffee shop that also sells donuts and meals, as seen by a coffee cup prominently displayed on the business’s emblem. But, despite its reputation as a coffee shop, food remains an essential part of Dunkin’ Donuts’ menu.

The power breakfast sandwich and the sourdough breakfast sandwich are two of Dunkin’s hearty morning sandwiches. As of 2021, the menu includes healthier choices like avocado toast, as well as Stevia as a sugar alternative, and oat milk.

The interiors of Dunkin’ Donuts and Starbucks establishments are designed to be visually distinct, with the former generally imitating fast-food restaurants in terms of furnishings and decor.

In 2018, David Hoffman was named CEO of Dunkin’ Brands.

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Hoffman joined Dunkin’ Brands as president of Dunkin’ Donuts in the United States in 2016. He was in charge of the company’s US operations as well as the coffee chain’s new concept shop. Hoffman took over for Nigel Travis, who had retired from the post. In 2009, Travis took over as CEO. Travis is the current chairman of the board.

Starbucks vs Dunkin : General Outlook

Almost every Dunkin’ Brands location is a franchise. Starbucks outlets are disproportionately found outside of the United States.

The operational and capital expense structures of company-operated stores differ from those of franchised outlets. Starbucks’ cost of goods sold (COGS) and store running expenses account for a substantially higher percentage of sales than Dunkin’. Furthermore, Starbucks’ profits are more severely influenced by changes in coffee bean prices since COGS is so much more significant in its expense structure.

Starbucks also has a higher capital expenditure weight than Dunkin’ Donuts, which is not required to buy cooking equipment for franchise stores.

On the other hand, the higher exposure franchises of Dunkin’ Donuts result in a fundamentally different company than Starbucks’ mainly owner-operator model, which has significant consequences for revenue streams, cost structure, and capital spending.

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Nevertheless, Starbucks has developed a higher-end brand than Dunkin’ Donuts. Starbucks has a larger menu and allows for more product personalization, which is emphasized by the fact that each customer’s name is written on the side of their cup. Customers are encouraged to mingle, work, study, read media, or listen to music while consuming Starbucks drinks since the corporation provides a nice and quiet setting with a free wireless internet connection. When these elements are combined, they provide a more luxurious experience that commands a higher price.

Dunkin’ Donuts offers more affordable prices and caters to the middle class. Dunkin’ Donuts management has stated in corporate filings and earnings conference calls that it intends to be the lowest-cost provider in the market while keeping quality above an acceptable level.

Starbucks has narrower margins than Dunkin’ Donuts because it owns and operates its own locations. Starbucks has historically had a smaller capital expense burden than Dunkin’ Donuts.

Key Takeaways (Starbucks vs Dunkin)

  • The two largest coffee-focused restaurant chains in the United States are Starbucks and Dunkin’ Donuts.
  • In terms of market capitalization and store count worldwide, Starbucks is the larger firm.
  • Starbucks has also developed a more premium brand, with shops that resemble a cozy coffee shop, a larger menu, and more product customizing options.
  • Dunkin’ Donuts stores have a more conventional fast-food feel to them, and they have lower prices than Starbucks.
  • The majority of Dunkin’ Donuts locations are franchises, hence the company is more exposed to franchise and rental income.

Starbucks vs Dunkin: Key Differences (Detailed)

#1. Franchising

Almost every Dunkin’ Brands location is a franchise. Starbucks stores are disproportionately concentrated outside of the United States, with corporate-owned and operated locations accounting for 59 percent of locations in the United States and 48.6% of locations outside.

On the other hand, due to its larger exposure to the franchise and rental income, Dunkin’ Donuts has a fundamentally different economic model than Starbucks, which is mostly owner-operator. This has far-reaching consequences for revenue streams, cost structure, and capital spending.

#2. Branding and Focus

Despite its reputation as a coffee shop, food remains an essential part of Dunkin’ Donuts’ menu. Dunkin’ Donuts has been focusing on unusual meal offerings in recent years in the hopes of drawing customers outside of breakfast hours. Steak was added to the menu in 2014 as part of a push to include heartier fare with an increasing number of sandwich alternatives. The interiors of Dunkin’ Donuts and Starbucks establishments are designed differently, with the former generally mimicking fast-food restaurants in terms of furnishings and decor.

Starbucks markets itself as a beverage company that also provides a more traditional coffee house dining experience. Starbucks locations are designed to be as comfortable as possible for their customers. For those searching for a place to read, relax, or connect with friends, the free internet access and friendly atmosphere make it a more appealing option.

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Going to Starbucks becomes a possible social activity as well, transforming the businesses into destinations rather than just distribution points. Customers looking for a high-end experience will appreciate this. These customers typically have more disposable income and are willing to pay more for higher-quality materials. People with smaller disposable incomes are more inclined to change their consumption habits during economic downturns than those with higher financial reserves.

While the macroeconomic environment has an undeniable impact on Starbucks, the company is well-established with a more resilient and less price-sensitive consumer base, which helps to mitigate the effects of economic cycles. Starbucks, like Dunkin’ Donuts, has adjusted its focus to include more goods geared toward afternoon and nighttime customers. Small dishes and sandwiches, as well as wine and beer, are available. Both companies have increased their focus on critical technology efforts such as mobile ordering and delivery, which explains Dunkin’ Donuts’ March 2017 announcement of a partnership with Alphabet Inc.’s (GOOGL) navigation software Waze.

#3. Quality

Starbucks has developed a higher-end brand than Dunkin’ Donuts. It has a larger menu and allows for more product personalization, which is emphasized by the fact that each customer’s name is written on the side of their cup. Customers are encouraged to socialize, work, study, browse media, or listen to music while enjoying a Starbucks product because the company provides a comfortable and quiet environment with free wireless Internet access.

When these elements are combined, they provide a more luxurious experience that commands a higher price. Dunkin’ Donuts offers more affordable prices and caters to the middle class. Dunkin’ Donuts management has stated in corporate filings and earnings conference calls that it intends to be the lowest-cost provider in the market while keeping quality above an acceptable level.

#4. Financials (Starbucks vs Dunkin)

Starbucks has narrower margins than Dunkin’ Donuts because it owns and operates its own locations. Starbucks had a non-GAAP operating margin of 16.2 percent in the fiscal second quarter of 2018, compared to nearly 30 percent for Dunkin’ Brands in Q1. In the second quarter of 2018, Starbuck’s comparable-store sales in the United States increased by 2%, compared to 3% growth in fiscal 2017, which was the lowest in five years.

Dunkin’ Donuts spent $14.6 million on capital in 2017, compared to $276.91 million in net operating cash flow and $860.5 million in revenue. Starbucks spent $467.4 million on capital expenditures, compared to $4.4 billion in net cash flow from operations and $22.4 billion in revenue. This disparity is due to the two firms’ distinct store ownership structures, and it has significant implications for the fundamentals available to investors.

You should also take note of the two companies' different capital structures. Dunkin' Donuts has a debt-to-enterprise ratio of 0.39, compared to 0.05 for Starbucks.

#5. Food Alternatives

The menus at Starbucks and Dunkin Donuts are extremely different. For Starbucks, Scones, muffins, bagels, a variety of bread, and sandwiches are among the items available. Furthermore, Starbucks now sells bistro boxes, which are pre-made lunch boxes that often include a sandwich, some vegetables to feed on, and a small dessert. Cookies, cake pops, and tarts are among the numerous desserts available.

A health menu is also available at Starbucks. They provide a gluten-free breakfast sandwich, a reduced-fat turkey bacon sandwich with egg whites, oatmeal, spinach, and feta wraps.

Starbucks also tries to delight its customers by including seasonal holiday goods in its offerings. As a result, it sells turkey and stuffing paninis, carved ham and egg sandwiches, pistachio honey croissants, gingerbread loaves, penguin cake pops, and snowman cookies for the winter holidays. They make a duck-shaped cake pop for Easter and a heart-shaped cake pop for Valentine’s Day.

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Bagels, muffins, croissants, bagels, sandwiches, hash browns, and wraps are available at Dunkin Donuts. The main distinction between Starbucks and Dunkin Donuts is that Dunkin Donuts sells popular products like donuts and munchkins. Chocolate frosted, chocolate glazed, vanilla frosted, Boston Kreme, glazed, and many other tastes are available.

Munchkins are available in a variety of flavors, including glazed, glazed chocolate, powdered sugar, and jelly. A health menu is also available at Dunkin’ Donuts. Oatmeal, multigrain bagels, turkey sausage sandwiches, egg and cheese sandwiches, and a vegetable egg white sandwich are among other products available.

They add food options like Santa donuts, Hershey kiss donuts, and cinnamon cream cheese during the winter holidays. They prepare heart-shaped donuts for Valentine’s Day. A Peeps-flavored donut for Easter. They have a maple cream cheese spread, apple donuts, and a Belgian waffle sandwich for the fall season. They make donuts with a munchkin in the center to appear like a spider for Halloween. Also, they each serve a variety of sandwiches and sweets.

In the end, picking which option to get food from is determined by the price range you are willing to pay and the type of food you desire.

#6. Options for Drinks

When it comes to drinks, Dunkin Donuts offers the standard small, medium, and large sizes. They have a wide range of hot and iced coffees, lattes, hot chocolate, ice teas, fruity iced teas, and coolatas to choose from. The coffee selections at Dunkin Donuts include the Americano, latte, macchiato, cappuccino, espresso, and cold brew. On a hot summer day, coolattas are the perfect drink. Coffee (or fruit juice, depending on the order), ice, and flavor syrup are combined in this drink. Furthermore caramel, mocha, raspberry, blueberry, and coconut are among other flavors available.

Dunkin’ adds unique menu items for the holidays like the food options. They introduced a Peeps marshmallow-flavored coffee for Easter. They added an Irish Creme coffee and espresso to their menu for St. Patrick’s Day. They’ve added a peppermint mocha hot chocolate and almond joy coffee for the holidays.

Dunkin’ Donuts’ cups are also decorated with the word “joy” and images of Christmas trees. Pumpkin spiced coffee and lattes, maple-flavored coffees, and pecan-flavored coffees are available during the fall season.

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Starbucks, on the other hand, sells drinks in large, grande, and venti sizes. This came about after Howard Schultz, the founder of Starbucks, visited Italy and decided to name the sizes in Italian.

Starbucks serves lattes, hot and iced teas, lemonade, hot chocolate, a range of hot and iced coffees, and their famed frappuccinos and refreshers, among other beverages. Cappuccino, americano, latte, macchiato, and espresso are among the coffees available.

Starbucks’ signature drink is the Frappuccino. Depending on which frappucino you get, it’s coffee combined with flavors, ice, and other components. Caramel, mocha, chocolate chip, and vanilla bean are some of the most popular flavors.

A refresher from Starbucks is a drink created with fruit juice, ice, and a small amount of coffee. Berry Hibiscus, strawberry acai, mango dragonfruit, and, the pink drink, are all popular tastes. Basically, passion fruit juice is combined with coconut milk, acai juice, and strawberries to make the pink drink.

When it comes to the holidays, Starbucks also adds new menu options. They serve toasted white chocolate mocha coffee, chestnut lattes, caramel brulee, gingerbread and eggnog lattes, and peppermint mocha hot chocolate throughout the winter holidays. To get their consumers in the festive spirit, they also alter their mugs to red, white, and green. The coolata and frappuccinos are the most notable differences in their beverage offerings.

#7. Prices: Starbucks vs Dunkin

When comparing pricing, Dunkin Donuts is significantly less expensive. Dunkin Donuts charges roughly $2.49 for a large latte. A venti latte at Starbucks, on the flip side, costs $4.15, over $2 more than at Dunkin.

The meal choices at Starbucks are likewise more expensive. A piece of bacon, cheddar, and egg croissant costs $4.75, but a bacon, egg, and cheese croissant costs only $3.59 at Dunkin.

Dunkin Donuts is roughly 30 cents cheaper without any additional taste. Even though it appears to be a minor variation, it could pile up over time. Basically, if you get Dunkin Donuts every day for a year instead of Starbucks, you’ll save roughly $110. (365x.3).

#8. Apps

Both Dunkin Donuts and Starbucks offer apps that serve the same purpose. Both applications allow you to place an order ahead of time and have it ready for pickup. You can modify the size, amount, and type of sweetener, as well as the dairy, flavor, and any other add-ons.

Both apps allow you to put your credit or debit card into the app and pay with it. When you pay with the app, you earn points that can be redeemed for rewards.

Their incentive systems, on the other hand, are very different. For every $1 spent on the Dunkin Donuts app, you will gain 5 points. Every dollar you spend on the Starbucks app earns you two stars. Once you achieve 200 points on the Dunkin Donuts app, you can enjoy a free drink of any size. To earn a free drink on the Starbucks app, you must hit 150 stars. If you do the arithmetic, you’ll find that a free drink at Dunkin Donuts costs $40, whereas a free drink at Starbucks costs $75. It’s an added advantage that both apps can be downloaded on Android and Apple devices.

#9. Atmosphere

This takes us to the question of the target consumers for each coffee business. Starbucks’ target demographic is primarily men and women between the ages of 18 and 44. In other words, they cater to an older demographic by offering a variety of coffees. Starbucks customers are also more likely to be professionals with a higher income.

On the other hand, they appeal to young people because it has a cool atmosphere and provides free WiFi. Students from colleges and even high schools are frequently seen studying in Starbucks. Starbucks wants to create a warm and familiar environment for customers to interact and mingle, according to their website. Starbucks has a more “loungy” feel about it. When you visit the business, you’ll see that it’s pretty large with plenty of seating. It appears to be a warm and inviting space where you would want to sit and converse with your friends. There are couches and the lights are dim, creating a nice environment.

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“America runs on Dunkin,” says the Dunkin Donuts slogan. Their food and coffee are intended to be picked up on the way to work or school. Unlike Starbucks, where you are encouraged to sit and converse with your peers.

Most Dunkin Donuts are extremely small because they seek to create a fast-paced environment. The majority of locations have three to four tables. Some sites, such as the one at Baruch College on the corner of E23rd and Lexington Avenue, don’t even have a place to sit.

Other Dunkin Donuts locations may not have an actual storefront; instead, they feature a window where customers can walk up and place their orders. These designs make sense since they aim to create an environment where you can grab a coffee and a donut and go about your day.

Personal preference has a role in determining which is best. It depends on what kind of coffee you want, what kind of food you want, and how much money you want to spend.

Starbucks vs Dunkin FAQs

Is Dunkin or Starbucks better?

Both Dunkin and Starbucks have their perks and drawbacks. In terms of pricing Dunkin is cheaper. In terms of environment and atmosphere Starbucks wins it. So when it comes to Starbucks vs Dunkin, the better option is often based on preference.

Starbucks made over $22 billion in revenue in the fiscal year 2017, while Dunkin’ Brands made over $860 million. Starbucks has a greater global reach, with 28,209 stores vs Dunkin’ Brands’ which has more than 20,500 locations.

Is Dunkin Donuts more expensive than Starbucks?

When comparing pricing, Dunkin Donuts is significantly less expensive. Dunkin Donuts charges roughly $2.49 for a large latte. A venti coffee at Starbucks, on the other hand, costs $4.15, nearly $2 more than at Dunkin. Dunkin Donuts is roughly 30 cents cheaper without any additional taste.

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