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By SHOSHANNA DELVENTHAL Updated January 17, 2022 Reviewed by CHIP STAPLETON
Fact checked by SUZANNE KVILHAUG
Starbucks vs. Dunkin': An Overview
Starbucks Corp. (SBUX) and Dunkin' Brands are the two largest eatery chains in the U.S. that specialize in coffee. Both companies offer similar coffee options— although different food options—and both have similar overall strategies. Nonetheless, there are key differences in their business models related to scale, store ownership, and branding.
Despite being founded 20 years after Dunkin' Donuts, Starbucks grew aggressively and is a substantially larger company. Starbucks generated over $23.5 billion in 2020, while Dunkin' Brands' 2019 annual revenues were $1.3 billion (Dunkin' was sold to Inspire Brands in 2020 and no longer reports stand-alone financial statements).Starbucks has a larger footprint, with over 30,000 locations worldwide, compared to Dunkin' Brands' 13,000 locations.
Starbucks has expanded beyond the U.S. more extensively. Dunkin' Brands has a substantial international presence, though many of its international locations are Baskin-Robbins ice cream stores rather than Dunkin' Donuts stores.

Dunkin' Donuts' international revenue contributes only a small part to total sales, while over 26% of Starbucks' revenues are generated outside the U.S. Dunkin' has announced aggressive international and domestic expansion plans with the hope of challenging its main competitor's footprint, but the difference in scale stems from variations in expansion strategy.
KEY TAKEAWAYS
• Starbucks and Dunkin' are the two biggest coffee-focused eatery chains in the U.S. • Starbucks is a bigger company in terms of market capitalization and the number
of stores globally.
• Starbucks has also built a more premium brand, has stores that look more like a
comfortable coffee house, has a more extensive menu, and greater product
customization.
• Dunkin' stores resemble more traditional fast-food eateries and they offer more
competitive pricing relative to Starbucks.
• Most of Dunkin's stores are franchises, where it has greater exposure to franchise
and rental income.
Starbucks
Starbucks brands itself primarily as a beverage provider that offers a more typical coffee house dining experience. Starbucks' locations are designed with the comfort of customers in mind. Free Internet access and inviting decor are meant to offer a more enticing option for those looking for a place to read, relax, or chat with friends. This also makes going to Starbucks a potential social activity, turning the store into a destination rather than a simple distribution location. This appeals to customers seeking a premium experience.
Typically, such customers have higher disposable incomes and are more willing to pay extra for higher quality materials. In economic downturns, people with lower disposable incomes are more likely to alter their consumption habits than people with larger financial cushions. While Starbucks is undeniably impacted by the macroeconomic environment, it is firmly established with a more resilient and less price-sensitive customer base, which helps to dampen the blows brought on by economic cycles.
Starbucks has also shifted focus to include more products aimed at afternoon and evening customers. These include small plates and sandwiches as well as wine and beer. Both companies have doubled down on strategic tech initiatives like mobile

ordering and delivery, explaining Dunkin' Donuts' partnering with Alphabet Inc.'s (GOOG) navigation app Waze.
Just like Dunkin', in mid-2018, Starbucks reorganized management. Starbucks announced Howard Schultz's departure from the company in 2018. Myron E. Ullman was appointed the next chair of the Starbucks board of directors, and Mellody Hobson was appointed vice-chair. In March 2021, Ullman retired and Hobson succeeded him as chair.
Dunkin'
Dunkin' Donuts markets itself primarily as a coffee seller that also offers donuts and food, a fact made apparent by a coffee cup prominently featured on the company's logo and executive management's explicit assertion that Dunkin' Donuts is a beverage company. Despite building an identity as a coffee seller, food is still an important element of Dunkin' Donuts' offering.
Dunkin' serves a variety of hearty breakfast sandwiches, such as the power breakfast sandwich and the sourdough breakfast sandwich. As of 2021, the menu features healthy options, such as avocado toast, as well as offering Stevia as a substitute for sugar, and oat milk.
Dunkin' Donuts' interiors are designed to be aesthetically different from Starbucks stores, with the former often resembling fast food stores in furnishings and decor.
David Hoffman was named CEO of Dunkin' Brands in 2018.In 2016, Hoffman joined Dunkin' Brands as president of Dunkin' Donuts U.S. He led the company's U.S. business and directed the coffee chain's new concept store. Hoffman replaced Nigel Travis, 68, who retired from his role. Travis began as CEO in 2009. Travis currently serves as chairman of the board.
Starbucks vs Dunkin.
They are the two largest eatery chains in the United States that specialize in coffee. While both companies maintain similar menus and overall strategies, there are key differences in their business models related to scale, store ownership and branding.

Despite being founded 20 years after Dunkin’ Donuts, Starbucks grew aggressively and is a substantially larger company. In FY 2017, Starbucks generated over $22 billion in revenue while Dunkin’ Brands reported sales of more than $860 million. Starbucks has a larger footprint, with some 28,209 locations worldwide, compared to Dunkin’ Brands’ more than 20,500 points of distribution across the globe. At the national level, Starbucks leads with about 14,000 locations compared to the nearly 9,200 Dunkin’ Donuts locations in the U.S. Starbucks plans to open another 3,400 stores in the U.S. by 2021 and double down on markets such as China, while Dunkin’ plans to open 1,000 net new stores by the end of 2020. Starbucks has expanded beyond the U.S. more extensively, with 27,339 locations in 75 different countries, as of the end of 2017. Dunkin’ Brands has a substantial international presence, though many of its international locations are Baskin-Robbins ice cream stores rather than Dunkin’ Donuts stores. While only 3,397 Dunkin’ Donuts stores exist outside the U.S., the company boasts 5,422 international Baskin-Robbins locations, compared to its 2,560 U.S. stores.
Dunkin’ Donuts international revenue in Q1 2018 of $5.4 million contributed less than 4% of total sales, which came in at $139.9 million. Roughly 30% of Starbucks’ consolidated net revenues of $6 billion in the most recent period ended April 1 were attributed to markets outside of the Americas. Dunkin’ has announced aggressive international and domestic expansion plans with the hope of challenging its main competitor’s footprint, but the difference in scale stems from variations in expansion strategy.
Franchising
Nearly all of Dunkin’ Brands’ locations are franchises. Licensed Starbucks stores are disproportionately located outside the United States, as corporate owned and operated stores account for 59% of stores in the U.S and 48.6% of locations overseas.
Dunkin’ Donuts’ higher exposure to franchise and rental income leads to a fundamentally different business than Starbucks’ largely owner-operator model. This has major implications for revenue streams, cost structure and capital spending.
Company-operated stores have different operational and capital expense structures from franchised locations. Cost of goods sold (COGS) and store operating expenses are a much larger percentage of sales for Starbucks than Dunkin’. Because COGS is so much more prominent in Starbucks’ expense structure, its profits are more severely impacted by changes in coffee bean prices. Starbucks also has a higher

capital expense burden than Dunkin’ Donuts, which is not obligated to purchase kitchen equipment for franchise locations.
Focus and Branding (concentration strategy)
Dunkin’ Donuts markets itself primarily as a coffee seller that also offers donuts and food, a fact made apparent by a coffee cup prominently featured on the company’s logo and executive management’s explicit assertion that Dunkin’ Donuts is a beverage company. Despite building an identity as a coffee seller, food is still an important element of Dunkin’ Donuts’ offering. In recent years, Dunkin’ Donuts has focused increasingly on nontraditional food options with the hopes of attracting customers outside of breakfast hours. The introduction of steak to its menu in 2014 was a step toward incorporating heartier food items alongside a growing number of sandwich options. Dunkin’ Donuts’ interiors are designed differently from Starbucks stores, with the former often resembling fast food stores in furnishings and decor.
Starbucks brands itself primarily as a beverage provider that offers a more typical coffee house dining experience. Starbucks locations are designed with the comfort of their customers in mind. Free internet access and inviting decor offer a more enticing option for those looking for a place to read, relax or chat with friends. This also makes going to Starbucks a potential social activity, turning the stores into a destination rather than a simple distribution location. This appeals to customers seeking a premium experience. Typically, these customers have higher disposable incomes and are more willing to pay extra for higher quality materials. In economic downturns, people with lower disposable incomes are more likely to alter their consumption habits than people with larger financial cushions. While Starbucks is undeniably impacted by the macroeconomic environment, it is firmly established with a more resilient and less price-sensitive customer base, which helps to dampen the blows brought on by economic cycles. Like Dunkin’ Donuts, Starbucks has also shifted focus to include more products aimed at afternoon and evening customers. These include small plates and sandwiches as well as wine and beer. Both companies have doubled down on strategic tech initiatives like mobile ordering and delivery.
Quality
Starbucks has built a more premium brand than Dunkin’ Donuts. Starbucks offers a more extensive menu and more product customization, which is reinforced by writing each customer’s name on the side of their cup. The company offers a comfortable and quiet environment with free wireless Internet access, encouraging customers to stay to socialize, work, study, browse media or listen to music while

consuming their Starbucks product. Taken together, these factors form a more premium experience and command a higher price point. Dunkin’ Donuts has more competitive pricing, focusing on the middle class. In company filings and earnings conference calls, Dunkin’ Donuts’ management has described its intent to be the lowest cost provider in the market while maintaining quality above an acceptable minimum.
Financials
Because Starbucks operates its own stores, it has tighter margins than Dunkin’ Donuts. Starbucks posted non-GAAP operating margin of 16.2% its fiscal second quarter 2018, compared to Dunkin’ Brands’ operating margin of nearly 30% in Q1. In the second quarter of 2018, Starbuck’s comparable store sales rose 2% in the Americas, while fiscal 2017 sales growth of 3% marked its worst in five years.
As mentioned earlier, Dunkin’ Donuts has a lower capital expense burden than Starbucks. Dunkin’ Donuts’ $14.6 million in capital expense in full year 2017 compared to net operating cash flow of $276.91 million and revenues of $860.5 million. Starbucks’ $467.4 million of capital expenses compared to net cash flow from operations of $4.4 billion and revenue of $22.4 billion. This discrepancy is a consequence of the different store ownership structures for the two companies, and it has material consequences for the fundamentals available to investors.
Investors should also note the difference in capital structure between the two companies. Dunkin’ Donuts has a debt-to-enterprise value of 0.39 versus Starbucks’ ratio of 0.05.
Changes in Leadership (Turnaround strategy)
In mid 2018, both companies reorganized management. On June 4, 2018, Starbucks released a press release announcing Howard Schultz’s departure from the company. Myron E. Ullman was appointed the next Chair of Starbucks Board of Directors and Mellody Hobson was appointed Vice Chair. (See also: Who is Myron E. Ullman, New Starbucks Chairman? )
In a press release posted on July 11, 2018, David Hoffman was named CEO of Dunkin’ Brands. In 2016, Hoffman joined Dunkin’ Brands as president of Dunkin’ Donuts U.S. He led the company’s U.S. business and directed the coffee chain’s new concept store. Hoffman will replace Nigel Travis, 68, who is retiring from his role.

Travis began as CEO in 2009. He will serve as executive chairman of the board and focus on developing the international business.
Key Differences
Nearly all of Dunkin' Brands' locations are franchises. Licensed Starbucks stores are disproportionately located outside the U.S.
Company-operated stores have different operational and capital expense structures from franchised locations. Cost of goods sold (COGS) and store operating expenses are a much larger percentage of sales for Starbucks than Dunkin'. Because COGS is so much more prominent in Starbucks' expense structure, its profits are more severely impacted by changes in coffee bean prices. Starbucks also has a higher capital expense burden than Dunkin' Donuts, which is not obligated to purchase kitchen equipment for franchise locations.
Dunkin' Donuts' higher exposure franchises lead to a fundamentally different business than Starbucks' largely owner-operator model, which has major implications for revenue streams, cost structure, and capital spending.
Starbucks has built a more premium brand than Dunkin' Donuts. Starbucks offers a more extensive menu and more product customization, which is reinforced by writing each customer's name on the side of their cup. The company offers a comfortable and quiet environment with free wireless internet access, encouraging customers to stay to socialize, work, study, browse media, or listen to music while consuming their Starbucks products. Taken together, these factors form a more premium experience and command a higher price point.
Dunkin' Donuts has more competitive pricing, focusing on the middle class. In company filings and earnings conference calls, Dunkin' Donuts' management has described its intent to be the lowest cost provider in the market while maintaining quality above an acceptable minimum.
Because Starbucks operates its own stores, it has tighter margins than Dunkin' Donuts. Dunkin' Donuts has typically had a lower capital expense burden than Starbucks.
• 3.2) Starbucks SWOT Analysis:
• Strengths: Strong Market Position and Global Brand Recognition: Starbucks has a significant geographical presence across the globe and maintain a 36.7% market share in the United States and has operations in over 60 countries. Starbucks is also the most recognized brand in the coffeehouse

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segment and is ranked 91st in the best global brands of 2013. Starbucks effectively leverages its rich brand equity by merchandizing products, licensing its brand logo out. Such strong market position and brand recognition allows the company to gain significant competitive advantage in further expanding into international markets and also help register higher growth in both domestic and international markets. Over the years, they have achieved significant economies of scale with superior distribution channels and supplier relationships.
Products of the Highest Quality: They give the highest importance to the quality of their products and avoid standardization of their quality even for higher production output.
Location and Aesthetic appeal of its Stores: Starbucks has stores in some of the most prime and strategic location across the globe. They target premium, high- traffic, high-visibility locations near a variety of settings, including downtown and suburban retail centers, office buildings, university campuses, and in select rural and off-highway locations across the world.
This has earned them a significant competence and advantage to be able to penetrate prime markets and tap into customers convince factor. Their stores are visually appealing and have a ‘cool’ factor attached to it with being designed to reflect the unique character of the neighborhood they serve in and environmentally friendly. They provide free wifi, great music, great service, warm atmosphere and provide an environment of community meeting spot, which forms a wider part of the ‘Starbucks Experience’. The main aim for the firm is to make their stores a ‘third place’ besides home and work.
Human Resource Management: Starbucks is know for its highly knowledge base employees. They are the main assets of the company and they are provided with great benefits like stock option, retirement accounts and a healthy culture. This effective human capital management translates into great customer
services. It was rated 91st in the 100 best places to work for by Fortune Magazine.
Goodwill among consumers due to Social Responsibly Initiatives: Their stores are community friendly, focused on recycling and reducing waste. They build goodwill among communities where they operate.
Diverse Product Mix: Starbuck portfolio of products given in, that caters to all age groups demographic factors.

Use of Technology and Mobile Outlets: Starbucks efficiently leverages technology with its mobile application “Starbucks App’ in both apple and android software’s. They make significant investments in technology to support their growth every year.
Customer base loyalty: Starbucks has cult following status among consumers and they have also implemented loyalty-based programs to drive loyalty with the Starbucks Rewards programs and Starbucks Card. The Starbucks Card is a value card program that provides convenience, support gifting, and increase the frequency of store visits by cardholders and integrated with their mobile application.
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Weaknesses:
Expensive Products: While Starbucks does differentiate their products with being highly quality couple with the whole ‘Starbucks Experience’, in times of economic sluggishness, consumers to have so switching costs to competitor’s products with lower prices and forgo paying a premium. These premium prices could also pose some weakness for it to succeed in developing countries.
Self-Cannibalization through overcrowding: By aggressive expansion and high saturation due to overcrowding in the market leads to self cannibalization and diminishes long term growth targets of Starbucks. This is happening especially in the United States where Starbucks operates 8078 stores.
Overdependence in the United States market: In line with self- cannibalization of the US market with 8078 stores, Starbucks generates a huge percentage of their total revenue from the US and this makes it very sensitive to prospects of the US economy and growth.
Negative large corporation image: Like any large corporation, Starbucks does come under increased scrutiny and have to invest in corporate social responsibility activates and maintain tight control over labor practices.
American/European coffee culture clash with that of other countries: Starbucks coffee culture may not widely accepted in some countries as part of their international expansion strategy.
Opportunities: Expansion into Emerging Markets: The increase saturation and self-cannibalization of the US market makes its international strategy

even more important. Starbucks has made good inroad into many countries, with India recently joining the list with a joint venture entry. Starbucks has a great growth potential in further expanding into the emerging and developing markets. They can leverage their size, experience, financial prowess and efficiencies to make new market share.
Expanding Product mix and offerings: Starbucks recently started to expand their product mix by venturing into the Tea and fresh juice product offerings with a smart acquisition strategy. This provides significant opportunities for Starbucks.
Expansion of retail operations: Starbucks currently sell its packed coffee products, iced beverages and merchandizes through large box retailers. This market’s potential is yet to be fully realized and this provides Starbucks great opportunities for the future to future monetizes their brand.
Technological advances: Starbucks has leveraged the use of mobile applications and has an investment partnership with Square, a mobile payments app that is integrated with its Starbucks app. This creates an ease of use process for customers, aligns customer loyalty through reward programs. Starbucks has already set the bar in the industry with this advancement and about 10% of its transactions in the US have been made using mobile applications.This is a growing field and would drive more business to their stores as technology advances.
New distribution channels: Starbucks introduced a beta version of a delivery system called Mobile Pour. This presents a great opportunity for the future by expanding their end product distribution systems and could drive more revenue if the implementation is successful.
Brand extension: Starbucks carries a powerful brand image and it can leverage it to extend into horizontal lines of its business and also venture into product diversification with keeping brand dilution risk in check.
Threats: Increased Competition: This is by far the biggest threat that Starbucks faces with the market being at a mature stage, there is increased pressure on Starbucks from its competitors like Dunkin Brands, McDonalds, Costa Coffee, Pete’s Coffee, mom and pop specialty coffee stores. Dunkin Brands had at its main threat in the US market by trailing Starbucks with a 24.6% share.
Price Volatility in the Global Coffee Market: There has be significant fluctuations in the market prices of high quality coffee beans, which Starbucks

can’t control.
Developed Countries Market Saturation: Starbucks derives a significant amount of its revenue from the development markets and there is increased market saturation currently.
Developed Countries Economy: In an increasingly economically integrated world, an economic crisis like the one in 2008 could have a trickle down effect from the developed markets to the developing markets. This threat would hurt revenues for Starbucks as consumers shift away from premium product mix to stay in limited budgets during economic hardships.
Changing Consumer tastes and lifestyle choices: The shift of consumers toward more healthy products and the risk of coffee culture being just a fad represent a threat for Starbucks going into the future.
Dunkin Donuts SWOT Analysis:
Strengths of Dunkin Donuts
• Global Operations: Tapping into a large market offers more customers, which increases sales and profits. By 2002, Dunkin’ had 5,000 food joints in 38 countries, which has increased over the past two decades to 13,000 restaurants in 46 countries. It has evolved into the largest coffee-and-baked-goods chain in the world.
• Perfect Positioning: Dunkin’ is synonymous with breakfast nearly everywhere. This is attributed to its perfect positioning as the to-go for breakfast. By focusing on a small niche, the fast-food chain has set itself apart from the competition.
• Superb Franchise Strategy: The robustness of business models is put to the test in times of crisis. Dunkin’s franchise strategy cushioned the impact of the pandemic and enabled the company to emerge on the other side better off than competitors.
• Community-Centric Strategies: Adopting strategies that seek to help the community will never go unrewarded. Dunkin’ recently announced it will be hiring 25,000 new employees as part of its commitment to keep America running and working.
• Strategic Branding: With 70 years in the industry, Dunkin’ has always stayed relevant to consumers regardless of the generation. From marketing to dropping ‘Donuts’ from its name and menu changes, the company employs strategic measures to ensure it remains relevant to the target audience.

• GreatSupplyChainManagement:Dunkin’effectivelymanagesitssupplychain to ensure timely delivery of freshly baked products and ground coffee to the customer’s preferred outlet. It recently joined the Sustainable Coffee Challenge to increase the supplies of quality coffee.
• Eco-friendly Policies: In the current society threatened by climate change, companies that adopt eco-friendly policies are favored by consumers. Dunkin’ set a target to reduce its carbon footprint and successfully transitioned all its outlets from polystyrene cups to paper cups.
Weaknesses of Dunkin Donuts
1 Over-Reliance on US Market: In FY 2019, 46.7% of the company’s total revenues came from the Dunkin’ Donuts US segment. With nearly half of its revenue generated from the US, Dunkin’ will be severely impacted in the case of economic challenges in the market.
2 Slower Expansion: As competitors like McDonald and Burger King expand rapidly across the world, Dunkin’ adopted a limited expansion strategy. This snail-paced expansion is a weakness since Dunkin will always enter new and emerging markets after its competitors.
3 Poor Targeting outside the US: While Dunkin’s effective targeting has enabled a steady revenue growth in the US, the chain is struggling in India and other emerging and lucrative markets. This is attributed to poor understanding of non-Americans leading to poor strategies.
4 Lack of Variety: Dunkin’ relies primarily on coffee and bakery products, which limits the fast-food chain to a small segment in the food sector. Reducing or streamlining offerings to cater to a specific sector also limits the number of customers.
5 Low Financial Capabilities: To compete favorably for market share, companies require immense financial resources. Dunkin’s competitiveness has been undermined by financial constraints and was forced to scale back its expansion plans.

Opportunities for Dunkin Donuts
1 Offer Healthier Options: The revenues of Dunkin’s competitors like Burger King increased tremendously after they introduced healthier plant-based options in their menus. Dunkin’ can also exploit the increasing demand for healthy foods by offering healthier options.
2 Expand Market Presence: Dunkin’ can cater to more customers and increase its profits. Dunkin’ has to increase the number of stores and market presence to capture more customers.
3 Diversify Revenue Streams: Putting all its income generators and resources in one sector can be disastrous if the sector declines. Dunkin’ can diversify its revenue streams to include something like grocery selling healthy and fresh farm produce.
4 Strengthen Operations in Emerging Markets: Markets in emerging economies are unsaturated and offer a higher potential for growth. Dunkin’ can strengthen its operations in these markets to catalyze growth.
5 Offer More Variety: Since Dunkin’ lacks variety in its menu, it has the opportunity to cater to the needs of the entire food business market. The chain can include all types of meals on its menu for breakfast, lunch, and dinner. More variety, more customers.
Threats for Dunkin Donuts
6 Intense Competition: With strong competitors like McDonald’s, Burger King, KFC, Starbucks, Pizza Hut, and Domino’s, Dunkin’s market share, and profits are always under threat.
7 Inherent Issues in Franchising: Even though franchising is an internal matter, external forces play a role in the success of the franchising model. Other fast- food chains like Subway are struggling to effect new prices with opposition from franchise owners. Dunkin’ is also threatened by inherent issues in franchising.
8 Global Pandemic and Recession: The pandemic has devastated economies globally with many countries already sliding deeper into recession. The fast- food sector is not immune to the pandemic or recession, which means Dunkin’s operations and profits are under threat.
9 Increasing Health-Consciousness: The ever-increasing number of health- conscious consumers threatens fast-food chains including Dunkin’ Donuts. Since Dunkin’ offers unhealthy fast-foods, customers can migrate to competitors offering healthier options.
10 Stringent Regulations: The prevalence of cardiovascular diseases,

hypertension, and obesity due to unhealthy junk and fast food can prompt governments to enact stringent regulations targeting fast-food joints like Dunkin’ Donuts.
11 Rising Costs: From rising prices of farm products due to climate change to the burdening costs of logistics, each additional dollar chips Dunkin’s profits.
Who Are Starbucks' Main Competitors?
The main competitors of Starbucks are McDonald's, Dunkin', Tim Hortons, Costa Coffee, Caffe Nero, Caffe Ritazza, to name but a few.
Is Dunkin' Cheaper Than Starbucks?
Yes, in general, the coffee at Dunkin' is cheaper than the coffee at Starbucks. This is primarily due to the difference in the cost of goods sold (COGS), with Starbucks having a higher COGS, which is passed on to the consumer through higher prices.
Does Dunkin' or Starbucks Have Stronger Coffee?
Starbucks has stronger coffee than Dunkin', with an average of 267 milligrams of caffeine in a cup of coffee versus 220 milligrams of caffeine in a cup of Dunkin's coffee.