If you’ve ever traveled somewhere abroad and gone off the tourist trail, you’re used to it being a really foreign landscape. The moment you leave the beach resort, most of the brands you know disappear. But sometimes, you find American companies having success in the strangest places.
For me, that “wow!” moment came when crossing Colombia on grungy buses. At almost every terminal, I’d see at least one Dunkin Donuts (DNKN) shop. I was left wondering, how did Dunkin Donuts become a power player here in Colombia? In the US, they’re viewed as a distant second to Starbucks (SBUX), but in Colombia, they rule the roost.
As you’ll soon see, DineEquity (DIN) and Wingstop (WING) stock also stand to benefit from a surprising presence overseas.
DNKN: In Colombia, It’s All About The Donuts
In the United States, you could be forgiven for thinking Dunkin’s donuts are primarily a form of advertising. The sweet smell coming from Dunkin stores surely drives more sales of its coffee.
In Colombia, donuts are the main attraction. According to a story in Colombia’s La Republica, Dunkin Donuts has more than 175 stores in the country; it’s closest donut-selling competitor has fewer than two dozen. DNKN has been operating in Colombia for more than thirty years through its local franchiser Donucol Colombia. Donucol uses a conservative growth strategy, opening five new stores a year, and renovating the existing store base frequently.
At this point, DNKN sells roughly 2 million donuts a month in Colombia, and generates roughly $25 million a year in sales. This puts it far ahead of the competition. Krispy Kreme (KKD) entered the Colombian market two years ago, but so far it has had little success in denting Dunkin’s popularity.
Dunkin Donuts also sells coffee in Colombia, as it does in the states, however so far the company has had much more success selling donuts. There’s an opportunity for other sweets sellers. Companies such as privately-held Cinnabon have also had great success in Latin America.
Much of the talk about DNKN stock has been: Can the company compete with Starbucks? But that really isn’t the right question. If they can roll out the Colombian model successfully in other emerging markets, claiming the donut space to itself, DNKN stock should benefit sweetly.
Applebee’s: Not Just An American Joint (DIN)
Applebee’s is a American-style restaurant chain owned by DineEquity, which also owns IHOP. If you’ve been to Applebee’s you’d know they have a fairly generic menu and not particularly high quality food.
And yet, in a show of the possibilities for American brands abroad, Applebee’s has been surprisingly successful away from home. The country has basically no presence in other English-speaking markets. It has 16 locations in Canada and nothing else.
But in foreign countries where the appeal of American culture runs stronger, Applebee’s has grown strongly. DIN has 59 Applebee’s locations in Mexico already. Along with, even more inexplicably, 28 IHOPs.
Mexico is no aberration, Applebee’s has locations in six different Latin American markets, including locales as farflung as Chile, Brazil, and Costa Rica. Even in humble Guatemala, where Starbucks has only managed to open two stores, DIN has found room for five Applebee’s and three IHOPs.
And that’s not all. Applebee’s has also established itself in the Middle East. If you go to the company’s Middle Eastern site, you can see the menu features the same Cowboy Burger, Quesadilla Burger, and Sizzling Jumbo Shrimp that you could get in any American suburb.
Applebee’s has 19 Saudi Arabian Applebee’s, 10 in the UAE, and 7 in both Kuwait and Qatar, along with locations in Egypt and Jordan. So yeah, if you’re considering how to get access to the Middle East, DIN stock is a surprising but realistic option.
Wingstop: Spreading Its Wings
Wingstop is a young brand still rapidly growing in the United States. Despite that, it’s already decided to push torrid growth abroad. Here in my fairly nondescript city in Mexico, my apartment is within 10 minutes walking of a Wingstop store.
Wingstop opened its first store internationally in Mexico in 2009. Since then, the chain has blown up. As of year-end 2014, the company had 41 international locations in countries as diverse as Indonesia, Russia, the Philippines, Singapore, and the UAE.
Perhaps even more remarkably, Wingstop has sold 310 additional international restaurant commitments already to store franchisers. The company, following its IPO, is aiming for turbocharged growth. Will WING stock fly with it?
According to the company’s filings, the company believes international growth is a great opportunity. It cites the universal appeal of chicken, the simplicity of the company’s menu, and the ability to broadly differentiate its sauces to local interest. It is a recipe that may lead to surprising success for WING stock.
Be it donuts in Latin America, staid chains such as Applebee’s selling Americana abroad, or Wingstop offering up fried chicken, there are many opportunities for American restaurant brands beyond what you’d instinctively think. There’s more market opportunities than just McDonald’s (MCD) and others selling low-end burgers. For DIN stock, DNKN stock, and WING stock, international expansion may serve as the secret sauce for future growth.
At the time of this writing, the author had no position in any of the stocks mentioned. You can reach him on Twitter at @irbezek.
