Dunkin' Brands Group (DNKN) Q4 2016 Results - Earnings Call Transcript
Dunkin' Brands Group, Inc. (NASDAQ:DNKN) Q4 2016 Earnings Call February 9, 2017 8:00 AM ET
Executives
Stacey Caravella - Dunkin' Brands Group, Inc.
Nigel Travis - Dunkin' Brands Group, Inc.
Paul C. Carbone - Dunkin' Brands Group, Inc.
David L. Hoffmann - Dunkin' Brands Group, Inc.
Chris Fuqua - Dunkin' Donuts LLC
Paul E. Twohig - Dunkin' Brands Group, Inc.
Scott Hudler - Dunkin' Brands Group, Inc.
Analysts
John William Ivankoe - JPMorgan Securities LLC
Zachary Schwartzman - RBC Capital Markets LLC
Andrew Marc Barish - Jefferies LLC
Jason West - Credit Suisse Securities (USA) LLC
Matthew DiFrisco - Guggenheim Securities LLC
Nicole M. Miller Regan - Piper Jaffray & Co.
Jeff Priester - Barclays Capital, Inc.
Sam J. Beres - Robert W. Baird & Co., Inc. (Broker)
Gregory Lum - Goldman Sachs & Co.
Drew Stevenson - Stephens Inc.
Matthew Robert McGinley - Evercore Group LLC
Michael W. Gallo - C.L. King & Associates, Inc.
Stephen Anderson - Maxim Group LLC
Joe Stauff - Susquehanna Financial Group LLLP
Operator
Good day, ladies and gentlemen, and welcome to the Dunkin' Brands Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Ms. Stacey Caravella. Ma'am, you may begin.
Stacey Caravella - Dunkin' Brands Group, Inc.
Thank you, operator, and good morning, everyone. With me today are Dunkin' Brands Chairman and Chief Executive Officer, Nigel Travis; and Dunkin' Brands Chief Financial Officer, Paul Carbone. Additionally, we have both Paul Twohig, who is retiring as President of Dunkin' Donuts U.S. and Canada; as well as Dave Hoffmann who has taken over for Paul, both on the call and both will be available for the Q&A session at the end of the call. We also have Chris Fuqua, Senior Vice President of Brand Marketing, Global Consumer Insights & Product Innovation for Dunkin' Donuts; and Scott Hudler, Chief Digital Officer, both of whom will also be available for questions.
Today's call is being webcast live and recorded for replay. For planning purposes, our calendar year 2017 earnings call are tentatively scheduled for April 27 for our Q1 call, July 27 for our Q2 call and October 26 for our Q3 call. One additional item to add to your calendars is our next Investor and Analyst Day. It will be held in February 2018, likely in the New York City area.
Before I turn the call over to Nigel, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our website, investor.dunkinbrands.com, along with any reconciliation of non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures. Just a reminder that fiscal 2016 was a 53-week year for Dunkin' Brands. We will be referring to our results and guidance targets on both a 52-week and 53-week basis.
Now, I'll turn the call over to Nigel Travis.
Nigel Travis - Dunkin' Brands Group, Inc.
Stacey, thank you very much and good morning, everyone. And thank you for joining today's call to discuss our fourth quarter and full year 2016 results. 2016 was a year of significant achievements. For the full year, our franchisees added 415 Dunkin' Donuts restaurants in the U.S., excluding the closure of 18 self-serve coffee stations in Speedway locations.
We grew Dunkin' Donuts U.S. comp store sales by 1.6% and achieved our goals of 2% revenue growth and 9% adjusted operating income growth and exceeded our adjusted earnings per share target or the guidance we gave, which came in at 17% adjusted EPS growth, and that's all on a 53-week basis.
Before we get further into our results, I'd like to take a moment to thank Paul Twohig who, as Stacey said, retires at the end of next month. I'd like to thank him for his leadership, his remarkable ability to coach people and, of course, for everything he's done for the company over the past seven years. Among his many noteworthy accomplishments while at Dunkin' has been his impact on global restaurant growth.
Since he joined the company in 2009, our franchisees and licensees have added nearly 4,800 net restaurants around the world for both brands, including more than 2,200 net new Dunkin' Donuts restaurants here in the U.S. alone. We are truly a development machine, thanks in large part to Paul's hard work. Paul, we have greatly benefited from your wisdom and insight, and wish you nothing but the best in your future endeavors.
And now, the responsibility for Dunkin' U.S. passes over to Dave Hoffmann who comes to us with a world-class résumé and have spent the past few months digging in to our business, working in restaurants where I'm told is actually quite good, meeting the franchisees, and understanding our customers. He is making a real difference with his candid and collaborative style with the franchisees. His areas of focus are targeted towards strengthening our core business, and that's optimizing our more than 4,500 drive-thru restaurants, simplifying the menu to improve the guest experience, and expanding our value platform.
Now, back to Q4 of fiscal 2016. As you know, we've undertaken the implementation of a six-part plan to fuel Dunkin's strategic growth in the U.S. and better position us as the beverage-led On-the-Go brand. As a reminder, that plan includes building our coffee culture, faster and improved product innovation, targeted value and smart pricing, being a leader in digital, improving the restaurant experience, and driving consumer packaged goods and new channels. We have a great deal of confidence in this plan particularly because it is rooted in the research we've conducted with 10,000 consumers, crew members, franchisees and employees.
As I look back on 2016, I would sum it up as a year of accomplishments, but – and this is important – we still have not unleashed the full potential of Dunkin' Donuts in the U.S., and I believe we will. We know our brand can deliver more growth. Our consumer research clearly indicates that if we focus our efforts, we are capable of being the most beloved beverage-led On-the-Go brand in the country. Not only does our consumer research tell us this but the results of the DD Perks loyalty program clearly demonstrates our growth potential.
In 2016, Dunkin' Donuts Perks members who have been in the program for at least a year and made purchases in both Q4 2015 and Q4 2016, and we always talk about this group as our comp members, that group increased their average weekly spend by 9% year-over-year. This included more than a couple of 100 basis points in traffic growth.
I recognize that most of these are our loyal fans but I see this as an indication of the impressive growth we can drive where we get guests into our digital ecosystem. To that end, I'm pleased to announce that we have now surpassed 6 million DD Perks members with this group making up more than 10% of transactions in Q4.
During the quarter, we held our first-ever Perks week promotion in November, a week that was dedicated to appreciating and celebrating our most loyal guests with daily deals and special prizes and which really drove membership. We also launched On-the-Go Ordering nationally in June, a huge operational and system accomplishment particularly in a franchise system. As a reminder, On-the-Go is an offering reserved for our Dunkin' Perks members and enables them to order ahead and speak to the front of the line in store.
It really is a compelling benefit of Perks membership. And in the fourth quarter, On-the-Go made up more than 1% of transactions, hitting a record high of 1.6% of transactions during Perks week. Not surprisingly, the majority of On-the-Go Ordering takes place in the morning hours. And, importantly, our data shows that On-the-Go guest visit nearly 45% more than a typical guest. And we're just in the early days of On-the-Go Ordering. Imagine the power this offering can have if we grow it exponentially as a percent of sales year-over-year. It does remind me of my days in the pizza industry when online ordering as a percent of sales was in the mid-single digits and, today, major chains are greater than 60%. On-the-Go gives us the power to drive customer loyalty and the power to drive efficiency and speed of service in our restaurants. So, we're not stopping with On-the-Go Ordering. We're constantly innovating to make it easier than ever for guests to get their Dunkin' fix.
For example, at the end of 2016, we launched a curbside pickup test at a store in Massachusetts. If you place an On-the-Go order using the Dunkin' Mobile App, one of the options for picking it up at that store is curbside. We think this could be particularly powerful for locations where drive-thrus aren't feasible or where the drive-thru is busy in the morning. We plan to expand this test in the first half of 2017 and, already, we're getting many franchise requests.
Although we're talking about digital, let's not forget the backbone of our digital ecosystem, and that's the DD Card. We are close to $1 billion in system-wide sales using the Dunkin' Donuts Card in 2016 with more than half of that on a mobile device. Since last year, we have grown mobile payments by nearly 70%. The more we can get customers using a DD Card, then enroll them as Perks members and then get them hooked on the convenience by our On-the-Go platform, the easier it is to keep them from straying to the competition. This will contribute to our speed of service, a key differentiator against the competition and flow through to comp growth and with that, store level profitability.
Now, let's shift our focus to the Q4 comparable store sales performance. For the quarter, we delivered a 1.9%. In the fourth quarter, ticket was probably 400 basis points and traffic was negative 200 basis points.
Let me break down that ticket number. In Q4, ticket was comprised of approximately 200 basis points of price, in addition to nearly 200 basis points attributable to less discounting year-over-year. The decrease in discounting was approximately half from the elimination of combo meals on our menu boards, which of course we're rolling over at the end of February this year, and the other half came from having fewer discounted offers in 2016 versus 2015. For the full-year, pricing was about 350 basis points of which 250 basis points was from actual menu board pricing. This was down from more than 300 basis points in menu board pricing taken in the prior year.
In an environment of rising labor costs, it would have been easy for franchisees to continue to take price. But over the past year, we've allocated resources to working with franchisees on what we call smart pricing and talking to them about the impact of price increases. And as a result of this and, of course, our strong relationships, they took price more conservatively than they did in the prior year. This is a big win.
For the quarter, (11:42) again performed well, driving both iced coffee and total coffee sales. As in Q3, our media in Q4 was largely dedicated to beverages with little resource outside of store POP dedicated to food. Yet we were still able to grow breakfast sandwiches and donut sales proven that by leading with beverages, and that's the key, leading with beverages, our guest will buy food once they're in the restaurant. Offsetting the growth of beverages on food were continued declines in restaurant K-Cups sales.
For 2017 and beyond, we're focused on building a portfolio of category-leading beverages along with complementary and craveable food and bakery offerings while, of course, improving the guest experience.
Yet as we continue to innovate, we are simultaneously focusing on simplifying our menu by removing some of the complexities that have built up over the years. We want to get a little leaner to run faster. Later this month, we will begin testing a streamlined menu particularly on the food side in 300 stores across a variety of markets.
Franchisees are really excited by this test and we expect it to drive a number of benefits in the restaurants and those benefits include, number one, improved throughput and accuracy as we reduce the complexity of the menu. Secondly, superior service through better execution of the basics required to run the restaurant, reduced food cost for our franchisee as we remove some of the lower-moving SKUs, less turnover in our franchisees' employee base as we make Dunkin' an easier place at which to work. And the last benefit is ultimately stronger restaurant level sales as we focus our marketing spend and operations activity on core big ideas.
Now, of course, you're going to have many questions on this test. And once we and our franchisees have had the time to study the consumer reaction, we will share additional details with this group.
Lastly, for Dunkin', I'd like to cover the launch of our ready-to-drink bottled iced coffee, which is being manufactured, distributed and sold by The Coca-Cola Company, along with bottling partners nationwide. In January, Dunkin' bottled iced coffee began arriving at grocery chains, gas, drug and convenience stores nationally, and then Dunkin' Donuts restaurants.
I must say the response on social media in Houston during the Super Bowl where we did extensive sampling, and other channels has been strong. And we are very excited about the opportunity for sales in our restaurants and retail. Not only does our entry into the ready-to-drink category advance our goal of being a more beverage-focused brand, it will result in more people drinking Dunkin' Donuts' coffee every day. Let me take you through the numbers.
By the end of 2017, we expect to deliver nearly 2.6 billion cups of coffee through thousands of locations in addition to our restaurants with Dunkin' K-Cups, bagged coffee and now ready-to-drink bottled iced coffee. Add to that the almost 2 billion cups of coffee our franchisees and licensees will sell in their restaurants around the world this year for a total of nearly 5 billion cups globally in 2017.
So, continuing to expand our CPG product portfolio and exploring the other new sales channels is a critical piece of our strategic growth plan for Dunkin' U.S. And as an added benefit, our franchisees share in the profits from CPG.
In summary, as I have repeatedly said, our work to transform ourselves into a beverage-led On-the-Go brand will not happen overnight. There's going to be ups and downs in our performance as we work to best position the brand for long-term growth.
Moving to Baskin-Robbins U.S., we had a 0.9% comp decline for the quarter. From a category perspective, cups and cones had a strong performance, driven equally by scoops and the new Warm Cookie Sandwich platform. Dessert sales were also up, driven by the new Polar Pizza platform that launched earlier this year, and increases in online ordering.
We remain excited about the performance of the brand and optimistic about its growth trajectory. We will continue to focus on meeting customer needs for convenience with expanded digital channels, innovative and high-quality products and on improving shop operations.
As for our international business, I've just returned from Asia where, amongst other things, I attended the opening of our newest restaurant in Beijing, marking our 35th Dunkin' Donuts restaurant in China. I was encouraged to see the progress and engagement of our international franchisees and licensees there.
However, with both brands, we continue to experience negative comps in several key international markets, with discretionary spending by consumers coming under pressure as a result of several factors including sluggish local economies and currency devaluation. Baskin-Robbins posted positive comp sales led by a strong quarter in Japan. That was pleasing news. And Dunkin' Donuts posted negative comp sales due to poor performance in South Korea, Europe and the Middle East.
On the positive side, we're seeing stronger performance in some of our newer markets, and our international franchisees are focused on value offerings, product innovation, and digital technologies to make our brands more convenient. We all know that international needs to perform better and the team is highly engaged in making this happen.
Before I hand it over to Paul Carbone, as I complete my eighth year here at Dunkin', I think it's appropriate to look back and reiterate some of the key fundamentals that make our business really attractive. One, our asset-light model produces highly predictable results and industry-leading adjusted operating income margin. I'd like to remind you that in 2016, our operating income margin is nearly 53%, which is further strengthened by us now being 100% franchised in the U.S. So, we've continued to focus on the asset-light model.
Secondly, as we explained last quarter, we have strong franchisee restaurant level returns driven by our highly ritualistic, high-margin coffee and beverage offerings.
Thirdly, we are a growth machine. Just in the U.S. alone, on an average year, we produce 8,000 more jobs. Being a growth machine, we have significant white space remaining in the U.S.A. and of course overseas.
Fourthly, we have developed a fast-growing new revenue source in consumer products and we're excited about that.
And finally and probably most importantly, we have a leadership team that is focused every day on improving our business, and most of all, we have a clear strategic roadmap for Dunkin' Donuts U.S. that gives us great confidence in the future.
In short, ladies and gentlemen, I feel good about where we're heading as a business. And with that, I'll hand over to my friend, Mr. Carbone.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Nigel, and good morning, everyone. Let me start with our store development results for Q4 and the full year. In the fourth quarter, Dunkin' Donuts U.S. franchisees opened up 201 net new restaurants excluding two Speedway closures, versus 164 net new units last year, excluding 41 Speedway closures.
For the quarter by region, 29% of net development was in the core, 29% in established markets, 27% in emerging and 14% in the West. Those percentages are all excluding the Speedway closures.
For the full-year, Dunkin' Donuts U.S. franchisees opened 415 net new restaurants excluding 18 Speedway closures versus 430 net new units last year excluding the 81 Speedway closures. For the year, by region, 24% of net development was in the core, 36% in established markets, 23% in emerging and 17% in the West, and again, those percentages are all excluding Speedway closures.
In the fourth quarter, Baskin-Robbins U.S. has 5 net store openings versus 14 net store openings last year. And for the full-year, Baskin-Robbins U.S. had nine net new openings versus no net restaurant openings last year. Baskin-Robbins International has 41 net store openings versus 24 net store closures last year and Dunkin' Donuts International had 51 net store openings versus 59 net store openings in Q4 of the prior year. For the full-year, Baskin-Robbins International had 206 net store openings versus 55 net store openings last year and Dunkin' Donuts International had 111 net store openings versus 91 net store openings in the prior year.
In total, on a global basis for both brands, our franchisees and licensees opened up 741 net new restaurants excluding the 18 Speedway closure in Dunkin' U.S., around the world in 2016 versus 576 excluding the 81 Speedway closures in 2015.
Now, let me turn to the P&L. Revenues for the fourth quarter increased $11.9 million or 5.8% compared to the prior year period due primarily to the increase in royalty income driven by the extra week in the current period as well as an increase in franchise fees due to additional renewal income. These increases in revenue were offset by a decrease in sales at company operated restaurants, driven by a net decrease in the number of company-operated restaurants. All remaining company operated points of distribution were sold during the fourth quarter. Revenues for the fourth quarter increased 1.5% on a 13-week basis.
Operating income and adjusted operating income for the fourth quarter increased $70.4 million or 161.9% and $15.3 million or 14.8% respectively from the prior year period primarily as a result of the increases in royalty income and franchise fees as well as gains recognized in connection with the sale of company-operated restaurants, offset by an increase in G&A expense.
Additionally, operating income in the prior period was unfavorably impacted by an impairment of our Japan joint venture. Operating income and adjusted operating income for the fourth quarter increased nearly 150% and 9% respectively from the prior year period on a 13-week basis.
Net income for the fourth quarter increased by $65.1 million to $56.1 million and adjusted net income increased $10.5 million or 21.4% to $59.4 million compared to the prior-year period primarily as a result of the increases in operating income and adjusted operating income of $70.4 million and $15.3 million respectively, offset by increases in income tax expense and interest expense.
Diluted earnings per share for the fourth quarter increased by $0.71 to $0.61 and diluted adjusted earnings per share increased $0.12 or 23.1% to $0.64 compared to the prior-year period as a result of the increases in net income and adjusted net income respectively as well as the decrease in shares outstanding.
The decrease in shares outstanding from the prior-year period was due primarily to the repurchase of shares since the fourth quarter of 2015 offset by the exercise of stock options. During the fourth quarter of this year, we repurchased approximately 521,000 shares at an average price of $48.02.
On a 13-week basis, diluted earnings per share for the fourth quarter increased $0.68 to $0.58 and diluted adjusted earnings per share increased $0.09 or 17.3% to $0.61 compared to the prior period. At the end of the fourth quarter, we had debt to adjusted EBITDA ratio of 4.6 to 1. Our effective tax rate for the quarter was 35.5%.
During the quarter, we generated approximately $75 million in free cash flow. We ended the quarter with $431 million in cash and short-term restricted cash on the balance sheet. And of that $431 million, $178 million represents cash associated with our gift card programs and marketing fund balances. And we used $27 million in cash during the quarter to pay our Q4 cash dividend to shareholders.
In our press release this morning, we provided certain targets regarding our 2017 performance. Let me cover those now. We expect low-single digit comp store sales growth for both Dunkin' Donuts U.S. and Baskin-Robbins U.S. We expect Dunkin' Donuts U.S. franchisees to add approximately 385 net new restaurants. We do not expect significant Speedway closures in 2017. We expect Baskin-Robbins U.S. franchisees to add approximately 10 net new restaurants.
Internationally, we expect franchisees and licensees to add approximately 200 net new restaurants across the two brands. We expect low- to mid-single-digit revenue growth on both a 52-week and a 53-week basis. We expect mid- to high-single-digit GAAP operating income and adjusted operating income growth on both a 52-week and a 53-week basis.
We expect GAAP earnings per share of $2.16 to $2.24 and diluted adjusted earnings per share of $2.34 to $2.37. And we expect full-year weighted average shares outstanding of approximately 93 million and a 38.5% effective tax rate.
And with that, I will turn it back over to the operator to open it for Q&A. Operator, please?
Question-and-Answer Session
Operator
Thank you. Our first question comes from the line of John Ivankoe with JPMorgan. Your line is open.
John William Ivankoe - JPMorgan Securities LLC
Excuse me. Hi. Thank you very much. Two questions, if I may. Firstly, in terms of testing the streamlined menu, obviously, it sounds like it's very significant, Nigel. I know you said you would get a lot of questions and I think you will. Obviously, the brand has been built on choice, it's been built on variety, it's been built on customization, really something much more than what the brand was 10 years ago. So how significant is the streamlined menu and if it's possible for you to quantify in terms of the items that you're thinking about taking off the menu, what percentage of sales those particular items represent?
Nigel Travis - Dunkin' Brands Group, Inc.
Okay. So that's your first question, is it John?
John William Ivankoe - JPMorgan Securities LLC
Yes. My second question will be on U.S. unit development. Completely separate things.
Nigel Travis - Dunkin' Brands Group, Inc.
Okay. All right. So obviously, you say this is a significant test and this came out of the consumer work we did last year. And as I said in the remarks, basically on the food side, we haven't started that test yet. We recognized if you said there will be a lot of questions, there's going to be variants of it, it's going to be very closely managed. We'll be obviously looking at food items in both the morning and the afternoon.
I think my remarks in many ways covered it. We are in the process of trying to de-clutter what has been cluttered outside for many years. So this is a process. Dave is coming in, he's all over it, he's been working with the franchisees, so I'm going to pass out to him because I know he's kind of excited about the opportunities from this. Dave?
David L. Hoffmann - Dunkin' Brands Group, Inc.
Yeah. Thanks, Nigel. John, this is all part of my focus on strengthening the core. As you know, this isn't unique to Dunkin'. I think this is common in other players within the industry. Complexity creeps in, and then you have to attack it. But this effort is all around reducing complexity to produce better throughput and accuracy, improve employee satisfaction, reduce labor, improve food costs. All of those things that Nigel that pointed out, all with the aim of delivering a better guest experience. So, more to come on that. We're not going to go into specifics around sales at this point. But again, this is all our focus around strengthening the core right now.
John William Ivankoe - JPMorgan Securities LLC
Yeah. And certainly, the question was are we talking about items that are 5% of sales, 10% of sales, 3% of sales. There's obviously a big spectrum of possibilities here, and I just wanted to see if you could help us...
Nigel Travis - Dunkin' Brands Group, Inc.
So, Chris Fuqua, the management of this (30:25) day-to-day, so Chris.
Chris Fuqua - Dunkin' Donuts LLC
Yeah, John. So, I think it's a good question. We'll obviously give more details in the future. We're looking at lower moving SKUs. So we have a lot of products in our stores that move much slower than some of our core categories. We think removing some of those SKUs will let our core categories grow even more.
John William Ivankoe - JPMorgan Securities LLC
Okay. I won't press that anymore. And then, secondly, on development. Obviously, very symbolic that 2017 is less than 2016, so I wanted you to kind of elaborate on that. And as we kind of think about that trend of development, is 2017 the so-called slow mile that we've talked about before, Nigel? Do you expect acceleration from these levels or is this the right level of absolute unit openings longer term or do you think that the trend actually begins to come slope down from here as we get into 2018 and 2019?
Nigel Travis - Dunkin' Brands Group, Inc.
Paul is going to start...
Paul C. Carbone - Dunkin' Brands Group, Inc.
Yeah. Good morning, John. So, as we look at 2017, I think we said approximately 385 as a prudent number. We are – it's in our 4% to 6% long-term growth. Certainly, to the lower end but in that range as we have talked about, we think it's a prudent number. I think there are several factors. Top line has been below both our expectations and franchisees expectations.
Certainly, rising costs, the returns while still – as we talked about the 16 cohort 18% to 20% below historical. So – and then there's a lot of uncertainties out there with minimum wage, et cetera. So, I think it's a prudent number. I think that as you look in the future we continue to believe we're in the 4% to 6% and it can grow from there, but we are taking again, and I use that word deliberately, a prudent approach to 2017. We're letting Dave and his team do his work on executing the strategy, as Dave has said to us many times. We're done thinking about this. Now it's time to put this plan and execute. So, we feel like it's the right level of development at this point in time and do expect it to grow over time.
John William Ivankoe - JPMorgan Securities LLC
Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Next question, please. Thanks, John. Next question, please?
Operator
Our next question comes from the line of David Palmer with RBC Capital Markets. Your line is open.
Zachary Schwartzman - RBC Capital Markets LLC
Hey, this is Zachary Schwartzman in for Dave. Do you have quarterly cadence in sales or earnings that is worth pulling out at this point? In particular, your expectation to be up low single digit Dunkin' U.S. same store sales in first quarter and does this guidance include the potential impact of the few rationalization that you're testing?
Paul C. Carbone - Dunkin' Brands Group, Inc.
Yeah. So, let me take that. So, first, we don't guide quarterly. So, the low single digit comps as a full year and as we go quarter-to-quarter, part of it is what happened last year and you'll get a two-year stack, but we don't guide quarterly.
And then, to your second question, it's a great question. So, the test that we're doing is about 300 stores. So, we don't expect those 300 stores on a fleet of, call it, nearly 9,000. Whatever happens in that test to impact our comps on a full company or, said differently, our comp guidance incorporates anything that might happen in that test.
Zachary Schwartzman - RBC Capital Markets LLC
Okay. That makes sense. Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Great. Thanks, Zachary. Next question, please?
Operator
Our next question comes from the line of John Glass with Morgan Stanley. Your line is open.
Unknown Speaker
Hi. Good morning. It's Chris (34:10) on for John. So, I wanted to ask about the smart pricing program. If there's any additional color you could provide on that that would be helpful.
And then, secondly, just how generally the acceptance of the recommendations so far informs your view on the comp guide for 2017?
Nigel Travis - Dunkin' Brands Group, Inc.
Okay. So, I'll kick off and then pass it over to Chris (34:34) manage this. Firstly, as I've said, this is a huge win. I'm really pleased with the progress we've made on this. The work is unbelievably sophisticated and well done, and it's being communicated around the country. Chris will give you the details. But franchise – the second thing is the franchise understanding and acceptance is, and I want to make this clear, beyond what I was expecting. Chris?
Chris Fuqua - Dunkin' Donuts LLC
Yeah. Thanks for the question. So, we basically have a SWOT team of people that we've put in place to concentrate fully on pricing. They go out and they work with our ad committee level franchisees on understanding how to make pricing recommendations across all of our categories.
So, rather than doing blanket recommendations like we may have done in the past, five years ago or so, today, we're doing specific category recommendations. We don't guide on what pricing is going to be overall for our comp guidance in the year, but I think we have a much better idea about where we think our franchisees will go in the future, and we can really help make them more targeted specific recommendations. So, I'm much more confident in it; we've worked with some external partners on building the database, and we're going to continue to get more sophisticated on this, so it's something that actually becomes a differentiator for us.
Nigel Travis - Dunkin' Brands Group, Inc.
Yeah. And I'll just add one point. This has been so successful we've now been doing the same thing on the Baskin-Robbins side as well.
Unknown Speaker
Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Chris (36:08). Next question, please?
Operator
Our next question comes from the line of Andy Barish with Jefferies. Your line is open.
Andrew Marc Barish - Jefferies LLC
Hey, guys. Good morning. Just wondering on the full year earnings guide, below sort of your operating income growth targets and below consensus out there, what are the thought processes behind the 2017 earnings guide at this point?
Paul C. Carbone - Dunkin' Brands Group, Inc.
Yes. So let me start with the second half of that question. So, below consensus – obviously, those are your numbers, not ours. But if you look at consensus, I think it's all share count. So as we go into the year, the way we think about this is we are going to guide on flat share count. So to offset dilution, we don't really have additional buybacks in our guide and that happens as we go throughout the year. If it does or it does not, we update with that. So I think that's – if you add back – if you come back to the 93 million shares, I think you get really close to our consensus. We get really close to our guide.
And then just – is 2017 below our long-term? Yes, it is. But the op income and EPS growth is kind of the output of everything else. So, low-single digits in Dunkin' U.S., that's below our long-term guide of comps. So, this is again a year we want to get to reset our core, as Dave talked about, to accelerate comps into the future, development inside our long-term guidance of 4% to 6% but to the low end. So again, being prudent. So, as I think about the op income and the EPS growth, that's kind of the outcome of the business metrics. And on the consensus side, it's a share count – mainly a share count disconnect, I guess, between the 93 million that we are guiding to and what's in consensus.
Andrew Marc Barish - Jefferies LLC
Okay. And then, just quickly on the gain in the fourth quarter on the company-owned restaurant sales, what was that approximately?
Paul C. Carbone - Dunkin' Brands Group, Inc.
So that was on the P&L. It's about $3.2 million for the quarter. And I am happy to report, as I said in the script, we are no longer in the company-owned store business.
Andrew Marc Barish - Jefferies LLC
Thank you very much.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Great. Thanks, Andy. Next question, please?
Operator
Our next question comes from the line of Jason West with Credit Suisse. Your line is open.
Jason West - Credit Suisse Securities (USA) LLC
Yeah. Thanks. Just going back to the comments on the CPG business, I believe, Nigel, you kind of pointed out that the amount of cups being sold there is somewhat equivalent to the retail business. But the visibility we get on those cups is pretty low. So, I don't know if you could share any just big picture thoughts on the profitability kind of per cup or sort of how to think about the value of a cup sold at CPG versus at your retail stores, and if there's ever going to be a little more disclosure on some of these agreements you guys have on the CPG side of things.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Yeah. So, let me take that. This is Paul again. So, certainly I would say, a cup of coffee sold in the restaurant is going to be the most profitable for both the franchisee and for Dunkin' Brands. We are a restaurant company above all else. We believe in CPG. We believe in driving people between CPG and the restaurant, but in the end and we will always be a restaurant company first. So, that is where we will make the bulk of our revenue and our profit.
As far as disclosing the agreements, I don't think we're going to disclose further on the agreements but I will tell you, this past year, if you look at other revenue where all the CPG revenue goes, we ended the year approximately $52 million, most of that is CPG and we expect that to grow mid to high single digit next year with K-Cup growth and the introduction of RTD which we're very, very excited about. And we're going to continue to grow that business with new product introductions, et cetera.
Nigel Travis - Dunkin' Brands Group, Inc.
So, I think, I'll just add one point or two points. One is this is a business that in many ways is relatively new to us. So, we see opportunities as we go along. I think our partners have done a good job but we're always pushing them to do even more, get more SKUs, get more placings (40:56) in supermarkets, for example.
I think online continues to be an opportunity that we need to grow. If we then talk about the yield which, as Paul said, we're not going to go into the agreements, one of the things that I think we're pretty good at is managing P&Ls and down the road we see opportunities to improve it. And remember, every time we improve it, it's not just good for Dunkin' Brands, it's good for our franchisees as well, which is the great thing of our sharing relationship. So, I'd sum it all up: we're excited. We see opportunities. And Paul and the team are doing a great job pushing this business.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Great. Thanks, Jason. Next question, please?
Operator
Our next question comes from the line of Matthew DiFrisco with Guggenheim. Your line is open.
Matthew DiFrisco - Guggenheim Securities LLC
Thank you. My question is with respect to the streamlining of the menu and that 300-store test. I was curious also does that have a meaningful impact on potentially reducing the investment cost? Have you set out a target to reduce that investment cost? I know a couple of, maybe it was Analyst Day or a couple of quarters ago, on one of the calls you mentioned that some of the West Coast returns and development were a little bit hampered by the initial stores that you went into, the bared (42:15) higher investment cost. I wondered if this streamlining also might help and address some of that that could lead to maybe even stabilization or resumption of faster growth in those markets.
Nigel Travis - Dunkin' Brands Group, Inc.
Okay. So, there's a lot rolled into your question, so I'll try and separate it out. Firstly, the tax, to be honest, has nothing really to do with investment. It's about how to – Dave went through all the benefits and the throughput. It's about helping employees out of simpler stores because we have a pretty complex store that we want to simplify. So, I would think about it in line with the benefits that he spells out earlier.
In terms of investment, there's obviously a history. When we went out in California, we picked up some sites. Some of them were relatively high-priced sites. We've talked about that before. I'm pleased we got into the market early. And before anyone else ask the question, we're delighted with California and we've been delighted, I think, on every call we've had for the last four or five quarters. So that's a continuing story.
As we go forward, I'd like to believe that as we are this beverage-led On-the-Go brand, and if you take the stores that have drive-thrus, 70% of the business goes through the drive-thru. If you wanted a Nigel prediction, this isn't the guidance, the Nigel prediction is drive-thru will continue to increase. And I'm really pleased that Dave's here because he is a drive-thru expert and he's having terrific value already on thinking about the drive-thru.
On-The-Go is a real benefit. I think we're going to gradually require less space in our restaurants which should bring down capital investment. So, I disconnect the test, the simplifying test, I'd focus very largely on the fact we're a to-go brand. And as a result of that, I think ultimately we will require less capital investment because we'll need less space for people to sit inside the store.
Matthew DiFrisco - Guggenheim Securities LLC
Okay. If you don't mind, I have a follow-up regarding discounting also. Just curious with – in light of one of the larger competitors mentioning sort of leading with discounting for breakfast and coffee, how that might impact your outlook for pricing in 2017 or any tactics that you might take as far as when McDonald's starts discounting more aggressively nationally?
David L. Hoffmann - Dunkin' Brands Group, Inc.
Yeah. It's Dave. Just stepping back. As a brand, we're going to continue to be about convenience and affordability. And driving traffic is, as you pointed out as well, is a lingering opportunity for us. Taking those two into account, along with what you mentioned around the competitive landscape, not just the company you mentioned, but we've got opportunities to strengthen our national value voice. And so with that, one of the things going into 2017, working with Chris and the franchisees, we saw an opportunity to do this and, look, we're – I'm not going to discuss individual tactics at this point in time but we've got five new initiatives that we're layering in for 2017 and we're excited about that because affordability is part of our DNA going forward as well.
Nigel Travis - Dunkin' Brands Group, Inc.
And I think it's fair to say that's been pretty well accepted in all the discussions we have with franchisees as recently as yesterday.
David L. Hoffmann - Dunkin' Brands Group, Inc.
That's correct. Franchisees are aggressive and hungry.
Matthew DiFrisco - Guggenheim Securities LLC
Excellent. Thank you so much.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Great. Thanks, Matthew.
Operator
Our next question comes from the line of Nicole Miller with Piper Jaffray. Your line is open.
Nicole M. Miller Regan - Piper Jaffray & Co.
Thank you. Good morning. Looking at the U.S. franchisees, the ones that are accelerating openings like in the white space and infill store openings, how is their mood post election? And is there more than appetite or is there more optimism for growing a little bit faster with a lower cost, I think, model approved and then some of the streamlining processes that you're talking about?
Nigel Travis - Dunkin' Brands Group, Inc.
Okay. So, good question. Probably most of it hasn't anything to do with the election but Dave's been out and about talking to franchisees a lot. So, how have they been?
David L. Hoffmann - Dunkin' Brands Group, Inc.
Yeah. Coming in here, the way I talked about development the past couple of years, look, the slowdown was driven a lot by rising costs and tepid sales. I think you just have to throw that out there. We think this has huge upside. We think an environment going forward that would – if you have government policies that are pro-growth, less regulation and a clean and efficient tax system with some infrastructure spending, we think that's going to be reason to ignite this. So, at this point we've got a balance between – we've got some internal challenges that we're working through and external upside and we're confident that the runway for us, not just Western Mississippi but also Eastern Mississippi, is that right in terms of growth.
Nicole M. Miller Regan - Piper Jaffray & Co.
Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Great. Thanks, Nicole. Next question, please?
Operator
Our next question comes from the line of Jeff Bernstein with Barclays. Your line is open.
Jeff Priester - Barclays Capital, Inc.
Hi. This is actually Jeff Priester on for Jeff Bernstein. So, going back to the unit guidance, historically, you've given a range versus this year. You kind of gave an exact figure. So, following the rationale behind that and then going forward on G&A, is growing at half the rate of revenue still the right way to think about it? Thanks.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Yes. So, we didn't – what we said is approximately 385. So, I will prefer you think about that not as an exact point. I know it sounds exactly – put the word approximately in front of, but we're approximately 385. So, we're not giving – so, think about that not as a precise number.
And then on G&A, yes, I would continue to think about that growing at about half the rate of revenue.
Jeff Priester - Barclays Capital, Inc.
Perfect. Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Right. Thanks, Jeff. Next question, please?
Operator
Our next question comes from the line of Sam Beres with Robert W. Baird. Your line is open.
Sam J. Beres - Robert W. Baird & Co., Inc. (Broker)
Hi. Good morning. Thanks for taking the question. May be first in terms of the Dunkin' U.S. unit growth in Q4, was there anything specific that may have caused the opening to fall slightly below your expectations and may be said differently, were there any factors that just cause some timing shifts from Q4 openings to the Q1 openings?
Paul E. Twohig - Dunkin' Brands Group, Inc.
Yeah. This is Paul Twohig. When we look at – go back and look at Q4, we open over 200 stores in the quarter which was a pretty solid performance but, admittedly, from where we thought it would be. We missed for the year from our guidance by 15 stores where there are a couple of things here and there that impacted that. Did I move some contractors in the Southeast because of the hurricane? Did I have some permitting problems?
Yeah, on the margins, there were two or three here and there. But the thing I guess I'd think about is when you look at opening stores in 2016, the decision to do that was made back in 2015. And some other concerns about or uncertainty our franchisees were looking at from a minimum wage standpoint, labor standpoint, overall business climate, may have caused them to look at things a bit differently or it could be a bit cautious going into 2016.
Some of those remain unresolved when you look at California and New York and their minimum wage issues. So, again, as Paul spoke earlier about the 385 or the approximate 385, it's a prudent number. It's the sentiment of our franchisees remain to be very aggressive to grow, but they're going to be prudent.
Nigel Travis - Dunkin' Brands Group, Inc.
I think I'll just add to that the number we did in the fourth quarter was actually more than most other companies did in the whole year with the exception of one. So, I mean, I remain very firm on the fact that we're a development machine. As Paul said, perhaps we missed one or two as a margin. But to develop all those stores in the fourth quarter compared with what everyone else said, I think, demonstrates the development machine is still very much on track.
Sam J. Beres - Robert W. Baird & Co., Inc. (Broker)
Great. Thanks. And maybe as a follow-up, Paul, would you be willing to share maybe a guidance for interest expense in 2017? And then, as we think about the potential re-leveraging event kind of over time, I guess what factors would cause you to look at that, whether it's 2017 or 2018 potential timing? And in terms of the interest rate environment with rising rates, I mean, any rate level where you'd be more hesitant to do another re-leveraging event kind of in the next couple of years here?
Paul C. Carbone - Dunkin' Brands Group, Inc.
Sure. So, on your first question, our interest expense for the year is going to be, call it, $93 million, $98 million, $99 million because it's obviously all fixed rate net debt assumes kind of current status. So, we finished the quarter with 4.7 times levered and we set our ranges 4.5 to 5.5 and we de-lever about 50 basis points a year.
So, as we think about it, and this is still – the thesis of the company is still returning cash to shareholders, high cash generation returning it to shareholders. So, as we look out there before I get to the interest rate question, we see, this time next year, we'll be down in the 4.2-ish range. So, sometime between now and then, we think about our re-lever.
Additionally, the other thing that factors in there is we do have four-year bonds that will be two years old now. Well, this time next year, it will be three years, the make-whole payments will go away. So, that's another factor in there of refinancing and getting on the cadence. So, we like to have bonds coming due every three years to four years and thinking about re-levering the company.
And then, on interest rates, everything is fixed. We do see rising interest rates into the future although, as we have seen for many, many years, the yield curve is never in actual steep as the yield curve is looking out, would be number one. And then secondly, in the securitization market, those yields move or those rates move much slower than they do in the traditional bank and bond market. So – but we do look at rates. This is not a rate I could tell you, Sam, that X we're not going to do a re-lever and why we would. I mean, if we look at it, we look at what it does for the company but this is a cash flow and return capital to shareholder story and it continues to be.
Operator
Thank you. Our next question comes from the line of Karen Holthouse with Goldman Sachs. Your line is open.
Gregory Lum - Goldman Sachs & Co.
Hi, good morning. This is actually Greg Lum on for Karen this morning. So, traffic growth has continued to be a challenge. Can you maybe just dive into what you think the drivers are? Do you think it's just retail weakness in some of the off peak hours, maybe frequency declines or customers lapsing. And then if it's the customers lapsing, where do you think they're going for coffee instead?
Chris Fuqua - Dunkin' Donuts LLC
Yes. So, traffic is something that I think you've heard a bunch of our industry peers talk about. Overall, traffic is the challenge. We are focused on our six-point plan. We think that one of the key measures of success will be a return to traffic growth. And like Dave mentioned before, this layer that we're putting in on value, we think it helps tackle some of those traffic challenges.
Additionally, as we move more towards the beverage-led On-the-Go brand, we expect to drive traffic with that shift in strategy. So, I think it's a good question. We are really focused on it and positive traffic is going to be our measure of success and we'll be able to declare victory when we get there.
Nigel Travis - Dunkin' Brands Group, Inc.
So, this might be a good opportunity. I mean, you've heard from us over many years, Dave has been here for, what is it now, three and a bit months. What's your thoughts about how we've done?
David L. Hoffmann - Dunkin' Brands Group, Inc.
Yeah. And just to add on to your question on traffic, and I'll dive into the other piece as well. Look, I think there's also – you have to acknowledge – I don't know the science behind it, but you have to acknowledge a fundamental – also, a fundamental shift in consumer behavior with staples. We're an impulse-driven business, and impulse is going the way where you can get a lot of things that you can – staples and things like that you can get online as well. So that's where loyalty and digital that you've heard upfront and Nigel's speech becomes such a big play for us and so again, value is going to be an element of that to neutralize it. But down the road, loyalty and digital platform, and I would say ours is right there with the best of them in terms of leading edge.
In terms of – just getting back to Nigel's question, I believe those in the call know this. January is my first full month taking over the U.S. business, and I'd say it's as a tribute to Nigel and his leadership team for a well-planned, thoughtful transition between Paul Twohig and myself. And look, I came here because I believe in this brand, our future and the growth levers that are in front of us. If I had to tick those off, the strategic roadmap is solid. The brand positioning of a beverage-led On-the-Go brand is clear, progressive, and forward-leaning. We're driving greater exposure to high-growth and high-margin beverages. Like I said, if you listened to Nigel's opening around digital platform, it's leading-edge what we're doing there. There is a lot of runway in terms of unit expansion, and I've got a lot of experience doing that overseas. And we've got a great drive-thru advantage in our existing fleet as well.
And I think most people forget that we're also the category leader in donuts, bagels and muffins and these have great attachments. So, we're not – we're doubling down on these particular areas because they have great attachments to what we're doing around beverages.
And I think the final thing, and this team knows it well, I've been on the road a lot since coming here with our franchisees and their restaurants and net-net, I'd leave you with the message that this system is fired up. The franchisees are energized and hungry. We just saw it in some leadership meetings yesterday, and they're hungry to drive the business. So, yeah, everything is pointing north.
Gregory Lum - Goldman Sachs & Co.
Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Greg. Next question, please?
Operator
Our next question comes from the line of Will Slabaugh with Stephens. Your line is open.
Drew Stevenson - Stephens Inc.
Hey. Thanks, guys. This is actually Drew Stevenson on for Will. So, seeing how successful the Cold Brew has been for you and the overall innovation taking place in the coffee segment, should we think about you all being more aggressive in finding additional growth platform opportunities in the future? And then could you just talk about how you feel about your beverage pipeline in general? Thanks.
Nigel Travis - Dunkin' Brands Group, Inc.
Yes – pass over to Chris.
Chris Fuqua - Dunkin' Donuts LLC
Yeah. We feel great about the beverage pipeline. It's where a lot – our innovation team is spending a lot of time. Cold Brew is a great success and we expect more things like that in the future.
Nigel Travis - Dunkin' Brands Group, Inc.
Just a short answer, because we're really excited about it. So, we're not going to reveal all the things we've got in the pipeline.
Drew Stevenson - Stephens Inc.
Great. Okay. Thanks.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Drew. Next question, please?
Operator
Our next question comes from the line of Matt McGinley with Evercore. Your line is open.
Matthew Robert McGinley - Evercore Group LLC
Thanks for taking my question. My first one is on the implied composition of the comp into 2017. As you went through the course of the year, price was obviously a key driver of the comp but as you exited the year, you're obviously a lot more disciplined on price but you didn't necessarily see a step-up in traffic. So, the question is does taking less price risk the comp growth or do you feel that the six-point plan and just reducing price overall will have the impact of driving more traffic in 2017?
Chris Fuqua - Dunkin' Donuts LLC
So, this is Chris again. I think we're going to – price is going to be a part of our growth in the future, I think the reality is we're going to take targeted strategic price increases. We think a healthy growth is a balance between taking price and traffic growth, and our six-point plan is designed to do both of those. So, I wouldn't expect the majority of our growth to come from either side. We need to get to a point where both transactions and price are driving our growth.
Matthew Robert McGinley - Evercore Group LLC
Good. And then, on the store growth for 2017, is the composition on a region basis about the same as what you saw in 2016 for that 385 or do you have more of a shift out into the emerging and West market?
Chris Fuqua - Dunkin' Donuts LLC
Yeah. So, two things. Again, I'm going to take the opportunity to say we are at approximately 385, so...
Matthew Robert McGinley - Evercore Group LLC
Sure. Approximately.
Chris Fuqua - Dunkin' Donuts LLC
Not using a pinhead there on an exact number. And then, secondly, we stopped guiding on regional development. We will update you on it quarterly as we have. But over the long-term of the business, to answer – and I know this isn't your exact question, yes, growth will continue to accelerate out West vis-à-vis the core, but we don't do quarterly or yearly guidance on regional development.
Matthew Robert McGinley - Evercore Group LLC
Okay. Thank you.
Chris Fuqua - Dunkin' Donuts LLC
Thanks, Matt.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Next question?
Operator
Our next question comes from the line of Michael Gallo with C.L. King. Your line is open.
Michael W. Gallo - C.L. King & Associates, Inc.
Hi. Good morning. Thanks for taking my question. My question is on the repositioning, the On-the-Go beverage, whether you see any signs that that's changing the mix towards beverage, especially in new markets like West Coast markets and how you see that evolving in 2017? Thanks.
Nigel Travis - Dunkin' Brands Group, Inc.
Yeah, I think what I would say is (60:59) one of the reasons we're going down that way is we see not only an opportunity, we're seeing our performance going there. And I would say – not necessarily a scientific analysis in the newer markets. We seem to be getting a higher beverage mix faster out the gate than we did previously. Now, that's probably due to the fact we've learned a lot and I mean if I go back and take markets like Phoenix, which, when I came to the business was really struggling with fairly low beverage mix, which is a bad term because it's really beverage sellers that we look at. That's come up astronomically but we've learned many lessons from those early days. We're applying them to the new markets. I think two things that we used to talk about at the IPO but they're really important still is the fact we have national media that covers all these markets. So, if you're in a brand new market with one or two stores you have national media like everywhere else. And secondly, one of the benefits of our CPG strategy is that we are developing the same profile of Dunkin' products right across the country.
Michael W. Gallo - C.L. King & Associates, Inc.
Great.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Michael. Next question, please?
Operator
Our next question comes from the line of Steve Anderson with Maxim Group. Your line is open.
Stephen Anderson - Maxim Group LLC
Yes. Good morning. I just wanted to ask in regard to your new unit development goals for 2016. I wanted to ask about your plans to expand within the BJ's Wholesale Club. I noticed before the year-end you opened about 20 or more stores within BJ's in the New York area, and I just wanted to see how that plays into your development goals.
Nigel Travis - Dunkin' Brands Group, Inc.
So, let me just clarify, development goals of 2016 or 2017?
Stephen Anderson - Maxim Group LLC
Okay. Within the – and that's inclusive in those stores for 2017? Okay. Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
So yes. So those opened in 2016, and they're in our numbers in 2016 that we reported of a little bit over 200 for Q4. We'll have a few more openings of BJ's in 2017. And again, it's in that approximately 385 number.
Stephen Anderson - Maxim Group LLC
All right. Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Great. Thanks, Steve. I know we're past the top of the hour. I see two more people in the queue. So let's take these last two questions, and then we'll wrap up.
Operator
Our next question comes from the line of Joe Stauff of Susquehanna. Your line is open.
Joe Stauff - Susquehanna Financial Group LLLP
Oh, thanks a lot for taking the question. I just wanted to come back. You addressed in various capacities that your ability to grow units, and there have been some factors that maybe have discouraged your ability to grow units at that 5%-plus level. And I just wondered, as a potential investor/franchisor, I mean, isn't the traffic a significant sort of contributor in terms of just the return dynamics and the unease with respect to investing and attracting that incremental franchisor? Can you just talk about that? I know you've addressed it. You've got the 6-point plan, but it seems unlikely your traffic issue is going to correct itself for the foreseeable future. Is that accurate?
Paul C. Carbone - Dunkin' Brands Group, Inc.
Yes. So, let me start at the end there. So, will the traffic correct itself? So we have the 6-part plan, these guys are working on it, everything, and then making the operations less complex, making it a better place to work, so yeah. I think all of that will address the traffic issues. Now, to when you (64:47) start it. Yes, traffic, overall comp performance, right, has been softer than we and our franchisees would expect and that has certainly dampened enthusiasm to open up restaurants. Now, within that, we're going to open up greater than 4% restaurants next year. So, I don't want to over index of – we're not opening up any restaurants. So, again, we're going to open up approximately 385 net...
Joe Stauff - Susquehanna Financial Group LLLP
Sure.
Paul C. Carbone - Dunkin' Brands Group, Inc.
...restaurants next year. So, there are a lot franchisees building a lot of restaurants. But that being said, we get transactions positive and our long term – if you look at our long-term comp goals in the 2 to 4 range, yeah, yeah, you get to a 3.5 comp. It's a different story than a one fixed comp, right? So, yeah, I think it's all those things. It's no one thing. But comps get better, restaurant operations get simplified, guest experience gets better. We focus on beverage-led On-the-Go. I think all these things are going to come together to really drive developments.
Joe Stauff - Susquehanna Financial Group LLLP
Okay. I appreciate the response. And I just wanted just the ability again to correct in a meaningful way your traffic declines, call it, roughly 200 basis points this past year, that's something that is still going to take time, when you infer to it in your previous comments and so forth. Is that a fair critique?
Nigel Travis - Dunkin' Brands Group, Inc.
So, okay. So, we've been down this route before. So, let me just give some facts. Until the last couple of years, we grew traffic every year during my time here, okay? Can we get back to positive traffic? Yes. Do we have the plans to get back to positive traffic? Absolutely. And I'm probably more optimistic than I was at the turn of the year because Dave's really driving here. He's really focused on this national value that some of your colleagues point out in their writings regularly. So, it will take a little bit of time, but I'm more optimistic than I was last year.
And I want to point out something that Dave said that if you look at just about everyone else in our industry, there is negative traffic, and that includes in the coffee and bakery segment. And I think, if you actually look at our traffic, we outperformed many other large companies.
Joe Stauff - Susquehanna Financial Group LLLP
Great.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Joe. Operator...
Joe Stauff - Susquehanna Financial Group LLLP
Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
...let's go to the last question.
Operator
Our last question comes from the line of Matthew DiFrisco with Guggenheim. Your line is open.
Matthew DiFrisco - Guggenheim Securities LLC
Thank you. I appreciate the second question. With respect, I don't think I heard it on the call. Did you guys mention a percent of sales done on mobile order and pay? And I was just curious, is potentially the streamlining also a benefit that might help unleash maybe even more greater flow-through on the mobile order and pay before it would maybe potentially be, call it, a bottleneck problem at some of those stores? Just curious if that's in the back of your minds also as you test this 200 stores to 300 stores.
Scott Hudler - Dunkin' Brands Group, Inc.
Yeah. So, Matt, this is Scott Hudler. We did thought it's about 1% of sales from mobile ordering. We think it's an absolute unlock for making the restaurant experience better. So, you can have that experience where you can order outside of the restaurant, come in, speed past the line and get your coffee and food items. We think that's a huge unlock. We will be looking at that as we tie into the streamlined menu in that 300-store test, but we think we are in very early days still. We've only had mobile ordering available for a little over six months. We think we're just scratching the surface. And we feel like we build our program and the delivery of it in the restaurant to avoid some of the bottlenecks that you may have been hearing about. I think what we have planned for the future, this is a real focus of ours, is making that experience even better as it scales to become 3%, 4%, 5% of sales in the future.
Matthew DiFrisco - Guggenheim Securities LLC
Great. Excellent.
Paul C. Carbone - Dunkin' Brands Group, Inc.
Thanks, Matt.
Matthew DiFrisco - Guggenheim Securities LLC
Thank you.
Paul C. Carbone - Dunkin' Brands Group, Inc.
I'll turn it over to Nigel.
Nigel Travis - Dunkin' Brands Group, Inc.
So thank you, everyone, for coming to listen to us today. You're probably all surrounded by snow like we are. I want to say, I think we have an excellent year. I just want to pick up on what Scott said. I mean, we've got all this technology installed in a franchise system. We're excited about that, as Scott was just describing. Other companies sometimes do it in their company stores, but they don't do it in their franchise stores. We've done it right across our store base.
So, I think we had an excellent year in 2016. I think we have a wonderful plan that's been validated by consumer insight. And I just want to comment, I've spent most of the middle of last summer recruiting a new leader for Dunkin' U.S. It took a lot of time. It's been worthwhile. Dave has added a new energy that is compelling to our business. So, we're in great shape as we go into 2017, and we look forward to talking to you again. So, thanks.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.