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FDD Talk 2016: The Domino’s Pizza Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on August 23, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Pizza Franchises



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Domino's Pizza Photo by Rasidel Slika

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Domino’s Pizza franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Domino’s Pizza franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Domino’s Pizza’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2014, 2013, 2012, 2011, and 2010 average weekly unit sales for company-owned, franchised, and combined company-owned and franchised Domino’s Pizza Stores, including Domino’s Pizza Traditional Stores, Domino’s Pizza Non-Traditional Stores, and Domino’s Pizza Transitional Stores
  • 2014, 2013, 2012, 2011, and 2010 store count at year-end for company-owned, franchised, and combined company-owned and franchised Domino’s Pizza Stores, including Domino’s Pizza Traditional Stores, Domino’s Pizza Non-Traditional Stores, and Domino’s Pizza Transitional Stores
  • number of Domino’s Pizza Stores in operation at year-end 2014, 2013, 2012, 2011, and 2010 that achieved or exceeded the average weekly unit sales for the year
  • average total variable costs, total fixed costs, and EBITDA for franchised Domino’s Pizza Stores that submitted complete and properly prepared profit and loss statements with average weekly unit sales of $9,000 to $10,000; $12,000 to $13,000; $15,000 to $16,000; and $18,000 to $19,000, respectively

Section I – Background Information

Domino’s Tapping Into Customers’ Mobile Habits

Consumers’ intensive focus on their mobile devices is leading Domino’s down the mobile trail as the company continues to invest in mobile ordering apps for multiple mobile operating systems, including wearable tech and game systems.

“The real growth engine for Domino’s is the mobile platform,” Chief Information Officer Kevin Vasconi told the Wall Street Journal in a February 2016 interview. Mobile apps, Vasconi said, “are going to be a big part of the strategy.”

Vasconi said customers using digital channels aren’t generally tied to one particular channel, but use whatever is most convenient. He plans to hire about 50 new IT staff in 2016 for the mobile push, which will include exploration of how to best integrate technology and data analytics into the ordering, dining and carry-out functions.

No-Touch Ordering App Launched

In fact, Domino’s even has a website, “Anyware,” that simply shows customers the different ways people can order a pizza.

They can already use an Easy Order Button, an emoji tweet, the Amazon Echo, the Apple watch, Smart TV or even the Xbox One. But to make ordering even easier, Domino’s in April 2016 launched a “no-touch” ordering app for mobile devices.

Once you set up the Zero Click app and input your pizza preferences, all you have to do is launch the app. As long as you order the same pizza all the time, you can just sit back and wait for it to arrive.

If you accidentally open the app, a 10-second countdown will give you a chance to stop the order. If you don’t make it in time, you’ll see an order confirmation.

Pizza Robot Getting Tryout in New Zealand

A step up from mobile apps is the pizza robot being given a trial run in New Zealand. In March 2016, the company announced that the autonomous robot had successfully delivered its first pizza.

The vehicle’s development began in 2015. The four-wheel robot can carry up to 10 pizzas, along with beverages, and can go 20 kilometers from the store before it needs its battery charged. A customer unlocks an order by entering a code.

It’s uncertain how the robot would escape the potential of theft or vandalism, although the company has said surveillance will be included.

Brothers Started Pizza Business

Domino’s was founded in Ypsilanti, Mich., in 1960 by brothers Tom and James Monaghan. James left the company eight months later; Tom went on to start franchising in 1967. By 1983 the chain had surpassed 1,000 locations and opened its first international restaurant in Winnipeg, Manitoba, Canada. Domino’s is now the second-largest franchised pizza chain in the United States, following Pizza Hut.

Tom Monaghan retired in 1998, selling 93 percent of the company to Bain Capital, who took Domino’s public in 2004. Monaghan owns the campus where the chain is headquartered at the Domino Farms Office Park in Ann Arbor Charter Township, Michigan.

Chain Has Presence in More Than 80 Countries

Domino’s now has more than 12,600 pizza stores in the United States, Canada, Europe and Africa, and sells pizza in more than 80 countries.

The stores sell regular, pan and thin-crust pizza, from classics like pepperoni and sausage to specialty pies like the Philly Cheese Steak Pizza and the Pacific Veggie Pizza. The chain also sells pastas, sandwiches, chicken, breadsticks and buffalo wings.

Domino’s Sued for Shorting Workers

New York Attorney General Eric T. Schneiderman filed a lawsuit in May 2016 against Domino’s Pizza Inc., Domino’s Pizza LLC and Domino’s Pizza Franchising LLC, along with three Domino’s franchisees, alleging that workers were underpaid at least $565,000 at 10 New York stores.

An investigation allegedly revealed that Domino’s urged franchisees to use payroll reports from “PULSE,” the company’s computer system, even though the company had known for years that that program under-calculated gross wages.

Section II – Estimated Costs

  • Please click here for detailed estimates of Domino’s Pizza franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis



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