FDD Talk 2019: Domino’s Pizza Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk 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 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Domino’s Pizza franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Domino’s Pizza outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Domino’s Pizza’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2017, 2016, 2015, 2014, and 2013 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

• 2017, 2016, 2015, 2014, and 2013 median 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

• 2017, 2016, 2015, 2014, and 2013 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 and percentage of Domino’s Pizza Stores in operation at year-end 2017, 2016, 2015, 2014, and 2013 that achieved or exceeded the average weekly unit sales for the year

• 2017 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 <$10,000; $10,001 to $15,000; $15,001 to $20,000; $20,001 to $25,000; and $25,000+, respectively

Section I – Background Information

25 Things You Need to Know About the Domino’s Pizza Franchise

Celebrates Opening of 16,000th Store

1.  At the beginning of March 2019, Domino’s celebrated a major milestone with the grand opening of its 16,000th store in the world, in Cheektowaga, New York. Ritch Allison, president and CEO of Domino’s, said, “This is an incredible milestone for Domino’s, and I am beyond excited it is happening in Cheektowaga. We’ve grown our total global store count by nearly 4,800 stores in the past five years, and we couldn’t be more thrilled to commemorate our 16,000th store in the world, right here in New York.”

2.  The 16,000th store hosted a ribbon-cutting ceremony with Allison, COO and president of the Americas Russell Weiner, Cheektowaga Domino’s franchise owner Allan Erwin, and other key company executives, on Monday, March 4. Erwin also presented a $16,000 donation to the Cystic Fibrosis Foundation, Western New York Chapter, in honor of the 16,000th store.

3.  Erwin said, “Having the Cheektowaga community be a part of this milestone is very meaningful to me, as does being able to give back to the community. The Domino’s team and I are honored to support a great local organization that helps cure cystic fibrosis and provides all people with the disease the opportunity to lead full, productive lives by funding research and drug development, promoting individualized treatment, and ensuring access to high-quality, specialized care.”

4.  Erwin began his career with Domino’s in 1993 as a delivery driver. He purchased his first store in 1998 – just five years after joining the company. He now owns 37 stores throughout New York, North Dakota, South Dakota, Montana, and Wyoming. He is not alone – more than 90 percent of Domino’s U.S. franchise owners began their careers as delivery drivers or pizza makers in Domino’s stores.

Pilots GPS Delivery Tracking

5.  At the end of April 2019, Domino’s announced that it was piloting a test of GPS driver tracking in 27 corporate-owned stores around Phoenix, Arizona. Customers who order from one of these stores can track the location of their order and driver via a map from the order confirmation page of Dominos.com or the Domino’s app. They will also receive an estimated delivery time and can opt into SMS notifications that let them know when their order is about two minutes away.

6.  Dennis Maloney, senior vice president and chief digital officer of Domino’s, said, “We’re excited to offer this feature to our customers. Transparency on orders that are out on the road makes a big difference to customers, as well as drivers and store managers. With GPS tracking, everyone can have the best possible delivery experience.”

7.  In addition to customer benefits, this piloted feature also benefits Domino’s delivery drivers, as it provides optional navigation and one-touch customer callback capabilities. Store managers, meanwhile, will have a driver-tracking screen at the store that will show where all of their drivers are out on the road, allowing them to better manage store operations and make efficient deliveries.

8.  The pilot was extended to select stores in three franchise markets later in the spring, including Lansing, Michigan; Roanoke, Virginia; and the suburban Seattle-Tacoma, Washington area.

Partners With Xevo to Launch In-Car Ordering in New Vehicles

9.  Toward the end of March 2019, Domino’s announced that it was working with Xevo Inc., the global leader of in-vehicle commerce and services for automakers, to launch the latest AnyWare pizza ordering platform pre-loaded in cars starting in 2019. The new in-vehicle Domino’s app is powered by Xevo Market, an automotive commerce platform for connected cars.

10.  Chris Roeser, director of digital experience at Domino’s, said, “At Domino’s, we want pizza ordering to be simple and always within reach, no matter where a customer happens to be. This new AnyWare platform will make ordering pizza easy, whether you’re in the car waiting for the kids to finish soccer practice or you’re on your way home from work.”

11.  With the AnyWare app, customers will be able to order their Domino’s favorites with just a few taps on their vehicle’s touchscreen. Once the customer is logged in, they can save time by ordering their Easy Order or most recent order, and then track it with Domino’s Tracker, so they know when it’s out of the oven. Customers can locate their local store and call in an order from the in-car interface as well.

12.  The Domino’s ordering feature will be automatically loaded on millions of cars with the Xevo platform starting in late 2019. Xevo demonstrated the Xevo Market in-vehicle experience live April 7-10 at the Restaurant Leadership Conference in Phoenix, Arizona.

13.  According to Brian Woods, chief marketing officer at Xevo, “We’re excited to work with Domino’s, and to have them join the Xevo Market platform, which is already live in millions of vehicles on the road today. Domino’s is the world’s largest pizza company, and they’ve always been technological innovators. Xevo Market makes it possible for Domino’s to reach people directly in their cars, streamlining mobile ordering to help busy consumers save time.”

Begins Offering Reward Points for Any Pizzas – Even Competitors’

14.  At the beginning of February 2019, Domino’s rolled out its Points for Pies rewards program – a program where Piece of the Pie Rewards members can receive loyalty points for any pizza, including national competitors’.

15.  Beginning on Saturday, Feb. 2, just ahead of one of the biggest pizza days of the year (Super Bowl Sunday), Domino’s began awarding rewards points for ALL pizza that customers may eat through its new Points for Pies program.

16.  The process is simple: Customers download the latest Domino’s app, sign up for the Piece of the Pie Rewards loyalty program (if not already a member), use the newly-embedded pizza identification feature to scan their pizza, and then earn 10 points. After a customer earns 60 points, they can redeem them for a free medium two-topping Domino’s pizza.

17.  According to Art D’Elia, senior vice president, chief brand and innovation officer for Domino’s, “Instead of advertising during Sunday’s game, we decided to invest in a breakthrough program that rewards everyone who loves pizza as much as we do. We know everyone is asking themselves, ‘Did Domino’s just say they will award points for eating ANY pizza? Even from a competitor?’ You read that right; oh yes we did!”

18.  To make the Points for Pies program work, Domino’s internal teams developed a pizza identifier that will scan each pizza or slice and will then use artificial intelligence-driven software to identify the image as pizza, so that points can be awarded. This technology will recognize all pizza – not just Domino’s – for rewards. Non-pizza items will not be recognized by the scanner and cannot be used to get points.

19.  Domino’s awarded Piece of the Pie Rewards members with Points for Pies points when they used the latest version of Domino’s mobile app to scan a “pizza or an eligible image of a pizza” from Feb. 2 to April 28, 2019. Domino’s committed to giving pizza lovers at least 100 million points toward free pies during the program’s 12-week duration. Members could earn 10 points through scanning one pizza per week and earn up to a maximum of 60 points through Points for Pies.

Company History

20.  Domino’s was founded in 1960 when Tom Monaghan and his brother James took over a small pizza chain called DomiNick’s in Ypsilanti, Michigan. Initially, the Monaghans had planned to split running their new business 50/50, but James decided he did not want to quit his full-time job as a postman. The following year, James traded his half of the business to Tom in exchange for the Volkswagen Beetle they had been using to make pizza deliveries.

21.  By 1965, Tom Monaghan purchased two additional pizzerias for a total of three restaurants. Monaghan wanted all the pizzerias to share the same branding, but the original owner would not let Monaghan use the DomiNick’s name for this purpose. After a suggestion from an employee named Jim Kennedy, Monaghan renamed the business Domino’s Pizza later that year. Monaghan also updated the logo to a domino with three dots representing the original three restaurants.

22.  Following the rebranding, Domino’s grew rapidly over the next decade and by 1978 there were 200 stores opened across the United States. Domino’s explosive growth continued into the 1980s and in 1983 the chain celebrated the opening of its 1,000th restaurant. Also that year, Domino’s opened its first international location in Winnipeg, Canada. At the end of the 1980s, Domino’s introduced its first new menu item, Pan Pizza, and opened its 5,000th store.

23.  As Domino’s growth continued in the 1990s, the chain added several new items to its menu, including bread sticks, thin crust pizza, buffalo wings, and flavored crusts (for a limited time). In 1997, Domino’s updated its company logo and store interiors with brighter colors and a newer look. The following year, Monaghan announced his retirement and sold about 93 percent of the company to Bain Capital, Inc. for about $1 billion.

24.  Over the past two decades, Domino’s has continued to grow around the world. The chain has also continued to innovate its menu, its store operations, and its branding and stores. In 2012, Domino’s dropped the “Pizza” part of its name as the brand has continued to expand its menu offerings beyond traditional pizza. Today, there are Domino’s locations in over 84 countries around the world.

Entrepreneur’s Franchise 500

25.  Domino’s did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Domino’s Pizza franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Domino’s Pizza’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Traditional Outlets

Franchised

2016

• Outlets at the Start of the Year:  4,853
• Outlets at the End of the Year:  5,029
• Net Change:  +176

2017

• Outlets at the Start of the Year:  5,029
• Outlets at the End of the Year:  5,254
• Net Change:  +225

2018

• Outlets at the Start of the Year:  5,254
• Outlets at the End of the Year:  5,514
• Net Change:  +260

Company-Owned

2016

• Outlets at the Start of the Year:  384
• Outlets at the End of the Year:  392
• Net Change:  +8

2017

• Outlets at the Start of the Year:  392
• Outlets at the End of the Year:  392
• Net Change:  0

2018

• Outlets at the Start of the Year:  392
• Outlets at the End of the Year:  390
• Net Change:  -2

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• Set forth below is information concerning the average weekly unit sales and other financial data of Domino’s Pizza Traditional Stores, Domino’s Pizza Non-Traditional Stores, and Domino’s Pizza Transitional Stores operated in the Continental United States for the years noted.

• You should take this information into consideration only if you are acquiring a franchise for a Store now located or to be located in the Continental United States.

Part 1 – Average Weekly Unit Sales (AWUS) and Other Financial Data of Stores

• The AWUS of franchised and company-owned Stores for the past 5 calendar years is set forth below. These Stores include Domino’s Pizza Traditional Stores, Domino’s Pizza Non-Traditional Stores, and Domino’s Pizza Transitional Stores.

• AWUS means the average weekly unit sales (i.e. average weekly Royalty Sales). AWUS is calculated by dividing the total Royalty Sales reported by all Stores operating during the year by the number of weeks reported.

AWUS

2013