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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Domino’s Pizza’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2018, 2017, 2016, 2015, and 2014 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
- 2018, 2017, 2016, 2015, and 2014 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
- 2018, 2017, 2016, 2015, and 2014 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 2018, 2017, 2016, 2015, and 2014 that achieved or exceeded the average weekly unit sales for the year
- 2018 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
28 Things You Need to Know About the Domino’s Pizza Franchise
Commemorates Opening of 17,000th Store
1. At the beginning of March 2020, Domino’s Pizza commemorated the opening of the brand’s 17,000th store in the world with a special celebration on Monday, March 2. The milestone store celebration took place at Domino’s located in Bradbury, New South Wales, Australia.
2. Ritch Allison, Domino’s CEO, said, “Domino’s opened its first international store in Winnipeg, Manitoba, Canada in 1983. We’ve come a long way since then, and I’m incredibly proud to announce the opening of our 17,000th store in the world. This achievement is a true testament to how hard Domino’s has worked and truly is a reflection of the success of our global brand.”
3. Domino’s Bradbury celebrated by giving away free pizza and a total of $17,000 AUD. From noon to 1 p.m., the store served up free pizzas to carryout customers, with seventeen of those pizza boxes featuring a hidden “Golden Slice” on them, worth $1,000 AUD in cash.
4. Don Meij, the group CEO and managing director of Domino’s Pizza Enterprises Ltd., said, “It’s an honor to celebrate this global milestone right here in Bradbury. This store opening represents our commitment to international growth and development. We look forward to continuing our global growth momentum by opening even more stores closer to our customers and serving up high-quality food to local residents.”
Plans to Give Away 10 Million Slices of Pizza Nationwide
5. In early April 2020, during the ongoing COVID-19 crisis, Domino’s announced that its company-owned and franchised stores throughout the U.S. will donate roughly 10 million slices of pizza within their local communities. Domino’s is partnering with its franchisees as part of this national effort, so that hospitals and medical centers, schoolkids and their families, health departments, grocery store workers, and others in need can enjoy a hot, delicious pizza.
6. Domino’s franchisees, corporate managers, and their local store employees know their neighborhoods best and will begin feeding the need they see around them by providing pizza to the people and organizations that are meaningful to their communities. All 6,126 stores nationwide are expected to be a part of this effort.
7. According to Russell Weiner, Domino’s COO and president of the Americas, “We have a long history of feeding people during times of crisis and uncertainty. When we were looking at how we could help, we knew we could use the reach of our national brand to make a difference in thousands of local neighborhoods. We have franchisees and company-owned stores all over the country already doing amazing work in their communities and we know that by amplifying those efforts together we will be able to help even more people who are struggling right now.”
8. At the time of the announcement, Domino’s noted that many of its franchisees were already out helping their local communities. Domino’s franchisee Pat Farmer, who owns stores in the Seattle-Tacoma area, said, “We empowered our managers to look for opportunities in their local neighborhoods to donate pizzas to those in need. It could be for families, frontline workers or even those showing up to work at our grocery stores. Stores are now actively looking for who they can help next. They have pride in how they’re making a difference during difficult times.”
9. Memphis-area Domino’s franchisee Jason Shifflett added, “We take our responsibility seriously and we are honored that we can provide meals to those in need, as well as those who are working to save lives during this difficult time.” Shifflett has committed to donating an additional 1,000 pizzas to those in need in his community.
10. San Diego franchisee Shane Casey is matching the 1,000-pizza commitment in his Southern California neighborhoods. Franchisee Jim Gronemann has already personally handed out pizzas to families in LaPorte, Indiana and has pledged to do so weekly.
Thrives During Uncertain Times
11. In late May 2020, Domino’s Pizza reported that from March 23 to April 19, Domino’s began to see its COVID-19 investments and market positioning pay off. The company spent roughly six weeks rewriting its operating procedures. The main flip: moving to a 100 percent contactless delivery model nationwide. The results haven’t slowed since.
12. Domino’s provided a look into the first eight weeks of Q2, which produced a “material increase in U.S. same-store sales,” the company said. It was the latest (and last) coronavirus business update Domino’s planned to share outside of typical quarterly earnings.
13. CEO Ritch Allison said, “We are seeing a tailwind as consumer behavior across the restaurant industry has shifted toward delivery and carryout, though we are not sure whether this trend will continue for the remainder of the second quarter or how long this tailwind may last.”
14. As of May 24, Domino’s said nearly all of its corporate domestic units were open, with dining rooms closed and stores deploying contactless delivery and carryout solutions. At the end of Q1, Domino’s entire U.S. system faced fewer than 20 temporary store closures due to COVID-19 (5,811 of the brand’s restaurants are franchise run). Domino’s also estimated fewer than 900 international restaurants (out of 10,933 total restaurants around the globe) were temporarily closed at the time.
15. Allison added, “I am proud of the way the Domino’s system has responded rapidly to the COVID-19 environment, innovating across all aspects of our operations and our digital platforms to provide a contactless delivery and carryout experience, which is just one aspect of the unwavering commitment that we and our franchisees have to the safety of our customers and team members. We will continue to focus on providing our franchisees and stores with tools to remain operationally and financially healthy, and to provide a trusted, safe and affordable option for customers at a time when they need it most.”
16. Allison added that Domino’s international sales could be “choppy” for the foreseeable future. “In some markets, sales results are matching or exceeding those that we see in the U.S.,” Allison said. “In others, where our master franchisees are still experiencing significant operating limitations or temporary store closures, those sales are down materially versus last year.”
17. At its peak, Domino’s had roughly 2,400 international closures. “We expect that temporary closures, partial-week openings, abbreviated store hours and limited service methods will continue to pressure international same-store and retail sales in the near-term,” Allison said.
18. In Q2, Domino’s borrowed the remaining $158 million available under its outstanding variable funding notes. The company said it has repaid $100 million of the borrowings and is currently generating positive operating cash flow. Domino’s has nearly $250 million cash on hand and $102 million of available borrowings. “We will continue to be a ‘work-in-progress’ brand, adapting to this new world, while maintaining our long-term emphasis on great-tasting pizza, value, service, and technology,” Allison said.
19. BTIG analyst Peter Saleh wrote in a note that Domino’s nearly 21 percent comps boost in recent weeks “demonstrates the power of the investments the company has made in technology and menu innovation over the past decade and the favorability of a largely delivery/carryout model.” “While we recognize this recent sales surge is likely unsustainable as more restaurants reopen, we expect domestic sales trends to moderate to a higher level than they otherwise would have given lingering mandates and consumer apprehension,” he added.
20. To Allison’s earlier point about sales sustainability, it’s difficult to say how much Domino’s momentum will moderate as other restaurants begin welcoming guests back to dining rooms. But there’s no question Domino’s has made ample changes during the pandemic. It rolled out contactless drive-up carryout technology to all U.S. stores. Whether it stays a corporate mandate or not, Allison said the chain expects to make contactless delivery available “for some extended period of time.”
21. Leading up to Q2, Domino’s ran its digital mix up to 75 percent of total sales from 70 percent. It went as high as 80 percent one week. The company unfurled a system that makes tipping delivery drivers easier and more prominent in the ordering experience and even created a cardboard “pizza pedestal,” so drivers don’t have to put guests’ orders on the ground.
22. Additionally, Domino’s redirected advertising to focus on contactless delivery and carryout. The company previously noted it was producing roughly an ad per week going on six straight weeks. In recent quarters, Allison has also hinted at a menu innovation coming over the summer, which Saleh believes will provide another jolt.
23. Domino’s Pizza, which is branded simply as Domino’s, was founded in 1960 when Tom Monaghan and his brother James took over the operation of DomiNick’s, an existing location of a small pizza restaurant chain that had been owned by Dominick DiVarti, in Ypsilanti, Michigan.
24. Initially, the brothers agreed to split the work hours evenly, but James didn’t want to give up his full-time job as a postman. So James agreed to sell Tom Monaghan his half of the business in exchange for the Volkswagen Beetle they had been using to deliver pizzas.
25. Tom Monaghan continued to run the business by himself and in 1965, he purchased two additional pizzerias. At that time, Monaghan decided he wanted the stores to share the same name and branding, but was forbidden by DiVarti to use DomiNick’s. However, an employee named Jim Kennedy came up with Domino’s, and Monaghan loved the idea. The company’s original logo was a domino piece featuring three dots to represent the first three stores.
26. Over the next few decades, Domino’s continued to expand across the United States and in the early 1980s, the brand opened its first international stores in Canada. This was quickly followed by more international locations in the UK and Japan. Throughout the 1990s, Domino’s expanded rapidly both domestically and internationally, and there were thousands of locations around the world.
27. At the end of the 1990s, Monaghan announced his retirement and sold about 93 percent of the company to Bain Capital, Inc. for about $1 billion. Following Monaghan’s retirement, Domino’s kept expanding around the world. Today, there are Domino’s locations in over 84 countries.
Entrepreneur’s Franchise 500
28. Domino’s Pizza did not rank on Entrepreneur’s 2020 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 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 5,029
- Outlets at the End of the Year: 5,254
- Net Change: +225
- Outlets at the Start of the Year: 5,254
- Outlets at the End of the Year: 5,514
- Net Change: +260
- Outlets at the Start of the Year: 5,514
- Outlets at the End of the Year: 5,815
- Net Change: +301
- Outlets at the Start of the Year: 392
- Outlets at the End of the Year: 392
- Net Change: 0
- Outlets at the Start of the Year: 392
- Outlets at the End of the Year: 390
- Net Change: -2
- Outlets at the Start of the Year: 390
- Outlets at the End of the Year: 342
- Net Change: -48
Section V – Financial Performance Representations (Item 19, 2020 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.