Dominos Pizza Poland (DPP)   49p   Mkt Cap £60m



DISCLAIMER: Usually I do my best to avoid investing in loss making companies, especially start ups with no track record. I made an exception for DPP about 3 years ago. I guess its my dirty little secret. Anyway I thought I’d share a few thoughts after looking at the recent interims.



Dominos Pizza is a GLOBAL PHENOMENON
I once took a couple of weeks looking at Dominos Pizza, given its success in the UK. I traced it back to its roots in the US in 1960. Then the move to franchise stores as well as own them and then it's international expansion. There are now over 12,900 Dominos Pizza stores globally. There are over 900 stores in the UK with plans to get to 2000. It is also very successful in France, Australasia, the Netherlands, Japan, India, Canada. And it's still growing fast with plans in all countries for further roll outs.



How does the franchise model work?
Each international market agrees a master franchise agreement with Dominos Pizza inc in the US. The master franchises can then either open stores operated by themselves (known as corporate stores) or attract sub-franchisees. Sub franchisees are typically entrepreneurial store managers who want to give it a go themselves and take on the risk of running a store. Every pizza and ancillary product sold has a royalty which must be paid to the Master franchise, whether they are sold in stores owned and operated by the master franchisee or by the sub franchisee. The royalty is around 4% for stores operated by the master franchisee and 6.5% for the sub franchisee. Part of this royalty is passed back to Dominos Pizza Inc in the US, part is retained by the master franchisee. In DPPs case it pays 3.5% of the 4% back to DPI in the US and retains either 0.5% from the corporate stores. For the sub franchisee stores it pays 3.5% back to DPI and retains 3%.. The sub franchisees are also required to pay 4% of turnover into a national advertising fund to promote Dominos Pizza in that country. So as the number of outlets grows in a country, so the national advertising fund grows.



Technology and innovation
The advent of the App has been a major bonus for Dominos, with over 2/3 of sales in Poland…

Unlock the rest of this Article in 15 seconds

or Unlock with your email

Already have an account?
Login here