Costs can be spread across multiple storesįortressing also creates a barrier to entry to competitors and protects the returns on investment for the franchisee.
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Drivers are busier and make more tip money, lowering employee turnover.Lower delivery times decreased delivery costs.The profitability of each store increases because of:
But the opposite happens, same store sales actually increase. The initial thought is that this will cannibalize the previous store’s sales.
If an area has one Domino’s store and, based on internal data, that store is reaching capacity, management will approach the franchisee about opening another store nearby. You can think of it as Domino’s flywheel. Fortressingįortressing is Domino’s term and strategy for growing same-store sales. Domino’s leverages this demand to build more stores and to execute its "fortressing" strategy. Potential franchisees want to be a part of Domino’s and current Franchisees want to open more stores. And this is not accounting for sales growth. With these returns, it takes about 3-4 years for a store to pay back the original cost.
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So, actual free cash flow gets closer to $125,000 per store. The average store earns between $1-1.3 million in revenue and the average store generates $177,000 in EBITDA.įrom Domino’s Q3 2021 Investor presentationĪ franchisee most likely financed the build out of their store and will have to pay interest. The average cost to build out a Domino’s store is between $300,000 and $350,000. Catalysts for Price Appreciation and Dividend Growth Unit Economics Domino's has repurchased so many shares that the Retained Deficit line item on its balance sheet-where Domino’s records its treasury stock repurchases-is so large it creates negative equity. Like Home Depot, Domino’s Pizza consistently repurchases its shares. The negative Debt to equity ratio is not a concern. Dividend Safetyĭomino’s passes every item on our dividend safety checklist. Domino’s Pizza does.ĭomino’s Pizza has compounded its quarterly dividend at 18.6% over 10 years and 19% over the last 5 years. It’s flat, stackable, and built to withstand the rigors of a car ride.Ī delivery-focused pizza business feeding our insatiable pizza demand should have high sales per square foot and high ROIC. Pizza is also the perfect food for delivery. In the United States, 350 slices are eaten every second, while 40 percent of Americans eat pizza at least once a week. It is no wonder why we crave pizza and we eat large amounts of it. We get a rush of dopamine causing us to want to eat more pizza. When glutamate hits our tongue, it activates our reward system. Our tongue is loaded with sensors for glutamate ions. The more savory the food, the more we crave it. When you taste something savory, you’re tasting glutamate. If that wasn’t enough, pizza is packed with glutamate. The Maillard reaction is the amino acids and sugars in high protein foods like cheese and pepperoni reacting with each other. When pizza bakes, the natural sugars in its toppings and dough start to brown and caramelize. Pizza’s taste complexity is enhanced by two chemical reactions, Caramelization and the Maillard reaction. It’s a complex taste with the perfect blend of fat, sweet, and rich foods.
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