Domino's Pizza Inc Stock

Domino's Pizza, Inc. (Domino's) operates as a pizza company worldwide.

The company has presence in various locations in over 90 markets around the world. The company operates two distinct service models within its stores, with a significant business in both delivery and carryout. The company is a highly recognized global brand, and it focuses on value while serving neighborhoods locally through its large worldwide network of franchise owners and U.S. Company-owned stores through both the delivery and carryout service models.

The company is primarily a franchisor, with approximately 99% of Domino's global stores owned and operated by its independent franchisees as of December 31, 2023. The company's hand-tossed dough is made fresh and distributed to stores around the world by it and its franchisees.

Domino's generates revenues and earnings by charging royalties and fees to the company's franchisees. Royalties are ongoing percent-of-sales fees for use of the Domino's brand marks. The company also generates revenues and earnings by selling food, equipment and supplies to franchisees through its supply chain operations primarily in the U.S. and Canada and by operating a number of Company-owned stores in the United States. Franchisees profit by selling pizza and other complementary items to their local customers. In its international markets, the company generally grants geographical rights to the Domino's Pizza brand to master franchisees. The company announced its Hungry for MORE strategy aimed at generating MORE sales, MORE stores and MORE profits.

Competition

In the U.S., the company competes against regional and independent or local companies as well as national chains Pizza Hut, Papa John's and Little Caesars Pizza. Internationally, the company competes primarily with Pizza Hut, Papa John's and country-specific national, regional and local pizzerias.

Customers

As of December 31, 2023, the company's largest franchisee based on store count, Domino's Pizza Enterprises (DMP: ASX), operated various stores in 12 international markets, which accounted for approximately 28% of its international store count and 19% of its global store count. Revenues from this master franchisee accounted for 1.7% of the company's consolidated revenues in 2023.

Menu

The company offers a menu designed to present delicious, quality offerings to customers, while keeping it simple enough to minimize operational complexity and expedite order-taking and food preparation. The company's basic menu features pizza products with varying sizes and crust types. The company's typical store also offers side items including bread products, wings, boneless chicken, pastas, oven-baked sandwiches, dips, soft drink products and desserts. During 2023, the company launched its newest menu items in the U.S., Domino's Loaded Tots and Pepperoni Stuffed Cheesy Bread. International market offerings vary by country and culture, such as the Lipu Taro Paste and Oats Double Decker Crust in China as well as offerings that tap into the spicy taste preferences of Domino's customers in India, such as their Blazing Chicken and Paprika Pizza and Blazing Onion and Paprika Pizza.

Store Image and Operations

The company operates two distinct service models within its stores with a significant business in both delivery and carryout. In the U.S., delivery and carryout generally contribute evenly to the company's overall system transaction count. The majority of the company's U.S. and international stores are constructed in the carryout-friendly Pizza Theater design.

Segments

The company operates through three business segments: U.S. Stores, International Franchise, and Supply Chain.

U.S. Stores segment

U.S. stores segment consists primarily of the company's franchise operations, which consists of franchised stores located in the United States. The company also operates a network of U.S. Company-owned stores.

Directly operating Domino's stores contributes significantly to the company's ability to act as a credible franchisor. The company also uses its Company-owned stores as test sites for technological innovation and promotions, as well as operational improvements. Additionally, the company uses them for training new store managers and operations team members, as well as developing prospective franchisees. While the company is primarily a franchised business, it continuously evaluates its mix of U.S. Company-owned and franchised stores. As of December 31, 2023, franchised stores represented approximately 96% of the company's total store count within its U.S. stores segment.

U.S. Franchise Profile

As of December 31, 2023, the company's network of U.S. franchise stores was owned and operated by independent U.S. franchisees. The company's franchise formula enables franchisees to benefit from its brand recognition with a relatively low initial capital investment. The average U.S. franchisee owned and operated stores and had been in its franchise system for over 17 years.

The company applies rigorous standards to prospective U.S. franchisees. The company generally requires them to manage a store for at least one year and graduates from its franchise management school program before being granted the right to franchise. This enables the company to observe the operational and financial performance of a potential franchisee prior to entering into a long-term agreement. Substantially all of the company's independent U.S. franchise owners started their careers with it as delivery drivers or in other in-store positions. In addition, the company generally restricts the ability of U.S. franchisees to be involved in other businesses, which helps focus its franchisees' attention on operating their stores. The company maintains a productive relationship with its independent franchise owners through regional franchise teams, distributing materials that help franchise stores comply with its standards and using franchise advisory groups that facilitate communications between it and its franchisees.

U.S. Franchise Agreements

The company enters into franchise agreements with the U.S. franchisees under which the franchisee is generally granted the right to operate a store in a particular location for a term of ten years, with an ability to renew for an additional term of ten years. The company had a franchise agreement renewal rate of approximately 99% in 2023. Under the current standard franchise agreement, the company assigns an exclusive area of primary responsibility to each franchised store.

The company's stores in the United States generally contribute 6.0% of their sales to fund national marketing and advertising campaigns (subject, in certain instances, to lower rates based on certain incentives and waivers). Beginning on March 27, 2023, Domino's National Advertising Fund Inc. (DNAF), the company's consolidated not-for-profit advertising subsidiary, effectuated a temporary reduction of 0.25% to its standard 6.0% advertising contribution, which will expire on March 24, 2024. Contributions by the company's U.S. franchisees to DNAF are primarily used to purchase media for advertising, and also to support market research, field communications, public relations, commercial production, talent payments and other activities to promote the Domino's brand.

International Franchise segment

This segment consists of a network of franchised stores in over 90 international markets. The principal sources of revenues from those operations are royalty payments generated by retail sales from franchised stores, as well as certain technology fees.

The company's international franchisees employ its basic standard operating model and adapt it to satisfy the local eating habits and consumer preferences of various regions outside the U.S. The vast majority of the company's international stores operate under master franchise agreements.

International Franchisee Profile

The majority of the company's markets outside of the U.S. are operated by master franchisees with franchise and distribution rights for entire regions or countries. In a few select markets, the company franchises directly to individual store operators.

International Master Franchise and Other Agreements

The company's international master franchise agreements generally grant the franchisee exclusive rights to develop and sub-franchise stores, and the right to operate supply chain centers in particular geographic areas. Agreements are generally for a term of ten years, with options to renew for additional terms. The agreements typically contain growth clauses requiring franchisees to open a minimum number of stores within a specified period. The company also has agreements with certain of its international master franchisees with respect to certain technology fees.

Supply Chain segment

In the U.S., the company operates regional dough manufacturing and supply chain centers, thin crust manufacturing facilities, vegetable processing center and center providing equipment and supplies to its U.S. and certain international stores. The company also operates dough manufacturing and supply chain centers in Canada. The company plans to continue investing in supply chain productivity initiatives in the future. The company's supply chain segment leases a fleet of more than 1,000 tractors and trailers. The company's centers produce fresh dough and purchase, receive, store and deliver quality food and other complementary items to substantially all of its the U.S. stores and most of its Canadian franchised stores. The company regularly supplies stores with various food and supplies.

Third-Party Suppliers

The majority of the company's meat toppings in the U.S. come from a single supplier under a contract that expires at the end of December 2025. The company has entered into a multi-year agreement with Coca-Cola. This contract, renegotiated in December 2023, provides for Coca-Cola to continue to be its exclusive beverage supplier and expires on December 31, 2030, or at such time as a minimum number of cases of Coca-Cola products are purchased by Domino's, whichever occurs later.

Trademarks

The company has many registered trademarks and believe that the Domino's mark and Domino's Pizza names and logos, in particular, have significant value and are important to its business.

History

Domino's Pizza, Inc. was founded in 1960. The company was incorporated in 1979.