Domino’s Pizza

Telephone:

01908 580 000

Activities:

Domino’s is the market leader in the home delivery and takeaway pizza sector and is one of the largest quick-service restaurant chain in the UK. The group claims to sell one in ten of all meals delivered to the home in the UK.

Chief Executive:

Stephen Hemsley

Key People:

Executive chairman: Colin Halpern
Chief operating officer: Chris Moore
Finance director and company secretary: Lee Ginsberg
Operations director: Patricia Thomas
Business development director: Andrew Mallows

Commentary:

Pizza accounted for 48% of the £1.36b market for home delivered meals in 2005 and Domino’s dominated the pizza market.

The group has grown rapidly under current chief executive Stephen Hemsley from 210 stores in 2001 to more than 400 in 2005. But Domino’s sees plenty of scope for further growth to around 1,000 branches.

Its view is backed by market research which suggests that the delivered pizza market is likely to double in size from £400m in 2004 to £800m by 2010.

Domino’s plans to open 50 stores a year to reach this target, although it faces hurdles from stricter planning controls that require it to seek A5 rather than A3 consent for new stores. It has also suffered from a scarcity of suitable franchisees in areas earmarked for growth.

Nearly half of its franchisees are multi-site operators and 20 had reached millionaire status in terms of assets by 2004, when the group’s highly successful franchise model won it the Franchisor of the Year award

Hemsley elected to apply the entrepreneurial spirit to the 18 company-owned stores and started a search for joint venture partnerships to run them. In June 2005, it sold 13 to newly-formed Dough Trading for £4m and said it was seeking a sale or a joint venture on the five remaining company outlets.

Domino’s has been quick to embrace innovation and technology. It developed the corrugated pizza box to keep the pizzas from getting soggy and sticking to the lid; introduced Heatwave technology to keep the pizzas warm; and was the first pizza delivery company in the world to offer internet and interactive TV ordering on a nationwide scale.

The group has also responded to health concerns by keeping its products free from genetically-modified ingredients and introducing a lower-fat mozzarella. However, its decadent double-decker pizza has proved the biggest hit and boosted average weekly sales to record levels in the six weeks to January 2005.

Strategy:

“With room in the market for 800 Domino’s Pizza stores, our target is to open 50 stores per year. On reaching 500 stores, we believe that we would deliver to around 60% of all households and believe that this will be in 2007 at the earliest.”

Source: company statement, January 2005

Operating Data:

The turnover figures above refer to sales generated from royalties, fees on new store openings, food sales, rental income and turnover from corporate stores and joint ventures.

System-wide sales across all branches in the year to January 2006 grew by 15.1% to £200.7m (2005: £174.3m).
System-wide sales for the half-year to 3 July 2005 grew 19.1% to £97.1m (2004: £81.5m)

In the year to 1 January 2006, e-commerce sales grew by 69.5% to £13.9m(2005: £8.2m) to represent 10.4% of delivered pizza sales.

Number of Domino’s stores worldwide: in excess of 8,000 in more than 50 countries
Number of stores in the UK and Ireland: 407 (five company-owned).

Number of franchisees: 152in the UK and Ireland (more than 2,000 worldwide)
Number of employees: in excess of 8,000 in the UK and Ireland (more than 145,000 worldwide)

Average store size: 1,000 to 1,200 sq ft
Average catchment area: each store covers between 20,000 and 25,000 households.
Typical start-up cost of a franchise: £228,000 excluding VAT

Financial Snapshot:

Full year    

Turnover: £85m (2005: £77.3m)
Pre-tax profit before interest: £11.2m (2005: £9.1m)

Half year

Turnover: £41.8m (2004: £36.2m)
Pre-tax profit : £5m (2004: £4.1m)

Financial year end:
 1 January 2006
Half-year end: 3 July 2005

Address:

Lasborough Road

Kingston,

UK