A Closer look: Domino's Pizza Enterprises Ltd

I have always been a big fan of fast food, as a consumer and as an investor.

I used to have a stake in Restaurant Brands Ltd [RBD.NZX], the New Zealand franchisee of Pizza Hut, KFC and Starbucks.

As business these sorts of companies are excellent ones to own, if they are well managed, cost and service levels kept on top of and food quality maintained.

If none of these things are adhered to they can be a license to go out of business. RBD has struggled for years with the operation of its Pizza Hut franchisee, finally relenting and selling the business to owner operators.

Domino's Pizza Enterprises Ltd [DMP.ASX] is the Australian listed pizza chain franchisee that runs over 750 Domino's pizza outlets in Australia, New Zealand, France, Belgium, The Netherlands and the Principality of Monaco of all places and like most other fast food chains is currently doing well, with a huge rise of profit forecast that is to be announced 19 August because of the switch from going out to eat to punching the keypad and settling down on the couch with a pizza and Coke.

Company Profile | Success Factors | Corporate Governance

Webcast Q2 2009 Domino's Inc.[DPZ.NYSE] Earnings Conference Call (Replay) 07/22/09 at 11:00 a.m. ET

To be fair Domino's has been growing outlets, sales and profit for a few years before the current boom and it is a very well operated business, with a focus on the bottomline and customer satisfaction the two main keys to its success and it has ambitious plans to keep growing. It has grown quickly by purchases of other pizza brands, adding sub-franchisees and good old-fashioned organic growth through efficiencies and great marketing.

But beware the fast food business or any food business for that matter can be a fickle one. Pizza, more than any other slice of this market seems to have very big swings in business cycles from boom to bust and they operate on wafer thin margins and high throughput, with constant competition from mum and dad pizza stores to the other large and smaller chains.

Domino's does have an edge though. It specializes in one thing and does it well and its owner operators are the secret to the Australian Franchisor success (Domino's OZ is itself a Franchisee of big daddy Domino's Inc [DPZ.NYSE] in the USA but in turn has franchisees that own and operate individual stores that provide a percentage of their store turnover which is Domino's OZ main form of income-apart from sales from its company owned stores ) driving the Domino's brand, literally, to become the worlds largest Pizza Delivery and sales company.

Domino's Australia seems to be near the top of their current growth phase but having said that there will be more boom times to come and lets hope their good management gets them through the troughs to come.

The ASX listed stock seems fully priced at current levels and is worth adding to your portfolio during its down cycles.

Domino's @ Share Investor

Domino's Australia dominant in Australasia
The Dots get the Hots

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Related Links

Domino's Pizza Enterprises - Corporate Website | Investor Relations


DMP 2008 Annual Report - 10MB PDF

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c Share Investor 2009

Domino's Australia dominant in Australasia

Domino’s Pizza [DMP.AX] is the largest pizza chain in Australia, in terms of both store numbers and sales. It is also the largest franchisee for the Domino’s Pizza brand in the world.

Domino’s Pizza Australia now encompasses five countries, with more than 720 stores employing approximately 14,000 people and making more than 60 million pizzas a year.

The Domino's brand is owned by Domino's Pizza, Inc [DPZ.NYSE] a listed US company.






Domino's shares were down by 29c or 8.29% to AU$3.21 on the ASX today. Probably due to a slump in sales for the year. Profit however, was up by almost 30% compared to the previous year.


While Australian based Domino's dominate the New Zealand and Australian pizza market, it is leaving its competition in the dust.

Domino's total same-store sales grew 4.1 per cent over the last year, while its main competitor in New Zealand-Restaurant Brand's [RBD.NZ] run Pizza Hut-same store sales declined 7.1% for the 12 weeks ending 19 May 2008. That quarters total sales were $15.2 million, a decrease of 13.3% over the prior period.

As a customer one can tell the different immediately from the Domino's vs Pizza Hut experience.

Domino's generally has fast efficient friendly service, excellent pricing and a good line of pizza offerings and toppings Their pizzas and marketing are well excecuted.

It is the opposite at Pizza Hut; slow, rubbish service, unfriendly, extremely bad marketing and a disappointing menu and quality of food.

Apart from the differences above Restaurant Brands manage its pizza brand badly. I suspect much direction is from head office and the local input from sub par managers to bolster young uninterested staff to treat customers better is clearly missing.

Domino's New Zealand stores, which number 72 and will max out at 85, are franchisee run while Pizza Hut are company managed in NZ with a parent franchiser YUM! Brands Inc [YUM], based out of the US.

Having the owner running the business at store level is the important difference and another reason why Domino's will continue to kick Pizza Hut around in the coming years

The ASX-listed company yesterday announced net profit after tax for the year ending June 29 was A$11.8 million ($14.42 million), up from A$9.1 million last year.

The Australia-New Zealand market revenue for the group - which has outlets in New Zealand, Australia, France, Belgium and the Netherlands - fell from A$180.4 million to A$160.7 million.

Chief executive Don Meij said he was confident New Zealand operations would continue to perform strongly, regardless of the current recession.

"Pizza's very resilient in economic downturns. We think we're going to ride through whatever economic challenges are out there."

Domino's Australia is a well run company and a must for investors who want exposure to a listed Australasian fast food company but don't have the patience for the slack management at Restaurant Brands to get things right.

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c Share Investor 2008

The Dots get the Hots

Dominos Australia wants
a slice of the Global Pizza
Market.

Doing what our domestic Pizza Franchisee with the Pizza Hut license, Restaurant Brands [RBD.NZX] couldn't do, Dominos Australia [DMP.AX]the Australian arm of US giant Domino's is successfully expanding overseas.

It will open at least 35 stores in Europe each year until it reaches 1000 stores, betting on rising demand for home delivered food.

Domino's has a total of 667 stores, with 404 in Australia, 65 in New Zealand and a combo of 198 in France, Belgium and the Netherlands.

Restaurant Brands [RBD.NZX] delivered appalling results when it bought the ailing Pizza Hut chain in Victoria Australia in 2000, with a total of around 60 stores.

Poor management was unable to turn company fortunes around and RBD has now almost finished selling their OZ arm after losing 10s of millions of shareholder dollars.

The pizza biz is a very competitive industry but if Domino's OZ expansion works then their slice of profits will get bigger.

Their approach to the New Zealand pizza market is far more aggressive and competent than RBDs and the signs look good for them to take it to Pizza Hut in a big way.

Domino's Australia is listed on the ASX .


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Domino's Australia dominant in Australasia




c Share Investor 2007