Thursday, August 21, 2008

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.

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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.

Related Share Investor reading

Restaurant Brands Pizza Hut faces further competition

The dots get the hots

Related Amazon reading

Pizza franchise operator seeks shelter of Chapter 11 bankruptcy. (Karam Enterprises Inc., Domino's Pizza franchisee) (company profile): An article from: Fairfield County Business Journal by Joan Stableford
Buy new: $5.95
Available for download now

c Share Investor 2008

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