Domino’s to double store count, overhaul menu after delivering record profit

NOT only will Domino’s nearly double its store count, the pizza chain is also planning to branch out beyond pizza.

Domino’s delivered a record full-year profit of $92 million in the 2016 financial year. Photographer: Sean Proctor/Bloomberg

DOMINO’S says it will nearly double its store count in Australia and New Zealand over the next 10 years after delivering a record profit.

The listed pizza chain has upgraded its store count outlook by an extra 300 to a projected total of 1200 by 2025, up from its current 714. Globally, Domino’s expects to have 4550 stores within the decade.

It comes as Domino’s reports a record full-year profit of $92 million in the 2016 financial year, an increase of 43.6 per cent.

Total network sales were up 32.7 per cent to $1.964 billion off the back of strong same-store sales growth. Same-store sales were up 10.9 per cent across the group, led by 14.8 per cent growth in Australia and New Zealand.

Before-tax earnings in Australia and New Zealand were up 28 per cent, which Domino’s credits to “disruptive digital initiatives” centred around faster delivery, more efficient ordering and payment platforms.

Domino’s chief executive Don Meij said the store expansion was pre-acquisition organic growth, hinting the country’s largest pizza chain could snap up failed rival Eagle Boys.

“Opportunities have been presented to us for acquisition,” he told analysts on Tuesday. “Where management has the capacity and capability, we will look to expand the business also through that area.”

Mr Meij said Domino’s “cannot get them open fast enough” to meet pent-up demand.

Even with 1200 stores, Mr Meij pointed out that the pizza chain would still only be the fourth-largest quick-service restaurant (QSR) in Australia and New Zealand. Currently Domino’s only takes 2.7 per cent of the fast-food market.

“We’re big in pizza but we’re tiny in fast food, we can’t forget that. There’s still so much opportunity,” he said.

Domino’s is now the market-leader in six of its seven countries, including Japan and Germany, and Mr Meij said Domino’s would be the market leader in Belgium within 12 to 18 months.

He said the pizza chain was preparing to launch its biggest menu overhaul since 2008 in September focused on making the menu “healthier and tastier”, adding that a “significant” double-digit percentage of orders did not include pizza.

Domino’s chief executive Don Meij. Picture: Brendon Thorne/Bloomberg

He stressed that “we are not launching hamburgers”, but the goal was to continue taking sales away from outside the pizza category through innovation in pizza and other menu items including dessert, chicken and breads.

“We’re going to be launching a number of new side items,” he said. “In many cases we get full transactions that are non-pizza. We are also launching two new menu items in the second half which are firsts for us — they’re not pizza and I can’t tell you what they are.”

Domino’s is offering its strongest ever guidance for the 2017 financial year of 30 per cent profit growth and before-tax earnings growth of 25 per cent after strong start to the financial year with same-store sales up 8.9 per cent.

Mr Meij also hit out at “misreporting” of “unfortunate research” released last month by Deutsche Bank which suggested the pizza chain would take a hit to its bottom line as a result of a new penalty rates deal.

“We have been preparing for this for a number of years,” he said. “We expect despite labour increases we will have another record year. There was some unfortunate research that was presented into the market a couple of months ago that confused our shareholders.”

He said franchisees were “sharing in the great success” of the business, with some up 25 per cent in store profit, and drivers had already received pay increases in the first five weeks of the year.

On the collapse of Eagle Boys, Mr Meij said “nobody likes to see somebody fail”, but the lesson was “the customer has to be at the centre of everything you do and you can never take that for granted”.

“If you do that, your franchisees will benefit, your team and shareholders will benefit.”

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