Domino Franchisee Profits Improve With Strong Sales, But Workforce Looms
Domino franchisees ended 2020 in the best financial position they have ever known. The pizza chain’s strong sales during the year helped them generate $ 177,000 in EBITDDA per store, which is earnings before interest, taxes, depreciation and amortization – far more than the company expected and a record for the chain.
Not a single franchise-owned store closed in the first three months of the year, as same-store sales rose 13.4% in the U.S. It is remarkably rare for any more chain of 6,000 establishments to spend three months without closing at least one of them. Domino’s closed a corporate store during the period.
“This $ 177,000 store-level EBITDA really puts our system in an incredible position of strength,” CEO Ritch Allison told investors Thursday. “And when you see it, you’re not surprised to find that we only had one store closed in the United States during the entire quarter.”
This will be particularly important in the coming months as the industry, including Domino’s, faces a severe labor shortage. The shortage pushed up wages and made it harder for restaurants to attract workers. It has also created supply chain problems, as distributors struggle to find drivers and suppliers struggle to recruit staff to meet demand.
“The combination of COVID, strong sales, the reopening of the economy as a whole and the high level of government stimulus creates one of the most challenging staffing environments we’ve seen in a long time,” Allison said. “This forces our operators to meet demand while continuing to provide excellent service to their customers.”
The biggest problem for the chain is the conductors. With so many companies hiring drivers – including third-party delivery services, ridesharing services, and traditional delivery companies like distributors – finding people to bring pizza home has proven difficult.
“The real pinch point in the business is the pilots,” said Allison.
Many of the strategies implemented by the company aim to make this process more efficient and ensure that drivers do more driving and less other work.
“A lot of the work we try to do around the technology and the store operating model is basically getting the drivers moving 100% of the time with the long term goal of never getting out of their cars, deliver pizzas. constantly as opposed to other tasks and activities, ”Allison said.
Domino’s also said that its “fortress” strategy, its strategy of building more stores in specific markets to improve delivery times and increase porterage, can help fill the driver shortage by improving the number of drivers. deliveries per employee.
And Allison believes the company’s long-term opportunity for drivers – that they may someday become franchisees – could attract more people to the company. “A big part of what makes Domino’s different is that being a driver in a Domino’s or a pizza maker inside the store is an opportunity to become an entrepreneur over time,” said Allison. “A big part of our job and the jobs of our franchisees is also selling the opportunity in the future, as 90% of them started as drivers or insiders.
For now, however, franchisee profits are skyrocketing. The chain’s first-quarter comparable store sales result was its 40th consecutive positive quarterly figure in the United States, a full 10 years. Executives are increasingly confident they can continue this streak even as it faces more difficult comparisons over the next two quarters.
“We have some really good laps ahead of us,” said Allison. “But we’re really focused on continuing to invest to drive the long-term growth of the business. And as I watch the rest of the year, we’re really in an enviable position.