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Nearest dominos 923378/6/2023 He also points out other positive metrics, such as the 99% annual franchisee retention rate, which suggests that the average store will last for decades and that Domino's should enjoy much more stable than usual cash flows as compared to the broader restaurant industry.Īnother positive factor is how well Domino's has fared internationally. While Domino’s typically runs at stronger restaurant margins and lower buildout costs than its competitors, strong store-level sales suggest a meaningfully higher franchisee return even at identical margin structures and buildout costs, an advantage that we view as reflective of the firm’s strong brand." against $1.2 million at Papa John’s and $860,000 Pizza Hut, per Euromonitor and our calculations), resulting in impressive franchise-level EBITDA just shy of $140,000 in 2022. To this effect, Domino’s sports higher average unit sales than peers ($1.3 million in the U.S. "Comparable sales, which operate as "flows," accrue over time in higher average unit volumes ("stocks"), allowing franchisees to generate more EBITDA at the same operating margin-improving their cash-on-cash returns and underpinning a strong growth narrative. Here's Morningstar's Sean Dunlop explaining why Domino's has a wide competitive moat: And there's certainly no shortage of rival pizza brands out there. Restaurants are a notoriously difficult business to establish much of a competitive moat in. What Gives Domino's So Much Sticking Power? So it's worth diving into Domino's here and see if shares might be a compelling opportunity after the significant drawdown. That said, Domino's earnings results haven't been particularly bad it's not like sales have collapsed or anything. Now that the economy has reopened, there are more food options out there, so Domino's has to compete more aggressively for business. People stuck at home ordered a lot of delivery pizza. Some of this is likely related to the same pandemic-related dynamics that have hit so many industries. Since 2021, however, Domino's has cooled back off, with the stock dropping from above $500 back to $300. Shares went up as much as 50x from the lows: After struggling through the 2008 financial crisis amid lackluster sales and poor brand positioning, Domino's brought in a charismatic CEO who turned everything around. Coldsnowstorm/iStock Unreleased via Getty Imagesĭomino's Pizza ( NYSE: DPZ) is one of the most remarkable corporate comeback stories in recent American history.
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