Summary of Domino's Pizza 10k 2023

These are some of the basic notes after reading DPZ (Domino's Pizza) 10k 2023. This is not detailed analysis but basic info based on the public filing. This focused more on fundamental analysis.  

• As of Dec 31, 2023 over 20,500 locations in 90 markets. 
• Started in 1960, became Domino’s Pizza in 1965.
• 99% of global stores are franchised. 
• Largest franchisee based on store count is Domino’s Pizza Enterprise (DMP: ASX) that operates 3,840 store in 12 international market (~28% of international stores, ~19% of global stores). 
• Business Segments:   
  • US Stores:    
    • Accounts for ~32% Revenue $1.45 billion , 6,566 franchised locations. Owns and Operates 288 locations. 
    • 96% are franchised. 
    • US Franchisee Profile: 735 independent US Franchisees. Average franchisee operates 9 store and has been with Domino’s for 17 years.  22 operates more than 50 stores, largest operates 143 stores. 209 of franchisees operated only 1 store. 
    • US Franchisee Agreements: Term generally 10 years. Franchise renewal rate of 99%, 5.5% of sales on royalty fee and certain technology fee. 6.0% of sales on marketing fee
  • International Franchise:    
    • 7% of revenue, $310.1 mil, 
    • 13,737 locations, 
    • Fees on royalty payments on sales and certain technology fees. Royalty on average is 3%. 
    • Ten largest market by store count (pg 7): India 1,916 (JUBLFOOD:NS), UK 1,254(DOM:L), Japan 1,015 (DMP:ASX), Mexico 894 (ALSEA: MX), China 771 (1405:HK), Australia 747 (DMP: ASX), Turkey 689 (DPEU:L), Canada 605, France 489 (DMP:ASX), South Korea 480
    • International Franchisee Profile:  Vast majority are master franchisees with distribution rights to entire regions or countries. Few market directly to store operators. 
    • International Master Franchise and Other Agreements: Grants right to operate, sub-franchise and operate supply chain. Generally for 10 years, with option for renewal. Typically has growth clause that requires franchisees to open minimum bunker of store in specified period. 
  • Supply Chain:     
    • Accounts for 61% of revenue, $2.72 billion. 
    • In US: Operates:22 regional dough manufacturing and supply chain centers, 2 thin crust manufacturing plants, 1 vegetable processing center, 1 provides equipment and supplies. 
    • In Canada: Operates 5 dough manufacturing and supply chain center. 
    • Fleet of : Over 1,000 Trucks and Trailers. 
    • Provide profit sharing agreements to US and Canadian franchisees who purchase all food for their stores from company’s center. ~50% of pre-tax profit. 
    • Third Party Suppliers: Cheese is their largest food cost. Charges franchisee based on CME’s cheddar block price plus supply chain markup. 
      • All cheese comes single supplier, most meat comes from single supplier, agreement with Coca-Cola. 

• Their Pizza Theatre image (type of store they call that does not have lot of indoor seating) are easier and cheaper to start. 
• In 2023, entered partnership with Uber. Also lunched Pinpoint Delivery that allows customers to receive delivery anywhere like park, baseball fields. 

• Human Capital:    
  • As of Dec 31, 2023: 11,200 employees ( ~6,900: supporting US company owned and franchisee operations,  ~3,200: Supply Chain, ~ 100 supporting international franchisee operations, ~1,000 corporate employees). ~4,700 are part time, ~6,500 are full time. 

• Properties: 
  • Lease ~285k sq ft for World Resource Center in Ann Arbor, MI.
  • Own’s four supply chain center buildings. All other supply chain centers are leased for 5 to 21 years. 
  • All buildings for US company owned are leased typically under 10yr lease. 

• As of February 19 2024, has 170 mil authorized shares, of those 34,812,723 are issued and outstanding. 

• Liquidity and Capital Resources:     
  • On Dec 31, 2023  had working capital of $67.0 million, excluding cash/cash equivalent which was $200.9 million. 
  • Restricted cash: As of Dec 31 2023 had 149.1 million held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure,
    • $51.6 million is equivalent to three month interest reserve, 0.2 million other restricted cash. 
    • $88.2 million in ads fund only used to promote Domino’s brand. 
  • Long Term Debt: Distributed notes in 2021, 2019, 2018, 2017 and 2015. 
    • As of 4th quarter of 2020, leverage ratio of 5.0x.  
  • Investments: Holds non controlling stake in master franchise of China (DMC Cash). As of Dec 31 2023 value was $143.6 million. 

• (pg. 82) During 2022:  company purchased 23 stores in Michigan for $8.6 mil, also re-franchised 114 stores in Arizona and tach for $41.1 mil. 

• Exec Team: All of them are really new. Longest one been in company since 2012. Short tenure for exec team compared to other fast food chains. 

Proxy Statement 2023     

It has two same directors since 1999. Most are in 60’s or close to 60’s Youngest one is 48 (CEO of Best Buy)

Ownership: Vanguard: 11.16%, Blackrock: 8.33%, T. Rowe: 7.08%

All execs and board of director ownership (0.81%), extremely small insider stock ownership. 

All director are paid 185k - 313k.