Domino's Pizza says it can 'resolve current differences with franchises'
Domino’s Pizza UK has reported group system sales of £1,259.5m, up 9.0% on a 52 week basis – and insisted that it can resolve tensions with franchisees that is set to lead to a slowdown in store openings.
UK system sales were up 7.1%, with like-for-like sales up 4.6%. Republic of Ireland system sales were up 5.2%, like-for-like sales up 4.0%.
Group underlying profit before tax was £93.4m, down 1.1% on a 52 week basis.
The company admitted 2019 UK store pipeline similar to 2018 at the same time last year, although actual openings likely to be lower than 2018 given ongoing franchisee discussions.
Chief executive David Wild said: “We are also conscious of the inflationary environment, notably in labour.
This has inevitably contributed to a period of more intense commercial discussions with franchisees, which have continued into the new year.
We are confident that we will resolve our differences to the benefit of customers and maintain the long term alignment of interests that has served all parties very well for so long.
Despite these inflationary headwinds and an uncertain consumer environment, franchisee profitability per store (measured across all stores) was only slightly down during the year.
Solid like-for-like growth, as well as some additional support on food costs to provide compelling value for customers, partially offset inflationary pressures.
We recognise, though, that many new store openings have a temporary negative impact on existing stores where franchisees are splitting territories.
While the returns are still very attractive for franchisees longer term, we do provide some short term relief in the shape of incentives for new stores.”
In 2018 these incentives totalled £3.4m, equivalent to £75,000 per new store that qualified.
Wild added: “2018 was a mixed year.
In the UK and Ireland, which account for around 90% of the business, we extended our excellent track record of growth and cash generation, responding well to the very challenging environment for the casual dining market.
Our franchisees opened 59 new stores, creating more than 2,000 jobs and sold a record 102 million pizzas.
We also continued investing for future growth in digital and by successfully completing our new supply chain centre in Warrington, our most significant investment to date, which supports our target of 1,600 stores in the UK.
Internationally, we have experienced some growing pains which have hampered our overall financial performance.
These are all good markets, with more than 100 million population, good appetites for pizza and little, if any, global brand competition.
This is why we have strengthened our management teams and are committing disciplined capital to support future development.
We expect an improved performance from International, with the business targeted to break even this year.
I would like to thank our highly talented colleagues and franchisee partners for their ongoing dedication to the brand and our customers.”
Article credit: Propel