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Domino’s Pizza Fundamental Analysis October 2023


Domino’s Pizza Fundamental Analysis.

Founded in 1960, Domino’s Pizza Inc., known for delivering pizzas under the Domino’s Pizza brand, is a leading player in the Quick-Service Restaurant (QSR) category, specializing in pizza.

Through its subsidiaries, the company operates as a pizza delivery firm both in the United States and internationally, with 20,008 locations across over 90 markets.


The company operates and reports results through three distinct business segments: Domestic Stores, International Franchisees, and Supply Chain.

Domestic Stores (33% of total revenue in the second quarter of fiscal year 2023).

This segment primarily consists of franchised stores but also includes company-owned stores used for promoting new products and enhancing operational efficiency. As of June 18, 2023, the company owned and operated 6,735 domestic stores.

International Franchisees (6.9%).

Domino’s has a network of franchised stores in over 90 international markets. As of June 18, 2023, the company had 13,470 international franchised stores. Revenue in this segment mainly comes from royalty payments generated from the retail sales of franchised stores. It’s worth noting that the majority of the company’s international stores operate under master franchising agreements.

Supply Chain (60.1%).

This segment manages 19 regional dough production and food supply chain centers in the United States. It also operates a center for thin-crust dough production, vegetable processing, and the supply of equipment and supplies to its domestic stores and certain international outlets






According to Domino’s Pizza Fundamental Analysis, analysts think that there are several reasons to buy the stock.

Strong Brand Image.

The pizza category is a rapidly growing segment in the quick-service restaurant industry in the United States, and Domino’s is one of the largest global pizza chains. In the U.S., the company is the market leader in the home delivery segment. Domino’s strong position in the industry, backed by its versatile promotions, portrays it as a brand that produces high-quality, fresh pizzas delivered promptly.

Robust International Expansion.

As Domino’s generates a significant portion of its revenues outside the United States, the company is committed to expanding its presence in high-potential international markets to drive its business. Meanwhile, the company’s international growth remains strong and diversified across markets, thanks to outstanding unit-level economics. In the second fiscal quarter, the company added 27 net new stores in the U.S., bringing the total number of U.S. system stores to 6,735. During the quarter, its international business added 170 net new stores. Furthermore, the company is confident in its two- or three-year outlook for global net new store growth of 5-7% annually.

Franchising Strategy Safeguards profits

Domino’s has an extensive network of franchising, both domestically and internationally. Reducing restaurant ownership and increasing the focus on re-franchising minimizes the company’s capital requirements and facilitates earnings per share growth and expansion of Return on Equity (ROE). During the third fiscal quarter, the company re-franchised stores in Arizona, Utah, Phoenix, and Salt Lake City. Furthermore, the company has reported market optimization by its master franchisees in Brazil. Additionally, free cash flow continues to grow, allowing for reinvestments to increase brand recognition and return to shareholders. In fact, the company has increased its dividend every year since it began regular dividend distributions in 2013. Domino’s is less susceptible to food inflation due to its franchising model compared to other global pizza companies

Initiatives to increase Sales

Domino’s continues to boost sales through regular limited-time offers (LTOs). Meanwhile, the company’s restructuring efforts have gained momentum, leading to improved sales in past quarters. The company is working to convert all its restaurants to the “Pizza Theater” prototype, which offers a welcoming lobby, the ability to see the open area where food is prepared, and the option to electronically track takeout orders on a screen in the lobby. In the meantime, the company continues to see growth in both carryout and delivery orders. Additionally, it has focused on the Car Side Delivery initiative with a 2-minute guarantee.

To support the transition to online pickup, the company has launched coupons (worth $3 tips) that customers can use for their next order. To increase sales, Domino’s has entered into a global partnership with Uber Technologies. The initial launch of the partnership will begin in the fall in four pilot markets. Both Domino’s and Uber Eats share 27 international markets. This partnership can help increase Uber Eats orders for 70% of Domino’s stores worldwide. Domino’s customers in the United States can now place orders on the Uber Eats platform, which will be delivered by Domino’s. The company expects ordering through the Postmates and Uber Eats apps to be available nationwide by the end of 2023.

The company has launched a new delivery service called Pinpoint Delivery in the U.S. market. The concept is based on the idea of making food deliveries to location-based landmarks rather than a standard address. Available in the Domino’s app, the initiative supports outdoor deliveries (in places like parks, baseball fields, and beaches) and a convenient pickup option.

More Menu Offerings:

In the first fiscal quarter of 2022, the company introduced some changes to the “Mix & Match” deals priced at $5.99. Priced at $6.99, the menu includes the addition of 32 pieces of Parmesan bread bites, 6 pieces of chicken wings, and 3 pieces of chocolate lava cakes.

Supported by the successful launch of Domino’s Loaded Tots, the company has unveiled its plan to launch Pepperoni Stuffed Cheesy Bread in August 2023. The Stuffed Cheesy Bread platform represents a strong margin profile and a healthy ticket increase for its franchisees. Given the synergies with the company’s Mix & Match menu, the company is optimistic about it and expects the initiative to provide incremental margin growth in the periods to come.

Digitalization for Growth

Domino’s is heavily investing in technology-based initiatives such as digital ordering to boost sales. In 2022, the company’s digital sales accounted for approximately two-thirds of global retail sales, equivalent to $11.7 billion. Meanwhile, Domino’s digital loyalty program, Piece of the Pie Rewards, continues to significantly contribute to traffic gains. As of the 2022 balance, the company had around 30 million active members in its Piece of the Pie loyalty program. The company has over 77 million customers enrolled in its loyalty database.

Additionally, further digital enhancements in terms of ordering, service method selection, payment, and tipping have been implemented to improve the consumer experience. Domino’s continues to aggressively innovate in all aspects of its business, including GPS, electric bikes, AI-based in-store technology, high-quality food, and an evolving digital experience. During the first fiscal quarter of 2023, the company initiated the deployment of electric vehicles for pizza delivery. Furthermore, the implementation of advanced pizza preparation technology and the use of AI for better demand and capacity matching are underway. These initiatives are intended to enhance speed, accuracy, and efficiency of services in the future.

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