Expanding into international markets
In the previous part of this series, we learned about Domino’s Pizza (DPZ) domestic same-store sales growth. Here, we’ll compare that growth with international same-store sales growth and show how weaker economic activity in the US can be mitigated by international market expansion.
The chart above shows 20 years of same-store sales growth at Domino’s domestic and international locations. On average, international same-store sales growth has been higher—5.5% compared to 2.8% growth in the domestic market.
Top Domino’s markets
India and the UK top the numbers list in terms of Domino’s restaurants, with 830 and 811 locations, respectively, in 2014. Surprisingly, China isn’t even in the company’s top five.
MCD makes up about 4% of the Consumer Discretionary Select Sector SPDR Fund (XLY) and 3% of the iShares U.S. Consumer Services ETF (IYC). IYC has 12% of its portfolio in restaurant stocks. XLY also has ~3% of its holding in Starbucks (SBUX).
Domino’s doesn’t have any company-operated stores in international markets. Instead, it prefers to expand in these markets using a master franchise model. Master franchise agreements give a single entity the right to develop and grow Domino’s in a particular region. We’ll discuss master franchises, next.