Domino’s Pizza (DPZ) generates its revenue from these main components:
- domestic company-owned restaurant sales
- franchise fees
- royalties collected from domestic and international franchised restaurants
- the supply chain
- funds received from franchisees for advertising
In the first quarter of 2018, sales from domestic company-owned restaurant sales generated 15.4% of the total revenue while franchise fees and royalties collected from domestic and international franchised restaurants generated 18.1%, supply chain generated 56%, and funds from franchisees for advertising generated 10.5%.
Analysts expect Domino’s to post revenue of $3.53 billion in the next four quarters, which represents growth of 19.5% from $2.95 billion in the corresponding four quarters of the previous year. The revenue growth is expected to be driven by positive SSSG (same-store sales growth), the addition of new restaurants, and the adoption of a new accounting standard that mandates reporting of funds raised from franchisees for marketing under revenue.
In January, Domino’s management reaffirmed its three-to-five-year outlook. It expects its SSSG to be in the range of 3% to 6% in both domestic and international markets. Also, management expects unit growth in the range of 6% to 8% annually.
To drive SSSG, Domino’s is focusing on improving every aspect of the customer experience, which includes technological advancements, menu innovations, and various marketing and promotional programs. In April, the company launched its Hotspot program, creating “hotspots” near parks, beaches, sports fields, and other places from where customers can order. This initiative is expected to improve customer convenience, driving sales.