Domino’s, one of the leading pizza delivery chains globally, has recently announced a series of initiatives aimed at delivering material cost savings, improving operational efficiency, and laying a stronger foundation for future growth. These measures include the closure of Domino’s Denmark, optimization of the corporate store network through accelerated franchising, closure of underperforming stores, and streamlining core operations. The company expects these actions to have immediate positive outcomes while positioning itself for long-term success.
Closure of Domino’s Denmark and Optimizing Corporate Store Network
As part of their strategic plan, Domino’s has made the decision to close Domino’s Denmark. While this may come as a disappointment to Danish customers, the move is a part of the company’s efforts to focus on markets with the highest growth potential. Additionally, the corporate store network will undergo optimization through accelerated franchising and closure of approximately 65-70 underperforming corporate-owned stores. These closures, which represent less than 2% of the global network, are driven by the stores’ inability to achieve sustainable levels of sales and profitability in the near term.
Delivering Cost Savings and Operational Efficiencies
Domino’s is committed to improving its financial performance and operational efficiency through various initiatives. The planned commissary closures in South-East Asia and accelerated amortization of legacy IT assets will contribute to cost savings. The company is also streamlining core operations by identifying areas for increased operational efficiency. These combined efforts are expected to yield immediate savings, with an estimated boost of approximately $25-30 million to Earnings Before Interest and Taxes (EBIT) for the fiscal year 2024. Furthermore, as these initiatives progress over the next two years, the savings are anticipated to increase.
Passing Savings to Franchisees
Recognizing the importance of a strong franchisee network, Domino’s plans to reinvest approximately one third of the savings back into its stores. By doing so, the company aims to support its franchisees and enhance their growth potential. This strategic decision emphasizes Domino’s commitment to collaboration and shared success within its franchise system.
Reviewing Business Units for Efficiency
Domino’s is conducting a thorough review of its business units to identify further efficiencies. This includes realignment of business structures, simplification of systems, and removal of operational areas that are not deemed core to future growth. As an immediate step, the company has closed its Construction and Supply subsidiary in Australia. The ongoing streamlining efforts are projected to deliver additional EBIT savings of approximately $20 million starting from FY25.
Commitment to long-term growth
Domino’s strategic measures to deliver cost savings and improve operational efficiency highlight its commitment to long-term growth and shareholder value. By closing underperforming stores, accelerating franchising, and streamlining core operations, the company is setting a stronger foundation for future success. The anticipated savings of $25-30 million in FY24, with potential increases in the following years, will contribute to enhanced financial performance. Moreover, by reinvesting a portion of the savings into the franchisee network, Domino’s demonstrates its dedication to supporting its valued partners. As the company continues its efforts to identify efficiencies and align its business units, shareholders can look forward to further updates during the Full Year Announcement in August.