Domino’s Franchise Same-Store Sales Grow Just 0.3% in Q3

Domino’s Pizza reported higher third-quarter profit on Tuesday even as sales growth slowed in the U.S. and international markets, according to CNBC. The results are the first under Joe Jordan, who took over as CEO on Oct. 1.

Revenue increased 3.4% to $1.19 billion. Domino’s also reported net income of $152.2 million, or $4.60 per diluted share. Higher supply chain sales and franchisee royalties drove revenue growth.

U.S. same-store sales grew 0.3% in the quarter, down from 5.2% a year earlier. Franchised locations, which account for 7,070 of the brand’s 7,257 U.S. stores, grew 0.3%, while the 187 company-owned stores grew 1%.

The price of the food basket purchased by an average U.S. store through Domino’s supply chain was 2.2% higher than a year earlier. The company counts that increase as a revenue driver for its supply chain business. Supply chain gross margin also improved 0.9 percentage points, which the company attributed to procurement productivity. Franchisees faced higher food costs while sales at existing stores barely grew.

The system added a net 26 U.S. stores and 149 international stores during the quarter, with franchisees responsible for 25 of the U.S. additions. Company-owned store revenue declined after Domino’s refranchised certain U.S. markets in the second quarter. Over the trailing four quarters, the system added a net 956 stores, including 162 franchised U.S. units.

U.S. comparable sales rose 0.9% in the first quarter and 0.1% in the second, according to the company’s earlier reports, and Domino’s cut its full-year U.S. outlook after the first quarter. In the earnings release, Jordan said his priorities include “helping our franchisees grow their profitability.” He previously served as chief operating officer and president of Domino’s U.S. business.

Domino’s reported higher revenue and profit, but sales at existing U.S. franchise stores grew just 0.3%. The results highlight the difference between a franchisor's financial performance and the sales trends its franchisees experience at the store level. For prospective owners, the company's earnings report is only part of the picture. The FDD and conversations with current franchisees can offer more detail about store-level costs, sales and profitability.

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