By Mark Kalinowski
Published on June 18, 2019 at 12:00 AM
In our Domino’s (DPZ; Buy) report published yesterday (“DPZ: 2019 Franchise Disclosure Document Review for Domino’s”), we noted that “The Royalty Fee for a Domino’s U.S. franchisee is 5.5% of sales, and the Advertising Fund contribution for a Domino’s U.S. franchisee is 4% of sales.” We want to clarify that at present, Domino’s U.S. franchisees are funding the Domino’s National Advertising Fund (DNAF) at a rate of 6% of sales, as the other 2% that would typically go to the advertising cooperative under section 13.2 of Domino’s standard franchise agreement is instead being rolled up into DNAF (resulting in the 6% being paid to DNAF). So it’s a rate of 6% of sales for all franchisees, with the exception of incentives.
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By Mark Kalinowski
Published on June 17, 2019 at 12:00 AM
Not too long ago, Domino’s (DPZ; Buy) filed its 600+ page Franchise Disclosure Document (FDD) for 2019. In this report, we cite some of the highlights from that document following our review of it, including our review of it in comparison to last year’s Franchise Disclosure Document. For example, in 2018, the Advertising Fund spent $401,643,843. This was an +11.1% increase over what the Advertising Fund spend in 2017. On top of this, during 2018, the Advertising Fund spent 85.6% of this on Media Placement (or approximately $343,807,130), versus an 84.27% rate during 2017 (or approximately $304,044,399). In dollar terms, this was an increase of +13.1%. We maintain our Buy rating on DPZ and note the following:
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By Mark Kalinowski
Published on May 30, 2019 at 12:00 AM
We recently met with Domino’s (DPZ; Buy) — including CEO Ritch Allison, Executive Vice President and CFO Jeff Lawrence, and Director of Investor Relations Chris Brandon — in Ann Arbor, Michigan. We thank them for their time! Topics of interest that were asked about include Domino’s plans to fight off delivery aggregators and other competition (“The good news is, the strategies to play offense against the aggregators are exactly the same as the strategies to play offense against the traditional competition.”), how crisis (such as the possibility of higher protein costs given the risks brought about by African swine fever) could be a net positive for Domino’s, and Domino’s current thoughts regarding plant-based proteins (“We don’t have any imminent plans in place, but we have to stay on top of it and see what consumers are going to do.” Management said that when they have tried some of the latest plant-based offerings, the “flavor and texture are shockingly close” to real beef). We reiterate our Buy rating on DPZ, and note the following:
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