¶ … Business Plan Domino's Pizza, Inc.

Domino's Pizza

Management and Human Resources

Organization structure. Domino's Pizza, Inc. was founded in 1960 and incorporated as Domino's Pizza, Inc. In 1965 in Ann Arbor, Michigan. Domino's Pizza, Inc. issued an IPO in 2004 (Yahoo Finance, 2011); several international franchises (e.g., India, Australia) followed suit. The publicly owned company has ten principle subsidiaries (Pederson & Cengage, 2004). Domino's sells pizza and related food items through company-owned and franchise-owned stores, domestically and internationally. As Q4 2009, there were 466 stores and 8,555 franchises in the network, encompassing 50 states and 60 international markets (Yahoo Finance).

Corporate governance. Domino's governance structure consists of a board of directors and managing directors / officers (Yahoo Finance), listed below:

David A. Brandon, age 58, is Chairman, CEO and Chairman of Domino's, Inc.

J. Patrick Doyle, 47, is President and CEO.

Russell J. Weiner, 42, is Chief Marketing Officer and V.P. Of Build the Brand.

Michael T. Lawton, 52, is CFO and Vice President of Finance.

James G. Stansik, 55, is Vice President of Franchise Relations.

Corporate culture. An explicit diversity policy is prominently displayed on the corporate Web site, just after a description of Domino's Pizza employees striving to be "Fast and Nice" and admonishing them to "Sell More Pizza, Have More Fun" or work with "Smart hustle and positive energy." To bring these aspirations to fruition, Domino's holds an annual World's Fastest Pizza Maker contest (Domino's Pizza, 2011). The winner receives prize money, a trophy, and presentation of the coveted title by CEO David A. Brandon (QRS, 2007).

The Vault Web site discloses several comments from employees, ranging from general manager to delivery driver. All are typical and unremarkable employee comments (2011).

Recruiting and career paths. More than 170,000 team members make up Domino's network (LinkedIn, 2011). Of the 2,100 employees who maintain LinkedIn profiles, most have college degrees: Bachelors' (58%), a Masters' (23%) or an Associates' degree (9%). Domino's draws heavily from local universities, and operates a Manager-in-Training (MIT) program.

Job postings / wages / benefits. LinkedIn shows a diverse list of job openings. Per CareerBuilder, store managers earn $26,600-$70,000/year and trainees earn $19,700-$32,000/year, depending on location. Drivers earn up to $15/hour, plus tips and mileage (CareerBuilder, 2011). Domino's has a generous benefits package (Domino's Pizza, 2011).

Products and Marketing

Target market and distribution channels. Domino's clearly understands its primary target market: Young, active, social gatherers. In keeping with this B2C segment's proclivities, marketing uses the ubiquitous social media channels, (Twitter, Facebook, youTube), television, direct mail, and a well-developed Web site. Billboards, guerilla-style signs, truck sides, and even a banner pulled by an airplane are used in special campaigns (Domino's Pizza, 2011).

Community and customer relations. The Domino's Web site is peppered with witty posts and links, and the Facebook pages show enticing deals, foreign store activities, and links to promos. When Papa John's Pizza confessed in a courtroom that their slogan "Better ingredients. Better pizza." was just "puffery," Domino's peeps obligingly re-tweeted the news.

Domino's is working to make pizza ordering fun. Consumers can now track delivery on Domino's Web site using Pizza Tracker. From the time the pizza leaves the oven, consumers can get an audio progress report, choosing from six themes (from Hair Metal to Romance Novel) for an audio tracking experience. Domino's claim: "Pizza Tracker Will Rock You!"

Product line and product mix. The product line has grown substantially since the days when Domino's Pizza had a single product -- classic pizza. The main product is still ready-made pizza, but there is an amazing variety to the product mix, which includes oven-baked sandwiches, breadbowl pasta, boneless chicken, and chicken wings. There are three breads for dipping and -- for dessert -- chocolate lava crunch cake (Domino's Pizza, 2011).

Industry Analysis

Competitive landscape. The pizza category has robustly maintained market share in the restaurant industry over the past few years (Carroll, Esch, &...

Pizza Hut, Inc. has 11% of the market share and made 14% of the sales in 2010. Domino's Pizza, Inc. has 7% of the market share and made 8% of the sales. Papa John's International, Inc. And Little Caesar Enterprises, Inc. each have 4% of the market share and made 6% and 4% of the sales, respectively (Carroll, et al., PQM, 2010).
Competitors. Papa John's Pizza beat out the quick-serve competition in the industry's 2009 Satisfaction Index (ACSI) report, coming in at 80 out of 100 for overall satisfaction. Little Caesars and Pizza Hut at tied at 78, while -- even after their "inspired pizza" campaign in 2010 -- Domino's overall satisfaction rating was stagnant at 77 (Cook & Ross, 2010).

Product innovation. Market share held steady during the fiscal crisis. An inspired pizza industry renewed its efforts to create new and better versions of adorned pizza bread. Toward the end of 2009, Pizza Hut launched a targeted discount promotion ($10 for any pizza / any crust / any topping) that effectively competed with independents and lower-priced chains (Meyer, 2010). The Little Caesars redux on November 1, 2010, was "Pizza! Pizza! Pantastic (Meyer). Even Papa Murphy's got creative with S'mores pizza for Valentine's Day (PMQ). In March 2010, Domino's -- dismayed by focus group feedback about the poor taste of their pizza -- embarked on an aggressive campaign based on a new "inspired pizza" (Watson, 2010), and started creating healthier pizza for school lunches. It's difficult to know if the pizza really tastes better, if Domino's oven-baked sandwiches really are better than Subway's, or if customers just really like the commercials. Marketing and analysis firm Kantar Media believes Domino's spent in excess of $171 million in advertising in 2009 and $121.1 million in the first three quarters of 2010 (Meyer).

Financial Analysis

Fiscal status. Domino's Q4 profits rose from $11 million in 2008 to $23.6 million in 2009, more than doubling the year-over-year figure (Watson). Total Q4 2009 revenue increased year-over-year by 8.1% to reach $462.9 (Watson). Domestic same store sales rose 1.4% and international same store sales climbed by 3.9%. International sales were strong, pushing Domino's network Q4 2009 sales to $694.3 over $518.9 in 2007. In Domino's 2010 annual report, EBITDA grew 1.51% and EBITDA Margin was reported at 13.8%.

Stock performance. The stock sticker symbol for Domino's Pizza, Inc. is DPZ. On February 25, 2001, the stock was priced at 16.79 and rose 2.13% on intraday figures; the service sector / restaurant industry as a whole was up 0.84% (Yahoo Finance).

Leverage. Long-term debt reached $942.3 million in 2004 when the domestic IPO was anticipated (Reeves, 2004). The debt-to-equity leverage ratio (using interest-bearing, long-range debt) at Q3 2010 was 3.91 (Yahoo Finance). A debt-to-equity ratio based on shareholders' equity at Q3 2010 was -1.34 (Yahoo Finance). Per Domino's Q3 2009 earnings call, Earnings per Share (EPS) was 1.38 in 2009 (diluted) and rose to 1.46 in 2010 (Yahoo). In 2009, Domino's repurchased $189 million in fixed rate notes principal, and re-purchased $239 million in principal over 14 months, ending Q3 2009 (Biz Yahoo, 2010).

Domino's is heavily leveraged. Borrowing has allowed the company to pay bonus dividends to stockholders, per the 2010 annual report, at a time when bondholders have been paid more than the company's net worth (Edwards, Allen, 2010). A look at the company's history, including two periods of re-capitalization (Biz Yahoo, 2010; Edwards; Reeves), makes the prospect of ridding the company of long-term debt seem quite dim.

References

Biz Yahoo. (2010) Domino's Pizza, Inc. earnings conference call Q3 2009. Retrieved on February 26, 2011 from http://biz.yahoo.com/cc/1/120891.html.

CareerBuilder. (2010). Domino's Pizza, Inc. Company profile and membership information. Retrieved on February 26, 2011 from http://www.careerbuilder.com/jobseeker/jobs/jobresults.aspx?NCC=%22Domino's+Pizza%22.

Carroll, Robert; Esch, Carrie; McGarry, Cara. (2006). The U.S. pizza restaurant industry. [PowerPoint] Presented in marketing course by Professor Raj Sethuraman at Southern Methodist University, Cox School of Business, in Dallas, Texas. Retrieved from rsethuraman.cox.smu.edu/mktg6224/course_files/PizzaIndustry.ppt.

Cook, Donald C. & Ross, Stephen M. (2010). Rise in satisfaction for airlines may be short-lived; big…