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Thu 21st May 2015 - David Wild – ‘we’re very confident we can increase Domino’s UK store numbers by 50%’
David Wild – ‘we’re very confident we can increase Domino’s UK store numbers by 50%’: Domino’s Pizza is “very confident” it can increase UK store numbers by 50% to 1,200 outlets, the company’s chief executive, David Wild, said today. Speaking at the Numis securities Travel and Leisure Conference in the City of London, Wild said there were three main drivers to the company’s growth, digital sales, new stores and franchisee profitability. With over 70% of sales now ordered by customers using digital channels, digital “is by far the most important growth driver in the company – it’s been a long journey since we took our first digital order in 2003. But as customers increasingly want to interact with companies online, we’ve ridden the wave with great success,” he said. However, he said, the new stores the company is opening “are doing better year by year – that is, the stores we opened in 2014 did better than the ones we opened in 2013, with average weekly unit sales of £13,555, up 6.9% on unit sales on stores that opened during the previous year, and the new stores we opened in 2013 did better than the ones we opened in 2012.” Domino’s opened 40 new stores in 2014 “and we’ll open more than that this year,” he said. The chain was also seeing a rise on average spend per address for newly opened stores, up 8.4% for stores opened in 2014 against new stores opened in 2013, Wild said. “That’s a combination of things, first of all we’re more skilful at opening and marketing new stores, but more significantly and strategically, because our penetration is at a higher level, we are able to open in much smaller towns. And what we find is that when we open in a smaller town, we get a higher average spend per address, because the quick service competition in small towns is much lower. It costs about £1.2m to put a McDonald’s down, it costs about £750,000 to put a KFC down. We can put a Domino’s down for £250,000. So we can go into towns where these other big brands just can’t make the economics work. What that means is that, as the only global QSR operation in the town, we take a higher share of the total fast food spend. That’s why I can say with absolute confidence that the 1,200-store medium-term target is well within our grasp.” The third key driver to growth is franchisee profitability, Wild said. “We changed our strategy quite significantly last year, putting much greater emphasis on franchisee profitability, recognising that’s the fuel that drives our business,” he said. “We make our money by selling food to franchisees which they convert to pizza. So if they make more money, they spend more on marketing, particularly on new stores, and we then sell more dough.” Domino’s is also growing by splitting territories, persuading franchisees to open a new store in an existing area. “In the first year, it’s cash-negative for the franchisee,” Wild said. But when you split a territory, he said, “after four years you get 80% more money out of the territory.” In addition, the franchisee benefited with a greater defence against competitors, increased penetration, lower delivery costs, marketing economies of scale and growing cash profits. 

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