Internal research shows a 2022 high-single-digit decline in industry delivery sales (both pizza QSR & nonpizza QSR) reflects pressure from the high cost of fees & tips, prompting more people to eat at home.
- 4Q22 system comps increased +0.9% (up +13.1% on a 3-year basis), driven by +6.3% in pricing which offset softening demand for delivery (pressured by macroeconomic challenges during the holidays) & its “fortressing” development strategy which represented a -50 bps headwind.
- Management indicated that its price increases may have been too aggressive as many customers want something other than medium 2-topping pizzas available on its $6.99 Mix-and-Match value platform.
- Its carryout comp was +14.3% during the quarter (+31% on a 3-year basis) while delivery comps declined -6.6% (+3.3% on a 3-year basis). Carryout now drives 50% of orders & 40% of mostly incremental sales.
- Domino’s has the #1 domestic share in both delivery & carry-out pizza. The domestic QSR pizza category grew +10% versus pre-covid levels & Domino’s gained 3% share points during that time. Its carry out market share is up +2% in 2022 (+5% on a 3-year basis). Its market share in total pizza QSR (including delivery, carryout & sit-down) held steady during 2022 & is up +3% on a 3-year basis.
- Notably, the QSR pizza carryout segment is significantly larger than QSR delivery.
Domino’s Operations, Margins & Facilities
- While Domino’s service times are improving, they have not returned to 2019 levels.
- Turnover is down & job applications are up.
- Half of the system stores currently are on call centers.
- Domino’s market basket pricing increased +12.5% during the quarter.
- Food inflation is expected to increase +3% to +5% during 2023.
- 2022 AUV was $1.3MM with a $137,000 average store-level EBITDA (just slightly below the 2019 $143k level), reflecting the benefit of its carryout Mix & Match offer price increase to $6.99 from $5.99. 2023 EBITDA is expected to increase y/y.
- Management maintains that the U.S. can be an 8,000+ store market & new store openings paybacks have remained strong with stores opened in 2019 averaging 3-year paybacks like its 2018 vintage.
- Corporate refranchised 114 company-owned stores in Arizona & Utah for $41.1MM during the quarter.