Domino’s Pizza UK & Ireland, the pizza delivery firm, has acquired 75% of Intergrowth Enterprises Limited, the master franchisee for Domino's Pizza in Germany, as it looks to open 400 sites in the country over the next 10 years.
The company will invest just over £8.7m for the 75% interest in Intergrowth (Domino's Germany), acquiring 2.2m ordinary shares at just under 400p. It will issue 1.32m ordinary shares on completion of the transaction and a further 880,000 ordinary shares on the opening of the 35th Domino's store in Germany.
The other 25% of Domino's Germany is to be retained by Briskas Ltd, an affiliate of Grand City Hotels Group, the second largest hotel operator in Germany, with over 100 hotels in Europe.
Domino’s Germany was awarded the master franchise in April 2010 and currently operates two stores in Berlin. The company aims to open at least 400 stores over the next 10 years and believes that the market could ultimately accommodate more than double that figure.
Domino’s UK & Ireland is providing Domino's Germany with a €7.5m loan facility from its existing cash reserves to fund the development of the German business, €1m of which will be drawn down immediately following completion of the deal. This is in addition to the €2.5m of loan capital already provided by Briskas Ltd.
The German business will be headed by Patricia Thomas, Domino’s former operations director, who took up a new role of international development director at the beginning of the year.
The company said Thomas will be building a team to be based in Germany, drawn from the current German operation, strengthened with resources from the UK and others involved in Domino's markets worldwide.
In the short term, the stores will be run on a corporate basis while a franchisee model is put into place.
Chris Moore, chief executive, said: "This is a great opportunity for us to further increase the scale of our operation and develop our business in one of the largest economies in the world. The German pizza market represents a particularly fertile ground for Domino's with a limited number of relatively small players and no established international pizza delivery brand.
"This exciting move into a new territory gives us access to the potential opportunity of 2,000 stores servicing around 150 million people in two of the world's leading economies."
Domino’s UK & Ireland currently operates over 670 stores in the UK and the Republic of Ireland. It recently reported a 4.2% increase in like-for-like sales in the 13 weeks to 27 March 2011, with on-line sales up by about two thirds on the same period last year.
