Domino’s Pizza is asking franchisees to open more than one location in the same area, or even relocate sites, while at the same time the company will take steps to improve their profitability, chairman Stephen Hemsley told the Numis Travel & Leisure Conference in London.
Hemsley also said the company has been “blessed with pretty inept competition for quite a few years”, although he said Papa Johns is “decent competition”.
Domino’s wants franchisees to “split territories” in order to grow from 825 to 1,200 sites in the UK and Ireland in the medium term, and also prevent competitors opening in those locations, said Hemsley. London is a “particular focus” as a region where “we think there really is a good opportunity to drive more growth”.
Hemsley admitted it’s a “reasonably big ask on some occasions” to ask franchisees to open another site in the same area.
“In extreme cases we’re saying not only do you need to open another store, but you’ve got to relocate the existing one so you can service a whole territory sufficiently.
“That requires them to be quite certain that, a) they’re going to generate more sales, and b) that the stores are going to generate increasing returns for them.
“We feel we should help them do that by, not lowering food costs, but certainly not increasing them, and handing back some of the efficiencies that have been generated at corporate level.”
He said stores have generated sales of about £110,000 for the past three years. “During that period corporate profits have grown quite quickly and franchising is a partnership; you can’t have one partner growing profits and the other’s static.
“We’ve pulled it off for three years but we’ve had to take initiatives that allow unit profitability to increase.”
Hemsley added: “We are working in a more collaborative way with franchisees now. There’s been some element of command and control. We know that opening two stores in one territory is a really tough ask so we’re trying to find ways we can help them do that, do a lot more research into that market to try to prove to them that the additional sales will be there if they make that huge investment.”
He said Domino’s has reduced the number of franchisees from 180 to 112.