The Domino's effect

Oct 20 2006 By John Revill

run their own store. After passing through a training course and shelling out the cash obviously.

"It is a bit like that advert for the Royal Marines; 99 per cent of people need not apply. We have to make sure we get the right people."

The right people are people aged 30 to 45, although you don't have to have any catering experience.

"Often we prefer no catering experience, because that means we have got a blank sheet to work with," said Mr Moore. "The most important quality we need is an ability to deal with people and manage people.

"You could end up managing a team of 20 to 30 full and part time staff, and it is a very high pressure job."

One third of all orders come in eight hours of the week – between 5pm and 9pm on Fridays and Saturdays. Fail then, and there is a good chance the business is going to fail.

Still, the pizza market as a whole is on the increase.

This is part of a general trend towards convenience food, with people who live increasingly hectic lives less likely to spend time in the kitchen.

There is also a move towards increasing home entertainment, with more and more people spending time and money on computers, plasma TV screens and other entertainment devices.

But isn't Pizza just a kind of fast food, and vulnerable to the current backlash against burgers and other junk?

Apparently not, with pizzas eaten less often and more as a treat, said Mr Moore.

"A pizza may have the same calories as a burger, but it is usually shared by lots of people instead of just being eaten by one.

"The frequency of ordering is much less, about once every five and a half weeks. Plus people have them as meal replacements. They are not a snack."

Still the market is expected to grow in the coming years. In 2005, the convenience food and takeaway market was valued at £7.2 billion of which the pizza delivery market (excluding carry out sales) amounted to £578 million.

Domino's itself grabbed a slice of this action – the company posted a 7.1 per cent increase in like for like sales last year.

In the year to January 1, it increased sales by 15.1 per cent to £200.7 million, while pretax profits surged 26.6 per cent to £11.2 million.

More of interest for potential franchisees was the increase in like for like sales which rose by 7.1 per cent last year.

On the property hunt, the company is also looking for suitable places to be. Each store must have a local population of 15,000 to 20,000 within a three mile radius that can be reached within eight minutes on a busy Friday night.

"We are not looking for prime retail sites. They don't have to be on the main streets, but they can also help rejuvenate an area."

So what is the catch?

People who want to have a slice of the action have to stump up £230,000, at least a third of which should be their own money and the remainder coming from lending or other sources.

The cost includes training and having a Domino's Pizza expert – or training angel – on site for the first five weeks, while the cost ia lowered to £180,000-£190,000 for subsequent openings.

Domino's also takes a 'royalty' of 5.5 per cent out of each site's sales, 2.7 per cent of which goes straight back to Domino's in the US.

Another five per cent goes towards the firm's national advertising fund – which has been sponsoring Sky's coverage of the Simpsons since 1998.

Sounds a lot, but Mr Moore said the average business had paid off its start up costs in four years.

"It is a very stable business. Each franchisee has the opportunity of having their own business with a successful brand behind it. Franchising used to be a dirty word, but we offer a lot of support.

"The market is expanding. The pizza delivery market is estimated to grow by 92 per cent by 2015 to more than £1 billion.

"But we are not just competing against other pizza companies, we are competing against Chinese, Indian, other takeaways."

Part of the sales are driven by the constantly evolving line up of pizzas with at least six campaigns a year, and at least five new products.

The latest version is the Ay Caramba fajita based pizza, which follows on from the Simpsons link.

This has been extended to Fundiddly Onion Rings – from Simpsons character Ned Flanders, while this year's big hit was the Football Fanatic pizza to coincide with the World Cup.

"It's an endless task coming up with new pizzas, and we have lots of tastings," said Mr Moore.

E-commerce is becoming an increasingly important part of the business with 12.3 per cent of sales currently online – a figure which rose by 40 per cent this year and is expected to increase even more.

Meanwhile the lucky franchisees – those who passed the section process – also get a choice in where their store is.

Apart from on the so-called jewel in the crown sites, where a "beauty contest" is held to determine who gets it.

This involves an assessment of how the site meets the 30 minute service delivery target as well as other considerations such as how many pizzas they sell.

"To get one of the best sites you have to have a pretty convincing record. But they also have to have a good understanding of the operation and of the product," said Mr Moore. "There are huge financial rewards, but people will have to work really hard." 

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 FACTFILE
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>>  Domino's Pizza was founded in Ann Arbor Michigan in 1960

>> There are currently 5,000 stores in the US, and 3,000 in the rest of the world, including 420 in the UK and Ireland

>>  Domino's UK and Ireland has four of the ten busiest stores in the world, with the busiest located just outside Dublin serving 3,000 orders per week

>> Domino's Pizza UK & Ireland, based in Milton Keynes, has had the UK and Ireland franchise since 1985