Domino's shares take dive amid franchisee friction

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The boss of Domino’s on Tuesday played down the tensions between the chain and its franchisees over profits as its shares took a beating. 

Some franchisees, who buy food and services from Domino’s, have been dissatisfied with how much money they can make amid rising costs and pressure to open more sites. 

Today chief executive David Wild, who has seen three finance chiefs leave the business in the four years he has been in charge, said: “Domino’s has one of the most successful franchise businesses in the UK. 

“The franchisees are entrepreneurs who are focused on profit and that’s something we constantly look at. They talk to us about the things we can do to help. Occasionally we have disputes.” 

Although group sales rose 12.8% to £616.6 million, boosted by the 8.2 million pizzas it flogged during the World Cup in Britain, a 9.7% slump in statutory pre-tax profits scared investors. 

Its debt also widened from £61 million to £182.1 million for the half year to July 1 to fund growth. 

The shares were down 11.9%, or 37.8p, to 280.2p, an 11-month low. 

Same-store sales in Britain were up 5.9% “despite a challenging consumer environment”, said Wild. But its international business, where Domino’s has been expanding apace through acquisitions and opening new stores, has dragged down the overall performance. 

“Domino’s challenge is now to replicate their success at home internationally and for now, the jury is still out,” said Steve Clayton of Hargreaves Lansdown. The chain is opening 60 more stores in Britain this year, edging closer to its 1600 target, of which up to a dozen will be in the capital. Wild added: “It’s not easy to get planning permission in London.” 

Full-year profit is expected to remain the same at between £95.9 million to £101.4 million. 

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August 7, 2018 |
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