Domino's Pizza Inc · NASDAQ:DPZ
Domino's Pizza — Investor Day (October 2008)
126 slides from Domino's Pizza's investor day presentation, Oct 28, 2008
Slide 1: Domino's Pizza Investor Day 2008
Domino’s Pizza Investor Day 2008 Domino’s Pizza Leadership Team October 28, 2008 Exhibit 99.1
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements This presentation and our accompanying comments may contain “forward-looking statements.” These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results,
Slide 3: Today's Agenda
Today’s Agenda A Context: When the “Game Began to Change” The Turnaround Plan – Our Current Position 2009 and Beyond… Supply Chain Costs – a Range of Possibilities Q&A Lunch: New Store Concept and Test Product Review Financial Overview Q&A International – Master Franchisee Perspective Q&A Closing
Slide 4: A Context: When the "Game Began to Change"
A Context: When the “Game Began to Change” Domino’s Pizza 2005 – 2008 David A. Brandon Chairman & CEO
Slide 5: Pizza Industry Traffic & Check
-1.5% -2.4% -4.5% 0.5% 0.0% -1.5% Pizza Industry Traffic & Check Percent Change vs. Year Ago Essentially a 6-Year Negative Trend 2.6% 3.0% 1.7% 3.8% 3.3% 2.5% Party Check Transactions Source: The NPD Group/CREST
Slide 6: Domino's Pizza Traffic & Check
7% -2% 4% -3% -1% 4% 5% -1% 2% 1% 0% -2% Party Check Transactions Percent Change vs. Year Ago Source: The NPD Group/CREST Domino’s Pizza Traffic & Check
Slide 7: Domino's Overview – Circa 2005
Domino’s Overview – Circa 2005 National Marketing was driving strong results Franchisee attitudes and behavior The results of our environment and strategy – Store growth – Strong unit economics – Heavy reliance on national promotions / marketing – National Advertising Fund growth
Slide 8: Marketing Spend
Marketing Spend National (TV – Print PR) Co-Op (Spot TV – Radio – Print) Local (Box-toppers, local sponsorships) 3% of sales in 2004 4% of sales in 2005 5% of sales in 2006 5% of sales in 2007 4% of sales in 2008 Avg. 2.3% of sales in ‘04 Avg. 1.5% of sales in ‘05 Avg. 0.5% of sales in ‘06 Avg. 0.5%
Slide 9: History of National Promotions
Q1 Q2 Q3 Q4 Full Year - Weeks of National TV History of National Promotions BFD & Brooklyn/Philly (5.2%) Comp 444 Promotion (5.1%) Comp Gotham City Pizza (6.1%) Comp Oven-Baked Sandwiches Cheesy Garlic Bread Pizza (2.9%) Comp Brooklyn/Philly & 555 promotion 2.1% Comp Philly/Brooklyn & 1 week of Oreo
Slide 10: Learning from the Past: 2005
Learning from the Past: 2005 Strategy & Tactics – “555” became a sub-brand of Domino’s Pizza – Low cost delivered pizza option – VARIETY and VALUE – Drove ticket and traffic – Other (LTO) promotions drove only ticket Implications – Traffic decline was happening, but not for DPZ due to the success of
Slide 11: Learning From the Past: 2006
Learning From the Past: 2006 Strategy & Tactics – Knew rolling ’05 comps would be tough – Had more national TV weeks (38 vs. 34) – Pursued aggressive ticket growth strategy (through LTO/bundles) – Delivery charges were rolling out fast Implications – Bad test reads and bad market timing • 555 succes
Slide 12: Learning from the Past: 2007
Learning from the Past: 2007 Strategy & Tactics – Rolling weak comps (9 less TV weeks due to media inflation/alternative media investments) – Continued with LTO promotions – national events dominated calendar – Local store marketing (LSM) campaigns were most successful • Q2 positive comps – Increase
Slide 13: Back to the Present: 2008
Back to the Present: 2008 Strategy & Tactics – “You Got 30” message – heavy reliance on LSM – “Chased” value message based on consumer malaise (BFD failure led to 444 promotion launch) – Started attacking traffic issue (sandwich tests and roll-out) – Stepped-up R&D – get out of LTOs and into menu/da
Slide 14: The Consequences: Franchisee Reactions
The Consequences: Franchisee Reactions 2005: Happiness! Love the roll-up Signed up for increased roll-up in 2006 National marketing doing much of the “work” Costs “in check” – making lots of money!
Slide 15: 2006: What Happened?
2006: What Happened? Must be a blip…rolling over tough comps Costs are moving…but store economics still good Let’s “give Ann Arbor another chance” – Rolled-up again for 2007 – Less local spending/activity The Consequences: Franchisee Reactions
Slide 16: 2007: What the Hell Happened?
2007: What the Hell Happened? National promotions “don’t work any more” Less money for Ann Arbor for 2008 (no roll-up) Some increase in local store marketing Environment getting tougher – increasing costs are a major problem! The Consequences: Franchisee Reactions
Slide 17: 2008: When will it End?
2008: When will it End? Agency / client learning curve Reduced share of voice – Less weeks on national TV than in many years! Continued traffic declines and tremendous cost inflation “No matter what I do, it isn’t working” – store level economics lousy Hope on the horizon – promising test products a
Slide 18: The Consequences: Store Growth
The Consequences: Store Growth Total (’01-’05) DPZ U.S. Store Count 4,813 4,848 4,904 5,008 5,092 +279 Pizza Hut Store Count 6,569 6,503 6,400 6,306 6,254 -315 Papa John’s Store Count 2,589 2,585 2,574 2,565 2,599 +10 Historically Steady Growth
Slide 19: Consequences: Store Growth
Consequences: Store Growth DPZ U.S. Open Close Net (through Q3) (69) Growth declined as sales declined
Slide 20: Consequences: Unit Economics
Consequences: Unit Economics Squeezed Sales Declines Profits Squeezed Higher Minimum Wage Higher Food Cost Lower Traffic Higher Delivery Cost Decreasing Advertising
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Slide 22: What We've Learned…
What We’ve Learned… Traffic growth is key – bring excitement back to Domino’s Pizza – Sustainable, organic growth – Today’s traffic = tomorrow’s same-store sales results LTOs don’t drive sustained traffic – Need product platforms, not “product-of-the-month” – Need day part expansion Need timely cons
Slide 23: The 2008 Turnaround Plan
The 2008 Turnaround Plan Patrick Doyle President, Domino’s USA
Slide 24: Traffic Builder – Near Term
Traffic Builder – Near Term New product appeal New day part
Slide 25: Sandwiches Results from Test
Sandwiches Results from Test Drove strong traffic and increased sales 40% of sandwich orders included a pizza Sandwiches increased customer frequency by 30% – Improves the overall profitability of each customer Sandwiches skewed towards carry-out (better margins) Sandwich customers reported: – High
Slide 26: Sandwiches – National Roll-Out
Sandwiches – National Roll-Out Results from the first couple of weeks show that: – Traffic is strong – the best results in over a year – Early sales results promising – Sandwiches are over 20% of mix – Still skewing towards carry-out (especially at lunch) – 40% of sandwich orders include a pizza – D
Slide 27: Menu Strategy: New Product Platforms
Menu Strategy: New Product Platforms Value – Large party, small party & carry out Premium – Local Legends Day part / menu expansion / variety – sandwiches & pasta Core pizza – improve! Ticket – Desserts, sides and beverage Online – Enabler for broader menu, higher ticket
Slide 28: Menu Strategy: Pasta Perfecta and Local Legends
Menu Strategy New Product Platforms Pasta Perfecta Local Legends Three Cheese Mac-n-Cheese Italian Sausage Marinara Chicken Alfredo Chicken Carbonara Pasta Primavera Philly Cheese Steak Honolulu Hawaiian Memphis Barbecue Chicken Cali Chicken Bacon Ranch Pacific Coast Veggie Buffalo Chicken Pizza
Slide 29: Menu Strategy: Ready-To-Go Chicken
Menu Strategy New Product Platforms Ready-To-Go Chicken Traditional and boneless Six sauce flavors Only in select stores Three hot-hold, ready-to-go items
Slide 30: Improve Current Product
Improve Current Product Improved core pizza product – Dough – Sauce – Cheese – Toppings Respect the Food
Slide 31: More Advertising
More Advertising Asking franchisees for a roll-up in national advertising Looking at options for partnership funding Enough advertising to support all product and promotional initiatives
Slide 32: Pricing: Perception vs. Reality
Average Ticket Per Eater Year Ending 2007 Source: The NPD Group/CREST Pizza Delivery Charge + Tip $3- +19% +15% +13% +17% Pricing: Perception vs. Reality $4.20 $4.76 $5.72 $6.57 $8.21 $10.00 $5.14 $6.20 Total QSR QSR Pizza Pizza Delivery - Party of 2 Pizza Delivery - Party of 4
Slide 33: Pricing Lessons: "$-Eye"
Pricing Lessons: “$-Eye” Don’t over-price the single pie Don’t increase delivery charge too much Cull down coupons Expand day part (lunch, late night) Leverage online ordering
Slide 34: "A," "B" and "F" Franchisees
“A,” “B” and “F” Franchisees’ YTD Stats “A” Franchisees “B” Franchisees “F” Franchisees Franchisees Stores Avg. Stores/Fran 6.5 3.5 2.5 2008 AWUS YTD 13,460 11,311 9,412 2008 PCYA -5.0% -5.9% -8.5% 2008 DOT % 77.3% 76.3% 75.5%
Slide 35: Store Development & Recruitment
Store Development & Recruitment On track to open 100 -120 stores (125 opened in 2007) 70 new franchisees in the system YTD (vs. 93 for full year 2007) 58 potential franchisees have attended Discovery Day Plans are in place to save and transfer as many at-risk stores as possible
Slide 36: U.S. Store Growth Expectations
U.S. Store Growth Expectations Open 100 to 120 Close 225 to 250 Net -100 to -150 Bill Kapp leading financial effort – Working to prevent closures – Even A’s and B’s struggling to finance purchases in past few weeks Transition to store growth driven by sales growth
Slide 37: Prefer Quality vs. Quantity
Prefer Quality vs. Quantity Gulfport Vision 20/20 store
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Slide 39: Russell Weiner, CMO
Russell Weiner, CMO Domino’s and Michigan: my new home! “Classically-trained marketer” – Consumer brands (Pepsi, Phillip Morris) – Company and agency side General management – Large projects, large teams, agency relationships Collaborative philosophy – Attracts talent and drives results
Slide 40: Why I'm Here
Why I’m Here The Domino’s team The Domino’s brand Upside potential! Can make a difference Karma
Slide 41: The next days…
The next 90 days… Forge a Lighthouse Identity for the Domino’s brand – Grounded in consumer insights – Informed by our past and inspired by the future Lighthouse drives brand decisions – Store design – Advertising & Communications – Innovation
Slide 42: Innovation Philosophy…
Innovation Philosophy… Long-Term Approach • 30 days and 30 years Quality, Quality, Quality! • We’re delivery. We’re service. We’re 30 minutes… AND the FOOD is great • Deliciously Fast Born out of a rational business need…Developed with an emotional POV that makes it uniquely Domino’s Drive increment
Slide 43: Our Vision for the Menu
Our Vision for the Menu Then and Now (Handouts)
Slide 44: Operators of the Future
Operators of the Future Closer to 5+ stores on average per franchisee All “A” and “B” franchisees No “F” franchisees Targeted exceptions for external franchisees
Slide 45: Team USA of the Future
Team USA of the Future Contribute more EBITDA Test platforms People pipeline
Slide 46: Maintain & Grow Stores
Maintain & Grow Stores Same store sales increases...leverage “the four walls” Targeted real estate improvements Focus on struggling stores during tough times Grow as business improves
Slide 47: Future Unit Economics
Future Unit Economics Need to assume that costs won’t dramatically change – Minimum wage increases staying – Commodities might flatten, might not – Delivery costs probably won’t improve – If costs decrease, we have upside The way we will strengthen unit economics is to grow the top line – “Grow your
Slide 48: Commodities and Costs
Commodities and Costs David Mounts, EVP Supply Chain
Slide 49: 2008 Update
Q3 2008 Update Commodities tough, but… a better outlook – Domino’s commodity index – Domino’s food basket Holy cow… what’s up with cheese? What we’re doing about it
Slide 50: Commodities Update – External Real Time
Commodities Update – External Real Time Date Cheese Pork Boxes Wheat Wings Sauce Beef Diesel/Fuel Electric Kickers Natural Gas October 17, 2008 $1.79 $0.88 127.7 $6.40 $1.04 $63.00 $0.91 $77.46 $61.60 $1.29 $6.79 10 Yr Average $1.41 $0.82 97.16 $3.95 $0.87 $53.22 $0.79 $39.01 $62.19 $0.88 $5.35 Unit
Slide 51: Commodities – Last Two Years, Ugh.
Commodities – Last Two Years, Ugh. Why??? Domino's Commodity Index - Year 60.00 80.00 100.00 120.00 140.00 160.00 180.00 200.00 DCI 2 Year Avg. of DCI
Slide 52: Commodities - Energy and Food
Crude (blue) vs. Corn Futures Commodities - Energy and Food For 8 of 10 Years Not Correlated
Slide 53: But Then Corn Correlated Two Years
But Then Corn Correlated Two Years And Corn Leads Beef, Pork, Chicken, Soy, Wheat Crude (blue) vs. Corn Futures
Slide 54: Culprits – Fuel on Everything
Q3 Culprits – Fuel on Everything Cheese Stayed High and… Kickers $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 Chicken Beef $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 Beef Sauce* $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 Paperboard Sauce Boxes
Slide 55: Commodities – Internal Food Basket
Commodities – Internal Food Basket Core Products Fixed or Contract Pizza Cheese Dough and Crust Chicken Wings Floating Fuel Sauce Vegetables Meats Boxes
Slide 56: Commodities – Internal Food Basket
An indication of food cost to store Hypothetical store - $10K/week AWUS Heavily influenced by price of cheese Cheese and dough are approximately 50% of the price of the basket Competitive comparison quarterly Commodities – Internal Food Basket
Slide 57: Price Basket - Trending
Price Basket - Trending 2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400 3,600 3,800 4,000 Period Cheese Inc. - $147 Cheese Inc. - $165 Dough Inc. – Phased in P1 & P2 Wing ‘K’ ends – inc. $55 Cheese inc. $87 Cheese Inc. - $108 Box ‘K’, P&P, Meat Inc. – Total of $48 Cheese Inc. - $106
Slide 58: Increases of DCI and Food Basket
Increases of DCI and Food Basket YTD 2008 DCI (1.74) (1.53%) 24.82 21.85% 47.01 41.39% Food Basket ($83.85) (2.73%) $230.10 7.48% $499.25 16.23% Increase over 2005
Slide 59: Party Price Comparison Qtr Differences
3 Party Price Comparison 3 Qtr Differences Competitor 1 9.15% Competitor 2 15.50% Competitor 3 10.71% rd rd
Slide 60: Holy Cow…What's Up With Cheese?
Holy Cow…What’s Up With Cheese? Not moving with oil Supply / demand tight in dairy, particularly cheese International prices above U.S. – strong foreign demand Butter has not carried its weight until recently High farm input prices for feed – Causing liquidations and productivity reductions
Slide 61: Holy Cow…What's Up With Cheese?
Holy Cow…What’s Up With Cheese? Summer High gas and other high prices decreased domestic demand Milk flowed into cheese and powder increasing supply International buying then picked up Fall Seasonal school milk tightened domestic demand Cheese buyers replenished inventories, increasing demand
Slide 62: Holy Cow…What's Up With Cheese?
Holy Cow…What’s Up With Cheese? This just in: Global financial crisis impacting key drivers – High export demand – High farm cost Global demand softening International supply increasing International prices have dropped, reducing exports of cheddar Two forecasts for 2009 Soft demand $1.50 – $1.60 Mo
Slide 63: What are We Doing About all This?
What are We Doing About all This? New contract strategies : – Better supply contracts – Locked in prices via forwards – End-to-end price and logistics savings New operating efficiencies: – Drove fewer miles – Used less fuel – More efficient warehouses
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Slide 65: What's Next? Lunch!
What’s Next? Lunch! Brandon Solano, VP Brand Innovation Vision 20/20 store New product operations Sampling test products at our “chef’s table” in the test kitchen – Taste products that have been or are in test – Not guaranteed to roll out nationally Brand strategy at work!
Slide 66: Web-cast Break for Lunch
Web-cast Break for Lunch Back Around 1:15 p.m. EST
Slide 67: Financial Overview
Financial Overview Wendy Beck, CFO
Slide 68: Agenda
Agenda Asset Backed Securitization (ABS) ABS 101 Revolver Liquidity Free Cash Flow Operational considerations Labor & Product Mix Foreign currency impacts Long Range Outlook
Slide 69: ABS Facility – Key Terms
ABS Facility – Key Terms $1.6B Senior ABS debt – 5.961% cash interest rate $0.1B Subordinated debt – 7.629% cash interest rate $1.7B Total funded debt – 6.059% cash interest rate $150M revolver facility Senior debt wrapped with insurance “Full-company securitization” secured with most cash flows of
Slide 70: ABS Time Line
70 70 ABS Time Line April 16, 2007 - $1.7 billion ABS Debt Facility funded • 6.06% fixed cash interest rate • Also includes $150 million unfunded revolver April 16, 2014 – Maturity if both 1-year extensions exercised If not refinanced after 5 or 7 years: • 30-Year Legal Maturity • 100% of cash flow
Slide 71: Royalties
Royalties *Domestic +international “Team USA Teamusa —_/ Profits ABS Entity Interest Expense Cash Trapping (ifapolicoble) Servicing Fee ABS Lenders Domino's Pizza VISES) yee
Slide 72: Debt Service Coverage Ratio (DSCR)
Debt Service Coverage Ratio (DSCR) – Defined as Collections / Senior Interest Expense – Collections cannot be calculated using publicly-disclosed information, but it tracks closest to EBITDA – EBITDA performance would need to drop by $65 - $75M annually before first trigger is reached – Triggers: Es
Slide 73: ABS DSCR Extreme Stress Test
ABS DSCR Extreme Stress Test 2009 Assumptions: – Domestic Net Store Growth (500) – Domestic Same Store Sales Growth (10%) Results: – Our DSCR still exceeds the first trigger
Slide 74: Current Credit Markets - Insurers
Current Credit Markets - Insurers Bond insurers have experienced credit issues – MBIA and Ambac wrapped our ABS debt facility Insurer Impact on Domino’s – Insurers’ troubles do not impact our current debt facility or debt costs – Availability of future ABS-type debt facility diminished in current ec
Slide 75: Current Credit Markets – Revolver Lenders
Current Credit Markets – Revolver Lenders In Q4, one of Domino’s lenders declared bankruptcy – Lender’s troubles do not impact our current senior or subordinated debt or debt costs – Our revolver is likely impacted, though – However, we do NOT need the revolver for operating needs
Slide 76: Revolver
Revolver Revolver facility – Original Capacity $150.0mm – Capacity Lost ($90.0mm) – Current Capacity $60.0mm – Less: LCs outstanding ($38.3mm) – Total Currently Available $21.7mm Letters of Credit (LCs): unfunded commitments pledged to insurance companies or lessors Current LCs: $ 31.2M self-insuran
Slide 77: Liquidity
Liquidity Main source is, and has always been, our free cash flow We generate FCF of over $1M per week, on average (please see chart on next page) We have unrestricted cash of $20.1M at the end of Q3 The current revolver, as well as previous revolver facilities, have not been used for working capita
Slide 78: Domino's Free Cash Flow ($ millions)
Domino's Free Cash Flow ($ millions) Domino’s Free Cash Flow • Free Cash Flow = cash flow from operations minus CapEx • 2005-2007 are pro-forma to reflect the current debt level $77 $81 $54 $65 2005 PF 2006 PF 2007 PF LTM Q3 2008
Slide 79: Uses of Free Cash Flow
Uses of Free Cash Flow Return of Capital Share Repurchases Dividend Payments Debt Repayments Reinvest in the Business
Slide 80: Debt & Liquidity Summary
Debt & Liquidity Summary Comfortable with our capital structure and terms of our ABS debt facility Debt facility with: – 6.06% fixed interest rates – A 5-year term with two 1-year extensions Business model with low cash needs that generates strong operating cash flow
Slide 81: Operational Considerations: Minimum Wage Impact
Operational Considerations: Minimum Wage Impact Most corporate markets had 2008 and 2009 increases: Min. Rate – Fed Min Wage $5.85 $6.55 $7.25 – Florida $6.67 $6.90 $7.25 – Minnesota $6.15 $6.55 $7.25 – Arizona $6.75 $6.90 $7.25 – North Carolina $6.15 $6.55 $7.25 – Maryland $6.15 $6.55 $7.25 Expecte
Slide 82: Operational Considerations: Food Cost Comparison
Operational Considerations: Food Cost Comparison Lowest to Highest Food Cost % Bread Pizza Pasta Chicken Sandwich Beverage
Slide 83: Foreign Currency Impact
Foreign Currency Impact International royalties are earned in local currencies When the U.S. dollar strengthens, we receive fewer U.S. dollars for the same amount of local currency Currency has helped us to a limited extent the last several years, as the U.S. dollar has weakened This impact has turn
Slide 84: Impact for Our Major Currencies
Impact for Our Major Currencies = Weaker $ is Favorable to DPII EBITDA 2008 Full Year Projected vs. 2007 2009 Projected vs. 2007 British Pound Euro Mexican Peso Canadian Dollar Australian Dollar Japanese Yen Korean Won = Flat = Stronger $ is Unfavorable to DPII EBITDA * See safe harbor statement rel
Slide 85: Foreign Currency Impact
Foreign Currency Impact Q4 2008 FX rates are estimated using consensus forecasts taken October 13, 2008 FX rates are volatile and further changes will impact results Year-Over Year Figures in $ millions, except per-share data 2008 Q3 2008 Q4 YE 2008 YTD Forecast Forecast Gross Royalty Sales Impact $
Slide 86: Long Range Outlook & Possibilities
Long Range Outlook & Possibilities • Long Range Outlook and Possibilities do not constitute specific earnings guidance. Domino’s does not provide quarterly or annual earnings estimates. See safe harbor statement relating to forward looking statements. Long Range Bull Middle Bear Outlook Case Case Ca
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Slide 88: Domino's Pizza International
Domino’s Pizza Michael Lawton EVP Domino’s Pizza International
Slide 89: International – A Big Piece of the Pie
International – A Big Piece of the Pie Represented 3,469 stores across 60 markets¹ – 3-year store count CAGR of 8.1% Accounted for over 40% of global retail sales – Posted $2.2 billion in Retail Sales in 2007 – 3-year retail sales CAGR of 15%² Made up 30% of DPZ operating income³ In 2007, Domino’s I
Slide 90: Q3 2008 marks the consecutive quarter of positive same store sales
Q3 2008 marks the 59 consecutive quarter of positive same store sales th
Slide 91: International Leadership with Significant Upside
International Leadership with Significant Upside ¹ Based on 2007 YE total store count ² Potential store count based on Domino’s Pizza International estimates Top 10 Markets YE 2007 Delivery Market Stores Position Potential Store Count Mexico #1 United Kingdom #1 Australia #1 South Korea #3 Canada #3
Slide 92: Market Highlights
Market Highlights Smaller markets: Greece and Israel – Greece reached critical mass and began TV ads for the first time – Israel is growing phenomenally lately and Domino’s is the #1 pizza brand in the country Medium-sized markets: Malaysia and Saudi Arabia – Domino’s stores in Malaysia are expandin
Slide 93: Market Highlights
Market Highlights Continued success: France, Netherlands and India – France recently began advertising on TV Up and coming market: Brazil – Strong growth from new partners – Building more stores - currently in Rio and São Paulo is next target New market: Indonesia, Qatar and Shanghai – First store i
Slide 94: Continuing Success: 2008 Milestones!
Continuing Success: 2008 Milestones! Stores operated by Domino’s Pizza Enterprises (Australia, New Zealand, Netherlands, France, Belgium) Stores operated by Domino’s Pizza Korea Stores operated by Domino’s Pizza India Stores operated by Domino’s Pizza Turkey
Slide 95: Anniversary of Domino's Pizza International
25 Anniversary of Domino’s Pizza International th
Slide 96: Michael Berkman
Michael Berkman – Grupo Mozzarella International Area Franchisee Domino’s Pizza International Franchisee since 1993 Began career as sub-franchisee for ALSEA in Mexico – Became the largest sub-franchisee in Mexico Michael is now the Master Franchisee for Panama, Costa Rica and Honduras Joint Venture
Slide 97: Michael Berkman – Grupo Mozzarella
Domino’s Pizza Michael Berkman – Grupo Mozzarella
Slide 98: Agenda
Agenda Grupo Mozzarella - Current Status How Did We Get There? Maintaining One Brand, One System Continuing Success Q&A
Slide 99: Grupo Mozzarella: Where We Are Today
Grupo Mozzarella Where We Are Today
Slide 100: International Master Franchise Model
International Master Franchise Model DPZ Ann Arbor, Michigan Master Franchisee: ALSEA Distribution System Corporate Stores Sub- Franchise Stores (Grupo Mozzarella) Royalty Royalty Store Profits Distribution System Profits Where Grupo Mozzarella Started
Slide 101: Where Grupo Mozzarella is Today
Where Grupo Mozzarella is Today International Master Franchise Model DPZ Ann Arbor, Michigan Master Franchisee: Grupo Mozzarella Distribution System Corporate Stores Royalty Store Profits Distribution System Profits
Slide 102: Grupo Mozzarella - How it All Began
o 1993: Sub-franchised first store in Mexico from ALSEA • Quickly became the top sales store in Mexico o 1996: Opened stores in two Wal-Mart stores • First Domino’s stores in Mexico to open inside another retail outlet o 1997: El Rosario store joins Domino’s Million Dollar Club o 2000: Opens first s
Slide 103: Grupo Mozzarella Mexico
Grupo Mozzarella Mexico Yearly Sales 1993 – 1998 ($ in Millions) $2.6 $4.2 $4.8 $.45 $1.4 $6.8 210% 89% 61% 14% 42%
Slide 104: And the Success Continued…
$9.3 $9.6 $11.4 $7.3 $8.2 $13.3 13% 13% 3% 18 % 17% 7% And the Success Continued… Yearly Sales 1999 – 2004 ($ in Millions)
Slide 105: How Did We Do It?
How Did We Do It? People – Robust training for all Managers, Customer Service Representatives, Pizza Makers and Drivers – Strong relationships with suppliers, customers and the community Intense focus on a quality product Service: store operations built around 30-minute guarantee Investment in the n
Slide 106: Grupo Mozzarella's Move to Central and South America
Grupo Mozzarella’s Move to Central and South America Panama – 1989: First Domino’s store opens in Panama – 2005: Grupo Mozarella enters Panama and opens the sixth store – 2008: Plans to open the 11 store by year end Costa Rica – 1996: First Domino’s Pizza store opens in Costa Rica – 2006: Grupo Mozz
Slide 107: Grupo Mozzarella's Move to Central and South America
Grupo Mozzarella’s Move to Central and South America Peru – 1992: First store opens in Peru – 2006: Grupo Mozarella enters into a Joint Venture with the Bolona Family – 2008: Operating 21 stores in Peru Honduras – 1987: First ever Domino’s Pizza store opens in Latin America – 2008: Grupo Mozarella e
Slide 108: Market Opportunity - Panama
Market Opportunity - Panama Republic of Panama – Population of 3.4 Million Panama Economics – Dollarized Economy – 37% below poverty line and 6.4% unemployment Economic activities: banking, Panama Canal, construction and tourism Competition – Pizza Hut, Tamburelli, Leonardos and Sbarro
Slide 109: Market Opportunity - Costa Rica
Market Opportunity - Costa Rica Republic of Costa Rica – Population of 4.5 Million…..smaller than West Virginia! Costa Rican Economics: – 13% devaluation of currency, the Colon, in 2008 – 16% below poverty line and 4.6% unemployment Economic activities: agriculture, call centers and tourism Competit
Slide 110: Market Opportunity - Honduras
Market Opportunity - Honduras Republic of Honduras – Population of 7.4 Million – Tegucigalpa– 1.2 Million Honduras Economics: – Currency is the Lempiras – 50% below poverty line and 27% unemployment Primary economic activities: agriculture (coffee) and tourism Competition – Pizza Hut, Little Caesar’
Slide 111: Grupo Mozzarella in Panama
Grupo Mozzarella in Panama Annual Sales ($ in millions) $1.9 $2.5 $3.1 $4.8 32% 21% 56% $1.1 71%
Slide 112: Grupo Mozzarella in Costa Rica
Grupo Mozzarella in Costa Rica Annual Sales ($ millions) $1.7 $2.2 $2.4 $2.8 25% 9.5% 18.9% $1.4 22%
Slide 113: Grupo Mozzarella in Honduras
Grupo Mozzarella in Honduras Annual Sales ($ millions) $1.5 $1.7 $2.5 $2.8 16% 48% 12% $1.2 17%
Slide 114: 8,000 Domino's Pizza Store Opening
8,000 Domino’s Pizza Store Opening January 2006 Grupo Mozzarella clipped the ribbon on the 3,000 international store in Panama City – 5,000 store in the U.S. opened simultaneously in Huntley, Illinois Celebration included fireworks and a visit from Panama’s First Lady Kicked off a program, “Gracias,
Slide 115: Slide 115
Slide 116: Best Practices from Central America
Best Practices from Central America Local store marketing – Direct mail – Massive door hanging events Support system of strong area supervisors Focusing on financial results: sales and profits
Slide 117: Grupo Mozzarella Central America Stores before....
GRUPO MOZZARELLA CENTRAL AMERICA Stores before.... Grupo Mozzarella Stores Before Remodel
Slide 118: Grupo Mozzarella Central America New Image
GRUPO MOZZARELLA CENTRAL AMERICA New Image Grupo Mozzarella – New Image
Slide 119: One Brand – One System
One Brand – One System Same Core Strategy: – Focus on delivery Marketing: – Same brand, logo and consumer promise Operations: – Same layouts, training and people focus Quality Control: – Same core products across the globe – Conduct audits and approve local suppliers
Slide 120: Localization
Localization Store Operations – Central American stores often have sit-down area • People in developing countries prefer dining out • Over 50% is carry-out or in-store dining business Local Product Adaptations – Crust, sauce and cheese remain the same as Domino’s U.S. – Toppings and side items, if t
Slide 121: Teriyaki Pizza in Peru
Teriyaki Pizza in Peru – Mozzarella Cheese – Peppers – Onions – Mushrooms – Chicken – Teriyaki Sauce Local Product Adaptations
Slide 122: Grupo Mozzarella Central America Promotions
GRUPO MOZZARELLA CENTRAL AMERICA PROMOTIONS Recognize this Promotion?
Slide 123: Grupo Mozzarella Central America Promotions
GRUPO MOZZARELA CENTRAL AMERICA PROMOTIONS “2X Tuesday” in the United States… “2X1 Everyday” Limited-Time Promotion in Costa Rica
Slide 124: Continuing Success in Central America
Continuing Success in Central America Change stores to the new Vision 20/20 image Optimize pricing Call Center (a single phone number for the region) Consolidate suppliers for more effective buys Streamline promotions between the Central American countries
Slide 125: What's Next for Grupo Mozzarella
What’s Next for Grupo Mozzarella Store opening events – Company motorcycle caravans – Free pizzas to team members’ families – Mobil unit – Massive flyer distribution – Press Expanding to other countries – Currently a Joint Venture with Peru – Goal is to also be in El Salvador and Nicaragua Exciting
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