The Domino’s brand posses a competitive advantage due to its differentiated positioning which we believe is sustainable for years to come. The Domino’s brand created a brand pull due to its strong marketing which the management intends to leverage to its advantage by expansion across Tier II and Tier III cities.
Dominos commissaries – It has 4 currently located in Noida (Delhi NCR), Mumbai, Bangalore and Kolkata. These commissaries primarily manufacture “dough” (base of the pizza) and act as warehouse for most of other ingredients. It enjoys good bargaining power with suppliers due to scale. It plans to open one more commissary in central India soon taking the total to 5.
Domino’s Pizza Inc. in its May 2010 investor presentation has indicated that the potential store count for India is 700 stores over the next few years, thus highlighting India as a high growth market. We expect 60-70 stores to be opened each year for the next five years as we feel that the coming years are very crucial for the players in the QSR industry to make their presence felt. The company caters to a wide section of the population (the target audience ranges from the lower middle class to upper class), with a range of products at multiple price points (lowest price point at Rs 39).
Financials of Indian Domino’s Pizza Quick Service Restaurant Chain – The Company registered same store sales growth of 37% in Q1FY11. On an average, over the last 5 years, the same store sales growth has been in the range of 18-19% CAGR with FY10 registering 22% growth in same store sales. However, we feel that 37% same store sale growth is an aberration due to low base and we may see growth in the range of 16-18% for FY11.