This is an English adaptation of a FoodBud historical article originally published on March 28, 2022.
On March 28, 2022, Domino’s China operator DPC Dash submitted a prospectus to the Hong Kong Stock Exchange for a planned listing. At the time, Domino’s China operated 485 stores across 10 mainland Chinese cities and held the exclusive master franchise rights for mainland China, Hong Kong and Macau.
According to Domino’s financial disclosures, as of January 2, 2022, Domino’s had more than 18,800 stores across over 90 markets globally. China ranked as its ninth-largest market.
Domino’s top 10 international markets were India, the U.K., Japan, Mexico, Australia, Turkey, Canada, South Korea, China and France, with 1,495, 1,169, 882, 802, 724, 605, 568, 475, 472 and 457 stores respectively. Together, these 10 markets accounted for 62% of Domino’s international store base. Franchisees in India, the U.K., Japan, Mexico, Australia, Turkey and France were listed companies.
Domino’s had previously told investors that China could ultimately support 5,000 stores.
China’s pizza market grew from RMB22.8 billion in 2016 to RMB33.5 billion in 2019, a compound annual growth rate of 13.7%. It was forecast to grow at a 15.4% CAGR and reach RMB62.3 billion by 2025.
Pizza-store penetration was still low compared with the U.S.: China had 9.8 pizza stores per million people, versus 236.8 in the U.S. Domino’s China’s prospectus projected China’s pizza delivery market would reach RMB37.4 billion in 2025, equal to 60% of the overall pizza market.
In 2020, first-tier and “new first-tier” cities generated 65.9% of China’s pizza-market revenue. From 2020 to 2025, lower-tier cities were expected to grow faster than first-tier and new first-tier cities.
Chain operators accounted for 88.2% of China’s pizza market in 2020. By 2025, chain-store pizza sales were forecast to reach RMB57.2 billion, or 91.8% of the total market.
Among the top five pizza companies in China in 2020, Domino’s China ranked third, with RMB1.1 billion in revenue, 363 stores and a 3.6% market share. Pizza Hut ranked first with RMB11.9 billion in revenue and a 39% share. Zunbao Pizza ranked second with a 5.6% share and 1,650 stores.
DPC Dash was founded in 2008. In December 2020, it completed the acquisition of Pizzavest China Ltd, then Domino’s master franchisee for Beijing, Tianjin, Shanghai, Jiangsu and Zhejiang, becoming Domino’s operating platform in China. In June 2017, it renewed its franchise agreement with Domino’s for an initial 10-year term, with an option to renew for 20 years.
Since its founding, Domino’s China had completed 10 financing rounds. In its three most recent rounds, it raised a total of USD130 million to support expansion in China.
In the second quarter of 2020, Domino’s invested USD40 million in DPC Dash, with the investment tied to certain performance targets. Domino’s then invested another USD40 million in the first quarter of 2021.
In December 2021, Domino’s China completed a USD50 million financing round from Domino’s, D1 SPV Master Holdco I (Hong Kong) Limited and SMALLCAP World Fund, Inc. Domino’s contributed USD9.1 million in that round, bringing its cumulative investment in Domino’s China to USD89.1 million.
According to the prospectus, Domino’s held 15.7% of Domino’s China.
Domino’s China reported revenue of RMB837 million, RMB1.104 billion and RMB1.611 billion in 2019, 2020 and 2021 respectively. Revenue grew 45.9% year on year in 2021.
Net losses were RMB180 million in 2019, RMB270 million in 2020 and RMB470 million in 2021. In 2021, food costs represented 26.4% of revenue, labor costs 43.7%, amortization of right-of-use assets 10.1%, kitchen-equipment depreciation 6.1% and utilities 4.4%.
Since 2018, Domino’s China had launched more than 100 pizza products to keep the menu refreshed, typically introducing a new pizza every 6 to 12 weeks.
The company promised delivery within 30 minutes. In 2021, more than 91% of delivery orders were completed within 30 minutes, with an average delivery time of 23 minutes.
Digital orders, covering delivery, takeaway and dine-in online orders, accounted for 95% of Domino’s China orders in 2021, above the industry average of 70%. Delivery orders accounted for 70%, 74.5% and 73.2% of orders in 2019, 2020 and 2021 respectively.
In 2019, one-third of Domino’s China revenue came from its own online channels. By 2021, that share had risen to one-half. Membership grew from 2.4 million at the end of 2019 to 4.0 million at the end of 2020 and 6.1 million at the end of 2021, a 60% CAGR.
As of December 31, 2021, Domino’s China had 2,991 full-time employees, 91% of whom worked in store development and operations. It also had 9,271 part-time employees, mainly riders and store staff.
The company’s five largest suppliers accounted for 29.6% of procurement spending in 2021.
Domino’s China operated three central kitchens across North China, East China and South China. Their 2021 utilization rates ranged from 43% to 95%. The kitchens handled dough production, food processing, distribution and storage, with a service radius of 350 kilometers.
At the end of 2021, Domino’s China operated 468 company-owned stores in 10 Chinese cities, with 57% located in Beijing and Shanghai. It opened 83, 98 and 108 new stores in 2019, 2020 and 2021 respectively.
The company separated Beijing and Shanghai from its “new growth markets,” which included Shenzhen, Guangzhou, Hangzhou, Tianjin, Nanjing, Suzhou, Wuxi and Ningbo. In 2021, Beijing and Shanghai stores generated average daily sales of RMB12,781 per store, versus RMB7,617 in new growth markets. Beijing and Shanghai stores averaged 138 orders per day at RMB92.6 per order, while new growth market stores averaged 89 orders per day at RMB85.6 per order.
Stores opened in 2019 reached average daily sales per store of RMB13,844 in 2021.
On a same-store basis, Domino’s China’s 2021 sales grew 18.7% year on year. Same-store sales in new growth markets grew 37.7%.
Domino’s China planned to open 120 stores in 2022 and 180 stores in 2023. Of these new stores, 46% were planned for first-tier cities, 39% for new first-tier cities and 14% for second-tier cities.
A new store typically required 4 to 6 months to open. Average store investment was RMB1.5 million, with an average store size of 124 square meters and 28 seats. Most new stores reached first breakeven within 1 to 3 months and had a typical cash payback period of 3 to 4 years. Stores in Beijing and Shanghai reached first breakeven within 1 to 2 months, with a cash payback period of 2 to 3 years.
Domino’s China expected store-opening expenditure of RMB180 million in 2022 and RMB270 million in 2023.
Note: IPO, financing, ownership, market-size forecasts and store-opening targets are historical figures from the March 28, 2022 source article.