This is an English adaptation of a FoodBud historical article originally published on October 16, 2022.
Domino’s China, also known as DPC Dash, updated its Hong Kong Stock Exchange prospectus. The company is the exclusive master franchisee for Domino’s Pizza in mainland China, Hong Kong and Macau.
Domino’s was founded in the United States in 1960, entered China in 1997 with its first China store in Beijing, and Domino’s Pizza, Inc. listed on the New York Stock Exchange in 2004. DPC Dash began operating Domino’s Pizza stores in December 2010 after acquiring Pizzavest China Ltd., then the master franchisee for Beijing, Shanghai, Tianjin, Jiangsu and Zhejiang.
In 2017, DPC Dash renewed its master franchise agreement with Domino’s International, a subsidiary of Domino’s Pizza, Inc., expanding its territory to mainland China, Hong Kong and Macau. Under the agreement, DPC Dash pays master franchise fees, per-store franchise fees and royalties to Domino’s International.
Several Domino’s system operators outside North America are also public companies, including master franchisees in Australia and Japan and franchisees in India and the United Kingdom.
As of September 11, 2022, Domino’s had 19,519 stores globally: 6,643 in the United States and 12,876 in international markets.
By the date of the updated prospectus, Domino’s China had 547 stores across 12 cities. It planned to open 180 new stores in 2023 and 177 in 2024.
In the first half of 2022, Domino’s China reported revenue of RMB 900 million, up 18.6% year on year. Net loss was RMB 95.5 million.
Key cost ratios for the period were:
In the first half of 2022, Domino’s China opened 40 net new stores, bringing the store base to 508 as of June 30. Of the 300 stores planned for 2022 and 2023, 46% were expected to be in first-tier cities, 39% in new first-tier cities and 14% in second-tier cities.
As of June 30, 2022, Domino’s China had 7 million members.
The company operated three central kitchens serving North China, East China and South China, with a stated service radius of 350 kilometers. Utilization ranged from 43% to 95% in 2021 and from 55% to 82% in the first half of 2022.
Domino’s China entered Ningbo, Zhejiang province, in September 2021. Its first Ningbo store reached initial breakeven in one month, with a cash investment payback period of about three and a half months, materially below the group average at the time.
It also expanded into Dongguan, Guangdong province, in April 2022. The first Dongguan store reached initial breakeven in one month, also materially below the group average at the time.
As of June 30, 2022, the average Domino’s China store measured 125 square meters and had 28 dine-in seats. A typical store was staffed with 20 to 30 team members.
A normal shift included about two full-time managers, one full-time employee and ten part-time employees. Managers oversaw overall store operations, while non-management staff worked across roles, including in-store kitchen or cashier work and delivery.
Domino’s China divided its markets into “Beijing and Shanghai” and “new growth markets,” the latter including Shenzhen, Guangzhou, Hangzhou, Tianjin, Nanjing, Suzhou, Wuxi, Ningbo, Foshan and Dongguan.
As of June 30, 2022, it had 283 stores in Beijing and Shanghai and 225 stores in new growth markets.
In the first half of 2022:
Mature stores performed better than newer stores. Among stores opened before 2019, average daily sales per store were RMB 17,000 in Beijing and Shanghai and RMB 10,000 in new growth markets.
Same-store sales grew 13.9% year on year in the first half of 2022. Beijing and Shanghai same-store sales rose 10.7%, while new growth markets rose 22.1%.
Delivery accounted for most of Domino’s China’s revenue. Delivery orders represented 70.0% of orders in 2019, 74.5% in 2020, 73.2% in 2021 and 71.5% in the six months ended June 30, 2022.
Domino’s China committed to 30-minute delivery. In 2021 and the first half of 2022, about 90% of orders were delivered within 30 minutes. Average order completion time was 23 minutes in 2021 and 24 minutes in the first half of 2022.
Active users increased from 1.3 million in 2019 to 2.3 million in 2020 and 3.5 million in 2021, a compound annual growth rate of 60.3%. Active users reached 2.5 million in the first half of 2022.
Monthly active users on online channels were 300,000 in 2019, 500,000 in 2020 and 800,000 in 2021, a compound annual growth rate of 60.6%. Online monthly active users reached 900,000 in the first half of 2022.
As of June 30, 2022, Domino’s China had 131 qualified suppliers. Purchases from the top five suppliers accounted for 34.1% of total procurement in the first half of 2022.
The company had 3,199 full-time employees as of June 30, 2022, with most based in Beijing, Shanghai, Guangzhou, Shenzhen and other operating cities. It also had 9,705 part-time employees, most of whom were riders.
Domino’s China had about 3,500 riders at the end of 2019, 4,300 at the end of 2020, 5,000 at the end of 2021 and 6,500 as of June 30, 2022. All such riders were dedicated riders, meaning that when rostered to Domino’s China they delivered only for its stores.
Outsourced riders completed 2.0 million delivery orders in 2019, 2.7 million in 2020, 4.1 million in 2021 and 1.9 million in the six months ended June 30, 2022. The remaining delivery orders were completed by full-time and part-time employees.
Employee compensation expenses related to outsourced riders were RMB 23.6 million in 2019, RMB 31.4 million in 2020, RMB 46.3 million in 2021 and RMB 20.3 million in the first half of 2022.
Domino’s China signed its exclusive franchise agreement with Domino’s headquarters on June 1, 2017. The initial term was 10 years, expiring on June 1, 2027. After expiry, the agreement could be renewed for two additional 10-year terms, subject to meeting basic conditions.
Under the agreement, Domino’s China pays a one-time master franchise fee, per-store franchise fees, royalties tied to sales, software license fees and annual upgrade fees.
Payments to headquarters were approximately:
These included master franchise fees of US$2 million, US$2 million, US$10 million and RMB 0 for the respective periods; store franchise fees and royalties of RMB 23.7 million, RMB 34.4 million, RMB 46.8 million and RMB 26.4 million; and software fees of RMB 2.0 million, RMB 2.8 million, RMB 3.3 million and RMB 2.8 million.
Note: IPO-related figures, store-opening plans and forward-looking franchise details are historical as of the October 16, 2022 article and related prospectus update.