Stephen HemsleyChief Executive
1 November 2007
Management changesDomino’s Pizza UK & IRL plc
• Succession plans ratified by Board– From start of 2008 financial year– Stephen Hemsley - Executive Chairman– Colin Halpern - Non-executive Vice Chairman– Chris Moore - Chief Executive
• Significant strength of Executive Team
Well placed to manage rollout to 1,000 stores
2
Store OpeningsDomino’s Pizza UK & IRL plc
• Better progress in Q3– 10 openings (2006: 7)
• YTD openings– 30 (2006: 26)
• 480 stores at 30 September (2006: 434)• Improved position since interim guidance
On track to open circa 45 stores
3
Cost pressuresDomino’s Pizza UK & IRL plc
• Franchisees food cost 25% of sales– Cheese - 5.9%– Dough - 5.3%– Meats - 7.5%– Vegetables - 1.5%– Other - 4.8%
• Average selling price £12.50 (plus VAT)
• Food cost therefore £3.125
• Assume a 20% cost increase (£0.625)
• Can be fully recovered by a 5% price increase
• Any price rises increase royalty and NAF contributions
4
Cost pressures (contd.)Domino’s Pizza UK & IRL plc
• Global pressure on food prices
• Main pressure for Domino’s is on cheese and wheat (flour)– Cheese up £1,060 per tonne since June. No further significant increase
expected. All additional cost passed on to franchisees from 1/11/07– Wheat likely to be 75 – 100% higher in new contract starting January 2008.
Equates to an increase of 15 - 21% in dough price to franchisee.
• Pressure on meat prices being negated through supply chain re-engineering
• Economies of scale (20%+ compound growth) reduce cost pressure
5
Chris MooreDeputy Chief Executive
1 November 2007
6
The road to 1000 stores
7
8
At build out *2001 2006 (circa 2017)
No. of stores 237 451 1,000- 50 openings p.a.
AWUS growth at 3% p.a. ** £8,422 £11,347 £15,700System sales £ 98m £ 240m £ 820mProfit before tax £ 2.9m £ 14.3m £ 73.8mPBT/System sales 3.0% 6.0% 9.0%
+100% +50%• Stores double – profits grow six-fold• c.8% of incremental sales to profit (commissary 5.5% + net royalty
2.8%) • Significant operational gearing
• Commissaries• Central infrastructure
9
The financial model at build out
* Independent analyst research – not a forecast** Average Weekly Unit Sales
Domino’s Pizza UK & IRL plc
At build out *2006 (circa 2017)
• PBT £14.3m £73.8m• Share buybacks ***• Average no. of shares in issue 162.6m 128.0m• EPS - pence 6.4p ** 40.6p
- CAGR 18% p.a.• Dividend - cover 2.3x 2.0x
- pence 3.1p ** 20.3p
COMPELLING 11 YEARS OF CASH GENERATIVE ORGANIC GROWTH * Independent analyst research – not a forecast** Restated for share split*** To achieve cash neutral position at 2017. Circa 20% of equity.
10
The financial model at build out (contd.) Domino’s Pizza UK & IRL plc
AWUS: a 10 year perspectiveDomino’s Pizza UK & IRL plc
£6,700
£11,347
£20,000
£0
£3,000
£6,000
£9,000
£12,000
£15,000
£18,000
£21,000
1997 2006 2017
Mature AWUSOBS: This does not constitute a forecast
11
Sales momentum for all storesDomino’s Pizza UK & IRL plc
AWUS by Store Opening Year
£3,000
£8,000
£13,000
£18,000
£23,000
£28,000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Opened in 1997 Opened in 1998 Opened in 1999 Opened in 2000 Opened in 2001
Opened in 2002 Opened in 2003 Opened in 2004 Opened in 2005 Opened in 2006
Opened in 2007 Linear (Opened in 1997) Linear (Opened in 2000) Linear (Opened in 1999) Linear (Opened in 2001)
Linear (Opened in 2002) Linear (Opened in 2004) Linear (Opened in 1998) Linear (Opened in 2003) Linear (Opened in 2005)
12
YTD sales growth by age of storeDomino’s Pizza UK & IRL plc
Sales momentum continues in older stores
0%
5%
10%
15%
20%
25%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2007 sales growth of stores opened in each year
Mature AWUS growth YTD
13
Sales above average in older storesDomino’s Pizza UK & IRL plc
£5,000
£7,000
£9,000
£11,000
£13,000
£15,000
£17,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
AWUS of stores opened in each year
Mature AWUS£ YTD
14
Mature Store AWUS bandingDomino’s Pizza UK & IRL plc
2% 2% 6% 7% 11% 11% 10%15%
20%12% 10%
18%
26%
28%33% 36%
42%
44%
25% 32%
39%
43%
42%
42%42%
34%
30%
30%31%
29%
20%17%
13% 12% 8% 6%
18%25%
8%4% 3% 1% 0% 1% 1%
0%
25%
50%
75%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007
<£5k
£5k-£7k
£7k-£10k
£10k-£15k
£15k+
2007 YTD: other years show FY trading
15
The size of the opportunityDomino’s Pizza UK & IRL plc
6%
23%
56%66%
100%
0%
20%
40%
60%
80%
100%
All Adul
ts 15+
Under 55
years
Ever ha
d hom
e deliv
ery
Ever ha
d pizz
a hom
e deliv
eryEver
had D
omino
's hom
e deliv
ery
Coverage of approx. 47% of UK & IRL households
Source; Mintel Home Delivery Report, 2004
16
The penetration gameDomino’s Pizza UK & IRL plc
Overall: 12.5%
15% 4%11%
1km 2km 3km
17
The size of the opportunity (contd.)Domino’s Pizza UK & IRL plc
6%
23%
56%66%
100%
50%
75%
0%
20%
40%
60%
80%
100%
All Adul
ts 15+
Under 55
years
Ever ha
d hom
e deliv
ery
Ever ha
d pizz
a hom
e deliv
eryEver
had D
omino
's hom
e deliv
ery
Coverage of approx. 47% of UK & IRL households
Source; Mintel Home Delivery Report, 2004Source: Ipsos-UK US market study, Feb 2006
U.S.
mar
ket
U.S.
mar
ket
18
Optimising delivery areasDomino’s Pizza UK & IRL plc
Case Study 1
£10,000
£15,000
£20,000
£25,000
£30,000
£35,000
£40,000
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111
One store Two stores
19
Optimising delivery areas (contd.)Domino’s Pizza UK & IRL plc
Case Study 2
£12,000
£17,000
£22,000
£27,000
£32,000
£37,000
£42,000
1 8 15 22 29 36 43 50 57 64 71 78 85 92 99 106 113 120 127 134 141 148 155 162
One store Two stores
20
Optimising franchiseesDomino’s Pizza UK & IRL plc
Case Study 3: a three-store town that went from three franchiseesto just one in 2007
£10,000
£14,000
£18,000
£22,000
£26,000
£30,000
2005 2006 2007YTD
Total average weekly sales from 3 stores
21
Domino’s Pizza UK & IRL plc
How 2017 figures are achievable2007 2017
Average households per delivery area 29,000 22,000
Penetration 12.5% 20%
Ave. ticket (delivery) £14.42 £17
Average frequency days 38 33Average frequency per year 9.6 11
Delivery sales £9,650 £15,910Add carryout sales at 26% 27%
AWUS £12,159 £20,206
Annual sales £632,302 £1,050,713
OBS: This does not constitute a forecast
22
Domino’s Pizza UK & IRL plc
How 2017 figures are achievable (contd.)2007 2017
Average households per delivery area 29,000 22,000
Penetration 12.5% 20%
Ave. ticket (delivery) £14.42 £17
Average frequency days 38 30Average frequency per year 9.6 12.2
Delivery sales £9,650 £17,501Add carryout sales at 26% 27%
AWUS £12,159 £22,227
Annual sales £632,302 £1,155,785
OBS: This does not constitute a forecast
23
How do we get there?• Continue fanatical focus on great product, unbeatable service, sharp image
• Support the premium quality positioning
• Ad Fund will drive the “new news” message and customer counts
• Our e-commerce lead will help drive sales and enhance store-level profitability
• Develop a reputation for being a great place to work
• Partner with the right franchisees to continue the roll-out
• Build infrastructure for 1000 stores
• Control overheads to drive operational leverage
• Resulting cash generated to be returned to shareholders
Domino’s Pizza UK & IRL plc
24
Investing in peopleDomino’s Pizza UK & IRL plc
DPG Directors• Stephen Hemsley, Chris Moore, Lee Ginsberg• Robin Auld, Sales & Marketing• Andy Emmerson, Business Development• Gareth Franks, Foodservice• Jane Kimberlin, IT• Patricia Thomas, Operations• TBA, Purchasing
25
Domino’s Pizza UK & IRL plc
…the best is yet to come
26
Patricia ThomasOperations Director
Operations update 1 November 2007
27
Domino’s Pizza UK & IRL plc
Operations Focus
• Operations Support– Getting talent pool and support structure right
• Focus on what’s important and incentivize results
28
Support TeamDomino’s Pizza UK & IRL plc
Franchise Consultants• Communication link• Standards Enforcement• Drive Results• 20 Franchisees per FC• 1997 store visits in 2007
Operations Support• New store opening
support (fee based)• OER min. 3X year• Follow up visits, product
roll-outs and operational training
• 60 Stores per OST• 1678 Audits completed in
200729
Domino’s Pizza UK & IRL plc
Training
• In store & Centralized Training
• Quality upgraded• New materials produced• Courses added• 457 People trained in
2007 (does not include field based training)
30
Domino’s Pizza UK & IRL plc
Franchise Development Programme• Strict selection process• In store orientation• 3 week course• Post-FDP support
31
Domino’s Pizza UK & IRL plc
Maintain High Standards
• The right measures (OER)• Positive correlation between OER & financial
metrics• Clearly communicated and integrated• Reward & repercussions
32
Operations Evaluation Report (OER)Domino’s Pizza UK & IRL plc
• Started in 2002• Focus on a few important things
– Service (Delivery times)– Pizza Quality– Image– Safety (for our team and customers)
• 5 Star system• Unannounced visits minimum 3X per year
33
5 Year trend Domino’s Pizza UK & IRL plc
2002 2007OER Ave 70.8 86.3Stars 2.6 4.1
2002 OTD < 25m 70.2%2007 OTD < 15m 70.8%AWUS (mature) £8717 £12334
34
It’s good to be a 5 star store!
9500
10000
10500
11000
11500
12000
12500
13000
13500
2 - 3stars
3 - 3.5stars
3.5 - 4stars
4 - 4.5stars
4.5 - 5stars
MatureStore AWUS
Domino’s Pizza UK & IRL plc
35
Domino’s Pizza UK & IRL plc
Integration• Integrated into Domino’s
culture• Element of all recognition
and reward systems• All training materials• 5 Star awards communicated
on our portal• Significant weighting on
approval to expand
Totally supports andis supported by
Out the Door < 15initiatives
36
RepercussionsDomino’s Pizza UK & IRL plc
• Failed audit – notice served• Re-visit at franchisee’s cost• Failed revisit may result in termination of the
franchise• Strategy to exit sub-standard franchisees
37
Real Time StatsDomino’s Pizza UK & IRL plc
38
75% of Orders < 15 Minutes OTDDomino’s Pizza UK & IRL plc
2005 - 10 stores would qualify2006• Round 1 - 39 • Round 2 - 47• Round 3 – 842007An average of 206 stores qualifiedeach round
39
Domino’s Pizza UK & IRL plc
Elite Membership vs. AWUS & Growth
9 , 0 0 0
1 0 , 0 0 0
1 1 , 0 0 0
1 2 , 0 0 0
1 3 , 0 0 0
1 4 , 0 0 0
1 5 , 0 0 0
6 5 4 3 2 18 . 0 0 %
9 . 0 0 %
1 0 . 0 0 %
1 1 . 0 0 %
1 2 . 0 0 %
1 3 . 0 0 %
1 4 . 0 0 %
1 5 . 0 0 %
1 6 . 0 0 %
1 7 . 0 0 %
1 8 . 0 0 %
Y T D A W U S Y T D % G r o w t h
* * * * * *
* No. of quarters in OTD elite
40
Jane KimberlinI.T. Director
IT Update1 November 2007
41
Technology within Domino’sDomino’s Pizza UK & IRL plc
• Integral part of our success
• Forefront of innovation
• Stable, time proven platform
• Further development to support 1,000+ stores
42
Continual innovation delivered in last 12 monthsDomino’s Pizza UK & IRL plc
• Online ordering for Republic of Ireland• 48.8% increase in UK online sales• SMS• Real Time Stats and EPoS reporting• OTD screen in stores• Electronic invoices & statements to franchisees
43
Real Time StatsDomino’s Pizza UK & IRL plc
• Demo• All stores in real time• Sales, service times, staff and audit details• Today to date and last 30 minutes• Real, actionable data• Direct impact on sales and service
44
Sales and service reportingDomino’s Pizza UK & IRL plc
• Demo• Telephone statistics• Weekly Key indicators • Payroll data• Download to excel• Consistent and visible
45
Plans for next 12 monthsDomino’s Pizza UK & IRL plc
• Business Intelligence• Food Early Warning System• In-store /kiosk ordering• SMS enhanced ordering• Web site – maintain at leading edge
and beyond……
• GPS tracking• Mobility• VOIP• M/S Surfacing
Limited only by our imagination and budget!46
Robin AuldSales & Marketing Director
Marketing Update1 November 2007
47
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
2006 2007 ytd
2007 average mature store sales per period
Extra fire power: YTD Mature stores +14.6%Domino’s Pizza UK & IRL plc
5% NAF driving sales: strong comparatives ahead48
12.8%
16.8%17.6%
9.5%
15.3%16.1%
19.7%
9.7%
13.3%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
22.00%
Jan Feb Mar Apr May Jun Jul Aug Sep
0
20
40
60
80
100
120
140
160
180
mature store sales increase (LHS) 2007 UK precipitation
The Great British SummerDomino’s Pizza UK & IRL plc
Weather has assisted sales in the Summer months
mm
49
The power of momentumDomino’s Pizza UK & IRL plc
8.6% 8.0%
10.1%
12.0%
15.9%
13.8% 14.0%
Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07
Domino’s mature store increase vs same quarter prior year50
Sales fuelled by rise in average ticketDomino’s Pizza UK & IRL plc
UK Average Ticket *
£12.80
£13.00
£13.20
£13.40
£13.60
£13.80
£14.00
P1 P2 P3 P4 P5 P6 P7 P8 P9
2007 2006
Growth built on strong foundations of rising average ticket* Net of VAT and includes carryout and delivery
51
E-commerce +49% reflecting increased spendDomino’s Pizza UK & IRL plc
UK E Commerce Sales
£200,000
£300,000
£400,000
£500,000
£600,000
£700,000
£800,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
2007 2006
Reaching 18.5% of UK delivered sales with higher average ticket52
Driving on-line• Significant increase in on-line marketing investment
• £300,000 alone on search marketing in 2007
• Starting to reduce labour cost overheads for some stores
• The Simpsons sponsorship credits have been revised to focus on on-line ordering
• 15 separate new media platforms are used to communicate the Domino’s brand message
Domino’s Pizza UK & IRL plc
53
15 different new media platformsDomino’s Pizza UK & IRL plc
Viral Games
Rich Media
Second Life
User Generated Content
Partnerships
Mobile
Local Listings
Natural Search
Paid Search
Display advertising
IPTV – Internet SitesIntegrated Content
Contextual targetingPortal Deals
54
CM11
Q3 Trading UpdateDomino’s Pizza UK & IRL plc
• Focus on driving core offering: Pepperoni Passion
• Clear communication of quality: differentiation to the market
• Maintaining the momentum ATL
• Increase in on-line marketing investment
• Scrummy: 6 meat pizza, leveraging interest in rugby
55
Slide 55
CM11 numbers need checking (and adding)Chris Moore, 05/07/2007
Q4 Update: Ciabatta pizzaDomino’s Pizza UK & IRL plc
NPD continuing to fuel sales56
CM12
Q4 UpdateDomino’s Pizza UK & IRL plc
• Ciabatta builds on success of previous Campaign 6 launches
• Five weeks TV advertising (+1 vs C6 ’07)
• Price premium £1 to £2 additional charge [boosting average ticket]
• Supported by ‘big’ DM, On-line, LSM etc
• Tough comparatives vs Q4 ‘06
57
Slide 57
CM12 numbers need checking (and adding)Chris Moore, 05/07/2007
CM13
• Domino’s classic option when trading down…offering great value for money vs dine out options
• Consumer spending shows trend towards eating in vs dining out is continuing to grow (Mintel)
• Premium quality, great service, trusted brand for £5.50 per person
• Domino’s frequency increasing, but a long way to go (average 38 day vs 42 LY)
Consumer Spending
58
Domino’s Pizza UK & IRL plc
Slide 58
CM13 numbers need checking (and adding)Chris Moore, 05/07/2007
CM14
Consumer Spending (contd.)Domino’s Pizza UK & IRL plc
• Domino’s brand strength protects against squeeze on disposable income (Quality, Service, Marketing spend)
• NAF will ensure continued aggressive marketing spend
• Consumers that come to Domino’s are driven by much more than just price
• Still a relatively infrequent treat
• Bespoke research conducted to quantify consumer opinion
59
Slide 59
CM14 numbers need checking (and adding)Chris Moore, 05/07/2007
CM15
• 97% of customers (last 3 months) had no idea when or if Domino’s had changed prices in the last year
• When asked to estimate the cost of a meal deal (circa £30) less than 10% were correct. Only 30% were correct to within £5.
• When asked to state the price of a single large Full House only 25%were correct – massive variations
• 78% stated that they didn’t have a set budget
• 94% stated they tried to take advantage of price offers
Domino’s Pricing Consumer Survey
60
Domino’s Pizza UK & IRL plc
Slide 60
CM15 numbers need checking (and adding)Chris Moore, 05/07/2007
Domino’s Pricing Consumer Survey (contd.)Domino’s Pizza UK & IRL plc
“There are lots of reasons for going to Domino’s. If their prices went up then I’d still carry on going there”
Just 10% disagreed with the statement
“Having a pizza is a treat and I don’t worry too much about the price”
Just 14% disagreed with the statement
“Price rises are a fact of life and Domino’s are no better or worse than any of their competitors”
Just 12% disagreed with this statement
61
CM16
2008 Strategic OverviewDomino’s Pizza UK & IRL plc
• Focus on new customer acquisition. An average store only delivers to 13% of it’s potential delivery area
• Continue to drive average ticket
• Focus on increasing average frequency from 38 days
• Continued focus on on-line sales growth & mobile sales (text ordering etc)
• A more aggressive execution of a winning strategy
62
Slide 62
CM16 numbers need checking (and adding)Chris Moore, 05/07/2007
• 5/5/5 promotion: proven formula
• £5.55 per pizza to accommodate rising food costs (11% increase invalue)
• Boost to average ticket / volume & new customers (over ½ million) in ‘07
• Supported with heavyweight TV advertising
• Two week BOGOF campaign (collection only)
2008 Overview: January ‘08
63
Domino’s Pizza UK & IRL plc
CM17
Slide 63
CM17 numbers need checking (and adding)Chris Moore, 05/07/2007
• £18m National Advertising spend (doubled since 2005)
• ATL budget increased by 50% in 2008
• Scope to increase coverage, frequency, weighting of TV exposure
• Identification of ‘big’ new sponsorship properties
• Making effective use of additional firepower: dominating the on and off line media landscape
2008 Overview
64
Domino’s Pizza UK & IRL plc
CM18
Slide 64
CM18 numbers need checking (and adding)Chris Moore, 05/07/2007
• NPD focus on popular products (5 pizza launches planned)
• Focus on quality messaging to create discernable differentiation
• Greater investment on-line, search Marketing, plus 2nd Life, You Tube, Ebay etc
• Direct Mail: Focusing on new customer acquisition, supporting campaign launches and increasing frequency
2008 Overview (contd.)
65
Domino’s Pizza UK & IRL plc
CM19
Slide 65
CM19 numbers need checking (and adding)Chris Moore, 05/07/2007
• Approaching 2 million customers on our database
• Implementation of new customer segmentation techniques based on behaviour & consumption patterns
• Increasing the relevance and therefore response of DM activity
• Giving individual stores a much greater degree of sophistication
Increasing marketing effectiveness
66
Domino’s Pizza UK & IRL plc
• 2007 record system sales and mature store sales increases
• Momentum is very strong & growing
• Significant increase in marketing firepower in ’08
• Strong brand offering great value
• 2008: take the brand to the next level
Summary
67
Domino’s Pizza UK & IRL plc
Q & A
68
Domino’s Pizza UK & IRL plc