Turk­ish Domino’s looks tastier than the UK op­er­a­tor

Why DP Eura­sia is more at­trac­tive than UK-fo­cused Domino’s Pizza Group

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In­vestors want­ing ex­po­sure to the leisure sec­tor with­out the risks of an over-sup­plied mar­ket like the UK should con­sider the com­pany run­ning the Turk­ish and Rus­sian op­er­a­tions of Domino’s Pizza, namely DP Eura­sia (DPEU).

The busi­ness is dis­play­ing sim­i­lar char­ac­ter­is­tics pre­vi­ously seen with the UK and US ver­sions of Domino’s, namely a shift­ing point with on­line sales.

Se­lim Ken­der, chief strat­egy of­fi­cer at DP Eura­sia, says other Domino’s mas­ter fran­chise own­ers saw like-for-like sales take off once the on­line chan­nel rep­re­sented 50% of over­all de­liv­ery or­ders. DP’s Turk­ish busi­ness is close to hit­ting this magic met­ric.

‘We’ve found cus­tomers who or­der on­line do so more fre­quently and there is a higher ticket price,’ com­ments Ken­der.

DP Eura­sia has 490 Domino’s Pizza stores in Turkey; of which 355 are owned and op­er­ated by sub-fran­chisees. The re­main­ing 135 sites are cor­po­rate-owned and lo­cated in Turkey’s main cities.

Ken­der says cor­po­rate stores are more prof­itable and ben­e­fit from DP Eura­sia’s con­trol over how they are run and hav­ing di­rect ac­cess to the con­sumer, thereby en­abling it to closely mon­i­tor cus­tomer pref­er­ences and trends.

He also states that DP Eura­sia

has 51% mar­ket share of the TRY 1.2bn (£237m) Turk­ish fast food pizza de­liv­ery mar­ket. ‘The sec­tor has grown by 16% to 17% a year over the last few years and this trend is ex­pected to con­tinue,’ he adds.

Stock­bro­ker Peel Hunt says the com­pany’s long-term tar­get is 900 stores which would take 13 years to achieve at a rate of 30 new sites a year.

‘Man­age­ment de­vel­ops clus­ters of stores, “cas­tles”, which pro­vide very fast de­liv­ery times to lo­cal house­holds and, crit­i­cally, make the ar­eas around clus­ters unat­trac­tive to com­peti­tors,’ says Peel Hunt an­a­lyst Ivor Jones.

Four years ago DP Eura­sia won the mas­ter fran­chise for Rus­sia, re­plac­ing some­one else who had only man­aged to open 13 stores in 17 years, all in Moscow. It quickly fixed the op­er­a­tions and now has more than 100 stores in the Greater Moscow re­gion.

Its first Rus­sian sub-fran­chisee opened a store in late 2016 and it now has nine sub-fran­chisee stores. The long-term tar­get for Rus­sian cor­po­rate and sub­fran­chisee is 1,500 stores.

Moscow of­ten has bad traf­fic which isn’t good for fast food de­liv­ery firms. DP Eura­sia has repli­cated its Turk­ish ‘cas­tle’ strat­egy in Rus­sia and only serves post­codes where it knows it can de­liver in less than 30 min­utes, thereby giv­ing it a com­pet­i­tive ad­van­tage over ri­vals. The com­pany will com­mence Rus­sian ex­pan­sion beyond Greater Moscow by the end of 2017.

Peel Hunt fore­casts TRY 43.2m pre-tax profit in 2017 ver­sus TRY 29.4m in 2016. Pre-tax profit is ex­pected to hit TRY 60.1m in 2018 and TRY 86.8m in 2019, il­lus­trat­ing how this is truly a rapid growth story. (DC)

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