Escalating row with franchisees knocks results at Domino’s
DOMINO’S PIZZA has posted falling annual profits and admitted store openings will be hit this year amid an escalating row with its franchisees.
The pizza delivery company said that, while its pipeline of new stores is set to hold firm in 2019, the actual number of openings is likely to be lower given “ongoing franchisee discussions”.
The news came as it posted a 22 per cent plunge in annual pretax profits to £61.9m after suffering “growing pains” in its international business.
The group said on an underlying basis pre-tax profits dropped 1.1 per cent to £93.4m for the year to December 30.
But shares lifted 6 per cent despite the profit fall.
Domino’s is working to resolve a dispute with disgruntled store operators, who have set up a group called Domino’s Franchise Association UK & Ireland, demanding more support from the company in the face of rising costs.
They also say Domino’s has asked them to open stores in existing locations, which they claim is affecting their profits.
Domino’s said it was “conscious” of the price pressures for franchisees and that it was confident of resolving the conflict.
The group added that it recognises the “temporary” impact of new stores close to existing sites and has increased short-term relief offered to franchisees – paying out equivalent to around £75,000 per new store in 2018.
But chief executive David Wild said the group did not want to end the row simply by lowering the price of food it sells to franchisees, which would cut its own profits.
He said: “We’re working with our franchisees to try and resolve their concerns.”