Domino’s Pizza posts falling annual profits as it faces row with franchisees
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% plunge in annual pre-tax profits to £61.9 million after suffering “growing pains” in its international business.
The group said on an underlying basis pre-tax profits dropped 1.1% to £93.4 million for the year to December 30.
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.
Chairman Stephen Hemsley said the company was “determined to improve operational and financial performance in our international businesses, and ensure a smoother relationship with some of our franchisees”.
Domino’s said it was “conscious” of the price pressures for franchisees and that it was confident of resolving the conflict.
It added that it recognises the “temporary” impact of new stores close to existing sites, but said it provides short-term relief equivalent to £75,000 per new store.
The group’s results showed a mixed performance, with the woes in its international arm offsetting an otherwise robust showing from the UK and Ireland, where like-for-like sales rose 4.6%.
Domino’s warned in January that profits would be at the lower end of expectations following weaker international sales and business integration challenges in Norway.
But chief executive David Wild said he expects the international division to break even in 2019.
The international arm saw underlying losses of £4.1 million in 2018, with Switzerland, Norway and Sweden all continuing to be loss-making.