Is Domino’s Franchise a good investment? How much can I make as Domino’s pizza owner? Are these lawsuits a concern? We’ll look at that today on Franchise City.
So the initial investment as outlined in their documents ranges between $145,950-$569,000 for the traditional store which we will cover today. Now many people look at the low end and think they can get in for around $150,000 but that number is not realistic. These range when you see them is actual high and low of costs to open a store and often the low end was a store that was already all set up and needed almost no changes, an exception and a rarity. Realistically you should anticipate much higher then the low figure.
Ongoing fees: Royalties are 5.5% weekly. Ad fund is 4%, co-op ad fund is 1-4% so right out of the gate you are on the hook for over 10% of your revenue. There are quite a number of fees, as franchises get larger we often see the addition of more fees over time. The PULSE system initiated some drama and lawsuits – lets take a closer look.
Some of the blame apparently falls upon this PULSE software. Here is a quote from at the time Attorney general Eric Schniderman
“We’ve uncovered rampant wage violations at Domino’s franchise
For those of you who plan on investing passively and having your Domino’s Pizza franchise on auto pilot – right in their FDD it states
“You must devote your full time (excepting reasonable vacation periods) to the management and/or supervision of stores in your development area and make a total commitment to the Domino’s Pizza system. So Domino’s is not a good fit for passive ownership.
But most importantly how much money can I make as a Domino’s franchise owner? Well zero if you are one of the stores that closed! But if we head over to the QSR50 list we can sort the top 50 quick serve restaurants by AUV’s or earnings per store and see that Domino’s is at about 1 million per year. We see Subway slipped again and is down to $413,000 per year. Now these numbers may sound high but once you calculate employee salaries, rent, taxes, operating expenses and Royalties, those numbers are a lot lower. But we like to see AUV’s over a million so Domino’s is right at that mark – so not too bad.
In terms of where Domino’s is in the growth curve: As a corporation they are actually doing extremely well and accelerating growth. their financials look very strong corporately so the intention is to open new stores, over the next 10 years opening about 2300 more stores. Buyers often get caught up in this enthusiasm and think growth is a good thing, and it is if you own stock! But it often is to the detriment of individual store owners by way of market saturation. We have seen this with many other franchises, the most notable being Subway. When franchises become primarily accountable to shareholders growth becomes the most important goal. This can create friction between obligations to shareholders and obligations to franchisees. What often happens with accelerated rollout is you get stores very close proximity to each other. And you do not receive an exclusive or protected territory with Domino’s. They can place stores wherever they choose to. Now for a period these expansions look great – and corporate continues to look very strong for shareholders. In the case of Subway the same transpired and then the closing of stores began, first in 2016 about 350 stores, then 900 stores in 2017. This growth curve to saturation and decline is quite common is franchising. But people don’t consider macro economics and look only at the surface level. Also most investors in bitcoin, real estate, stocks mostly rush in at the peak – using ancient history as their buying decision “Oh Mr So and so made millions in this franchise” and lo and behold – today is not yesterday and because you didnt research you may kick yourself.
So is Domino’s franchise a good investment? Only you can decide that and there are many factors that go into making your decision including your background, business goals, exit strategy, local demand and demographics and a lot more. We suggest buyers at least explore the advantages and disadvantages of each prior to making a decision. It costs you nothing to look and compare several franchises. In fact our services are free including skills assessments, territory checks and comparative analysis reports of any franchise brands including Domino’s. Thank you for watching please like and subscribe to be notified of recent uploads – lots more business content to follow