Good evening. I can see the attendees have now joined the meeting. Thank you for joining the Domino's Pizza Enterprises 2020 Investor Day, which we brought to you virtually this time due to COVID and travel restrictions. This evening, our purpose is not to provide guidance or to provide a trading update. Instead, it's to answer the key themes and questions that we've been receiving since our last update to the market. I understand the attendees have been able to access the video this afternoon. I hope that's been of value to you. With that, I'm going to hand over to our Group CEO and Managing Director, Don Meij. But before I do so, just a reminder, if you're looking to lodge questions, because this is a Q&A session rather than a presentation session, please click on the Q&A down the bottom.
We will see those and will be able to answer those in turn. Over to you, Don.
Thank you, Nathan, and thank you to Josh and Andre and Michael and Nick for being here with me today to help answer some of these questions. I hope that you found the presentation this afternoon insightful. Nathan, one of the benefits of obviously now having a proper investor relations in Nathan is that we've been scouring the sort of major themes that we get every six months, and we try to do our best to answer in probably an increased amount of disclosure and transparency than in previous years. So I hope you found that quite helpful. I think from a business, we're clearly still in a very fluid COVID environment where rising cases, as we've seen in recent weeks in Europe, and rising cases in Japan with what's happened in Auckland and Melbourne in this half, and even to some degree in Italy.
And so as a business, the same metrics that we talked a lot about at the full year and at the AGM are still in play, that we are seeing a big drive across the business in digital delivery. In most of our business, whenever we see lockdowns and curfews, we are seeing a reduction in the carry-out business, with the exception of Japan. Japan has a very strong carry-out delivery business. And Josh can talk to the reason why, because that's been some strategic things that have been implemented there in Japan. But yeah, it is a fluid situation. We've had a lot of questions around the costs. Are we seeing increased costs? And we know that some of our peers have talked about increased costs to their business. We're not seeing those increased costs in this half.
The costs, the roughly AUD 14 million in the last half of the last financial year, have now appeared to be more one-off. Of course, we're still fluid and things could change, but as we sit today, we're not seeing the sort of material costs that we saw in that last half. I can also share that without a doubt, the two biggest outliers in our business have been Germany and Japan, and they have been quite significant outliers. A data point I can point to in Germany today is that Germany now has the highest average weekly unit sales in all of DPE.
That may change over the Christmas period when Japan does its normal extra rally, but on a constant weekly basis right now, Germany is now the highest average unit sales in now of our nine countries, which is quite significant because it came on just four plus years ago at one of our lowest average weekly unit sales, and so the integration has gone exceptionally well, and we're now well ahead of our long-term plan from a sales perspective. The store count at this point, if we look back four years ago, we thought we'd be a little more ahead than where we are, but that, as we've highlighted, is being due to the franchisees in the business buying up even other franchisees who maybe didn't buy into the Domino's vision.
Now, that's now changing, and you've started to see the increase in store growth, and we do expect to have a strong year in Germany of store growth. In fact, we're going to see a strong year across the business for store growth, and each of the CEOs can talk to that. It's going to be material and material beyond just only the catch-up that we saw from stores that didn't open in the last part of last financial year, and the gear shift change there is largely out of Japan, Germany, and France. Before I move over to Japan, we often have talked in our business that we service 340 million population approximately today. If we look at the last decade, a lot of the heavy lifting was done in the profit growth from Australia, New Zealand, and the Netherlands.
Whereas today, while those businesses continue to perform well, the really big shift in earnings is coming from the Japanese, German, and now even the French business, as we're seeing the increase in store growth. I'm sure Josh will talk a lot about Japan today. We really have seen a big shift in that business. In my near 34 years now, I haven't seen the sort of performances that we're seeing out of Japan. And both in Japan and Germany, because they're such large economies and large populations, we are taking a different approach than we would have at the Australian business and the Dutch business, where they were small populations and we could easily run them from Houten or from Brisbane. But these businesses now, we're definitely getting a lot more depth into the field.
As a business, we're developing a lot more development team members both in Japan, Germany, and France. So we've increased our development team as we expand more out into the regions. But there's just been a serious step change. And while we can't be absolute on how much of it's COVID and how much of it's management, we do analyze with our board that we do believe there's a significant amount of the results are coming from management initiatives. And Josh can talk to at least four of the really big initiatives that are driving quite a big change that we're delivering in Japan. So we will see higher store growth. Japan will lead that, followed by France and Germany as a group. And at this point, I look forward to handing over now and answering some of the Q&A with the rest of the leadership we have today.
Thank you.
Thanks, Don. The first question is, I've got two related questions, one from Sally Warneford and one from Ben Gilbert. The first is, what are the key impediments to rolling out stores by market? Is it getting good management to run the stores, or is it property constraints? And similarly, on the store rollout from Ben Gilbert, how are you seeing the appetite for new stores from both new and existing franchisees, particularly for company-owned stores?
So I'll just give a macro answer, and then I'll hand over to Josh, Nick, and Andre on this. That is in some of the markets, we are seeing distressed retail, but not all of the markets yet, so we haven't seen distressed retail yet flow through in Germany, although we expect it to follow, and there's been some government support there for the businesses that have kept them going so far, but that's now being wound back, and Andre can add color to that, but in the rest of our business, we are seeing some distressed retail, so that's helping for location. We are also seeing really strong unit economics as a whole for our business.
And that's motivating franchisees, whether it's in Australia or an existing franchisee looking to buy out another franchisee neighboring or buy some of our corporate stores or even open some stores, or just the surge that you're seeing now where probably for the first time they're watching Japanese franchisees open their own stores rather than just buy our own stores. So we're seeing a combination going on there. But in more detail, I might even start with you, Josh, and then we'll go to Nick and Andre.
Sure. So very similar to last time we chatted, we talked about, well, what are the barriers? And you look at sites, and there's no problems with sites. In fact, there isn't distressed sites, but there's just a normal amount of sites available. We're not seeing that distressed sites coming our way just yet. We look at availability of staff to open those stores and what our pipelines are internally, because we are a corporate business. And then we look at availability of franchisees and what they're doing in their business. And we don't see anything slowing us down at this point. In fact, I kind of liken it to the franchisees, as Don said, it's like starting another engine within the business. And there's actually appetite for both franchise and corporate stores. We're very keen to open more stores and sell our franchisees.
That's a nice balanced rollout plan for us. We don't see any real reason why we can't keep expanding at the same cadence that we are right now. I'll pass over to Nick or the Commerce Minister.
All right, thanks, Josh. Yeah, so when it comes to new stores, there's a few moving pieces for us. And as Don mentioned, we've certainly seen improved unit economics for our franchisees, and that's inspiring them to take a lot of different opportunities. Some of those opportunities are quick wins, taking on corporate stores in our network, taking out underperforming franchisees where franchisees are seeing opportunities in those stores. And then obviously opening a pipeline attached to it. In many cases, it's not just one store that's being the territory being used to do another. There's many different pieces that are involved in that. And then that, from start to finish, that process is, in many cases, six to eight months.
So, seeing a ramp-up of that kind of behavior across the network and good interest from not only franchisees expanding their networks, but managers becoming franchisees for the first time there too. So when it comes to the new stores, I guess just to reiterate that it's more of a time and complexity of putting all those pieces together, finding the right site. And that's just a bit more time involved than franchisees taking other opportunities in the market.
Yeah. For Europe, sort of everything has been said. The impediment is getting enough good managers and good franchisees to grow, but fortunately, we're having a bigger and bigger base every time we talk. What we've seen is that there's been a delay in getting permits because local councils have worked from home, and that hasn't really aided the process, and we've seen a delay in getting utilities in because construction companies who have put the gas pipes in and getting us the electricity in stores have not been able to work as effectively as they have before, but looking at our pipeline in Europe has never been as big as it is today, and so it might take longer, but still those stores will open. Distressed retail, we've not seen a lot of that, and that's because of a lot of government aid to business that are still running.
But we're expecting more of that maybe in the second half year of our financial year. But so far, we've expected that earlier, but it didn't really materialize until now.
The last point I'd make on that is there's no exception this year that there will be a lot of stores that open in Europe and ANZ in the last week of December, as there will be in the last week of June. Japan is once again the exception. It seems to be able to open stores more consistently. But yeah, if you're thinking what the store count's going to be, wait right up until the first two days of January before you decide to see the final number for the first half.
Thank you for that. Just a follow-up question on that from Michael Simotas. You've reiterated ANZ store expansion targets, and when do you expect store openings to resume at pace?
Yeah, so I think I kind of touched on that before, but I'll just reiterate for that question. We're seeing a little bit of consolidation now when franchisees taking on corporate stores and also underperforming franchisees that they see opportunity in. And then there's also great interest in new stores as well. But that takes a little bit of time to ramp up. I think you'll see a moderate increase in this half with a much bigger one in the next. And then I expect that to increase going into the next year. And the one caveat to that, of course, is one of the challenges right now is with the lockdowns, we haven't been able to get to a lot of sites. We haven't been able to get contractors and trades in to be able to start construction in sites in, say, Victoria, Melbourne.
So those things do create temporary headwinds, but they're not changes to the strategy, just pauses.
Now, just turning to a couple of questions from Japan. The first is in relation to the store openings. Are they coming from existing franchisees taking multiple stores or more individual new franchisees? And on the same topic, what's the target, or do you have a target for franchisee corporate mix of the network in Japan?
Okay. So to answer the first one, which is around what is the mix of are franchisees expanding themselves, or is it new franchisees? It's actually both. We're actually going to see a record number of new franchisees come into the business this year, or we've already hit that record. And then what you're also seeing is franchisees expanding their own portfolios. And it comes in and out, but at this point in time, we're sitting anywhere about 2.8-2.9, which is materially bigger. I suggest that might dilute as we bring on more franchisees and more stores. But at this point in time, we're seeing that growth from within, which is really exciting. And just to remind everyone, we do not go external. It all comes internally. So de-risk our store openings. And what we're seeing is that that actually feeds into higher sales at the opening.
And we continue with those sales because we've got experienced staff and new franchisees in the business. In relation to the second one, it's a common question that comes up a lot. And the standard response is, well, where it makes sense for our overhead structure to open more corporate stores, we will. And there's plenty of spaces we can do that, even within existing portfolio. But what we're seeing a lot of success with is some of these regional areas. And we don't really put a number on what franchise and what corporate is. It just got to make sense given the store unit economics that we are running right now. An example, and I think last time we did this, we did a Japan Investor Day. We had a discussion around Hokkaido, and we didn't have the right model back then when we were thinking about Hokkaido.
But now we opened Hokkaido last weekend, and we have the right model now. And Todd spoke about it on the video about these different pricing models, these access points to the brands, and different ways people can enjoy our brand. And we've lowered all the risk. They can come get a delivery from us or a carryout. It doesn't matter. And then we've also got back of house, which enables us to do a cheaper supply chain and all the other strategies that work in our favor. And Project 3-10 is a big part of this. So it's not just one thing that we think about. I know you want to target on corporate and franchise, but overall, we'll expand wherever we can. We don't see a reason we can't go penetrate all the areas throughout Japan now. And with our new model, all areas are in play now.
Where previously we'd probably say, well, look, because we don't have a franchise model and because the overhead structure doesn't work for us out in these northern regions or these southern regions, we're not going to expand there. Now we don't see a reason that we have to hold back anymore.
Now, just in terms of customer retention during this period, again, a couple of related questions. The first is from Michael Simotas. Our presentation has highlighted the data that we were gathering, and what is the data telling us about the proportion of growth that's coming from existing customers versus new? Are we seeing signs we're likely to retain new customers, and as a follow-up to that is, Ross Curran's asking about the outlook for home-delivered food. Essentially, as a vaccine gets rolled out, does that seem people eat more food out of home, and is that a headwind?
Yeah, so I might even start with the first and then hand out to Andre, followed by Josh on this. Is that in our belief that we've literally fast-forwarded to the age of delivery. So the trends that we thought we might see in two or three years from now, we've been able to obtain these new customers that are trialing digital delivery for the first time. And I'll let Andre and Josh point to real evidence that we can see that we're retaining these new customers is that we think that that's quite fixed. And while we're still going to have carryout strategies and we're going to go after pickup customers, our view is over the next decade, the pool for pickup customers is going to get lower and lower because the market's shifting to delivery.
There's still a big carryout market, so it's still worth going after that carryout market day. And I'm sure we'll still be chasing carryout customers in 10 years from now. But by far, the bigger driver is digital delivery. And even with the vaccine, we still believe that that still is the momentum. That was the momentum pre-COVID, and it will be the momentum post-COVID because we also are retaining a lot of these new customers. But maybe, Andre, you can give some evidence input from the video or other.
Yeah, yeah. What we've seen in Europe in between the two COVID eras, basically over summer, we saw that delivery remained a lot higher than it was pre-COVID. We also saw a lot of new customers, but in all fairness, that is hard because it might be a lot of previous Domino's pickup customers that just were walk-ins that now ordered, and that we started to know who these people are. So they are new for us for delivery, but they're not necessarily new Domino's customers. What we did add a lot of new customers to our business too, so in between the two COVID moments, we didn't see a slowdown in delivery, which it's hard to look into the future, and it was a short period, but that makes us believe that we just brought the age of delivery forward, and people started to understand the convenience of delivery.
We also shouldn't underestimate that before COVID, we had issues staffing our stores. So we were, in some markets like France, focused on delivery because it's less labor-intensive. But with COVID, we've managed to staff our stores and also offer more value to the customer on the delivery part. So I think the biggest reason for carryout is value. But now we're offering that value. And Josh can add to that how he's done some really big changes in his system to offer more value on both sides, pickup and delivery. But I think people will understand the convenience of getting the pizza delivered at a great price and might not necessarily always go into pickup. So we'll keep that delivery and we'll find ways to be very aggressive on pickup again to maybe tap into another customer base.
Josh, do you want to expand on that? You're on mute.
No, you're Josh.
Glad to be someone. I think about the vaccine and things like that, and we've been able to convert the eyeballs that really came to us through that COVID period and at least still continue to some point and try to convert that into a way where we could play our own game and put in our own strategies and make sure that there was all the concerns the customers previously had, and we talk about barbell strategy, and we talk about these access points for our brand and ways to educate people in Japan, even on pizza, because pizza is not a staple. It's not something that people run out and get as much as they would a beef bowl or some sushi or something like that, so we saw that as an opportunity to structurally change our pricing structure.
We've got no minimum delivery, which opens up meals as a task. It opens up all these different occasions that then lead on to other occasions because customers aren't one-dimensional. They're multi-dimensional and need us for multiple things, and we are at a point we are executing against not only the delivery strategy and providing a lower access point for people to come in through that door, but we also saw the need to lower our entry point for carryout. That's through hangaku, which is half-price carryout, and again answers a meal as a task. It takes away the risk, and we were very high-priced, and now people can come and enjoy us for a much lower price than what they previously could get in, and then that leads to other occasions and other things and other reasons to talk to them.
And of course, we get their data, and then we can talk to them in different ways and ways they want to be heard from us. So really speaking, I don't see the variance as one thing, but I think structurally we've got the right model in place to continue the growth that we have. And the customers are enjoying it. And the frequency is showing in the frequency. It's showing in the new customers that are coming to experience the brand. And it's showing in even the conversion, which is the first repeat purchase after they come to our brand for the first time. We're seeing all those metrics positively enhanced through this period. And as I said, structurally changed it. So COVID now will come and go, but I believe we've got the right model to keep pushing through.
Nick, anything else you want to add from Australia and New Zealand? You're on mute as well, Nick.
Yeah, I was just trying to support Josh. I think we've covered off a lot. I mean, Australia isn't much different to what's been said. You're seeing a lot of people we now have clarity over that were potentially coming to us offline that are now delivery customers, and we're now getting that richness of data and being able to communicate with them, and then, of course, with the very heavy value offering that we have traditionally with carryout, we may have seen a lot of those customers potentially shopping supermarkets and cooking at home, so as things return to normal and we're able to provide that value proposition for carryout, we see them return back to the business as well.
Reinforcing the delivery on what Nick's saying for Australia and New Zealand is that when you've got markets like Tasmania and Western Australia and Queensland that have had no COVID cases for long periods of time, we still see a constant digital delivery growth. That's still the engine for those markets without COVID in those markets.
Just in terms of we've been talking about carryout and delivery, question from Craig Woolford. If you can clarify the approximate proportion of carryout versus delivery for key countries, Japan, Germany, France, and Australia? I know we haven't provided that previously, but perhaps Don might be able to give some color to that.
Yeah, maybe. Sorry, Craig, to dance around on that one right now, but maybe we can consider that for the February announcement there. Very few markets that were used to be less than 50% delivery are now not getting close to 50% or more. So New Zealand, Australia, France, Belgium were all well below 50% 18 months ago, 12 months ago, and so on. Now they're all encroaching on 50% or more in delivery. So there's been a real genuine shift change. It should be noted that in Germany, one of the reasons we think Germany's done so well is it was already mostly delivery. And so it's just been. It didn't lose any carryout. It didn't have to lose. And it's just net added this big increase in delivery at the same time.
Yeah, we'll consider that and talk about the breakdown for the February result where we can get it more accurate rather than talk about a month or two weeks or talk about a whole period.
Speaking of Germany, Grant Saligari's asked in terms of there's a comparison of brand awareness in Germany and the Netherlands, noting in the presentation the much higher awareness in the Netherlands. The question is, how long did it take the Netherlands to get to its current level of brand awareness, and what were the factors that led to that?, and does that give you an indicative timeline for Germany?
Andre?
Yeah, it's still continuing in the Netherlands. It didn't stop. We want to get even more brand awareness. But I think it's fair to say that we are expected to be a lot quicker in Germany, just not for the reason that we're smarter in what we're doing. And we're copying a lot of best practices into Germany. But also, we've invested heavily in media, so we'll see a quicker return. Our regional presence is increasing, and we've also adapted a different strategy in looking at Germany more like it's four Netherlands instead of one big country. And I think that in that way, we can aid the brand awareness a lot quicker than we used to do in really back. And even in France, we always looked at it as Paris-central, and we run everything out of there.
We started changing that as well to be more present regionally. So I think short answer is we'll be a lot quicker than in the Netherlands. You saw the presentation from Nicky. All the great things that we've done in the Netherlands, and although they're two different markets, the learnings are sort of the same and the way we look at it. And we won't make the same mistakes as we did in the Netherlands. So I think it's going to be a lot faster. And we'll ramp up store openings faster than we did in the Netherlands. So I'm thinking I'm hoping we could do it in half the time than we did it in the Netherlands.
A question from Ari from UBS. How has franchisee profitability performed globally? And are you now happy with the level of profits?
Yeah, we always have put ambition to. We don't just sit with our franchisees and say, "Well, that's as good as it gets." I think we just continue to drive, and we know that it's a self-feeding fire for the engines that the more you can make franchisees profitable. So we always continue to drive the ambition to get even better, but there has been double-digit shift across the business. For obvious reasons, Japan and Germany by a lot. I mean, they have really, really changed in this year. We're talking very material numbers with the rest of the business showing strong improvements. Even when we've been in these lockdown periods and same-store sales haven't been as strong, profitability has typically been quite strong because we've still got really good ticket averages, so for leverage for a franchisee, that's flowing through to good food and labor costs.
So yeah, metrics across the board have been pretty good with the rare exception when we're talking averages here. And there's the odd exception we've talked already about downtown Amsterdam or Paris or Melbourne CBD or Sydney CBD where this doesn't have the audiences today. Or even for all the tourist locations in Australia because Queensland was locked down, Surfers CBD, for example, hasn't been as buoyant. Whereas Mosman was trading and Southport continues to trade at Southport or Byron Bay or so on. So you've got these sort of shifts that are what we've already shared, and they're still constant today. But did I, sorry, the second part of the question, did I answer that question? Anything else?
Yeah, I think we've covered that one. In terms of just, I think it's probably a related topic to profitability. Does the company expect to be utilizing the Australian government incentive programs such as JobMaker and Instant Asset Write-Off programs?
I'll hand over to Nick.
Yeah, so certainly we're not, as DPE, in our corporate stores or in our business planning on utilizing those things. However, our franchisees may, depending on their circumstances.
Just in terms of some of the promotions that have been mentioned, Johannes has asked whether the cost of the free pizza for signing up to Domino's app is covered by DPE or shared with franchisees, and similarly, in Japan, is the elimination of the minimum order value, is that a franchisee paying the cost for less profitable delivery, or is there support from DPE?
Nick, on the first one?
Yeah, so franchisees cover the cost of the free pizza in the app, and on that point, I can say our franchisees are really eager to support initiatives where they can see that incrementality, and when you look at a promotion like that one, we're getting a free pizza for a first-time user on the app. Now, it's really clear for franchisees to be able to see that acquisition, and they know how valuable it is, and they're very eager for the most part to help when it comes to covering those costs.
Josh on the minimum delivery?
Yeah, sure, so the minimum delivery, I mean, there's always this fear that people had when we originally ran into this, and we try all of these things and make sure that these things don't have a material effect on the business and have a positive effect on the business long term because we don't. The question's sort of framed in a snapshot sort of view, but we don't see a customer as a one-time purchaser of pizza. We see it as a long-term customer. In fact, we track through the customer lifetime value, so when that customer comes in, it's very rare that someone just orders a Pepsi or a Coke from us. In fact, the average ticket or the average ticket on those orders are actually quite high.
But what it does, it enables that consumer that previously wouldn't have looked at us, look at us in a different way. And they become receptive to our marketing and to the things that we have on offer. So I wouldn't say there's a material impact. And you got to remember, we wouldn't put our corporate stores, our 400-plus corporate stores on the line for this either. So there is definitely a positive flow-on effect to our business here.
Question in relation to M&A from Ben Gilbert. Just given the strength of sales through COVID across Domino's globally, has the availability of new regions for DPE reduced? That is, have profits gone up or sorry, have prices gone up and not as attractive for us? Similarly, Craig Woolford has asked, do we see any territory expansion is now more likely given the success in Germany and strong performance throughout COVID?
Yeah, I think the best way to put this is that very, very clearly, we're looking at Domino's acquisitions, whether that be new master franchises or conversions of existing businesses. And the other way to look at this is that Germany and Japan were also not for sale initially, and we created a position for there to be a sale. So what has shifted in the last two years is that DPZ has given us approval on more nations than we've ever had in recent years. And then what we and our board's also given us approval to have a look at these. And then what we have to do then is basically bring them to a sale. And that can either be in a full sale or a joint venture like you've seen in Germany, in Japan.
Because our business case is what we can do with one digital or with our you would think Domino's globally is one system, but it's not all invested in one technology. It's not all invested in one lot of buying as a group. And it's not all invested in one leadership team. There's different pools of leadership, skill base, technology, for example, our One Digital platform. And so what we can point to, and we can very clearly highlight that in all of the acquisitions, specifically right now in Japan and Germany, the most recent ones. And we can highlight that one plus one in these cases is worth materially more.
So an investor may they'll have 51%, 70%, 66% and their last third may be worth even more in five or 10 years from now than their first two-thirds that they sold to us because of what we'll bring to that party. So yeah, we're still quite active. But it's opportunistic. It's one of those sort of things that's all the timing to pull it through.
Speaking of opportunistic, the question is in terms of distressed media, that there was distressed media inventory available to us near the start of COVID. Has that changed, and will marketing spend continue to rise faster than network sales?
We are still seeing distressed media, but it does come in various forms. So from a buying power I mean, John, Josh, Andre? What's the very latest?
In Japan, we saw some initially took a little bit longer. There's different buying cycles around media and where distressed media comes in. We have seen some more available slots. It comes in different ways. Sometimes you get some cheaper media for TVCs, but the other side of it is you actually just get more access to some different slots that you previously wouldn't have, so we're seeing both of those, but we're not seeing it as much as, say, we were back in September, October. It's all pretty much back to normal now.
Andre?
Yeah, same in Europe. Different media, different situations. Outdoor is still very distressed, and we've taken advantage of that. TV media was pretty distressed in the first wave, less so in the second because lots of bigger companies are taking advantage of this as well, which is not just us. So for different markets and different media, but we're still taking some advantage of distressed media.
And Nick?
Yeah, in Australia and New Zealand, we obviously saw some pretty good opportunities early on, but those things have now returned back to normal for the most part, barring some smaller opportunities in market.
Next question is how we think about operating leverage given a few halves of soft leverage. What's the outlook?
Yeah, so typically, our leverage follows network sales. So with the strong network sales, with the number of stores we're getting open and the high like the likes, then we're going to see leverage as a group. And you'll see that throughout the business. So yes, we do expect that the shareholders will be happy with the margins that we're seeing, and mostly influenced by Japan and Germany.
Two related questions. In terms of aggregators, how has the delivery platform aggregator share changed during this time, pre and post-COVID, during waves? And similarly, just what's been the engagement with aggregators in Europe, in France particularly?
Andre?
Yeah, luckily, and we've addressed this in a couple of these meetings, is that in France, we were a bit behind connecting to the delivery aggregators because we use the delivery aggregators as order aggregators, and they were not ready for that. But going into COVID, we were fully every store that has in their market a delivery aggregator, we were connected to them, getting orders through them and delivering them ourselves. So luckily, that whole project was finished when we in March. And what we've seen subsequently, and that's basically the same in all markets. We're getting more orders out of aggregators, but equally, we're getting way more orders out of our digital. So the share hasn't really changed of aggregator orders in the total digital order space because both have grown.
In France, we were just lucky that probably two-thirds of our network is now connected because the other third, in their smaller towns, the aggregators are not present. Luckily, we had rolled out that plan just before March.
Thank you. Just to Project 3-10, generally, obviously, we provided updates on Project 3-10 and its rollout, as we've done again today. Marco is looking for just how we're going with Project 3-10. Then Michael Simotas has asked if we can provide some detail on the case study that we provided, just in terms of obviously, we've provided that the AWUS of those stores has gone from AUD 55,000 a week to AUD 81,000, but if we can provide some context around the profitability of those stores.
The Campbell family means in the second part?
Correct.
Yeah.
Campbell.
Yep.
Campbell family.
I'll start with the bigger picture, and then we'll jump around and see the different markets and how they're developing with Project 3-10. Yeah, we're still very obsessed with Project 3-10 and have a number of initiatives. In some of our markets now, for Australian shareholders, they'll be familiar. We now have a thing called Call on Arrival. Actually, I might even give Michael Gillespie on this call. I might even give him an opportunity to talk about some of those bits of technology. Michael, at the end, if you just want to think it through. Yeah, because Rachel Kinch is a lady that heads up our operational innovation and Project 3-10 in the business. She's working on all sorts of different things, which I'll get Michael to touch on. We are making real improvements. Week on week, we can see the group.
We both look at it by individual stores and then by region and country. We can see countries coming down, and we can see the top stores in the world. I mean, it's just material how much they're shifting week on week. Maybe start with you, Josh. You had an exceptional week last week considering the sales and the number of stores that were out delivering.
Yeah, sure. It's incredible. Project 3-10 is definitely the right doctrine to put through and now part of the belief system. It's funny, we're still talking about it. It's just something that people wake up with and want to go and execute against. A lot of our success is due to Project 3-10. I mean, the ability to execute delivery and that service model has been a big driver of the repeat purchase and the frequency in our business. Because it's all good having all these marketing programs, which are fantastic and structurally the best thing we've done and the right thing to do. But we have to be able to deliver at a store level and repeatedly deliver, and Project 3-10 we started it back five, six years ago, or maybe shorter. I've only been here for the last three.
But we've been incrementally getting better and better and better. And we've been challenging ourselves. I mean, even through the month of November, we've been going after world records for markets. And we've had 150 stores go sub-15 in Japan just last month. So without these initiatives, it's very hard to grow your brand and grow brand penetration and grow customers that love you and grow that customer lifetime value, which is what we've been talking about. So it's not a one-and-done strategy. It's just part of the system, and it's just part of the things that you keep building upon. And the reason why store growth is still important to us and keep refining the operation. And Michael and his team have been delivering technology that's delivered against that as well. But a lot of it, which is fantastic, and will continue to drive new records for us.
But you've got to win the hearts and minds first. It's a mentality first before it's a technology. And the technology just comes and enhances it all. So yeah, Project 3-10 is just part of who we are.
Andre?
Yeah. And the one big change that we had is that the new focus on delivery also made us focus more, aside from technology, on really getting our operations in order and getting smarter and being more efficient. Next to that, before going into COVID, we had issues getting delivery drivers. So you had regions where we struggled with increasing our delivery times because we couldn't get enough staff. But that was one of the tailwinds we had going into COVID. We could finally fill all those vacancies and really start focusing on great delivery times. And we've seen records since. So where you would expect additional business on delivery and our delivery times would go up, they actually went down in all markets. And then next to the technology that Michael's delivering us, we've shaved minutes off our delivery times over the last nine months.
Nick, any thoughts?
Yeah. One of the great things about these times of the inflection in the business where we see these big shifts up is that you get this really laser focus from franchisees and teams in stores. And we've seen some new initiatives, and Michael talked to Call on Arrival, which is definitely helping with deliver on Project 3-10 and our ambitions there. But also that renewed focus in around when you're doing so much volume and you've got so many people focused on trying to solve for those challenges, you see some big movements. And I'm really pleased with what we've seen.
No, do you, Michael, just to talk about some of the projects you're working on?
Yeah, sure. And I guess one thing I love about Domino's is it's not a business that just then rests on the technology. Technology is there to add to all the great work that each of the CEOs are doing at an operational level. And ultimately, our technology is there to systemize processes that were in the past either done manually or could only be done at one or two or a handful of stores, not at all our stores. And I talked in the last session in the video about some of the tools that we do have. And we've given our markets the opportunity to look into the future and be prepared for a V 2, which is we think unparalleled in our industry at the scale that we do it at.
We've given, and Don talked about, and Nick, touching on Call on Arrival, which we've rolled out in A N Z and have available in a couple of other markets at a smaller scale. To be able to connect with the customer via a call and have them ready, it sounds like a fairly rudimentary process, but we were doing that on the road manually in recent years, calling customers and saying, "The driver's coming." All we're doing is systemizing it so it happens every time. It means the driver has a great handoff to the customer, and the customer's there. So you can save seconds, and you add that over a whole period of a shift or weeks or a whole year, and it really adds up to time savings and also availability of team members.
So we'll continue to look at how we refine the tech that we've put in stores, providing 3-10 support, and also look at new ideas and new technology that we can even add that we haven't even thought of yet due to the great amount of data we're collecting and the insights we get from field. So I'm really looking forward to seeing that 3-10 journey evolve in the coming years, just as it has in the past two and three years.
Thanks, Michael. Back to you, Nick. I think that was the second part of the question.
Yeah. So around the Campbelltown. So yeah, when we look at Campbelltown store specifically, so I think that was the question, is while it was doing a large amount of sales well above the national average, it was making below national average profits. And the real reason for that is that a lot of the territory that it was delivering into and getting sales out of, it was not recognizing any contribution to that. Because the biggest cost of delivery is the variable of having a human being get in some kind of vehicle and get from point A to point B. And as we can reduce that materially, it enables us to change the way we look at our delivery fleet, but also utilize a lot more of the technology.
That store now is performing quite well from a profitability point of view, even though its weekly sales aren't at the highs that it was before the new store was opened. Then, of course, you've got that new store that's been opened where we've been able to capture all those sales now efficiently and add this big incremental of what the carryout layout looks like. Both of those businesses are growing exceptionally quickly because the level of execution has just lifted so high. It depends on which window you want to analyze it in, but certainly, there isn't a window where you can look at this example and there's a return that goes backwards. It doesn't. It just goes up.
Thanks, Nick. There's been obviously a lot of tailwinds discussed on here. And Joe was just asking in terms of what are a couple of the largest headwinds across the group currently. What do we see those are and looking forward, if any?
Nick, maybe you can spell on that again. Continue. Any headwinds for A and Z?
Headwinds in ANZ. Yeah, look, certainly the chances of any lockdowns, although they're getting a bit smaller. There's some soft commodities into the next half that we'll see an increase there to deal with, and just making sure we can keep this intensity level up when times are good and franchisees are making good profits, making sure we can keep people engaged and wanting to run versus to take some time to smell the roses to balance that outcome out.
Yep. Andre?
Yeah. Headwinds, like Nick said, we're still having big cases of COVID every day, so we have to be worried about if governments will take bigger steps. The two things that I can think of is still the headwind is that we've lost a lot of carryout in big carryout markets like France and not Germany, but Belgium and the Netherlands, so that is a headwind, and the headwind is that it just takes longer to open stores due to restrictions with builders and utilities and permits, but those two spring to mind.
Josh?
Just really the same ones as Nick and not really seeing anything further in our foreseeable future.
And I think adding to some of that is that the second half, we'll obviously get the benefit from last year when we did have the closure of New Zealand and France. On the other side of that is that we had the most extraordinary last quarter in Japan last year, which we're feeling positive about the business, but it's still there. It's a big set of same-store sales. By and large, when we talk about headwinds, the reality is, and why you're not hearing a lot from the team, is that currently there's more green lights than red lights for our business. And coming into COVID, Europe and Japan were struggling to get driver numbers.
When Josh was asked at the roadshow in February of this year, he was saying, "Look, I've opened more stores. I've got all the capacity and will and desire, but I can't staff as many stores." Well, that's turned on, and across the board, we've seen that we've been able to access people for unfortunate reasons, but it has meant that we're able to staff our stores, that media is being effective, that there's all that screen media being watched at the moment with people at home. We've got access to capital. Interest rates are low. We're recycling the capital still really quickly in places like Japan, where we've got the corporate store built. Franchisees are accessing capital, so we've got a beautiful continual recycling of capital there.
So when you think of all the reasons we need to grow the business with capital, with locations, with people, with demand, there are mostly green lights, some soft commodities maybe in A and Z for the second half with cheese particularly. And then it's just keeping the intensity up, as the guys have said.
Just in terms of COGS, Ben Gilbert was just asked. We've obviously been talking a lot about value, and with rising labor and rising COGS, do you envisage a need to put up prices? I'm presuming this is particularly focused on A and Z, but what is the customer appetite for this?
Yeah. Clearly, value is front and center as part of our strategy. And it's not part of our plan to increase costs without adding extra value. And our drive is to try and find how we can give customers a more for less experience. And we've been able to show that when we can unlock new occasions or with different kinds of promotions, a bigger spend by giving more value. And at the moment, it's foot to the floor and just try to make sure that we can keep acquiring as many and keep as many customers as we can. And we think any of these increases, they're not big enough that we can't take them in stride. And our focus is on making sure we can continue to grow.
Just got one more question that's been lodged. Looks like the final one from Kevin. How long do you think it'll take Japan and Germany to reach critical mass in terms of store network, etc.?
So the good news for Japan is we're at critical mass now for television, and everything is accretive from here. So we either just keep getting more and more dense or we actually reduce our overall advertising costs because Japan has historically had our highest advertising costs. And Josh, anything else to add on Japan before we move to Germany?
No.
No, and in Germany, we're now, it's just continually accretive from here that we've got more and more weeks of television. So those two markets, because it's not just store count, but we've also had such a significant lift in average unit sales. The lift in unit sales are not the kind of lifts we're used to and therefore have been very material. In any given year, these are very, very big numbers, and that's brought leverage to the business, which has allowed us to spend more on television. We've also, in France, Belgium, and Germany, front-loaded television to stimulate some of that as well from DPE, and then we've seen the benefits that have come from, even in Australia, actually. We've seen the benefits.
So shareholders are not going to be seeing, "Is that going to be a drag on the earnings?" No, it's not because it's stimulated the growth, which has then just kept fueling itself. The one market that you would say that is really subscaled for television is still Belgium and Denmark. You don't have to get Denmark being small. But we don't have the critical mass to get to sustainable television yet in those markets, whereas the rest are just, it's all accretive from here. So you've got enough television now in Germany, be it small, but it's national television, and it just keeps feeding itself from here.
Just in terms of franchisee support that's being provided in Australia, I think you touched on that briefly before, Don, but what level of franchisee support's being provided? And is franchisee payback at two and a half years as per the DPE target?
2.5 years is an ambition. That's not something we, and that is our ambition as part of the Domino's global system. We're not achieving that in any market today as an average. Definitely, we have stores in that category, by the way. We have large pools of stores in that category right now. But it's not our average today. We've normally got a three or a four in front of the, with most a three in front of our return on investment. But anything else, Kilimnik, to add to that? There was a second part there, Nathan. I don't know if I answered the whole question there. Sorry. Answered so many questions today. I'm looping myself.
Yeah, so we've got that level of support generally.
Yeah. Nick can add to Australia. I mean, we wound all that back.
Yeah, so it's a very small number of stores now that are just in those areas where we have universities and CBDs mainly.
Question from Shaun about delivery share in France during this time when obviously there's been this fast forward in the age of delivery. Has the delivery share in France grown from 4%, and if so, where we're taking share from?
Andre?
Yeah. No. The delivery share has grown massively. But the pickup share has, we've lost a lot of pickup. And fortunately, with the higher tickets, we've been able to negate the pickup. But France was a plus 50% pickup market going into COVID. And with all the restrictions and people not daring to go out or not even being allowed to go out unless they have some pressing matters, we changed that into delivery. I think what you see is that because of this, we've taken more distance from our competitors who were not ready for delivery, and we were. And like I said before, just before this all started, we connected our last store to the aggregators. So we were happy to get more aggregator sales in. And our One Digital platform is performing still very well. We made some changes there.
We rolled out loyalty, which has gotten good traction in France. So yeah, the delivery shares do very well.
Yeah. Thank you, Andre. I believe our time has now expired, and I'll hand back to Don for any final comments to wrap up this evening's presentations.
Yes. Thank you, Nathan. I think what we were hoping to achieve just before we went into blackout is to answer some of the big questions about the retention. And hopefully, the videos have helped a lot today. We also wanted to make sure that when we've shared with investors at the AGM that same-store sales in the rest of the business, exclusive of Germany and Japan, is in the range of the upper end of our normal three- to five-year outlook for same-store sales. But Germany and Japan are greater than that. And what's so significant is that that leverage is coming out of Japan because of the high density of corporate stores. But in any given market that's mostly franchised, you wouldn't be seeing the same leverage through to our business as we are right now through Japan.
So we just want to make sure that that message had got through to shareholders before we go into blackout, but thank you very much, everybody. I hope this was very helpful, and I know we've still got another 24 hours of Q&A tomorrow, and may get to talk to many of you. Thank you.
Thank you all.
Good.