Thank you for being here. I'm Tim McIntyre, Executive Vice President of Communication and Investor Relations for Domino's. Thank you for coming to our Investor Day twenty nineteen. As you know, 2018 was a year of transition for us. A lot of people in new roles.
The beauty of our system though is that because of the depth of experience and the caliber of talent that we have, we were able to focus on what matters most. And that's why today's theme is what matters because we want to take you through in great detail the things that matter most. There's a lot of noise out there in the industry, a lot of concern, but we're going to unpack for you the things that we're focusing on. So I'll give you
a spoiler
alert. You're going to hear a lot about fortressing, order counts, value, consistency, and data driven decisions. Today, you're going to hear from Rich Allison, our Chief Executive Officer Russell Weiner in his role of Chief Operating Officer of Domino's and President of the Americas and our perennial favorite, Jeff Lawrence, our Chief Financial Officer. And with that, welcome Rich Allison. All
right. Well, morning, everybody. Thanks for sticking around in Florida for an extra day to spend some time with us this morning. We really appreciate it. A lot of you over the last couple of days have asked me a little bit about the first six months being the CEO of Domino's and what some of my impressions are.
So I thought I'd start this morning maybe by just sharing a few of those things with you as we get started. First, and this won't come as a surprise to any of you that follow us, Domino's is a very strong global brand. As of the third quarter of 'eighteen, more than 15,300 stores around the globe with a proven multiyear track record of growing order counts, stores, retail sales, most importantly, profitability for us and for our franchisees over time. We've got the best franchise partners in industry. I am 100% convinced of that, not just because I've had now about eight years of serving as the head of international and now as our CEO.
I've gotten to know our franchisees around the world and in The U. S. But also in my career prior to coming to Domino's, I worked with a number of brands while I was at Bain and Company. And I can tell you, we have the best out there, full stop. That's in our international business.
It's in our US business. And what's incredible about this job that I have is I get to travel around and visit stores with these folks. I get to talk to them about their businesses. And the stories that we have in our system of folks who have started as drivers, have started as store managers, and now run huge businesses, like the folks that you see on the screen right here is just extraordinary. And I'll tell you that our franchisees really are the soul of our company.
And when we talk to you about taking the long view in our business, which is the way we run the company, we do it that way because our franchisees really, really take the long view in the business. I mean, they're in it for a lifetime and sometimes for multiple generations. And that's why we, as the stewards of the brand, take a very long term view in how we lead the company. We've got a great franchise business model. And it really comes in two flavors.
Our international master franchise model is a model that allows us to get strong local experience and ownership. We have well capitalized master franchisees around the world. A number of them publicly traded companies themselves with access to capital, with strong management teams. And very importantly, their boards give them a growth mandate. So when you think about how you drive growth, we're not out there having to actively push folks along to grow their businesses.
They've got that mandate as well. And then in The US business, I'm really proud of the group of homegrown operators that we have. You will not hear Domino's advertising franchise opportunities on the radio. You will not see us going to franchise shows in The US to try to recruit outside operators into our business. We don't run it that way.
All of our operators in The US, if you want to be a franchisee, you've got to start by working in the stores and prove that you've got what it takes to lead starting at the store level and above. And then they go through our franchise management school so we can help them understand the operating model above the store level and set them up for success. And that's something that's not going to change because I think it is core to what we do and what has driven a lot of our success in The US. We've got a terrific leadership team. I'm really, really fortunate to have inherited from Patrick a fabulous group of leaders in our business.
You've got several of us here with you this morning. Russell Weiner is here. Jeff Lawrence is here. Tim McIntyre is here. But this group you see on the screen has over one hundred and fifty years collectively of Domino's pizza experience.
And a number of us have quite a bit of experience outside of the brand as well. We've also you may have seen, we announced within the last week that we've got a new executive vice president for our supply chain business that will actually be joining us officially on Monday, a gentleman named Stu Levy that we're really excited to bring on board. So we've talked about it all week. Heck, we've talked about it for a couple of years now. Retail sales growth is one of the most important things that matters to us.
And we're going to talk a lot about that this morning, about how retail sales growth drives the business, not just for DPZ, but also for our franchisees as well. And this really is the balanced retail sales growth driven by orders and driven by store growth is really what drives profitability in the business over time. So we're going to talk a good bit about that. Now I know that those of us that track the industry are hyper obsessed with same store sales. It's been that way in retail and restaurants certainly for the twenty odd years or so that I've been involved in the industry and even more.
And this brand has really an unparalleled track record of same store sales growth. If you take a look at our U. S. Business through the third quarter, 30 consecutive positive quarters of same store sales growth, the average since 2010, 7.4%. In our international business through the third quarter, 99 consecutive quarters of positive same store sales growth.
I don't know of any other restaurant brand or retailer that can boast that. And an average same store sales growth rate since 2010 of 5.9%. So we're proud of that. But we're also proud of the store growth that we've been able to achieve over time. And if you look over the course of this decade, we've opened more than 5,600 stores.
Just since back in 2011, you'll see the growth rates annually here from 2012 forward. And I think there are two things that are exciting about this chart to me. One is that the growth, the vast, vast majority of the growth is organic. We've had a few conversions over the years in places like Spain and Germany and France and South Africa, but well in excess of 90% of the growth is organic. It's franchisees choosing to put their capital into Domino's Pizza.
The second thing that I'm excited about on this chart is that darker blue layer on the bottom, which represents The US store growth. We went for about two decades at Domino's. From roughly about 1990 to about 2010, we were flat on stores in The US. We had about 5,000 stores, plus or minus a few, every year. Since the turnaround in 2010, we have been on a steady and increasing rate of growth in our US business.
And it takes a while to get that engine going. And in fact, if you look at what happened in 2010, we launched the new and inspired pizza. Same store sales growth in 2010 was 9.9%. In 2011, we actually had net closures in The US. We closed more stores than we opened.
The reason is that it takes time for franchisees to regain confidence in the brand and to start putting their capital in it again. But a great 2010, a strong 2011 on top of that, and franchisees having confidence in the momentum in the brand has resulted in continued investment and an ongoing build in the pace of store growth in The U. S. When you roll those things together, same store sales and store growth, you get retail sales growth, which is what really matters when you think about how you grow market share and how you grow your brand over time. And I'm very pleased with the balance that we have in that retail sales growth.
You'll see on this chart the mix of U. S. And international. And predominantly in the early part of the decade, retail sales growth was an international story. But now it's a very balanced story across The US business and the international business.
And as we share some more data with you this morning, you'll see that this growth is really driven by traffic, by transactions, by order counts, whatever term you want to use to talk about whether or not you are winning more customer visits over time. That's what's happening to drive this growth. And when Russell takes you through his slides, he'll share with you what's been happening there because that is the only sustainable way to grow the business over time. The growth in retail sales has driven significant increases in market share. And you'll see our US market share in QSR pizza on this chart.
As of Q3, it stood just north of 18%, which is about almost a five point gap versus our nearest competitor. And you may recall, it was not long ago that we actually passed our nearest competitor to become the number one pizza company in The U. S, and that gap has continued to widen. If you take a look at our international business, we've also become the number one pizza company outside of The U. S.
And depending upon how you look at it, whether you look at the total pizza market or you look at QSR pizza, even at one, we still only sell about one out of every 15 to one out of every eight pizzas in international, depending on whether you look at total pizza or whether you look at the QSR segment. So number one, but still with significant potential to grow. If you look across other sectors of QSR, the number one player generally has a 25% or higher share. If you look at burgers or chicken or you look at Mexican, you look at other categories. So we're excited about being number one, but even more excited about the runway ahead of us.
Now this long time goal that we fought for fifty seven years, we finally achieved it. And I want to talk a little bit about sort of how that happened, why we've been winning. And the reason that we've been winning is that we have been focused on what matters. That's the title of today's discussion. We've been focused on what matters for both our customers and for our franchisees.
And I'm going to talk about each of those in turn this morning. And as always, we're going to start with our customers. And it began with product. The turnaround brand really began with the launch of the new and inspired pizza in 2010. But we really haven't slowed down since then.
The vast majority of our menu is new since 2010. Now some folks say, well, why aren't you guys out there talking about product more often, introducing more products more often? And the reason why we've launched about 11 products since New and Inspire is that we are not going to launch something that we don't think has staying power on the menu. We don't play the LTO game. And of the 11 products that we've launched since 2010, there's only one of those that we've taken off the menu since then, and that was the artisan pizza.
The rest of the items are still on the menu. And quietly over time, we don't talk a lot about this, we've been improving the quality of the ingredients in our make line over time very methodically. Not talking a lot about it, but making sure that we're constantly testing our product with our customers to make sure that we're winning on taste and winning on variety. There are more than 60 items on our menu, almost 30 pizza toppings on the make line. So we feel very good about our food, variety, and taste, and our customers are giving us very positive feedback on it.
The next element that we've been talking about for years and years is service. And we are better than we've ever been in terms of delivery times and in terms of the variability around those times. We believe we're better than our primary competitors, and we believe we're better than what the third party delivery aggregators can do today. But we're still not good enough. And one of the things that we have been doing, Russell and myself particularly with our franchise system, is we've been telling them thirty minutes, which is what the business was founded on back in 1960, thirty minutes is not good enough anymore.
We've got to be better and better and better. And we've got some leading franchisees in The US and around the world who are really taking that message forward for us. We've got some markets where we're now doing deliveries in averages of twenty two minutes or twenty minutes, even some franchisees that are averaging sixteen, seventeen minute delivery. You get to sixteen, seventeen minute delivery, the customer can't even pull a frozen pizza out freezer of or preheat an oven and cook it in that amount of time. Fortressing is going to continue to help that.
We talked a lot about carryout and driving our carryout business over time. Well, one of the things our customers told us really mattered to them in carryout was coming into a better looking store. So we've been on a journey now of reimaging our system, which we started back in 2012. We've now got more than 90% of our U. S.
Stores in our pizza theater image, and almost 85% of our international stores are in this image. So while a lot of other brands right now are trying to refresh themselves, we feel like we've got one of, if not the freshest images in all of QSR. And as we think about how we mobilize our system to continue to grow stores going forward, we've got the benefit of having this investment in the reimaging process already behind us. Value, value, value. You hear us talk about it.
Dollars 5.99 and $7.99 We've been on it forever, and we've been on it forever because it's got true equity with our customers. And one of the things that we believe so strongly in is value is not something that you go onto and off of. I just don't get it when I listen to conference calls or I read articles in our industry and brands say that they're going back to value. Well, did they have a meeting and say, let's go away from value for a quarter? I mean, I don't know how that works.
This is a value category. I mean, we don't have pricing power in this category. I don't know who has pricing power in this category. If you're not focused on value, then you're not going to be able to grow transactions over time. You're not going to be able to create and maintain the loyalty in your customer base over time.
And we'll talk a lot more about that today because this is really central to how we think about the positioning that we have with our customers. And to be honest with you, we didn't get there because we're brilliant. We got there because we've made the mistakes over the years. In The US, if you go back more than ten years ago or so, we were bouncing around on value some. If you look at what's happened in places like Canada and Mexico and other markets around the world, they bounced around with price points over time.
Those markets are now aligned around making sure that we're serving our customers with great value. We talk a lot about what we're doing with our digital platform and leadership there. We've now got more than a dozen and a half ways that customers can order pizzas from us. And I'll share a little bit of an update with you this morning. As you'll see on the chart, we're now more than 65% digital in our U.
S. Business. In our international business, not quite to this level across the board, but really strong. For those of you that were here yesterday and went to hear what our partners in China had to say, You'll recall that of our delivery orders in China, more than 90% of them are digital. So this continues to be a terrific opportunity for us to build and grow our business over time.
And we're not going to slow down in our investment to maintain our leadership. Loyalty. 20,000,000 active loyalty users. We passed that milestone several months back. And we take a pretty strict definition when we tell you how many members we have.
Active means that these are customers that have ordered through the loyalty program at least once within the last six months. Doesn't just mean that they signed up and ordered one pizza. It means that they are active users in our loyalty program. This is absolutely a central element of our order count growth strategy. We launched this program in 2015, and we launched it intentionally with a frequency based program.
So if you think about how it works, you go in, you order from us six times, and you get a free pizza. It isn't a program that says if you spend x dollars, you get y dollars worth of free stuff. Because what we're trying to do is drive frequency transactions over time. We tested hundreds of earn and burn combinations before we launched this thing. But this was the platform and this was the approach that was consistent with the strategy that we've got to build and grow our business over time.
We have some of the most fun advertising out there. And whether it is carryout insurance that you see on the bottom by the way, that's Russell Weiner slipping and falling in his front yard right there or paving for pizza. Fun, innovative things that fit with our mantra of being the people on the planet that are most crazy about your pizza experience. And we have a fabulous marketing team. We've got a great agency.
And they work together to come up with terrific ideas, terrific news that don't involve us rolling out some limited time offer. So that's our customers. Next, I'm going to turn to the other very, very important group that we serve, which is our franchisees. And we're very focused on what matters to them as well. Any system, any franchise system out there, the thing that matters most to the franchisees are unit level economics.
And we put franchisee profitability at the center of every decision that we make product decisions, pricing decisions, promotion decisions, technology investment decisions that we make, franchisee unit level economics sit at the center of that. We're one of the few brands that shares those numbers with you on a regular basis, and we're going to share them with you again this morning. And I tell folks often, in my prior life when I was at Bain and Company, one of the things I did was I worked with acquirers in the restaurant space. I worked with private equity groups. And the first question I would ask when I went into work on a due diligence exercise was talk to me about the unit level economics.
What's the cash flow at the unit level? What does it cost to get a new unit open? And I wouldn't put a nickel of my own money into a franchise business if I didn't know what the unit level economics were. Next thing that we focus on to help our franchisees is operational simplicity. Now delivery is really, really hard.
It's really hard to take an order for three or four or six items, get all of them ready, get them in the hands of a driver, and get them to a customer in thirty minutes or less or twenty five minutes or less or twenty minutes or less. The simplicity in our operating model enables us to do that because basically, we've got one cooking platform. Delivery is really hard if you've got a fryer and you've got a grill and you've got a wok in the back or whatever you've got. You're trying to cook different items on different platforms and bring them together all at once to give them to the customers really, really hard. The beauty of the ovens in our store is that the items come out of the oven in exactly the same order that they went in.
So if a customer orders two pizzas and orders some chicken and orders an oven baked sandwich, we put all those in the oven and voila, they come out together. We're going to talk all day today about orders and traffic. We're one of
the
few QSR brands that is focused on and delivering this. If you look at the results in the industry over the course of the last couple of years, and when brands talk about their same store sales growth, the vast majority of that growth has been driven by ticket. And that's not the sustainable way to grow the business over time. You've got to grow it through traffic and orders. So everything from how we price our products, our value message, all the way through to our loyalty program is all about driving traffic and orders for our franchisees.
And many of these things that I've talked to you about this morning were not divine inspirations that any of us had. We figured it out by getting the data and doing the analysis and making a data driven decision. And as the new CEO in this business, one of the things that gives me great comfort is that I don't have to make gut calls on a bunch of decisions. My voice in the room isn't any louder than anybody else's because the voice that is loudest is the voice of the customer. That's what we're listening to.
And we're collecting the data and we're doing the analytics to make our decisions. Now, that translates into the relationships and the alignment that we have with our franchisees because and I've seen it happen in a lot of other places we don't sit down at the table with our franchisees and say, I think we should do two medium, two tops for $5.99 And then the franchisee just say, well, I think we ought to do it for $6.49 apiece. That just doesn't happen. We bring the data. And if a franchisee has an idea about a product or a price point or a promotion, we test it.
We get ideas from all over the place. We'll test them. And the best idea based on the analytics is the one that wins. And we've been doing this for long enough now in The US business that the franchisees trust us in the decisions that we make. I'll be honest with you.
We still have some work to do in this area in some of our international markets around the world. One of the things I've learned is I've come from that side of the business and now getting a much wider view across the whole of the business is that we've got an opportunity to take some of these terrific analytics and port them around the world. And one of the themes that I'm really pushing inside the company is that we globalize some of these best practices. And as part of his role as our Chief Operating Officer, Russell is standing up centers of excellence in areas like data analytics so that we can start to bring some of this terrific decision making process to more of our international markets. All of those things roll together to result in a cash on cash payback for our franchisees.
Right now, our global cash on cash payback, when you take a look at it across our 85 plus countries around the world, we're better than a three year payback. And my experience in our international business and getting a chance to look at markets around the world, this payback is the best predictor of where we're going to grow and where we're going to grow sustainably over time. When we have a three year or better payback, we're going to grow. It just happens because the opportunity to invest in a Domino's pizza store and get that money back inside of three years' time is very attractive relative to the other investment opportunities that are out there. The payback in The US right now is better than that.
We're more in that neighborhood of two and a half years or better in The US. And it's not surprising then that we're seeing significant numbers of franchisees who are willing to put their hard earned capital into the Domino's Pizza brand. And that's what it's really about here, underlying together because winning together is really what it's about. And we have to make sure that we stay focused on what matters to our customers and what matters to our terrific franchisees if we're going to win together and if we're going to sustain the growth as DPZ that we want to have over time. So I talked a little bit about what matters to the story around how we've been winning.
And I'll take just a few minutes now and transition into looking ahead, looking forward a little bit. And one of the questions that some of you have asked me is, well, Rich, under your leadership, what's going to change? Well, I'll start by telling you what isn't going to change. Couple of things here. Number one, focus.
We really like being in the pizza business. And we're going to stay focused on being in the pizza business. And we've got a really enviable number one position with massive growth opportunity still ahead of us. I like the fact that everyone on our management team and all of our franchisees wake up and they're focused on selling pizza. 300,000 plus team members around the world who wear the Domino's Pizza uniform are focused on selling pizza.
That's the business we're in, and that's the business we want to stay in. We also like the franchise model, and our focus on the franchise model isn't going to change. It is really, as I said earlier, the soul franchisees are the soul of our company. And that's really what their entrepreneurship, their willingness to invest, their willingness to take risks is really what drives the brand. Second, we're not going to stop making front footed investments.
We're going to invest in technology. We're going to continue to do that. Not just consumer facing technology, which is the thing that gets all the news, But we're going to continue to invest in our point of sale system. We're going to continue to invest in our supply chain systems. So technology is going to continue to be an important area for us.
We're going to invest in our supply chain capacity. As we talk about fortressing today with respect to our stores, you can't fortress your stores if you don't fortress the supply chain side of the business as well. So we've opened the largest Domino's supply chain center in the world in Edison, New Jersey in the second half of twenty eighteen. And as we shared with you on our July earnings call, we've pulled forward the investment in two additional supply chain centers. And we'll talk about that when Jeff goes through some of our capital spending plans later in the morning.
He'll talk to you about what's happening there. And then finally, on the fundamentals. And I won't repeat all of them, but this just goes back to what I shared with you in the first part of this discussion, which is the things that matter to our customers and our franchisees, those are the fundamentals in our business, And we're not going to divert our focus or change there. We are, however, going to raise the bar on our system and set an aspirational goal for where we want to take this brand going forward. We passed our primary largest competitor in The US and internationally to be number one just recently.
So it's time to set a new goal for our business, and that is to be the dominant number one pizza player in the world. And this morning, I'd like to dimensionalize that for you a bit and talk a little bit about what dominant number one means to us and what it means to our system. Dominant number one to us means 25,000 Domino's pizza stores around the world. 25,000 stores. Dominant number one to us means $25,000,000,000 in global retail sales by the year 2025.
What we've been working on since we set this aspirational goal some seven, eight months ago is we've been working on aligning our system around this goal. We introduced it to 9,000 franchisees and store managers last May in Las Vegas at our worldwide rally. And since then, our markets and our franchisees have been aligning around their part in achieving this goal. If you had the opportunity to attend the Dash brands, the Domino's China presentation yesterday, you saw Aileen talk about China's role in achieving dominant number one. She talked about 1,000 stores by the year 2025.
And that's the dialogue and the alignment that we're having with our franchisees around the world. And there is a lot of passion and a lot of commitment around this that gets all of us excited about what this brand can ultimately become. And dominant number one, the reason we want to achieve that goal is not just because it'd be fun to stand up here in 2025 and rah rah, we got 25,000 stores. It creates a virtuous cycle in our business. It matters.
And it matters starting with winning in every neighborhood and market. You don't get to be dominant number one in the world without being dominant number one in the local neighborhood. And when we talk about fortressing, fortressing is all about being dominant number one in the neighborhood. It's about having the highest delivery sales per household, the highest carryout sales per household in each market. That drives the best unit and franchisee economics.
And Russell's going to talk a lot about that in his presentation this morning. When you've got those great unit economics, it attracts investment from franchisees and from master franchisees. And that's a big part of what we do as a franchisor, is creating a business model and an environment that attracts investment. It allows us to leverage our scale at the enterprise level. That's scale in purchasing.
It's scale in technology investment, it's scale in supply chain, it's scale in advertising to continue to build the brand. And if we do all those things, it allows us to generate best in class returns for our shareholders. So this morning, our theme is all about what matters. What matters to the customer, what matters to the franchisee, what matters to us, what matters to our shareholders. And to take you into more detail around that, I'm going to invite Russell Weiner, our Chief Operating Officer and President of The Americas, to come up and share some thoughts with you.
Morning, everybody. How are you? So Rich just took you through the plan to get to dominant number one. And I really emphasize the idea of plan to get to dominant number one because we know how we're going to get there. And how we're going to get there is how we've gotten to where we are right now, and that's with healthy growth.
Healthy growth, we're gonna define as really growth through order count. If you're growing as a company, how do you know if you're growing well? If more people, surprise, are coming to your restaurants? Right? So order count is really important to us.
And what I wanted to do was really give you perspective on what does order growth look in the QSR industry? What does order growth look like in pizza? And what does order growth look like in Domino's? Alright. So this first is the QSR category.
And to explain what you're seeing here, green because green is good. Right? Green is order count growth. Red is ticket growth. And what you could see here is really back to 2004 and and even before that.
The QSR category is growing through ticket. Alright. The numbers are are really ticket. And if you if you think about actually population growth, order count's not even keeping up with population growth. So essentially, a 100% of the growth that you're seeing in QSR is through ticket.
Alright. So that's a macro QSR. Let's let's now look at pizza. But we're gonna do a little twist on pizza is we're gonna take Domino's out of the pizza category to really understand the health of pizza category. And same thing here.
Red is ticket. Green is order count. Couple of interesting things. One is you can see, yes, you know, ticket is increasing every year. But what's decreasing every year is order count.
And then at the end of the day, how does it ladder up? Right? Those numbers on the top, which is overall sales. And you can see really starting in in 2016, overall sales flat, last two years down. And so Rich has talked about the virtuous cycle, you know, that picture there.
There's a vicious cycle too. Alright. That vicious cycle is when you take price too much, when your value equation is wrong, at the end of the day, it impacts orders. And you just it's not sustainable as as you see right here. So this is the pizza category less Domino's.
And before I go to the next page, because I'm gonna show you Domino's, I do want you to remember the numbers on the left and the right on ticket. Alright? Because I'm gonna show you Domino's, and you know Domino's has grown through order count growth. But I think it's important to know that from a pricing power perspective, we're doing pretty much the same, if not slightly better than the industry. So see the 2.7 ticket in 2014 and the 1.3 ticket growth in 2018.
So next comes Domino's. And you can see that is a 2.7 for us and a 3.1 for us. Okay. So ticket growth at, if not slightly higher than the category. But order growth, I mean, you've not seen green like this in either of the two charts.
And so we really like where we sit here because order growth is what matters. Getting more people in your store is telling you you're doing things right. You're not trying to trick them to spend another penny. You're satisfying them. They're coming back for more.
And so essentially, if you look back to 02/2008, where we are today, we've built another Domino's. Essentially, we've doubled the business. So we've built another Domino's pizza since 2008 as far as orders. So order counts matter, right? This probably won't be telling you anything you don't know, but it really starts to get into how we leverage order counts and how order counts lets us do things that other people can't do.
All right? So what do order counts drive? Healthy same store sales, right? Everyone always talks about same store sales comp. If you got good same store sales, what do you have?
You have strong unit economics. Strong unit economics gets you store growth. Now Rich talked to you about earlier, right? We had a couple of years, I remember we launched new and inspired, we were up 9.9. We shrunk our stores.
So you need a few years of same store sales, and you need to move your profit number before the lagging indicator of store growth helps. And that's why it's kind of further up the ladder here. You have store growth, and what do you have? This bigger number, which is total retail sales. Same store sales is important, but total retail sales is higher up on the ladder because it comprises both.
And it helps you really drive share growth. And and you saw the the numbers Rich showed earlier, really how how it it's significant increase since we became number one. Share growth gets you scale, and this is the important piece. Okay? What does scale get you?
Scale enables value. Okay? Scale enables value. Let me talk talk to you about about what I mean. Value matters.
Right? Rich said earlier, hey. I don't know who in this business has pricing power. You know who in this business has pricing power? It's consumers.
Right? They can say you're charging me too much. And as you saw in total pizza less Domino's, they can come to you less. Right? So the customer has pricing power.
And so what what you need to have in order to feed into this business is order count because order count drives volume. And so in times where potentially margins need to shrink, there are headwinds on whether it's food or labor or what have you, how do you overcome? How do you keep the value where customers want it? How do you keep $5.99 for almost a decade? Is you grow volume.
Because even if the margin shrinks, we don't put percentages in the bank, right? We put dollars in the bank. And that's what scale gets you. And so value at scale then lets us give our consumers, our customers price points that they're going to want, not just custom not price points that we want. I always joke, hey, I'd love to be able to dunk a basketball.
I'll never be able to dunk a basketball. Right? I'd love to be able to charge $100 for a pizza. I'm never going be able to charge $100 for a pizza. So how do we give the customers the pizza at the price that they want?
It's through this value at scale. And then that also lets us continue to drive the profits home that our franchisees need, right, no matter what the headwinds are. Make sense? And so when you think about headwinds, look, we all have the same headwinds. But what what really has become clear to me over the last few years is that with the scale that we have and the value that we can offer, the headwinds in the industry are tailwinds for Domino's.
They're tailwinds for us. Know, Rich talked before about the data driven decisions I kind of liken it to taking a test in high school or college. Whenever we have a test, Rich and I, in the boardroom about what should we charge consumers, it's not a test. We have the answers to the test.
It's like going in and making decisions with the answers to the test because we do all the data analytics ahead of time. And so there are headwinds out there for everybody. But at the end of the day, headwinds for everybody else, because we have the answers to the test, are tailwinds for us. Value at scale, we said the pricing power, we're not sure there's really anything like pricing power. Customers have the pricing power.
But you know what we have? We have something stronger than pricing power. We have profit power. Right? Profit power is something that's consistent and sustainable.
Right? Profit power is something that even when the economic circumstances won't allow you to take price, you still make money. Why? Because you have volume. So profit power is, we think, the term that's important to think about long term, especially in QSR.
This is profit power, right? We launched two medium, two tops for May, believe it or not, in February. We have not it's been almost a decade on that offer. Right? This is profit power.
Offer hasn't changed. Now ticket has increased. We've done some smart things around adding things to the $5.99 menu. Every time we add things to the $5.99 menu, consumers pick more of them. So ticket goes up in a healthy way.
We're not raising prices. Customers are happy they're buying more things. But essentially, the main price point on our promotions have stayed the same, yet you see skyrocketing EBITDA. And that's because of scale. That's because of volume.
That's because we doubled the business. We've created a second Domino's. One of the ways you achieve profit power is through fortressing. I want to go a little bit deeper into fortressing right now. First, maybe there's elephant in the room on comps.
I know a lot of folks have questions on, hey, aren't you worried about the impact of fortressing on your comps? And so we thought we'd just give you the number for 2018 at least. So 2018, the headwind on our comp, we think, is somewhere between 11.5%. All right? Now I'm going to tell you that is an investment you want us to make all day.
You want us to make this investment all day. And let me tell you why. So one to 1.5, why it matters to us. We look at all of investments, but to be a little funny here, it it really doesn't matter to us. Why does it not matter to us?
Well, let's think about this headwind against our comp. What does our comp look like? Is it hurting us? Yeah. I mean, we're up 7.1% year to date.
Maybe it would be nice to be up 8.1 to 8.6%. But in the industry, and this is not just pizza industry, there's no one doing even half of what we're doing. Okay? So our feeling is, hey, if you can win in the short term while setting yourself up for the long term, that's a good win. Plus, what's higher than so we have 7.1% here.
Let's take the top end of the headwind and say it's 1.6. Okay. Wow. We could have been up 8.6%. You know what we're up in total retail sales year to date?
Jeff will show you this later. 11.7. All right. So we're making a one to one and a half percent impact investment in same store sales, still leading by 2x on same store sales and getting a total retail sales well north of where this headwind would have been had it not had we not done any splits. So we think this is an investment you should want us to make and we certainly want to make all day.
And we're going to show you some results of these splits in a little bit so you can see a little more. So why doesn't the comp worry I'll save you all the belabor bullet points. You have a company here in Domino's that is playing two games. We are playing a win in the short term, and we are playing to win in the long term. And that's a difficult thing to do, right?
But we're doing both at the same time. We're continuing to have the best same store sales in the business, right, building that order count. But that order count, at some point, it requires more stores. Remember, we doubled. We created a second Domino's since 02/2008.
And so we need more stores if we're going to double it again, let alone all the power of fortressing that I'm going to get into. But we plan to continue to double this business. So winning in the short and the long game is our plan. Why Fortress, right? Proximity matters.
Rich talked about some of our franchisees delivering service that's best in class, under twenty minutes, seventeen minutes, some countries internationally even less than ten minutes. They do it through proximity. Right? Proximity allows better service. Why?
You're closer to your customer. Even I can do that now. Okay? But what does it also do? We know we're in competition for drivers.
Right? Do you wanna drive for Domino's? Do you wanna drive for a delivery aggregator? Why would you wanna drive for Domino's? Because of our proximity, you get more runs.
I think I actually heard someone say more runs. You're right. You have more runs. All right. That's all right.
I used to drive a taxi in New York. So the more runs you get, it was just like the more rides I used to get. What do you get when you get more runs? No. That's like, don't stop talking to yourself.
It's good. I have the same problem. There's a medication I can talk to you later that we can yeah, yeah, yeah. You and I we'll do the two for one deal on that one. But the the you do more runs, you get more tips.
Right? So you're making your salary, but you're making more in your salary because you have more tips from each run, not only because of the frequency of the number of runs, but when you're delivering great service, guess what? Your tip goes up. Alright. So it gives an advantage to drive for Domino's.
Next thing about fortressing. What does it allow? No. We keep talking about this. K.
Everyone's talking about delivery, and delivery is super important to us. But we all know what's bigger than delivery, and that is carryout. And every time we open up a store, the carryout volume is 100% incremental, 98%, sometimes well over 100% incremental. Why? Because people just don't want to walk too far away from their stores for carryout.
And so this part of the business that's significantly bigger than delivery, proximity is super important. Next is franchisees care what they make on a per store basis. They also care what they make on an enterprise basis. Right? So if you're making record profit per store and you're owning more stores, that's why your enterprise EBITDA goes up.
Next, helps us against the competition. We know we deliver better than everyone else today. We know everyone's trying to catch up and leapfrog us. So how do we stay better? We continue to franchise.
And we think that's the key that's going to have people no matter what platform you can order pizza on, they're going to order it from Domino's. And lastly, and we learned this, Rich talked about how starting in the 90s for like twenty years, we stopped growing stores, right? And so there's a competitor out there now in The US that exists because we stopped growing stores in the nineties. Right? If if we don't grow stores, if we don't split our territory because the customers want better service, somebody else is going to split that territory.
So we're talking about fortressing today as an offensive thing, and it is offensive. But no, we're also doing it with who we have experience. It's a defensive play as well. If money is there to be made, someone will come in. So where is fortressing working?
Last year, Rich took you through Seattle. And we want to be a little bit broader because this really is happening all over the world right now. So I'm going give you a couple of international examples. I'll give you domestically, actually, a big city example and a small city example to show you it's really kind of working for us everywhere. First example I'll show you is I'll talk about is India.
India, really, we learn things from folks around the world just like they learn from us. And in India, we learn fortressing is super important. There's a store in, I believe it's in Delhi that is has been split well over half a dozen times. And so if you look at India today, you'll notice one thing which is we have one less major competitor than we did in the past. And I can tell you we didn't same store sales them out of the country.
Right? We fortress them out of the country. In The UK, are a couple of examples. Here's one in Exeter where we started with one store and we split it twice, one in 2014 and 2015. And if you look at where we are today versus where they were presplit, well over 100% increase in total sales.
Nottingham. Any Robinson fans out there? No? You don't know what I'm talking about. Okay.
Well, Nottingham. Nottingham has 10 stores today. We had six stores prior to adding four in 2013. You see the sales numbers, right, pre post, almost 80% What what I really like is that delivery time, twenty three point nine minutes. Alright.
And so if you look since those stores have been opened, so they opened in 2013, 2014. So the look here is 2015 till today. So no more splits in those areas. But do you think the splits work? Do you think that do sales continue to have to happen?
Absolutely. I mean, are two markets that are definitely outpacing the rest of the of The UK. All right. Let's come back to America. And we thought it was important to share with you a Team USA market.
So Team USA are corporate stores. And there are lot of companies out there who are probably splitting stores because they want their franchisees to split and they say, well, shucks, if we're going to ask the franchisees to split, we better split ourselves. We're selfish. We're doing it because we're making money. This is working.
And so we wanted to show you what's going on in Vegas. So here is the pre period. We have three stores that we split into four. And you can see and split is really the wrong word for Domino's. We are so big already in this country that it's really kind of a redistribution or a realignment of territories.
So you can see this new store took some households from three different stores. But the household counts the same. So no green space here. Pre post the same. So with the same amount of space in Las Vegas, let's look at what happened to the cluster of stores.
All right? Sales per store per year, up 42,100 and 20. Now let me dimensionalize this a little bit. Okay? These are these are average annual sales per year.
So the stuff pre, whatever sales were, it was divided by three. Now whatever the sales are are divided by four. And so what does this mean? This means it's more than a 100 it's it added more than a 100%. I mean, it's it's up 42,124 that entire cluster.
Carryout sales we talk about all the time being incremental. Right? Carryout sales per store per week up 81,000. Incremental. We're getting more out of this cluster in total sales and in carryout than we did before.
Net promoter score. Remember I tell you customers are happier when you get them their pizza quicker. Net Promoter Score up 12. Remember, this is just a year. Rich talked about the goal is a three year cash on cash returns.
These are this is just after one year. And speaking of cash on cash or EBITDA, EBITDA per store per year is actually up. So we added a store, and the average per store is still going up. And it's not just because the new one is making money. There's a store in there, particularly the one that we took a lot of the addresses.
It looks it lost a lot of addresses. It's making more money. Why? Tighter delivery space. Right?
And so we are going to continue to do this in Vegas. By the time 2019 is over, we plan to be up 25% in stores. And so Store nine thousand thirty eight is the one I just showed you, that opened up. We've had two since then, not quite a year of data for that, which is why we didn't show today. But then you can see we already have four leases signed.
So we 2016, we had 27 stores. By the end of twenty nineteen, we expect to have at least 34 stores. It's a corporate market. That's a big market. How about a small market?
So this is a franchisee that we have Kevin Shaw in Roanoke, Virginia. So Kevin had one he had a lot of stores, but this is one particular store. And what he did was he split his territory. Now you can see there's some dark blue at the end. So he split the territory and he got about 400 new addresses because he can now drive a little bit further in his second store.
But essentially, this is a split, right? What happened pre post the split? Total sales after a year, one year sales for these two stores versus the one up $05,000,000 EBITDA up $130,000 after one year in a small market in Roanoke, Virginia. All right. India, The UK, Las Vegas and Roanoke.
What does all this fortressing do? Right. It it accelerates the enterprise EBITDA for our franchisees. What's enterprise EBITDA? The number of stores, which is about six to seven per franchisee, time that EBITDA number, that one thirty three number that Rich showed you earlier, kind of over time.
That's enterprise EBITDA. Couple of things on this chart. One is you can see our average franchisee, their enterprise EBITDA is approaching a million dollars a year. Okay. That's a it's gonna be a nice milestone the day that we hit that.
And I wanna talk to you how we're growing this enterprise EBITDA. So first, new and inspired, people talk a lot about new and inspired in 2010. The fortressing started happening in 2012. This order count growth that we're talking about has been helping grow it as well. But there's something else.
We've talked about fortressing our stores. Rich talked about fortressing with our supply chain. We're fortressing with our franchisees as well. Okay. So here's what I mean.
If you look at the x axis, you can see in 02/2008, we began what we call an ABF program with our franchisees. You all went to schools. You're here, so most of you probably got A's. But you also know what F means, right? All right.
So we had twelve seventy franchisees in 02/2008, and we have seven eighty eight franchisees today. Now that doesn't mean we're not growing our franchisee base. We're getting, you know, about 30 franchisees a year. But we are fortressing behind our best operators. So something that is also helping drive all of these order counts is services better because we have better operators operating these stores.
The other thing, if you look below, is the number of single store operators. So think about all the headwinds going on now. Think about folks that don't have the EBITDA that we have, that have a bunch of single store franchisees. It is going be hard for them to stay open. And so we went from five fifty two to two seventy eight single store franchisees.
So we don't have a single store franchisee problem nor do we have one or two behemoths that can also put some pressure on us. So what about the EBITDA for the entire system? So if our franchisee system was a company, pre post on EBITDA. Remember I said since 02/2008, we've doubled the Domino's business from an order account perspective. We've tripled the EBITDA for our franchisees over that time period.
Period. Okay? Order count at scale matters. And that's what drives the virtuous cycle that Rich talked about earlier. Alright?
Order order count at scale drives that virtual virtuous cycle. Alright. To take you through the last part, mister Jeff Lawrence, thank you very much. Thank you.
You guys can clap for Russell. That was great. I thought he did great. Good morning, everybody. It's great to see everybody again.
Again, as Rich said, we appreciate you staying over in Florida one more night and one more morning. Hopefully, this has been worth your time so far hearing from Rich and Russell. And as you become accustomed to at these Investor Days, I'll walk you through some of the numbers just dimensionalizing and pulling it together from a financial perspective, what this all means, while also at the same time, we'll give a little bit of look into 2019 just in case you have a model that does need to be populated sometime in the next couple of days. Really three things. We'll go through top line, bottom line on the left, slides that you're usually used to seeing, but again, try to dimensionalize it a little bit.
I'll spend just a couple of seconds talking about how the global industry is doing. Punch line there is it's doing great. We're very fortunate to be in this global pizza industry. Pizza is alive and well in about 100 countries plus around the world and then what that means for store opportunity for us. And then finally, a look into 2019.
We're in 2019, but looking at some of the things that we're thinking about from a financial perspective that may be of interest to you. So let's jump right in. If there's one thing that hopefully you take away from today is that retail sales matter. You've been hearing us talk about this now really for longer than you probably would admit, but we know we've been talking about this for three, four plus years. And it's really because at the end of the day, as a global franchisor, this is what matters.
Having a balanced result in retail sales matter, just as Rich and Russell have unpacked for you today. So we'll talk a little bit about that as we get kicked off here. This is a slide that I've shown you before, and it's not a complicated slide, which is why I can present it. There are four ways to get retail sales growth going. You got a U.
S, you got an international business. The first is everybody's favorite conversation, which is a thing called comps. And we are very fortunate as we start 2019 to be yet in another year where we believe we're going to be able to grow comps in both The U. S. And the international business, and not everybody can say that.
But at the same time, on the bottom of the slide, around the world, our unit economics, those comps year over year over year, 99 consecutive quarters in international, 30 in The U. S, have gotten us to a point with unit economics to where we also get three and four, which are the even harder ones, which is consistent, sustainable unit growth globally. So we're really hitting on all cylinders here. We think we're going to continue to hit on all cylinders. And at the end of the day, if you were to draw it up on a whiteboard, this is exactly what you'd want, and we're proud that we've been able to achieve that and hopefully continue to sustain that going forward.
Rich shared with you the global retail sales growth history just a moment ago. I'm just going to walk quickly through The U. S. And the international slide. And we've broken it out basically between the comp and the dark blue.
Everybody likes the comp. But that light, that kind of Carolina blue a little bit, almost Carolina blue on the top, is the retail sales contribution you get from the unit growth. And in The US, you see a really interesting story. On the left hand side of the chart, comps equaled retail sales fundamentally. We were just like everybody else.
Comps, no real unit growth. We were like everybody else, and that's why everybody asked us only about comps in 2011 and through 2014 or 2015. But an interesting thing happened. That chart that Russell showed you with U. S.
Franchisees, the profitability got to the point where the economic investment for our independent entrepreneurs was so good that they decided to really start to throw the capital behind the business. And that's when you started to see hammer swinging and the units getting put in, in The U. S. Every single year, that light blue bar is getting bigger and bigger and bigger. And when you look at it, one way, one good way to get to double digit sustainable retail sales growth is to have comps firing, but also to have that unit growth firing at the same time.
Really proud of what The U. S. Business has been able to do here under Russell's leadership with his guys. And again, our goal here is to keep this going, and we feel pretty good about it. By the way, we talked about retail sales.
We've talked about splits and comps and fortressing all day long. That 7.1, as Russell said, could have been in the eight handle. We made the conscious decision to make the investment, that one to 1.5 investment to get the unit growth fired up even faster, more aggressive, that's why we're well north of 10% in the last three or four periods. And again, that's hopefully our goal going forward. International.
Under Rich's leadership, led this division for more than seven years. I could gush on about this slide all day long. I won't. Because when you have these kinds of numbers, you really don't have to. But sustainable consistent balance geographically also between same store sales and the unit growth contribution to retail sales.
And as you can see, double digit every single year. This is a look without FX. So it gives you really the sense of how the brand is really growing in all the local markets. And again, a track record of growth here, certainly in retail sales growth, but 99 consecutive quarters of comp growth in the international division, which is just truly astounding. So retail sales growth is great.
We talked about the comps. The only thing we haven't really talked about, and Rich showed this a little earlier, is the unit growth. More than 5,600 units since the end of twenty eleven, continuing to grow. A little bit of a bump there when we had a little bit more conversions in 2016 that we talked about in the past, but basically a nice steady burn kind of up the hill here. And not to be understated is the dark blue at the bottom.
That's The U. S. Business, a fifty nine year old business, which in 2018 will once again be the number one market for unit count growth in the world. Fifty nine years old and a growth opportunity at the same time. Really proud of what we're doing there because that, again, the dark blue is just one market.
The rest of the blue is international, that's 85 plus market. So very diversified global growth here, really proud of the trend here. So we talked about what matters today, and we are trying to tie together all of the financial pieces here for you. You can't do all of this unless the franchisees are really satisfied with the economic opportunity. You've seen this before, 2008 to 02/2017, all the way to 136,000 at the end of 02/2017.
And one of the nuggets that we'll give you today is an early look at 2018 U. S. Average franchise economics, up yet again in dollars, current estimate $137,000 to $140,000 And the important thing to note here, tying together splits, tying together fortressing, is that $137,000 to $140,000 in 2018, that average, that includes all those split units from 'eighteen, from 'seventeen, from 'sixteen. When you add it all up on average, even with those new units, the dollar amounts are still going higher for our franchisees on average. Really proud of that, really excited about that because we think that gives us an opportunity to continue the momentum going forward.
And of course, when franchisees are winning, it really gives a great opportunity for our shareholders to win, the folks in this room and around the world. Really proud of our 20% -ish or so compounded annual growth rate in diluted EPS over a very long period of time. Certainly, 18, we've been shooting a little higher batting average than normal, primarily due to tax reform. But really importantly, the ops continue to really fire through the first three quarters of the year as well. You roll it in, continues to give us really good flow through to the bottom line.
So we're taking those retail sales, double digit retail sales. We're getting really good leverage in the earnings per share. And again, we don't give guidance on EPS going forward. But of course, our goal is to to maximize that as much as we can while still making all the right choices for the long term. So shareholders.
We talked about franchisees winning, we talked about shareholders winning. We also are very serious about getting that enormous amount of free cash flow generation we get out of our business back into the hands of shareholders, but only after we make the smart investments to continue the train rolling down the tracks. So this is a look since 2011 on the amounts that we've returned to our shareholders, various ways that we do that. Of course, an ordinary dividend, we've done specials, we've done accelerated share repurchases. We've done open market repurchases.
The menu is alive and well to us. We try to be opportunistic. But over this time period, we've returned more than $3,500,000,000 back to you, the shareholders, which is a great end result for those that have the confidence in us under Rich and the leadership team as we continue to go forward. Also in that gray box on the left hand side, I'd be remiss if I didn't take a little bit of a moment to really congratulate our leadership team and again, the franchisees around the world. The stock has performed extraordinarily well with total shareholder return north of 45% over this time period, which is almost 4x the S and P 500 and almost 3x the S and P 500 restaurant index.
So really proud of the value that we've driven at the end of the day. And again, our goal is to try to continue to keep that going as we go forward. All right. So those are a lot of the numbers you know. We gave you a couple of nuggets that I don't think you had before.
Most importantly, that the franchisees again made more money in 2018 really than in the fifty nine year history of Domino's. Let's now look and take a broader look at the global pizza industry and give you a quick update for you there and what that means for us as far as unit count opportunity both in The U. S. And abroad. What matters?
Well, the industry matters. The global opportunity matters. And for us, it's really the same here. We've tried to dimensionalize the global pizza industry a little bit in more detail. You'd normally hear to say that, hey, the global pizza industry all in, including The U.
S, well north of $100,000,000,000 it's big, it's growing, it's fragmented. It's growing specifically in carryout and delivery more than full service and dine in, and those are all great things for us. In the middle of the slide, we came up with a little bit more of a granular look on what's the quick service restaurant subset opportunity of the $141,000,000,000 total opportunity in pizza. And you can see it's split pretty evenly between The U. S.
And the international opportunity. Regardless of which number you pick, you can pick either one you want, you can pick both, you can pick none. It's a big industry. It's growing. It's fragmented.
And again, it lines up well to what our strengths are in delivery and carryout. So great industry, but what does that mean for you all at Domino's as you look at the opportunity and units going forward? Well, you heard Rich talk about it earlier today. One of the big things that he's pushing for and that we are behind and our franchise partners are behind is to get to 25,000 units by 2025. And we're serious about it, and we think we have a really good chance to get there.
One of the first ways we're going to get there is by continuing to push aggressively for unit growth in The U. S. And this isn't as hard of a conversation as you would think it is with franchisees making more money than they've made in the history of Domino's. We're using data driven decisions. We know where the sales are.
We know where the location should go. And through the first three quarters of twenty eighteen, you could see that we were continuing to accelerate The U. S. Store development. We believe we have at least 2,000 more that gets you into the 8,000 handle that we've talked about before.
But again, our largest market, we're not done in The U. S. Really important distinguishing point here. We are not done in The U. S.
The economics are there. The opportunity is there. We think we can go get this over the next seven or eight years. Let's now shift to international. We're going to do this a little bit differently than you're normally used to and really because we think it's time to look at it a little bit differently.
We take the top 15 markets by store count. We usually show you a slide with the total opportunity, we say we got at least 5,000 units in these top 15 by current store count. But it's an easy way to look at it. It's a good way to look at it. We're going do it a little bit differently today.
Today, I'm going to tell you that in the top 15 international markets today by store count, minus Brazil, Russia, India and China, because everyone loves that acronym, and I do too. It's really easy to remember. We've got at least 3,000 more stores to go just in those 15 markets there, again, without the brick markets. And quite frankly, without the other 70 plus markets that aren't even going be on this slide at all today. These are just the big guys.
When you look at just Brazil, Russia, India and China, you mostly know about the India story. They're a public company, fantastic partnership with Jubilant FoodWorks out of New Delhi, India, and they are just great story for the brand. We don't talk as much about Brazil, Russia or China. But as Rich mentioned earlier, Dash Brands, which is our China master franchisee, was here at this conference, and they talked about getting to 1,000 units. We think that's a real opportunity.
We agree with them. It's at least 1,000 units. Brazil and Russia, we think those markets over time are probably at least 1,000 unit per market opportunities. You add that up, you look over the next kind of medium to long term, those four markets alone, at least 3,500 more units, not total units, more units for just those four markets. And of course, as you look across this slide, that's why we have the confidence that we can go from around the 15 handling units to the 25,000 unit mark in total by 2025.
All right. To wrap up here, and before I bring Rich and Russell back up for some Q and A, we'll look ahead to the rest of 2019 and give you some updates that I think you will care about. What better way to start 2019 than with an accounting update? I know you guys love this stuff. I know I know you love it.
I get a lot of questions on what's the new gap stuff? What's the SEC saying? I love when I get these questions. Last year, if you remember, it was all about revenue recognition. But three sixty ish days later, it's now all about lease accounting.
And for us, it's going to be really simple. It's going to be really simple. Expect us to gross up our balance sheet when we report Q1 early in the spring, but do not expect any reclassification or restatements of prior period financials and don't expect any material income statement impact from adopting the new lease accounting standard. So balance sheet will change, it will gross up, nothing really on the income statement materially, and we're not going to change anything going backward. That's the lease accounting standard that accounts for, I think, one CPE credit for all of you.
Chris Brandon will get that to you as you exit on the way back to the airport today. Let's now get into the investment. Before I tell you what I think our CapEx and our G and A is going to be for 2019, let me just again dimensionalize for you a little bit what Rich and Russell have been talking about and because it really does tie into the level of resources we think are required to keep this train going down the tracks. And I'll work from the top left here. The first thing we're going to continue to do is we are going to go hammer down on the digital consumer experience that's already best in class.
Not good enough to be number one, not good enough to be best in class. We're going to continue to pour money into this because it's what the consumers want and it's what's going to continue to drive this business, both in The U. S. And as we globalize to many more markets around the world. Moving to the bottom left, Pulse.
We're working on a next generation point of sale system that we've mentioned to you before. We've just embarked on this journey. And one thing that I'd be remiss if I didn't say is, while most QSRs out there are trying to get their system on one point of sale, we've had one for over a decade, and we're now moving to two point zero while the rest of the brands are trying to get point to zero. It's been a huge competitive advantage for us already. And with the next generation point of sale system that we're starting to work on, it's going to be even more important.
It's going to enable mobile even better. It's going to be cloud based even better. And it's going to integrate with our e commerce capabilities globally so that we can continue to provide a great technological in store experience that will continue to grow retail sales. On the top right, I know some of you visited the Edison, New Jersey Supply Chain Center, the biggest and most advanced that we have in the entire Domino's system late last year. This is a picture of our dough bot.
Yes, I said dough bot, that's what we call it. And this is basically another example. All of the things you see here are technology based. Even if it's supply chain, point of sale, ecom, I'll get to the bottom right in a second. All of these things are technological based and supply chain is ripe for technological innovation.
We did it in Edison, New Jersey. We're going to do it in South Carolina as we announced in the latter half of twenty eighteen. And we're also going to do it in Texas, which is the location of our third new center that we will be working very hard on 2019 to open along with South Carolina in the early part of twenty twenty. Finally, smart investing for the long term. One of the biggest kind of not secret secrets that we have is we have homegrown talent inside the world headquarters in Ann Arbor, Michigan, analytics professionals, marketing folks, technology folks that all work together to create the innovation that you've become accustomed to from Domino's Pizza.
On the bottom right is a rendering of our innovation laboratory that we are building out in the Buffalo Patch, if you've been to Ann Arbor, and what we affectionately refer to as our tech garage. This is going to be more than a a 150 seat facility where all of those innovators can continue to work together to come up with the next tracker, the next GPS, the next AV solution, whatever it is that we're gonna ultimately end up doing, it's gonna be coming out of this collaboratorium, and we're really excited about it. So that's the soft stuff. Let's get into the hard numbers. 390 to three ninety five for gross g and a for 02/2019.
I'm not going to give you more than one year because we're living in a dynamic environment, a dynamic industry with lots of competitive things going on. But I'm pretty sure that we'll end up in this range. You do know that it can flex significantly for strategic opportunities or performance based opportunities, and you know that, I've told you that before. But as we sit here in January, $390,000,000 to $395,000,000 gross. And the reason why I say gross G and A is because this doesn't include franchisee contributions to us or among other things, the digital fee that they pay us as they co partner with us in investing in that best in class technology there.
CapEx 2019, 110 to $120 USD. We are going to get a lot done in 2019 for the long term with this 110,000,000 to $120,000,000 Material progress, not on one new center, but on two more centers after New Jersey. Real material progress on our next generation point of sale system. Our innovation laboratory that is going up and will be open in the springsummer of twenty nineteen. We are going to get a lot out of this.
We're going get high ROI out of all these investments. And the gross number here for 2019, 110,000,000 to $120,000,000 All right. Let's shift to what our operators in The U. S. We think we're going to face.
We all know that there are some labor pressures out there. That really varies by market. But we do know with more certainty what they can expect in food. And it's basically that their food basket is probably going to be up in the 2% to 4% range in 2019. So a reasonable range.
We're going to continue to upgrade the product, which is included in the 2% to 4%, and we feel good about commodities as we go forward in 2019. Shifting gears a little bit, FX. We've given up over the last six, seven years more than $30,000,000 of operating cash flow, EBITDA, however you want to calculate it, pretax from FX. It is what it is, not a lot we can do about it. 2019, as we sit here today, looks to be another headwind year for us on FX.
But again, the one thing I'd show you is, at the end of the day, that EPS growth that you become accustomed to include those headwinds on that fact. We don't use it as an excuse. Again, it kind of is what it is. We hope that it flips in our favor. We certainly feel like we're due for a good year at some point.
But The Economist tell us right now that it should be between five and ten, and and we'll update you later in the year if that materially changes. Balance sheet update. You know that we've been fairly active in the capital markets over the last four or five years, topping it off a little more frequently, really layering the maturities, acting like what we are, which is an investment grade credit out there in the market. Current leverage ratio, kind of the old school calculation, just taking EBITDA versus gross debt, around 5.5 turns at the end of Q3, continuing to delever as you'd expect with EBITDA going up over time. Next park haul opportunity on our 2017 five year note is in January of twenty twenty.
That doesn't mean we're going to do a deal in 2020. It doesn't preclude us from potentially doing a deal in 2019. But again, this is one of the key dates that people normally like to know in our existing facilities in Jan twenty twenty is the next date there. And again, at the end of the day, our goal is to optimize the cost of capital and just be opportunistic if the market gives us that and be able to pounce on those types of opportunities going forward with the capital structure. And finally, before I invite Rich and Russell back up to the stage for some closing remarks and for some Q and A, we are super excited to reaffirm our three to five year outlook.
So in some ways, there's no update to the outlook, but the outlook is I'm starting another three to five year shot clock here, we are. Comps, 3% to 6% globally units, 6% to 8%. You do the math, it's eight to 12%, exactly what you've seen in the last couple of years from us. And I'll make just one more point as we wrap up what really matters. What really matters at the end of the day is the bottom number.
If I can get balance on the top, I kind of don't care whether it's three to six or six to eight or but if they are sufficient and they work together to get me twelve, to get us eight to 12 at the end of the day, that's what we really care about and we're really proud to reaffirm our guidance. And again, includes all the splits, includes all the competitive threats. It's the same number. We think we can deliver this more often than not over the next three to five years. And with that, I'd like to welcome Rich and Russell back up to the stage for some closing remarks and then Q and A.
Thank you, Jeff. All right. Well, before we get to questions, just a couple of thoughts to wrap up this morning. First, I hope you take away from the discussion this morning that we are really excited about the opportunity ahead of us in our industry. And we feel very fortunate to begin to go after that opportunity, that journey to dominant number one, from a position of strength.
Strength relative to our competition, strength relative to where this brand has ever been in the past. And we believe that if we stay focused on the things that matter to our customers and the things that matter to our franchisees, then we can deliver on the things that matter to you as our investors. So with that, we're going to open it up and be happy to take your questions.
And for those who have a question, both Chris and Becky have microphones. Just please raise your hand nice and tall, and they will pick you at their will.
The comments obviously in terms of what you think the impact from splits will be as interesting, especially 40% of store sales, you say it's 100% incremental that is takeout on premise. And so if you were to take 4.5%, which is approximately your store development, 60% and then divide that in half, that kind of sits between that 1% to 1.5% type of impact from the fortressing that you talked about. So one, I mean, I guess that's pretty simple algebra or arithmetic in this case. Kind of verify that, but is that 50% what you expected in terms of the again, the impact from fortressing on delivery sales? And where do you think that number trends over time?
Because you could imagine how it could go higher or lower and 50% is obviously like a nice round, easy to remember number. But where do you think that trends over time? Just to get even a little bit more into the details?
Yes. So what we shared with you this morning, John, the empirical data, it's the real data for what we saw during 2018. And as you take a look going forward, we're not going to project what that impact will be here this morning. But it will be based on how rapidly we continue to grow the store base in The U. S.
And what portion of those stores are fortressing and realignment of some of the territories of our other units. What I will tell you is that each of those decisions that we and our franchisees make about where to open a store take these things into account. So when we sit down and look at where a new store is going to go, we're not just having a conversation about what the economics of that incremental new unit will be and what the payback of that new unit will be. We're looking at the cluster of stores that surround it. So Russell shared with you that example in Las Vegas.
When a store opening package comes to Russell and myself and Jeff and all of us look at any store that we're going to build in our corporate store business, we're taking those things into account. So we're looking at the payback on the new unit and the payback on the cluster, taking into account any of that cannibalization of same store sales that you might see. And the good news is that over time, our models have gotten better and better and give us more confidence that when we build those units, we're going to see a strong result that we build as corporate stores or that our franchisees build. And I think another thing that gives us a bit more confidence as well is that we've been doing this for several years now. And if you look at what's happened in the first three quarters of twenty eighteen, we've only closed seven units in The entire U.
S. So if you're out there opening a lot of bad units, you're going to see a closure rate significantly higher than that. So we get a lot of confidence around it. We're going to keep tracking it and keep monitoring it. There've have been a lot of questions about the headwinds.
So we wanted to share an 2018 number with you, but we're not going to project forward a 2019 number or beyond this morning. I would just add
to that is certainly, we don't want to project forward because, like you said, things can change. Things can also change for the better. I mean fortressing also gives you the ability to potentially close the competition. We saw that in India, right? Competition is gone.
And that then becomes a tailwind. And so really it's that's why kind of year by year we can continue to plow through the numbers.
Think we're right here with Will.
Thanks. Will Slabaugh at Stephens. Jeff, I had a question for you on the 2,000 number you put up about The U. S, which we've seen one time or two times before. Have those conversations been had with the franchisees to the extent of saying, we feel confident around these 2,000 stores?
Do they know essentially roughly where they're going to go? And are they confident as you are about those stores as well? Maybe Russell, if you may want to
hop in there as
Yes. So I'll start and then I'll kick it over to Russell. He looks after that business. But from a financial perspective and a data perspective, we've built the capability internally of kind of what where does all this G and A go. We've stood up a function of capability that's really good at estimating sales per quarter mile everywhere in The United States and then being able to amalgamate that and then overlay competition, overlay traffic patterns, other things to say, here's where these 2,000 plus units and I think we're getting pretty damn good at it
So level of confidence from a data and a financial perspective is pretty high. I think that being a decade in on having data driven conversations with the franchisees, the other side of the the other participant on the other side of the conversation, they are so educated now. They're asking such great questions, our U. S. Franchisees, that it's really really good iterative conversation.
And you can see it in the numbers, at least through the end of the third quarter. They're opening stores. We're not closing stores. Their total profits on average in dollars are up including all the split. It's just working.
So yes, we think that there are at least 2,000 still. We think we know where they're at. And I think we have a really good chance on going to get them.
Yes. The only thing I you said everything. The interesting thing is that Roanoke example I showed you was a email that I got from a franchisee. How exciting it was. So they're doing their own calculation and it's just super exciting.
Hi, good morning. It's David Tarantino. Just a question on sort of how you see this pacing. I mean, it seems like the current environment is very favorable for you to potentially try to accelerate this fortressing strategy. And I just you didn't mention sort of how you think about that 2000 and when it occurs.
So I'm just wondering if you should the takeaway from today should be that you're trying to accelerate this given the current environment in 2019 and 'twenty and unit growth in The U. S. Might accelerate from where it's been tracking in 2018. And then relatedly, if you were to accelerate the rate of growth, should we think about that, the impact on comps as being kind of proportional to what you shared? So maybe like 20% to 25 of the unit growth is what you'd see on the
So David, we definitely see some opportunity to continue to accelerate the unit growth in The U. S. Business. And for a couple of reasons, really, first and foremost, the profitability is really strong today, not just at the unit level, but also, as Russell shared with you, our profit per franchisee and the cash flow that they're generating is very strong. We also now are coming off of the tail end of a major reinvestment cycle around the upgrading of the image of our stores as well.
And with more than 90% of the units in The U. S. Now in pizza theater, that is that's capital that isn't being employed now to go out and do reimages and the many relocations that were done in the past. So the opportunity is certainly there, and it's ripe, we believe, to continue to accelerate the pace of growth. As for the headwind impact on the same store sales, as I mentioned earlier, depends on a lot of different factors.
But what I can tell you is that for each of these stores that opens, we are going through the analytics and the math with the franchisees to try to make good decisions. And what we haven't talked about this morning is that in The US, Russell and his team actually tell franchisees no on opening new stores. Because if a franchisee brings a location, maybe there's a new center being built, They say, hey, it'd be fabulous to put a Domino's right there. What used to happen many years back is we'd help them get a store open. What we do today is we take that location, we run it through our models.
And if it doesn't pan out, either because the unit doesn't look like it would generate strong results or if we thought that the impact of that unit on the others around it would be detrimental to the cluster, we actively advise and encourage the franchisee not to open that unit. So we think about it very much on a micro level. We've got, as Jeff said, we know where we believe the next couple of thousand units need to go. And so we'll pull up periodically and take a look at numbers like the 1% to 1.5% that you saw today. But we don't worry a lot about it on a day to day basis because when you think about that investment in the context of driving retail sales growth toward our three to five year outlook of 8% to 12%, it's a no brainer investment on our part.
Over here.
Dave Palmer, RBC. In the fortressing strategy, how much do you take care to make sure that that new unit is cannibalizing an existing franchisee nearby? And how do you manage that process? Because we've seen I remember in the late nineties, McDonald's did did this sort of a thing, but it was with new franchisees and it caused some grumpiness within the system when a new guy is cannibalizing you. And then the second thing is when you are doing this, you're saying it's one to one and a half point drag, but you have these examples where it causes some outsized comp growth.
Is this one of those things where year two is a big comp year such that as we get deeper into this process, that one to 1.5 points really goes away because you're lapping the drag with some outsized comp growth?
Yes. So I'll start and then you guys feel free to chime in. So most of the fortressing that happens is with franchisees building inside of their own territories today. So we're in a much better position to do this given what Russell showed you that we've consolidated the franchisee base down from about 1,300 down to about 800. So most of the conversations we have are with franchisees about placing additional stores inside of a cluster of territory that they have today.
There are times when a store needs to be built on the border between two franchisees. And there's a lot of conversations that happen at the market level where some horse trading goes on where Jeff and I have some territory that's kind of intertwined. Maybe I sell Jeff a couple of stores, maybe he sells me a couple of stores, and then we go and fortress from there. In our corporate store market like Las Vegas, it's very easy because we just decide to do it. We have the market and we go after it.
So easier when it's the same franchisee. When it's not the same franchisee, it's a little more complicated of a conversation that we have to have. And that's part of the whole process that we go through with this over time. But the more success stories that we can have, like Russell shared with you today, the easier the conversations go and the more that we have franchisees who will actually evangelize for the strategy going forward. They do it themselves.
I mean, they will sometimes come to us saying, hey, we're going to reallocate stores ourselves so Rich can split and not worry about Jeff. We even have cases because now remember I showed you that store that lost household counts but made more money. And they're all about making money. They really there have been enough examples of that now that really the franchisees are very proactive with us. It's not us going out as much anymore and proselytizing.
It's about them saying, hey, you remember that plan we ran here? We want to run it here.
Yes. The only thing I'd ask just add from a more of a math perspective is your question around what happens at 1% to 1.5 We're not going give any guidance, as Rich said, but we've got enough vintages now. It's not like we just started Fortresson in 2017 or 2018, we've had three plus years, four, five years of doing this. So you've kind of got some of the old vintages in there, split stores, you've got some of the new ones, all kind of mashing together to give you that one to 1.5. So you got a little bit of both in there.
So to Rich's point, really just depends on the rate and pace of what we're able to accomplish going forward, we'll ultimately stitch you out a number. But end goal is that double digit retail sales growth and that's really the prize.
And the second part of your question around how things behave over time. So it's kind of a two part dynamic. When you go in and build a new store, as Russell has shared with you, the carryout business is incremental from the beginning. But then what happens with delivery over time is that we're able to grow the delivery sales per household in the service area because we're providing better service. Because if you think about it, even if your house is four minutes from a Domino's store pre and post that territory being split.
If that territory had a nine minute radius before, then you might have gotten some later deliveries over time because we were waiting on a driver to come back from a nine minute out location to then pick your food up and bring it to you. So when you tighten these things down, you actually reduce a lot of the variability around delivery times. So think about when we look at delivery times, we're looking at averages, but we're also looking at the distribution. We're looking at standard deviations and trying to understand how often are we really disappointing a customer by being forty five minutes with their delivery. So it builds over time.
And the data that we've been able together and analyze shows us that the closer a delivery customer is to the store, the more frequently they order, the more they spend over time, and the better job we do at consistently giving them good service, the more they The
only thing I'd add too is your a lot of the questions are about the headwinds. We don't we're not going to project future headwinds, just like we won't project future tailwinds. But I'd remind you that first chart or the second chart I showed you on order counts, QSR pizza, less Domino's, they're down. And so a potential result and down last four or five years. And so one of the results of fortressing can also be taken away from the category, which again, not projecting forward, but we all talk about what could the headwinds be.
Well, that could be a real tailwind if that continues. Christopher?
It's Chris O'Cull with Stifel. My question
is for
Russell. If you look at the franchise profitability in 2018, the estimated amount, it's up a couple of thousand dollars, but the comps have been up 7%. What kind of comp lift do you need, you think, this year in order to sustain growth in the EBITDA number for the franchisees, given all the headwinds you're seeing with wages? And then I also had a question regarding just how does the competitive environment factor in your analysis when The you look at store
first question was around the comp growth that we need to get the EBITDA growth. And I don't want to get too specific on that, but there is a comment that I've been saying to our franchisees, which is flat is the new down. If you are flat in same store sales, which a lot of folks aren't even in our industry, to even up one or two, I mean, you follow these businesses, you're down. And so I don't want to get into specific math. We need x point x percent growth to grow.
But I will tell you that unless something changes dramatically flat or an up tube won't do it, which is why you need the right value, but you also need the volume. And kind of maybe this touches on your second question a little bit about kind of competitive context. We test all of our pricing, and that's why we stayed at $5.99 for a while. We know a lot of the competitions come to where we are now and even more aggressive, some as low as $5 And I can tell you, dollars 5 when flat is the new down in a high wage market, at least with our numbers, there's not money to be made. Right?
And so whether or not that's sustainable all the long term, but we're in the business of delighting our customers, but also making our franchisees money. And $599 even in the coast is a good price point, kind of south of that, you would need volume better than us, which is best in the business to make money. So I don't know if that answers the question.
Jeremy Scott, Mizuho. Just on the CapEx breakdown, wondering if you could share some more color on that. Does the Texas and the South Carolina plants, so those both fall into 2019? Or is there some spillover there? And then separately, I know you don't typically guide G and A going forward or as a percentage of system sales, but given the investments that you're making, are we to expect practically a higher rate of investment going forward?
Yes. So first on the CapEx, the 110,000,000 to 120,000,000 for $2,019,000,000 a bunch of that is going to be getting South Carolina and Texas stood up. We got a little bit of that pulled forward into at the end of twenty eighteen. Some of it will spill, a little bit of it will probably spill into 2020, but the meat of it will be in 2019. And so continued elevated investment, smart investment, you got to have an investment for supply chain is a big part of 2019.
A big chunk of it is ongoing tech spending, tech investment. You can't get these retail sales without it. If we could, we wouldn't do it. But we do need to actually invest in those capabilities and stay ahead of the pack. And it's going to be supplemented by that next generation point of sale system that we're really accelerating on in 2019 as well.
So as I think about and there's other stuff, right? There's some Russell will build some smart corporate stores. We're going to finish up the Tech Garage, which is the innovation laboratory that we talked about earlier. So we've got a boil down prioritized list of some big things that we want to get done. This is not death by 1,000 cuts, copy machines and furniture.
This is strategic things that are really important to the long term prospects for the brand. And that's why we think we'll be north of 100. We're going to be smart about each project. If we think we can find ways to optimize, economize, any other kind of eyes, we will do that in 2019. But this is investment we know we have to make.
And what I would tell you is if I came to you in 2019 and said, we're going go old school and go back to the what I remember nineteen years ago when I started, we're never going to spend more than 25,000,000 or $30 on CapEx. You should absolutely sell the stock immediately because it run right off a cliff when Russell doesn't have dough balls, our point of sale system becomes second and third in class, etcetera. So that's kind of the CapEx look. On the G and A, again, we don't give a specific metric to that. We do behind the scenes worry and fret and we're always trying to get as much efficiency and as much ROI out of G and A as we can.
But I only we only give you one year because it's a real dynamic environment. It just I feel like if Rich stood up here and the rest of the team and we gave you a two or three year outlook, I know I'd be wrong. I don't know if we'd be wrong up or down or sideways, but it's just really hard to see out there because it is a pretty dynamic competitive environment right now. And we want to have the flexibility maybe just to invest a little bit more, maybe we're able to come off it on some things. But we're always prioritizing whether it's G and A, whether it's CapEx.
And if we continue to get the retail sales, if we can continue to get the throughput and the ROI, we're really encouraged to be front footed, like Rich said. So that's kind of how we're viewing it, but really don't want to guide past the three fifty or so days on those.
Jeff Bernstein from Barclays. Looking outside The U. S. For a moment, maybe just a two part question. The first part on the international comp, three to five year guidance.
You kept that at three to six for the international. Obviously, 99 straight quarters, it's pretty impressive. The past three plus years, it's been at the low end of that three to six. I'm just wondering as you think about, again, three to five years versus just one year, what was the thought process internally whether there's markets that maybe were weak the past year or two that you really have great confidence or accelerating or you have new markets that are going really kick in. But just wondering why maybe there wasn't a tweak down as you think about multiple years out just based on the recent trend.
And then the second one was just on international unit growth. That chart you showed, it looks like you had that big spike when you had some acquisitions a year or two ago. Maybe the organic is more stable, but do you foresee more of those big acquisitions? Because obviously, that gives you big jumps, whereas at a certain point, the organic growth is tougher to come by. Thank you.
Sure. So first, Jeff, on the question around the same store sales guidance. We still feel good about that three to five year outlook of 3% to 6%. The international business is portfolio of 85 plus countries out there. And at any given point in time and this has been true throughout our history we've got some international markets that are running double digit same store sales, and we've got others that are running negative.
And that blended number that you see is just is basically that. It's a blended number across all of those together. So as we look forward, even though we've had a bit of choppiness in some recent quarters, we still feel very positive about the opportunity that we have in those international markets. Even with some of the softer overall same store sales that you've seen in a few recent quarters, we've been very encouraged by the fact that all of that same store sales through the first three quarters of twenty eighteen was order count driven. More than 100%, the international same store sales number for the year through Q3 have been order count driven.
So we look forward and we still feel comfortable with that range. To your question on the unit growth and opportunities for potential conversions, there is a conversion that is still underway right now, which is the Hello Pizza conversion in Germany, which is being led by Domino's Pizza Enterprises, our largest master franchisee based out of Brisbane. And they're making good progress. I'm sure they'll update investors when they do their half year readout in the coming weeks. I'm sure they'll update investors on the progress the halo conversion.
We're always looking. Beyond that, we're looking opportunistically. It gets more and more difficult to find big conversion opportunities. The bigger we get, kind of two things happen. One is for a conversion to even matter, it has to be of a pretty material scale.
And then second, it has to make sense geographically in that country such that we're not closing a significant number of units due to overlap, for example. So we out there and look for opportunities. But my expectation is that the vast, vast, vast, vast majority of our growth going forward is going to continue to be organic growth. And frankly, that's the type of growth that we prefer anyway. Conversions are useful to fast forward share capture when that makes sense.
The long term, the way to grow this business is through organic growth.
Matt Frisco, Guggenheim. Two questions. With respect to the percent headwind from the fortressing, is that also embedded in the three to five year guidance as far as staying sort of static even though you're going to probably have to go north of 300 net stores a year in The U. S. Implied by your 2,000?
And then the second question, sort of a follow-up to David's where he was asking about the sophomore and junior the sophomore year of these stores after they've been fortressed. What would Seattle look like right now? Is a Seattle market from a year ago that you showed as a fortress, is that double digit comping? Is it out comping the national average because you've added that incremental capacity?
Chip, why don't you take part one
and Russell part two on that one? And part one again
The one to 1.5% is that in that three to five year plan as staying flat?
Yes. So every so the kitchen sinks in the three- to five year outlook is a short answer, whether it's existing competition, newfangled competition, split impacts, it's all in there. In the three- to six comps, in the six to eight units and in the eight to 12 retail sales. So it's all considered in those numbers that reaffirmed for you.
But is it embedded then that maybe that becomes 200 basis points if you were to do three fifty net openings?
I think that just goes to Rich's comment earlier, which is we're not we won't give guidance on it. But if we increase the rate and pace as a percentage of the base and the split inside of that even get a little bit bigger, you could expect that number to potentially grow. If we go the other way and we disappoint ourselves and you guys a little bit, it might shrink a little bit. That 1% to 1.5%, I won't even call it a headwind. Again, it's an investment that we've chosen to make.
That's specific to 2018. It depends on what we do and the rate and pace to really determine what that number is going to be going forward, but it's all embedded in the 8% to 12% for the next three to five years.
No, and as far as Seattle, the news there continues to be good on sales growth. In fact, they're continuing to build. And that's actually one of the also one of the supply chain centers that we got to make sure that we're keeping up with the volume that they're putting through. So yes, Seattle is still working really well.
It's interesting, just to add one comment to Russell. So our franchisees in Seattle, who are just absolutely terrific partners, they've actually recently said to us, with labor rates the way they are in Seattle today Seattle is a $15 an hour labor market we are so glad that we fortressed early on. Because if they hadn't, then trying to operate that business at a lower scale with $15 an hour labor would be incredibly difficult. And I think that's why when you look in that area of the country, you do see weaker restaurant units and brands really, really struggling to stay afloat.
It also enables them remember that we talked about value at scale. If they didn't have the scale out there with wages almost 2x where they are some places in the country, they wouldn't be able to do $5.99 which we know drives that volume. So the fortressing has really helped them stick with the plan. Matt McGinley. The question is on the unit level returns.
You obviously have comp outstanding at plus seven for a number of years, but your returns on a per unit basis seem to be hitting at point of diminishing returns where the profit per unit is no longer increasing at the same level. And part of that is the fruitful part of the fortressing, but the flip side of that or perhaps negative of that is you have pretty significant labor deleverage or decline in labor productivity. So I guess the question is what do you do to offset that? And would your franchisees be as jazzed to put up new units if they actually had decline in profit per unit?
I'll give you some thoughts back on that and then invite you guys to chime in a bit. So while you have, as Russell showed you and then Jeff showed you with the 2018 numbers, you have seen some plateauing, still growing but not at as fast a pace, unit level EBITDA or cash flow. And there are, with the rising labor costs in the marketplace and some of those headwinds, as Russell said, it is more and more difficult to get that cash flow growth at the unit level. You've got to continue to drive volume to get it. Now importantly, even with that slower growth pace in the unit level cash flow, the cash on cash returns for new units is still very, very attractive.
The unlevered returns are terrific. And we have some incentive programs in place in The US that also invest alongside our franchisees. And it really juices the returns on those new units also. So there's still really good investments to make on a per unit basis. But what I would draw your attention to also is the other chart that Russell showed you, which was the average franchisee level EBITDA, which over the period of time that Russell showed has gone up more than fourfold to the point where it's on a glide path to get to $1,000,000 of EBITDA or $1,000,000 of cash flow per franchisee.
So you've got to look at it in both of those dimensions. But the absolute returns are still quite strong and still great opportunity by continuing to fortress and build new units for our franchisees to grow what they actually end up putting in the bank, which is the cash flow that they have for their businesses. Yes.
The only thing I'd add to that is Rich talked about the absolute. The absolute story is there. The other is the relative. And potentially, that it's been flattening out the last few years. But what our franchisees do is they look relative to other folks in the industry, right?
So you've seen our order count growth. I showed you order count less Domino's for the rest of the industry. So that 01/1933, 01/1936 kind of number relative and I know you guys all look at profitability on a unit basis for the competition. I mean they're in the best business, our franchisees, that they could be in. And so there's the absolute and there's also the relative that they look at.
And finally, just on efficiency kind of in the four walls part of your question, Matt. We are getting more efficient. Our franchisees are getting more efficient, particularly in The U. S, and order volumes do that for you. But I do think we have a big opportunity in bringing technology inside the four walls, particularly since now a third of our business is carryout.
Russell, our CIO, Kevin Vasconi, really working hard on bringing technology and making sure that the carryout customer is having a better experience. But from an efficiency standpoint, the back of house stuff. We're quite frankly, we're still pretty old school when you get behind the counter at a Domino's. And so I think, again, this innovation laboratory that we're calling Tech Garage, a big focus of that is going to be working on things that improve the customer experience, but also really try to address efficiencies using technology to drive more efficiencies rather than just same nail, same hammer kind of thought in the QSR industry, trying to get more sophisticated about it, which is one of the reasons why we're making that investment that we think we can make some headway there.
Pete? Yes. Peter Saleh, BTIG. Two questions on the fortress ing strategy. I think in India, you guys mentioned you're pushing out some of your competitors and competition is going away.
But you've been doing the fortressing strategy here in The U. S. For three, four years now. Are you seeing real evidence that you're starting to push out some of your competitors in those fortress markets? And then also, I think your headline was where is fortressing working?
And you gave us some good examples. Are there markets where you feel like it didn't work and you've backed away from the fortressing strategy?
So a couple of thoughts there on the first part of your question. In The US, if you take a look at what's happening with unit growth among some of our primary competitors, they've actually been shrinking, net unit decline. And I think also, as you saw on one of Russell's charts, the pizza business in The US, excluding Domino's, has been shrinking transactions over time. So more than 100% of the transaction growth in the pizza category is coming through Domino's. So we are certainly seeing, when we look relative to the industry, some pressure that is being applied on some of the competition.
Not long ago, there was a smaller regional chain up in the Northeast that declared bankruptcy in the pizza business. So I think you're going to see some stress. And it's not just in pizza. With rising labor costs across the country, if you're not growing volume, if you're not driving throughput through your restaurant, you're just going to have a really hard time making the math work on the numbers. So I can't I don't have a crystal ball to know how that will unfold going forward.
But I do know that the longer we stay focused on what matters on value, on driving transaction counts, it certainly puts pressure across the rest of the industry. Then the second part of your question around are there examples where fortressing doesn't work? And we've certainly, around the world, and not so much recently, but in the past, we've built some fortress stores that don't work in certain places. And the lesson that I've learned from that, I think we've learned from that, is that we've got to take that data driven approach to figuring out where to put stores. And there no doubt have been some stores built I've seen them in markets around the world where it felt your gut told you that would work.
Hey, there's a great new center going up here. We could get a lease there. Feels like a great territory. Would allow us to better serve the area. Let's build a unit there.
And then we find out that it didn't work so well. We're trying to avoid that. And in The US, we've got great analytics. We know where the stores need to be built. We push back if a franchisee wants to put one where it shouldn't go.
In our international business, we still have an opportunity to take some of these learnings, these best practices, these tools and port them out to the rest of our markets. Because a lot of them just simply don't have the scale that we have to develop the kind of capability, frankly, to go hire the kind of people that we could hire and have them work on those types of problems. So we're still not perfect,
for sure. And I think we're getting to the point now, too, where there's a yes, but on the build. So, for example, we're able to look future focused. And while there may be a build or a split that makes sense, based on the dynamics around it, if you build in the wrong place, you preclude the next build. And so we're getting really, really ultra specific on, yes, where but also where is that build?
Because you don't want to build one at the expense of two. I think we're going to are we
going to Karen here? Yeah.
High level question. Going back to the data that you gave on the industry outlook for pizza versus QSR, pizza is certainly growing slower than the overall QSR category. And just do you have a view on why that's the case? And is there anything that would make you more optimistic on the sort of that gap closing?
I mean we could put Domino's back in the pizza number. Would look better, right? That's absolutely right. Yes. So remember, order count for overall QSR wasn't even keeping up with population growth.
And so if you put Domino's back in the roll pizza number, would be pretty we're just, like Rich said, driving over 100% of that.
Right. Makes sense.
Exactly. John? Rich, I want to go back
to the international comment and your comments about the importance of unit economics. You have very specific numbers for The U. S. When you look at your top 15 markets internationally, are profits per store in general growing or if there's some anecdotes you talk about that? I know you talked about the payback, but talking about the profitability per store in some of the international markets.
And related, there have been some franchisee frictions in international markets. I know there's some sensitivity, some these are public companies, but there's been some in the press. What are the sources of those? Is that unit economic issue? Or is it about core split decisions?
What are the sources of those frictions when they exist?
So John, first part of your question around what's happening with unit economics. Still quite strong in the international business. The average is about three years cash on cash payback outside The US. The absolute numbers for cash flow or profitability vary quite dramatically depending on what country you're in. So we look at the cash on cash returns.
So weighted average across those, take a look at those top 15, they really drive the overall answer in international. So still feeling good about being solidly in that three year payback. There are some markets where it is improving, some markets where it's flat and some markets where it's declined, as has always been the case, at least certainly as long as I've been here. Then the second part of your question around franchisee friction. In franchise systems, inside Domino's and other brands around the world, that's something that ebbs and flows.
If you go back a decade or so, we had some pretty heavy franchisee friction in The US business also. Those things ebb and flow over time. What I really worry about is, are we generating good returns in the market? And is there enough profitability in our business such that the master franchisor and the franchisees can both earn a solid return. Now sometimes, franchisors and master franchisors and franchisees may have a vigorous debate about how the pool of profit should be split over time.
But when I take a look across our large international markets, the confidence I get is from the fact that the Domino's business is making plenty of money for everybody to earn a solid return and to therefore be incented to continue to invest and grow.
I have two questions. The first was, I think you put up some data on ticket versus traffic. And it showed this year, I think, just over 3% in the highest level of the five years. Are you seeing franchisees make is that just mix driven? Are you seeing franchisees taking more pricing on the non kind of national platform parts of the menu than you sort of would expect or hope to?
Great question. One is we continue to add items to $5.99 right? We had salad, and so that drives the healthy mix. The other thing is we talk a lot about the $5.99 price. What we also don't what we don't talk as much about is we get pricing recommendations on the entire menu to our franchisees.
And so we're down to the point where we can look at a particular store and then the relevant competitors around that store and let our franchisees know, really on a monthly basis, how they should change pricing. And so some of that pricing is also a recommendation for us that maybe you don't see on TV. So that's something we don't talk about as much, but there is just as much as there's recommendations on the national offer, there are recommendations that are literally updated monthly based on what the competition is doing. And if things like labor were going up, the competition is going to be increasing their cost and it lets you raise price in other areas.
And ultimately, that decision is the franchisee's decision on the menu pricing. And the delivery charge is also ultimately their decision. As Russell said, we try to give them good data driven guidance, but ultimately, it's their cost.
And then I think you talked about unlevered returns. And can you just frame up maybe how much leverage your franchisees put on their boxes? And we hear a lot about leverage at the franchisee level in the industry. And do your franchisees do the same thing or not?
Yes. So in The U. S. Specifically, our franchise partners have a choice as to whether lever their independent business or not. A lot of them choose to do some of it.
None of them do it to the extent that we would be concerned as the brand owner or the franchisor. They report to us regularly on how they're doing on the P and L and they also submit balance sheet. So and no one's gotten into any trouble. So we kind of go along on the journey with them. They kind of keep us up to speed with what they're doing.
But none of them they're not allowed to go to 5.5 turns like we are because they've got a lot of operational leverage and we don't. So But as a lagging indicator, just like you don't have a lot of closures, you don't have any closures of franchisees because they got into trouble with their bank. It's not an
issue for us. One of the things that, as Russell showed you earlier, the EBITDA or cash flow at the franchisee level over time, if you went back ten years ago, I think the number was around $200,000 the average EBITDA or cash flow for franchisees. So ten years ago, the average franchisee didn't generate enough cash flow from their business in a year to open a new store. A new store costs $300 $350,000 You get today where that number is about 900,000 that average franchisee is generating enough organic cash flow to open multiple stores on an annual basis, which is you combine that with the fact that the vast majority of this reimaging cycle is now done, which was another place where franchisees were putting capital, I think our franchisee base is in a good position where they can make a very thoughtful decision about their own balance sheets as to how they want to fund building new stores. Do they want to do it out of organic cash flow?
Do they want to lever it up to some certain degree? There's a lot more flexibility in our system than there used to be.
Dennis Geiger, UBS. Given the investments being made to the supply chain, specifically the distribution centers, perhaps retrofitting certain equipment across the country, can you just talk about the potential for increasing supply chain profitability, both in terms of absolute dollars as well as margins, recognizing capacity and low cost dough to the franchisees is the main focus, just how you think about that profit opportunity?
You want to take
that one? Yes. I'll start and then you guys can chime Supply chain, first and foremost, is critical competitive advantage for us. We believe in controlling the proprietary fresh dough product, whether it's the hand tossed, the pan, and we're not going to let folks go and do that for us. That's really critical to us.
So being vertically integrated there is a choice that we make and a profitable choice. Good ROIC on that business. At the same time, and and we've said this on call I've said this specifically on some calls in the last couple of years, I think there's opportunity there for some efficiencies. We're certainly investing over time to get them, not in just capacity, but we're investing in systems, in supply chain. We're investing in new technologies.
You know, we're already starting to retrofit some of the things we're doing in New Jersey with some legacy centers. And so and as Rich mentioned earlier, we have a new leader coming in that actually starts in less than a week. So very optimistic about that business in general. I think there's opportunity there. Now we don't give guidance on margin percentages or anything, but I know the dollars are going up.
And I know as we add capacity, capacity cost, that could be a little bit of a drag. But I think the opportunity for efficiencies are there as well. So what I've said in the past, which is what I'll say again today, is I don't expect percentage margins to dramatically increase 500 bps or to shrink 500 bps. Mean I think it's a business that's operating where you would expect a business like that to operate in, but with some opportunity on the percentages. Dollars are just fine.
ROIC is just fine. I think the long term investment decisions we're making there are just fine. But I'm still a finance guy. And when you have annual turnover at $2,000,000,000 or so, every 10 bps matters with the operating leverage just like it does in Russell's corporate stores. So we don't talk about it a lot, but we're constantly looking for ways to get the most we can out of there.
But most importantly, providing that stable, steady, safe food supply to the franchisees who are putting that capital into the brand. I mean, they don't have confidence that we can continue to grow capacity and be efficient. They're not going to do that. And the last thing I'd say is, you know, $5.99 starts in the supply chain. It starts in our supply chain.
If we can't be efficient there, Russell and his team can't do $599 or $799 It's just as simple as that. So it's a value chain that holds together real nicely, and we're going to work real hard to try and do improve it wherever we can.
Andrew Charles from Cowen. Jeff, last year for The U. S, you provided first year average weekly sales figures for the new stores relative to the overall system. Just curious for an update for that for 2018, perhaps the level of splits has increased. There was about a 10 delta before.
Obviously, you're opening stores with less households in the area. So curious how that's trended and what the delta has been for 2018? And then for Rich or Russell, can you talk about the changes that you've made for development incentives for franchisees domestically from 2017 to 2018 and how that's shaping up for the And how does the take rate for what the franchisees have taken up on in terms of those development incentives?
Yes. I'll give my only ten second answer in the history that I've been on this planet. So I'm going try my best here. It's new stores stores. Are basically opening up just about as well as they were last year.
Almost. The preamble, I had to say the preamble is that it's close to shock locking. The
incentives actually, I won't even go back a year, you can go back kind of longer term than that. Because of the success and the EBITDA, the incentive level actually has come down. I don't think we go into specifics on it, but the better the economics are, the less the incentive is needed, and you're seeing what the store growth is. So it's we think it's really a good balance,
All right. Did my ten seconds, but I'm going add one more thing to that. Separate, separate from the ten second answer. We have a choice into whether to give store incentives in The U. S.
A lot of brands would come with better than three year paybacks and say, why would you ever give an incentive? Generational moment, a lot of pressures on the QSR industry, including pizza players. Some of the national guys, obviously, working through some of their own issues. Generational moment to go hammer down. That's why we're doing it, taking great returns and making them even better.
You made a comment kind of in your more prepared remarks around Pulse two point zero, and you said something about, and I don't have the exact words, global e commerce capability in terms of what you expected to achieve with that. Can you elaborate what that means? Mean most of us think about Pulse as being U. S, but I understand it's non U. S.
I mean do you expect more global integration and more global participation in Pulse going forward? And might that mean more of these bigger markets end up getting on Golo?
Sure. Why don't I start and then you guys can chime in a bit. So Pulse just kind of level setting on where we are with Pulse today. The vast majority of our international markets are operating on Pulse as we speak. We've got significantly more stores outside The US on it now than we have inside.
And I do see a glide path to getting the entire Domino's system on that single point of sale system. All of the markets that aren't on Pulse today, we're in some level of active discussions with them about coming on board. So I envision that happening. With respect to where we're going with Pulse two point zero, there are a couple of things that are really important in that transition. One is that the original Pulse that we run today, which has served us really, really well, was written for Domino's in a time when we were vast majority of our orders were delivery orders and the vast majority of our orders came in over the telephone.
And we're really a different business today. It's an e commerce driven business. We've got a bigger mix of carryout and even in some of our international markets, dine in business. So we've got to think about what does the modern interface for Pulse need to look like to facilitate the business that we run today. So
We're going to make it better for our team members in our stores and our franchisees to use Pulse. The second thing that's a big part of it is to develop it using an architecture that makes it easier for these consumer facing applications to bolt on through the APIs that Pulse will have. We'll also make it the new architecture will make it easier to go in and upgrade or modify specific components of Pulse, whereas today that is a more complicated process just given the code base and the architecture that the software was written in. So it's a combination of enabling the business that we have today and going forward combined with helping us to get more agile going forward in how we can continue to innovate and update not only Pulse but the things that plug into Pulse.
And could you give us
an update in terms of the percentage of your international, whether it's store base or sales base that is on Golo and whether you kind of think I I'm using the right acronym there, in terms of what that may be going forward in terms of Pulse two point zero and whether you think this might actually be a catalyst, if you will, for the system to come more onto the global system?
Sure. So on the Golo side, we've got more than 30 international countries on our Golo platform, 1,300 plus units on Golo. I don't see the same glide path for Golo that I see for Pulse as we go forward. We're continuing to work with franchisees to implement Golo in some reasonably good sized markets, markets with a couple of 100 units. But we don't yet have that in place in any of the largest of Domino's markets.
And a lot of our larger markets value the control and the flexibility that they have in running their own systems. So we're still committed to Golo. Every new country that we open now, we can have an e commerce platform for the first single store that opens. So it's been a great thing for our business to enable e commerce in those small and medium sized markets. Opportunistically, we may have some big ones going forward, but I don't see it rolling out at the pace that I see us getting the full system on the Pulse platform.
Just
a question. Think you mentioned, Rich, centers of excellence that are being developed. Maybe Russell's doing that. So can you describe what that means and maybe provide some examples of big opportunities you see in setting that up?
Russell, I'll let you you're building them. I'll let you take that. Well,
I think there are a couple of examples. One example would be, let's say, Right? Training right now, there's duplication. We had a or if not now, We're in in the midst of changing that. But, you know, you have domestic training for our franchisees, domestic training for our corporate stores, and international training.
So sometimes it's combining to one place for more efficiency and effectiveness. And then the other time, it's bringing new skills to countries that don't have them now. And so, for example, strategy and insights, all the data analytics we're talking about. You know, certainly some of our bigger masters have analytics. No one really to the degree that where we have.
And so whether it's a coaching or a doing, you know, we think that the same analytics that have taken us from what was a pretty flat mature market here in The US can be brought globally. So it's efficiency and best practices. And just a quick follow-up on that. Internationally,
you have some really big franchisees or big organizations. Is this something that those types of organizations are receptive to? Or is it
more They
are actually the ones that see the most value in it. Because back to what Russell talked about, how important scale is in the business, those are the countries that can benefit most from the more advanced analytics because they can drive it through a much bigger base of their business over time. I have
a question over here. It's Crystal Cole. Rich, you talked about the payback period improving in The U. S. And you think about in this environment right now, I'm thinking that the margin percent is probably coming down with wage inflation for a lot of operators.
Investment costs aren't going down. So it would imply that the sales volume is at least where they've been in the past, maybe even improving at new stores. Is that the case? And it's a little bit surprising given a lot of
the new stores are split.
We see terrific unit volumes in these new stores that were open. Think as Jeff mentioned already, he shared a little bit of that data, I think, last year with you. But we're still seeing new stores open really close to the levels of existing stores. And some of them opening up and just blowing the doors off some of our records. I don't know, Russell, if there's anything else you can add.
Yeah. No. I think it's important also to think about there's been a lot of discussion about how restaurants are now getting into delivery and how incremental is delivery. So we're we're a fifty plus year old delivery company not too long into getting into carryout, which we know is almost a hundred percent first we're seeing
seeing
we're we're growth the lot of in a get a then ir bit little
This is where global scale really helps our franchise partners. We have so many folks that are already licensed and paying maintenance on the existing system that it will basically, over a period of time, extended period of time, basically pay for itself. So there's no special assessment, no relicensing that we're going to do for the franchisees, and they're excited about that. But we're just it's them buying into the system, getting the scale. They're really getting a dividend now out of that.
We can do the two point zero with all these bells and whistles on what Rich talked about in mobile and cloud enabled, all these things off of the base really of the maintenance and licensees they've already paid. So financially, it's a great deal for them. And listen, it goes into their enterprise wide business EBITDA as well. So we still do have the digital the technology fee associated with e commerce platform around the world. As you guys know, we raised that last year to $0.25 kind of per drink.
There's still participation there, but we do get a lot of revenue in from the Pulse licenses and maintenance already, and it's going to help to fund us over time.
Could you remind us how big the data science and tech teams are today and how big they will be after you open the center of that?
Well, the Tech Garage that we're opening, there's no kind of planned increase just because we have Tech Garage. And in fact, our IT and our data and our marketing, all the innovation folks is much bigger than that building can handle. The idea is that building is set up for people working on specific projects. I mean, there'll be a store inside. We're calling it a garage because it is.
There can be autonomous vehicles that go in and out. So don't think of the tech garage as a new influx of people. Think of it as a place where great ideas are going to come to life. Overall, on and maybe you can talk to the IT number. On strategy and insights, we're now in the mid-50s, at least on The U.
S. Side. I always like to remind people, when I started in 02/2008, we had one. We're at 55%.
Yeah. On technology, over half the people that work in our business in Ann Arbor are technology folks in one form or another. A point about this tech garage. The idea is to accelerate innovation. And we're going to be able to break down and stand up a store in the span of a weekend.
So as you think about not just consumer facing technology, but new store equipment, new technology in the store, be that fixed in the store or handheld equipment that team members use along the way, the idea is to be able to more rapidly innovate and not have to go out and disrupt the operations inside a franchisee or a Team USA store as we go through the early stages of that. To be able to go through that whole kind of break fix process in a much more rapid way to get innovation accelerating even faster. We're going to at some point, we're going to do an open house there and invite folks to come in, just like we did with our supply chain center, invite folks to come in and take a look at it and see what we're doing.
Hi, Jeff Bernstein. Just a question on health and wellness maybe. It doesn't seem like it's a fad across the industry. It seems like it's here to stay, so kind of like not your LTO strategy, but more of a long term potential platform. I know we touched on it a little bit last night, Russell, but you've talked about how you've improved the quality and the ingredients overall, but you don't really talk about it.
Just wondering, even if it's not center stage in an ad campaign, maybe now would be a good time, you would think, to kind of have taglines or something that just highlights for people what you've done that you can further differentiate yourself and presumably open yourself up to more customers that might otherwise shy away from traditional pizza.
I think a couple of things. One is, you're right, we don't talk a lot about the ingredients, but I'd urge you to go online and look at ours versus the competition. And you will see fat, salt, all those calorie counts actually lower. But as far as and think I've launched out not not so recently. I I think overall whether or not we talk about that kind of stuff and gluten free, by the way, Whether or not we talk about that stuff in our advertising, you know, there was a line on on the advertising slide where it shows that I fell.
Thanks, Rich, for that one. Otherwise, it was elegant, though. Right? You look good doing it. I look good doing it.
There was a line there that he didn't read, which is we test all of our ads. And so when we create an ad, the ad that you see on TV had probably gone through three or four or five iterations to get great. Because in order to drive scale and that's something that people maybe don't under understand. $5.99 works because we can get volume. We only get volume not only if the price is good, but the ad has to score really, really high.
So if our advertising wasn't good, I'm making this up, we'd have to charge $6.99 Does that make sense? And so whether it's the benefit of price point of paving for pizza or health and wellness, these are all things that go into our advertising. And what comes out are the things that test the best, and that's what you're seeing right now.
And just one other thing.
You talked about how your market share
is now north of 18% and how you've widened the gap versus your nearest competitor. As you think out five years and maybe put aside your nearest big competitor, if you just looked at all the independents, which make up such a big percentage of this category, do you think they're in better position with all the new technologies that are becoming more available to the average? And presumably, comes at a cost, so maybe their profitability isn't as high. But I'm just wondering whether you think five years from now, the gap of your market share gains you're seeing every year, does that narrow a little bit because they now can do online or they could pay someone to do some delivery for them? Or do you just think your gap even widens further because you'll have better benefits than they would ever dream of having?
Russell, do want to take that one for The U.
Yes, sure. I think in The U. S, I mean, is just conjecture. But let me start with real numbers. If you look at real numbers, obviously, Domino's is leading the pizza category.
The two out of our other three big competitors, they're declining and actually the independents are doing better than they are. And part of it could be just the independents are taking their fair share as those guys shrink. I think part of it though could be the short term, they're getting this bump from these online platforms. The thing with the online platforms are right now, we talked about this last year a lot. We talked about the economics of it.
And really, the people funding the economics of these platforms are the investors who are helping the aggregators do these discounts. And so the question to me is how sustainable, you know, even if, you know, it's they're outgrowing Pizza Hut or Papa John, how sustainable is that over time once the economics go away? Because we know at 25, 30% of ticket, that's not a sustainable number. So oh, I'm getting the sign. Alright.
We got one more question or I think we got one more.
Yes. Gosh, I don't know that there's an overall answer to be able to share with you because market it's specific. There are some places where we can find plenty of real estate and others where, frankly, we have some places where we look for six months, twelve months, eighteen months to find the location that we want. But knowing where we want to build helps us to avoid settling for the wrong location. And that's kind of how we really, really think
Well, Richard, the other thing I'd add is we're in a different place than we were. So even in the past, if there was a place available, the landlord wouldn't always want dominance. Right? Now we can be an anchor tenant. We can be someone that's gonna attract.
And so there's a lot of stuff that wasn't available to the for us in the past that's available for
us now. Absolutely. Well, look, with that, I just want to take just a final couple of seconds to thank all of you for being with us this morning. And many of you came to our presentation on Tuesday and the breakout sessions and the reception that we had last night. So we really appreciate your time.
We appreciate your interest in our business. And for investors, we really appreciate the trust that you place in us when you put your capital in DPZ. And I hope that, as you saw today, you've got a management team working for you that really believes in the opportunity that we have ahead of us, a management team that is working hard to not only maintain but to expand the strength that we have with respect to our share and our position relative to the rest of the industry. And so we look forward to keeping you updated on our progress. And I'm sure we'll have many of you on the other end of the line with us in the third week in February when we share our end of year results.
So thanks, and safe travels home for all of you.