Pizza Entrepreneurs Hooked On Domino’s
It’s no secret that the recession in Britain has boosted demand for cheap thrills, whether it’s a night out at the movies or staying in with a pizza, and delivery chain Domino’s Pizza UK on Monday once again wowed market watchers with a set of strong six-month results. The recession has also led to more out-of-work businessmen trying on an apron for size and opening their own Domino’s franchise store, eager to get a slice of the company’s success while the financial sector struggles to find growth.
“People being made redundant from management positions are investing in the franchise,” said Paul Hickman, an analyst with KBC Peel Hunt, who upgraded his annual profit forecasts for Domino’s UK (DPUKF – news – people) by 3%, to 27 million pounds ($44.6 million), on Monday. Franchisees need 260,000 pounds ($430,000) up front to open their own store, and it seems that the white-collar victims of job cuts across the country have not had much trouble getting access to this kind of capital.
“The caliber of these new applicants is higher than ever,” said Chris Moore, chief executive of Domino’s UK & Ireland, itself a franchisee of the American Domino’s Pizza (DPZ – news – people). “They are better capitalized.” Moore said that franchisees had invested 12.1 million pounds ($20.0 million) in the first six months of the year by opening new stores, buying out other franchisees and refurbishing their outlets.
Shares of Domino’s Pizza UK & Ireland rose 4.6%, or 10 pence (17 cents), to 229.50 pence ($3.79), during afternoon trading in London. The company reported a rise in six-month profits of 35.0%, to 9.3 million pounds ($15.4 million), while sales rose 11.3%, to 73.7 million pounds ($121.7 million). The stock is trading at a price-to-earnings multiple of 18.8 times, which Hickman described as fair given Domino’s tendency to surpass market forecasts.
