This is a financial question because it’s about dough!

@Lewis do you make your own base or buy it? Adding the tasty fillers is easy but getting the base right, not so easy- but cooking the pizza on a circular ceramic pizza base does help, Grazie

Gotta make your own dough @PortfolioPlus, ideally a day or two before. Luke uncle Warren says, if you don't find a way for your dough to rise whilst you sleep, you'll be poorer for it.

There are a lot of pizza dough calculators on line, the amount of yeast you use will vary massively depending on how long you wait, and how warm it is. Make your own dough the day before, use some semolina flour when you make the pizza to stop it sticking. Use finely chopped tomato's from the tin for the sauce, some torn up basil, thinly sliced mozzarella and 2 or 3 other ingredients. Even without a fancy pizza oven, if you do that and use a bunnings pizza stone on the bbq you'll make something 10x better than your local takeaway. Its my 2nd love after investing.

@Lewis have you gone for the dome XL, Dome or the Arc XL?

The Arc @wonkeydonkey. No regrets, one of my better investments.

That looks amazing @Lewis!

I've been trying to refine my process in the Big Green Egg, but not yet at your level

...with emphasis on 'yet' ;)

Totally concur that it's all in the dough. Like with so many things in life and investing, if you get the foundations right it's hard to go too wrong!!

I had to put the ooni pizza oven back in the shed.

was making Friday night family pizza too stressful for the kids…lol

back to the domino’s $8 pepperoni for the kids.

incredibly convenient product..lol

that company is going nowhere.

oh, the main reason i stopped by this thread was to make a point on Dominos, but got distracted by all this talk of dough and home set ups, haha

The multiple is now so low, you could write-down every off shore operation to zero and be left with AUS/NZ operations generating around ~$95m in NPAT. A PE of a15 would give you the same market cap as it enjoys today.

They could reasonably sustain a dividend payout ratio of 85%, which would represent a fully franked yield of 5.5%, or ~8% grossed up.

Yeah, they wouldn't be growing much, maybe only 2-3% or so each year, but all in all you'd have a very low risk, attractive total return proposition.

I'm not saying they do this (but im not not saying they do it either!), but the point I was making on the pod is that the hunt for growth, and the scope and pace of their plans, has what has led to all their problems. To be fair, i'm sure there was a lot of pressure from shareholders and other stakeholders to grow at all costs, but this is example #3,498 of a company shooting itself in the foot because of hubris and greed.

Hi @Lewis the economics of pizza in general is certainly strong. Compared to the input costs of other meals that cost about the same, it wins hands down on gross margins. Although I’ve never really understood why people say it’s a good delivery food. In fact I struggle to think of a worse one, given the whole surface area you’re trying to keep warm is exposed. A calzone would be better. Just thought of a particular Seinfield episode. Anyway, I’ve digressed.

I think part of the magic of Dominos (perhaps partly explaining why a Hungry Jacks exec has been brought to run it) is what they accomplish with a store full of teenagers. Even the manager sometimes looks school aged. Not only are their input costs low, but also the fixed costs of running the store. I struggle to get my head around the economics of delivery though. Seems like a tough way to make a buck for all involved. Also Dominos seem to sink a lot of money into pointless tech. Like why do I need to see a video of my pizza cooking. It might as well be any pizza.

Anyway I look forward to digging into the numbers.

PS. The $2.99 Costco cafeteria cheese pizza slice might be the best thing I’ve found in ages. Lucky for Dominos they’re limited in how many Costco warehouses they can open.

I like the way you’ve framed the valuation @Strawman .. might not need to be any more complicated than that. As long as the overseas operations can be wound down if needed without the Australian operation being negatively impacted. And there’s no glaring issues with the Aussie business. Possibly a good number to watch here is profit per franchisee.

Regarding shooting themselves in the foot. Something I thought of today - I modelled Collins Food’s earnings a while ago and realised how much profit growth can be accomplished with modest same store sales growth with a conservative new store rollout. Dominos probably could have kept growing earnings steadily with minimum risk. For example I’ve always thought they needed more protein options. Like extension of the meat sides they had and tweeks like that. But instead they chose world domination. I actually bought the vision at the time as the former CEO sold it. But on reflection I realise how much risk they took on. Debt. Unfamiliar overseas markets. Aggressive store opening schedule. Operational leverage via franchise model. All layered on each other

On a side note the former CEO is showing on Tikr as having sold 90% of his holding earlier this year at twice today’s price. There’s possibly a good reason, but I suspect he saw the problems coming.

I just finished going through DMP’s last earnings call transcript, most of which was led by Jack Cowin, who recently moved from Chairman to Executive Chairman. He’s 83 now and has been involved with Domino’s since the early days. Most of his life has been in franchising, and he still seems to have the energy and clarity of thought to do the job in this tougher period, along with the right mix of humour and grounded perspective. In a previous business podcast, he was asked what his main goal was at this stage of life. His answer - “to stay alive.” As he put it, without health we have nothing.

I’ve heard him say before that he saw former CEO Don Meij as an optimist and a bit of a risk taker, and that DMP’s current goal needs to be pulling that back. He also believes margins matter more than sales, and that the high–low voucher pricing model needs to go. I personally think this better aligns with how people actually buy pizza. As a customer, I’ve always found their voucher system annoying. I eat pizza because I feel like it in the moment, not because I want to dig through a pile of coupons to find the right deal.

The earnings call really showed how far that shift has gone: cutting back on vouchers and moving to an everyday pricing strategy (which I think is a stronger model long term), consolidating the network by closing unprofitable stores, and reining in tech spend. I also liked the renewed focus on profit per franchisee, which Cowin sees as the key to long-term success. The more successful the franchisees, the more they’ll invest in the network themselves.

There’s probably still some value in the underperforming overseas businesses too. They’re not worth zero, and there’s real option value there. Overall, I’m comfortable that the Australian business alone supports the current share price with a margin of safety, and the overseas operations are effectively a free option. I’ve trimmed a bit of New Hope (which I didn’t really want to do) to make room for a DMP position in both my Strawman and real portfolios.

Good signs at the AGM address the management team at DMP delivered. The big shift they’ve made is moving away from constant vouchers and discounts and pushing an everyday value pricing strategy instead.

The early signs look good. Customer scores are improving when people pay full price, product quality scores are up, and the first stores using the new approach are showing better profits. Management highlighted that a small price lift per pizza increases franchisee profit meaningfully, from about $120K per store to about $150K. That is a big jump for franchisees, and is made possible by the high operational leverage.

This is important because a franchisor like DMP is different to a normal food retailer (I find a lot of analysts look at them the same way). Their real customer is the franchisee. When franchisee profits rise, everything else becomes easier. They are more willing to open new stores, and the royalties flowing back to head office improve.

They are also cutting overheads with advertising costs reducing because they don’t have to send vouchers out all the time. The most important development is below.