World Franchising
November 2007 Newsletter
 
Earnings Claim Hall of Fame: Domino's Pizza
 
 

ITEM 19
EARNINGS CLAIMS

Exhibit P includes information concerning the average weekly units, sales and other financial data of Domino's Pizza Stores, Domino's Pizza Pizzazz Stores and Domino's C Stores. We or our affiliates also may furnish data concerning specific proposed store locations or Delivery Service Areas ("DSA") that are prepared using Domino's Hawkeye Store Siting Model, which is a computer-based process by which we simulate the probable sales activity of a hypothetical Domino's Pizza store at an identified location or within a specified DSA (the "Hawkeye Model'). The Hawkeye Model utilizes demographic and store financial information from Domino's Pizza stores, as well as a variety of national databases, to estimate the sales performance and cash flow from a Domino's store within a DSA or at a site identified by Domino's or by you. If data generated by the Hawkeye Model is furnished to you, you will be provided with a Supplemental Earnings Claim explaining the Hawkeye Model in greater detail and the way in which the information differs from the information contained in this disclosure concerning average weekly unit sales and other financial data of Domino's Pizza stores. Except for the information contained in Exhibit P and any Supplemental Earnings claim and data to substantiate and support the information contained in Exhibit P and any Supplemental Earnings claim, we do not furnish or authorize our salespersons or sales agents to furnish any oral or written information concerning the actual or potential sales, costs, income or profits of a Domino's Pizza Store, Domino's Pizzazz Store or Domino's C Stores. Actual results may vary from store to store, and we cannot estimate the results of any particular franchise..

EXHIBIT P
EARNINGS CLAIMS
AVERAGE WEEKLY UNIT SALES
AND OTHER FINANCIAL DATA OF
STORES
AWUS

The AWUS of franchised and corporately owned Stores for the past 5 calendar years is set forth below. These Stores include Domino's Pizza Stores, Domino's Pizzazz Stores and Domino's C Stores. AWUS means the average weekly unit sales (i.e., average weekly royalty sales). AWUS is calculated by dividing the total royalty sales reported by all Stores operating during the year by the number of weeks reported.

AWUS

  2001 2002 2003 2004 2005
Corporate $12,611 $12,708 $12,473 $12,537 $13,445
Franchised $11,284 $11,649 $11,871 $12,192 $12,712
Combined $11,353 $11,733 $11,943 $12,233 $12,797

STORE COUNTS
(YEAR-END)

  2001 2002 2003 2004 2005
Corporate 516 577 577 580 581
Franchised 4,243 4,271 4,327 4,428 4,511
Combined 4,759 4,848 4,904 5,008 5,092

NUMBER OF STORES IN OPERATION
AT YEAR-END WHICH ACHIEVED OR EXCEEDED AWUS
FOR THE YEAR

  2001 2002 2003 2004 2005
Corporate 207 220 218 216 231
Franchised 1,871 1,803 1,832 1,625 1,881
Combined 2,136 2,064 2,050 1,836 2,118
The average annual growth in the AWUS over the 5 year period was 2.92%.

The AWUS for Domino's Pizza Stores (including Domino's Pizza Pizzazz Stores) for 2005 was approximately $12,797. The average number of households in the delivery areas of these Domino's Pizza Stores was 14,311, and the average dollar per household was approximately $0.89.

The AWUS for C Stores for 2005 was approximately $10,787. This calculation was based upon reports submitted by 106 C Stores. This number represents all of the C Stores in operation in 2005 other than those from which we did not have complete information. The average number of households in the delivery areas of those Domino's C Stores was 6787 and the dollar per household was approximately $1.59.

While the AWUS of Stores were generally higher for Stores whose delivery service areas had a larger number of households, Stores with delivery service areas containing households substantially lower than the national average still experienced, on the average, AWUS exceeding $10,653.

OTHER FINANCIAL DATA

Set forth below are calculations of pre-tax profit as a percentage of royalty sales and other financial indicators based upon AWUS of $9,000, $12,000 and $15,000. These pro forma statements have been derived from profit and loss statements submitted by franchised Stores in operation as of the end of calendar year 2005. Stores which did not submit profit and loss statements or whose profit and loss statements were considered incomplete or not properly prepared were excluded from these calculations.

Average Weekly Unit Sales
$9,000
$12,000
$15,000
Total Variable Costs
74.92%
74.21%
74.48%
Contribution Margin
25.08%
25.79%
25.52%
Total Cash Fixed Costs
18.59%
16.13%
14.08%
EBITDA
6.49%
9.66%
11.44%
Total non-Cash and Non-Operating Cost
6.18%
6.04%
5.49%
Pre-tax Profit
.31%
3.62%
5.95%
Explanatory Notes:

Average Weekly Unit Sales "AWUS": Total royalty sales reported divided by the number of weeks reported; (AWUS) total royalty sales reported.

Total Variable Costs: Includes operating expenses that vary proportionately with a change in sales. These expenses include food costs, variable labor cost (excluding manager salary), bonus, payroll taxes, worker's compensation insurance, Group Health Insurance, mileage reimbursement and related delivery expenses, advertising expenses, royalty expense and operating supplies.

Contribution Margin: Contribution margin is calculated as follows: Royalty Sales minus Variable Expenses.

Total Cash Fixed Costs: Includes operating expenses that do not vary proportionately with a change in sales. These expenses include telephone and utilities, rent, repairs and maintenance, professional fees, small equipment and computer expenses, other taxes (real and personal property taxes and business taxes), insurance (excluding worker's compensation and Group Health insurance), manager salary, and miscellaneous operating expenses.

EBITDA: Earnings before interest, taxes, depreciation and amortization. EBITDA is calculated as follows: Contribution Margin minus Total Cash Fixed Costs.

Total Non-Cash and Non-Operating Costs: Expenses that are not direct operating expenses or are non-cash in nature. These expenses include depreciation and amortization, interest expense, loss or gain on sale, administrative and overhead costs, and other income.

Pretax Profit: Pretax profit is calculated as follows: EBITDA minus Non-cash and non-operating costs.

Calculation of Return on Investment: After tax cash flow evaluated against initial equity investment. After tax cash flow is calculated as follows: EBITDA and other Income minus Debt Service Payment and Income Taxes.

Individual stores may experience expense variations from the figures specified in each of the categories. Additionally, accounting, operational and management methods employed by a store, different geographic areas of the country, number of households in the delivery service area and menu price variations, among other factors, may significantly affect profitability in any given operation.

THESE SALES, PROFITS OR EARNINGS ARE AVERAGES OF SPECIFIC FRANCHISES AND SHOULD NOT BE CONSIDERED AS THE ACTUAL OR POTENTIAL SALES, PROFITS OR EARNINGS THAT WILL BE REALIZED BY ANY FRANCHISE. DOMINO'S DOES NOT REPRESENT THAT ANY FRANCHISEE CAN EXPECT TO ATTAIN THESE SALES, PROFITS OR EARNINGS. A NEW FRANCHISEE'S FINANCIAL RESULTS ARE LIKELY TO DIFFER FROM THE RESULTS STATED.

SUBSTANTIATION OF THE DATA USED IN PREPARING THE EARNINGS CLAIM WILL BE MADE AVAILABLE TO A PROSPECTIVE FRANCHISEE ON REASONABLE REQUEST.