Published on 17/08/2016 by Punchmedia

Domino's Development Promotes Pizza Profit

As Domino's prepares to nearly double its store count in Australia and New Zealand over the next 10 years after delivering a record profit of $92 Million we take a look at the pizza restaurant industry and industry profits begin to soar.

Over the past five years, the Pizza Restaurants and Takeaway industry has been supported by rising demand for premium pizzas and growth in discretionary incomes.

The rising prominence of gourmet pizzas, which attract higher price points, has increased profitability over the past five years and industry revenue is expected to grow by an annualised 2.8% over the five years through 2016-17, to $3.7 billion.

Consumer Preferences

Consumer interest in gourmet and premium food have grown more prominent over the past five years. An influx of food-related television programs has stimulated Australia's growing food culture, which has benefited the industry as Australians have become increasingly enthusiastic about premium food products. As with supermarkets, which were quick to sign celebrity endorsement deals, fast-food restaurants have adopted premium and celebrity food trends into their menus. Industry pizza restaurants have embraced these trends and provided a growing range of gourmet pizzas at premium prices. As a result, industry profit margins have risen over the period to represent an estimated 7.3% of industry revenue in 2016-17.

Technology

Industry operators have sought to improve customer convenience over the past five years to combat competition from alternative fast-food options and ready-made food products in supermarkets. Many operators have implemented new technologies to achieve this goal. For example, almost 60% of orders for Domino's are received online, and 30% are received online for Crust Gourmet Pizza Bar. The accessibility of mobile apps and consumers' increasing receptiveness to online shopping have resulted in a seamless transition from phone ordering to online ordering. Major players, such as Domino's, have sought to constantly improve the convenience of their online ordering systems to more effectively compete with other fast food outlets. Over the past five years, Domino's has introduced online ordering systems with GPS driver trackers, made their ordering website compatible with the Apple Smart Watch and established SMS ordering systems. Domino's has also sought to reduce delivery times, introducing a 20-minute delivery guarantee nationwide and also running a flagship 10-minute delivery guarantee program in its New Farm store in Queensland.

Consolidation

Over the past five years, the rapid expansion of the Domino's store network has increased the industry's market share concentration. Although revenue growth from Pizza Hut store network has been sluggish and the Eagle Boys franchise network has suffered significant setbacks, this has been outweighed by the Domino's expansion. Market share concentration has also been driven by Retail Food Group Limited's 2012 acquisitions of the Crust Gourmet Pizza Bar franchise and Pizza Capers. These acquisitions were motivated by the potential achievable economies of scale, from a supply chain and marketing perspective.

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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