Domino's Pizza Expanding Aggressively at Home and Abroad

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Get the door — it might be the Domino's delivery guy, who is ringing more doorbells in more places every day. Now delivering pizza in 55 countries, Domino's Pizza Inc. (DPZ) is aggressively expanding its presence across the globe while at the same time expanding its domestic delivery area.

America's No. 2 pizza maker added 322 stores last year, the majority of which — 238 — are outside the U.S. With 45 additional stores added in the first quarter of 2006, the Ann Arbor-based company now boasts 8,124 company-owned and franchise stores and $5 billion in global sales.

Chairman and Chief Executive David Brandon wants to open the 10,000th Domino's store in the next few years, a goal that he says raised eyebrows when he first took control in 1999.

With that target now in sight, Brandon wants to continue focusing on other goals at the 45-year-old pizza giant. Among them: Cutting down on employee turnover, retaining more managers and being named one of the top 100 companies to work for.

While Pizza Hut is the bigges pizza maker with a focus on dine-in stores, Domino's touts itself as the No. 1 pizza delivery company with 19.4 percent of that market share.

The company wants to keep its focus on delivery, said Brandon, a 54-year-old who played football at the nearby University of Michigan in the 1970s for legendary coach Bo Schembechler.

"We have to get sharper, we have to be great at what we do and we have to earn the loyalty of our customers," he told The Associated Press in a recent interview at Domino's headquarters. "We can't say: `We're the biggest, and we've been at it the longest, so de facto we win.'"

When Domino's went public in 2004, the company drew criticism for weak growth in sales per store and for having too much debt. But since the IPO, when Domino's stock started trading at around $14, Wall Street has embraced the consistent growth and earnings, Brandon said.

"Since then people have come to appreciate them as a pretty predictable company," said Joseph Buckley, an analyst at Bear Stearns & Co. who forecasts a 3 percent to 4 percent increase in same-store sales in this year's third and fourth quarters.

Domino's stock closed Monday at $24.55 on the New York Stock Exchange.

Domino's has more than 500 stores in Mexico, 300 in Britain and Australia and 200 in South Korea and Canada.

As countries develop and people embrace busier lifestyles, Domino's has seen sales spikes, Brandon said.

"As they get more two-wage-earning households and as they get more fixated on technology and start living life at a faster pace, you can see the corresponding impact on our sales," he said.

Brandon figures there are about 800 more stores that need to be built in the United States in areas where Domino's lacks presence, especially in northern California and Chicago.

"A third of the nation not being able to get a Domino's pizza is way too high of a number," he said.

Brandon said Domino's owes much of its success to consistency.

The company has enjoyed a dozen consecutive years without a fall in same-stores sales, and it has brand recognition all over the world thanks to $1.3 billion in advertising over the past five years.

But this year, first-quarter same-store sales grew only 0.7 percent and revenue was down 6 percent as Domino's couldn't match last year's success. Despite the first-quarter results, Brandon said he's happy with the company's progress.

"The first quarter was a little tough, but it was mostly that we were a victim of our own success," he said.

In an industry that depends heavily on marketing, the rising popularity of TiVo and other technology that skips commercials has Domino's looking for other methods to reach potential customers.

Domino's partnered with Donald Trump on NBC's "The Apprentice" last year to launch a cheeseburger pizza and is a co-sponsor of NASCAR driver Michael Waltrip.

Domino's also has asked franchises to pay more for national ad campaigns.

"It's all about marketing and execution," Brandon said. "The first thing you have to do in our world we call it is make the phones ring. Your brand message has to be effective."

JP Morgan analyst John Ivankoe upgraded the company from "neutral" to "overweight" on June 1, citing stable cash flow and earnings in a generally unstable sales environment.

Ivankoe and other analysts say Domino's has less risk than other restaurant chains as fewer than 15 percent of the company's stores are company owned.

Lower 2005 third- and fourth-quarter sales comparisons and cheaper cheese should boost earnings and same-store sales growth later this year, Ivankoe wrote in a recent report.

Jason Shifflet, a 29-year-old who owns seven stores in the Memphis, Tenn., area, said he's had an easy time opening up stores after he worked at Domino's as a college student.

"We really try to be a local company with a national brand."