Domino’s is set to open 10 new stores by the end of the calendar year and has its sights set on having 1000 stores across Australia and New Zealand by 2024. This will include new store models, such as Domino’s mobile pizza kitchens (MPKs) and menu stores, which will enable Domino’s to service rural and regional areas across the two countries. It follows the expansion of the brand’s global footprint, with Domino’s acquiring the balance of its German joint venture operations for $150 mil
million. We talk to Domino’s ANZ chief development officer Cameron Toomey about the company’s performance, expansion strategy and broader plans moving forward. Inside Retail: Can you tell me about the growth of Domino’s in Australia, in New Zealand over the last couple of years? Cameron Toomey: Australia and New Zealand are considered to be fairly mature markets. But there’s still a lot of opportunity and a lot of areas to bring our kitchens closer to customers, to be able to continue to offer the service and the value that we do. We’re still building traditional stores, but we’re shifting our focus to other concepts to get those kitchens closer to customers, such as the mobile pizza kitchens (MPKs). We’re also looking at stores with simplified menus to be able to get into areas that may not have had a Domino’s experience previously. IR: In the 2022 financial year, Dominos opened 22 new stores across Australia and New Zealand. Can you discuss where those shops are, what the format is and so on? CT: A lot of those stores are in regional areas, but we are opening stores in developing areas – such as the outskirts of Melbourne and Sydney – as well as in penetrated and highly populated areas. Like every business in Australia, we are facing increased building and operating costs with food and labour. For us to be able to offer great value to our customers, we have to make sure that we can run our business as efficiently as possible. One of the ways we can do that is by having our kitchens closer to customers, so that our drivers are as efficient as possible when they’re delivering pizzas. IR: Can you discuss the 10 new shops that are set to open before the end of the calendar year? From what I gather, there’s a focus on rural and regional areas? CT: I wouldn’t say that the focus is on the regional areas, but that’s probably where there’s more opportunities popping up. While we’re focused on the more populated areas as well as regional, we’re probably finding opportunities for sites in the regional places to be a little bit easier than in metro areas. But the 10 that are coming up over the next few weeks before the end of December are a good mix [of the two.] IR: Why do you identify those rural and regional areas as an area of opportunity? CT: We certainly have built stores in regional areas in the past, but one of the things that [has been] identified is that people are moving out into the regions more. Whereas in the past, a traditional store might not have been able to operate commercially in a lower volume area, these newer concepts – which we’re trying to get on the ground at a lower build cost – are allowing us to get into these markets earlier than we probably would have in the past. I suppose the shift is that, in the past, we might have waited for those areas to grow to a certain population size, whereas now we’re able to [move to those areas] with a lower population, and [go] from there. IR: Are you able to discuss the mobile pizza kitchens, and how significant they’ll be for the business moving forward. CT: Without putting an exact number on the number of these stores, the thing that they allow us to do is to get into areas that we wouldn’t have gone to previously. So with the MPKs – to put it crudely – it’s a pizza shop on wheels. We can take that pizza kitchen into an area where there might not be a retail space available [to] build a store, or sustain it for seven days. We can [instead] use the MPKs to service two country towns. For example, we might be in one town from Monday to Thursday, then go to another town from Friday to Sunday. Primarily, it opens up opportunities for us in places that we haven’t necessarily been able to get into previously. It will be used in a lot of regional areas, but we’re also focused on metro locations where we haven’t been able to find a site. IR: In terms of that growth in the number of Domino’s stores toward the end of the year, is that related to Domino’s performance, or more to do with market conditions? CT: It’s just timing, I suppose. A new store is a 12 to 18-month process. That’s from the time it takes to identify a territory, to finding a site, to getting the plans approved by council, to getting the store built and so on. But we’re starting to see that growth [in the number of stores] accelerate. IR: Can you expand further on supply challenges, such as rising costs of material and labour, and how cost of living challenges are affecting Domino’s? CT: We face the same challenges that all businesses are facing at the moment, such as the increased cost of the food that we’re providing and the increased cost of utilities, electricity and gas. Then, there’s pressure on people as well. We know that while we’re facing those cost increases, our customers are facing those costs increases as well. The one thing that we’re concentrating on is how do we adapt our business, and ensure that we overcome those obstacles. While we do need to recover some of those costs, we need to ensure that we are offering that value to customers, so our sales and customer count continues to increase at the same time. IR: Do you think that customers will gravitate toward value items as a result? CT: When people are facing increased costs, and are watching their cash more closely, value becomes an even bigger attraction for customers. So that is something that we are focused on. While we’re managing our own costs, we need to make sure that we are still that number one choice for value for our customers. IR: Can you discuss the significance of the 1000th store projected for 2024? CT: While the 1000th store is a great number, and we will celebrate that, it’s important that every one of those stores is servicing its customers really well, and providing a great return for our franchisees. The thing that excites me is that, as we’re getting more stores on the ground that are closer to our customers, we can provide a hot, fresh, delivery service at great value. The more that we can continue to grow these store numbers, the more that we will be able to continue to offer that service value. IR: With the closure of Deliveroo and performance of other delivery services, how do you think that that might impact Domino’s moving forward? CT: Domino’s started as a delivery business. We pioneered delivery, which is our expertise. The delivery market has certainly become a lot more competitive, but we are leaning into that. One of our goals is that we intend to be the most efficient, sustainable, food delivery business on the planet by 2030. That is a long-term goal. Provided we can continue to offer great service at great value, I feel we can still [be market leaders]. IR: I’m curious about the key differences or similarities in terms of the Australian and the New Zealand market? CT: From the operational side of our business, they are very similar across the two countries. They have a similar menu with a couple of different pizzas for the different markets. The one thing I suppose that we focus on is the different customers. What is important from a cultural perspective for a New Zealand customer versus an Australian customer. We will make sure that our offering is localised for those different areas. Our aim is to source local products as well. So while the operating function is very similar across the two countries, we do operate the New Zealand business as a New Zealand business, and Australian business as an Australian business. IR: What are Domino’s plans for the next 12-18 months? CT: By the end of June 2023, we plan to have over 40 [new] stores, and then over the following financial year, another 40 to 50 [new] stores on that road to 1000, by the end of 2024. The MPKs will start to make up a significant portion of that business, with the aim to have 20 to 30 MPKs operating and servicing our customers by 2024. We will continue to evolve the simplified menu stores. So it is something that we are continuing to test and evolve, based on feedback from customers in those stores. We’re continuing to look at what it is that our customers want from our business, and how we can adapt our offerings to meet customers’ demands.