Domino’s Pizza Enterprises has reportedly increased the margin of ingredients it sells to franchisees, a move that store owners fear would further dampen their earnings.

According to the Australian Financial Review, the franchisees have written to the company’s management, demanding a reduction in fees and an audit into the ingredient purchasing process.

In the letter, the franchisees say their earnings have remained the same over the past 15 years and have not even risen in line with inflation, while Domino’s is making 73 per cent more.

With the price of products set by Domino’s, the margin on ingredients the company supplies to its franchise partners has a material impact on the income and profitability of individual stores.

The franchisees cited the rising margin on food purchased from Domino’s as their biggest concern. The margin was said to have grown from 3 per cent in the last 10 years to 6-7 per cent today.

Meanwhile, Domino’s said the food margin had “not materially changed” over the past five years despite significant food cost volatility.

“Domino’s aims to provide ingredients at optimum prices due to the scale of its global purchasing power and has made significant food cost savings this calendar year. These savings have been passed through to franchisees,” the company said.

The franchisees also raised concerns about an advertising fund charge, which they said was imposed with little negotiation and communication about how the company was using the money. 

According to the AFR, franchisees had provided 5.35 per cent of their earnings to Domino’s for advertising in the past. That was increased to 6 per cent last year, and is in addition to the 7 per cent of gross sales paid as royalties.

ASX-listed Domino’s Pizza Enterprises operates more than 3500 stores in Australia, New Zealand and 10 other markets.

In August, the company posted a loss of $3.7 million for the last fiscal year, its first annual loss in 20 years, while network sales were down 0.9 per cent.