The restaurant industry has been on consolidation this year, with more multibrand operating companies emerging all the time and large-scale buyers acquiring chains at higher and higher prices.
But don’t expect Domino’s Pizza to get in on the act.
Speaking on the most recent episode of Restaurant Business' podcast, "A Deeper Dive," CEO Ritch Allison says there’s enough growth in the company that it doesn’t need to make a deal for a restaurant chain.
“A lot of chains have consolidated over time in part because they see limited opportunities for growth with what they have,” Allison said. “I see a lot of runway.”
Domino’s operates 5,751 locations in the U.S. and another 9,603 in international markets. It is the largest pizza concept both in the U.S. and the world.
Allison believes the company has room to grow both domestically and internationally.
To be sure, the U.S. is a brutal market that is loaded with pizza players both big and small. But Domino’s immense sales growth over the years—its unit volumes have jumped from just more than $600,000 to more than $1 million since the recession—means it has stores so busy the company has no choice but to add nearby locations.
“We have a lot of stores in our base that are just too busy,” Allison said. “A lot of our stores need to have territories split so we can continue to provide great service to our customers in those delivery areas.”
In international markets, Allison said, the pizza category overall is growing.
Yet, he said, Domino’s only has about 10% of the total market share both domestically and internationally.
“We still only sell one out of six pizzas in the U.S., and one out of every 15 outside the U.S.,” he said.
Typically, the leader of a specific restaurant market, like burgers or chicken, has about 25% of the share of that market. That means Allison believes the company can continue to take share from competitors, both large-scale brands and independents. And so he doesn’t feel there’s a need to buy growth through an acquisition.
“There’s a lot of runway for continued growth,” Allison said.
To be sure, Domino’s could theoretically use its capabilities on the delivery and technology front to build the business at a different chain.
Presumably, that’s what a buyer of rival Papa John’s would do if a sale of that brand ultimately goes through.
Yet there’s something to be said for focus. Six of the 10 largest restaurant chains in the U.S., including the three largest, are solo brand companies. And Domino’s is the smallest of the six, suggesting it indeed can get bigger.
For all of the push to consolidate, there is something to be said for focusing on a specific brand. Allison believes it’s a brand strength.
“I also really like the fact that we have, across Domino’s around the world, 300,000 team members who wake up every day and all they think about is how to sell Domino’s pizza,” he said. “There’s value in having that single brand.”
Take a listen to Domino’s CEO Ritch Allison on Restaurant Business' podcast, "A Deeper Dive."
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