Domino's (DPZ) Q2 2025 Earnings Call Transcript

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DATE

• Monday, July 21, 2025, at 8:30 a.m. EDT

CALL PARTICIPANTS

• Chief Executive Officer — Russell J. Weiner
• Chief Financial Officer — Sandeep Reddy
• Vice President, Investor Relations — Greg Lemenchick

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TAKEAWAYS

• Income from Operations: Increased 14.9%, excluding foreign currency impact; Primary contributors to income from operations growth were higher U.S. franchise royalties and fees, improved supply chain gross margin dollars, and lower G&A expenses, including a $3.9 million gain from the Maryland refranchising.
• Global Retail Sales Growth: Up 5.6% excluding foreign currency impact, driven by positive U.S. and international same-store sales and global net unit growth.
• U.S. Retail Sales: Rose 5.1% in Q2 2025, with same-store sales accelerating to 3.4%, attributed to the Parmesan-stuffed-crust Pizza introduction and incremental transactions.
• Carryout Comps: Gained 5.8% in carryout comps, setting a record for the highest average quarterly carryout dollars for the U.S. system; carryout performance benefited from Domino’s Rewards user growth.
• Delivery Comps: Delivery rose 1.5%, with improvement in both the company’s proprietary channels and through aggregator delivery partners.
• U.S. Net Store Growth: 30 net new stores were added, bringing the U.S. store count to 7,061; thirty-six company-owned stores in Maryland were refranchised.
• International Retail Sales: Increased 6% excluding foreign currency, supported by net store growth of 148 units and 2.4% international same-store sales growth.
• Share Repurchases: 316,000 shares were repurchased for $150 million at an average price of $475; $614 million remains authorized for future buybacks.
• 2025 Guidance: The company expects global retail sales growth to be generally in line with 2024 and maintains its U.S. same-store sales forecast at 3% for 2025, anticipating stronger comps in the second half of the year.
• Aggregator Platforms: National rollout with DoorDash was completed in the quarter, with material sales contribution anticipated in the second half of the year (Q3 and Q4).
• Stuffed Crust Impact: Parmesan-stuffed-crust Pizza launch described by management as meeting high expectations, producing positive transactions and higher customer praise than any recent product.

SUMMARY

Domino’s Pizza (DPZ -0.95%) reported accelerating U.S. same-store sales and robust profit growth, with management highlighting successful execution of new menu innovation and aggregator partnerships as core drivers for the period. Strategic investments in training for product launches and active expansion of the Domino’s Rewards program amplified performance, while franchisee engagement and refranchising contributed to financial outperformance. Management reaffirmed its 2025 guidance, noting expectations for stronger sales in the second half of the year, and pointed to ongoing procurement productivity as a base for future supply chain margins. No material impact from global macro or geopolitical risks was observed during the quarter, according to management statements.

• Chief Executive Officer Weiner said, “We have never had this many tools at our disposal to capture market share.”
• Chief Financial Officer Reddy noted that 85% of orders are digital, leading to a cautious, phased rollout for the new e-commerce platform.
• Management confirmed ongoing positive store-level economics for franchisees, with a stated focus on profit dollars rather than margin rate.
• International net store growth remains in line with prior year levels, with significant new unit plans in India and China despite a sequential deceleration in international same-store sales growth from 3.7% in Q1 to 2.4% in Q2.
• The recently refranchised Maryland market was transferred to a franchisee with over two decades of experience at Domino’s across multiple roles.

INDUSTRY GLOSSARY

• QSR Pizza: Quick Service Restaurant pizza segment, referring to fast-food pizza chains with a focus on delivery and carryout, high operational efficiency, and standardized menus.
• Aggregator: Third-party online platforms, such as DoorDash and Uber Eats, that facilitate food delivery from multiple restaurants.
• Refranchising: The practice of selling company-owned restaurants to franchisees, typically to strengthen franchisee economics or focus corporate resources elsewhere.
• Comps: Comparable store sales, measuring revenue change at units open for at least one year.
• Procurement Productivity: Operational cost savings achieved through improved sourcing, supply agreements, and efficiency in purchasing goods and services for the business.
• Unit Economics: Financial performance and profitability of an individual restaurant location, often tracked on an EBITDA or cash flow basis.
• DPE: Domino’s Pizza Enterprises, the master franchisee for markets including Australia, Japan, and certain European countries.

Full Conference Call Transcript

Russell Weiner: Thanks, Greg, and good morning, everybody. Our team drove strong results in the second quarter. In the US, both our delivery and carryout businesses were positive, and we drove meaningful market share gains. Internationally, we continue to grow despite a challenging macro environment. It's clear that our Hungry for More strategic pillars are working together to deliver more sales, more stores, and more profits. I'd like to highlight some of the initiatives that helped us drive these results. The "M" in Hungry for More stands for most delicious food. An important way to drive deliciousness is through new products. Late in the first quarter, we added one of the biggest new menu items in our history, Parmesan stuffed crust pizza.

Sandeep Reddy: This launch has gone extremely well and has met the high expectations that we had for it. On every level, it's delivering incremental new customers to Domino's, and a high mix that has been in line with our projections. Most importantly, our teams are executing this product very well. This is proof that the training investments we made ahead of this launch paid off. In fact, customer praise for this product has been significantly higher than any of our recent product launches. Customers love Parmesan stuffed crust. I want to thank our franchisees and our operations team for their continued efforts to achieve operational excellence around this highly complex product. This is a point of differentiation for our brand.

The early read shows that the addition of stuffed crust should be a market share catalyst for us over time. This is the big reason why Domino's customers would go elsewhere in the past. The next Hungry for More pillar I'd like to highlight is renowned value, which has been a key strength for Domino's. We're driving renowned value through national promotions, Domino's rewards, and by growing on aggregator platforms. Domino's rewards was a tailwind to our comp in the quarter, particularly the carryout business. You'll recall that growing carryout users was one of the primary reasons we redesigned the loyalty program. Active users continue to grow, and we expect Domino's rewards to be a multi-year sales driver.

We have a strong slate of initiatives ready to go for the rest of the year, inclusive of our best deal ever promotion, which is currently running through early August. We will continue to give customers what they want, which is more value in an environment where they remain pressured. The other part of our renowned value barbell strategy is tapping into the aggregator marketplace for pizza delivery. We recently completed our national rollout with DoorDash, the largest aggregator in the US. This rollout went extremely well as we were able to apply learnings from our prior launch with Uber. We will now begin marketing on the platform with investments coming from both sides.

The expectation is that our sales on DoorDash will build as awareness and marketing increases. We continue to expect this to be a meaningful driver to our US comp in the back half of the year. Everything we do at Domino's is enhanced by our best-in-class franchisees. You've often heard us talk about how our franchisees are the secret sauce to our success, and this continues to be the case. In the second quarter, we refranchised thirty-six company-owned stores in Maryland to a new franchisee that's not so new to Domino's. In fact, he's been a part of the Domino's system for more than two decades.

We continuously assess opportunities to strengthen the brand's position for long-term success, whether that means expanding into new markets or transitioning existing ones to franchisees to grow their business. I believe we've never been in a stronger position to drive sustained growth in our US business. We have best-in-class franchisee economics in QSR Pizza, the largest advertising budget, the best supply chain, and the rewards program that has never been bigger. We're now fully rolled out on the two largest aggregators, and with the addition of Stuffed Crust, have all the major crust types on our menu. We have never had this many tools at our disposal to capture market share.

This will be how we drive best-in-class results and long-term value creation for our franchisees and shareholders well into the future. I'll now hand the call over to Sandeep.

Sandeep Reddy: Thank you, and good morning, everyone. Our second-quarter financial results continued to be impacted by a challenging macro backdrop, but we delivered profit growth that was slightly ahead of our expectations primarily due to the timing of investments. Income from operations increased 14.9% in Q2, excluding the impact of foreign currency. The increase was primarily due to higher US franchise royalties and fees, gross margin dollar growth within supply chain, and lower G&A expenses. The lower G&A was primarily a result of expenses from the World Wide Rally that took place in the second quarter of 2024.

It also benefited from the refranchising of thirty-six company-owned stores in our Maryland market, which resulted in a pretax refranchising gain of $3.9 million. Excluding this gain and a small amount of severance-related expenses in Q2 related to our previously announced organizational realignment, our income from operations would have increased 13.2%. Excluding the impact of foreign currency, global retail sales grew 5.6% in the second quarter, primarily due to positive US and international comps and global net store growth. In Q2, retail sales grew by 5.1% in the US, primarily driven by same-store sales and net store growth.

This growth was in line with our expectations and paced well ahead of the QSR pizza category, which was roughly flat through the first half of the year. Same-store sales accelerated to 3.4% for the quarter on the strength of our Parmesan stuffed crust pizza launch, which drove positive transaction counts. Average ticket benefited from 1.4% pricing and the addition of stuffed crust, which carries a higher price point. This was partially offset by a slight deterrent on mix due to a higher carryout business that carries a lower ticket visibility. Our carryout comps were up 5.8%, and it was our highest quarter of average carryout dollars of all time.

Delivery was positive 1.5%, and we saw improvement in both our own channels and aggregated delivery business. Shifting to US unit count, we added thirty net new stores, bringing our US system store count to 7,061. International retail sales grew 6%, excluding the impact of foreign currency in the quarter. This was driven by net store growth of 148 and same-store sales that came in around our expectations at 2.4%. We have not seen any material impact to date from global macro or geopolitical uncertainty. In the quarter, we saw strength in Asia that was due to continued strong comps in India and in our Americas region, which was driven by Canada and Mexico.

Moving to capital allocation, we repurchased approximately 316,000 shares at an average price of $475 for a total of $150 million in the second quarter. As of the end of Q2, we had approximately $614 million remaining on our share repurchase authorization. Now turning to our outlook for 2025, we continue to believe that global retail sales growth should be generally in line with 2024. As part of that, we expect the following. First, we continue to expect our US comp for the year to be 3%, and that it will be higher in the second half due to the timing of our initiatives.

This assumes that the pressured macro environment we have seen to the first half of the year in QSR Pizza remains the same.

Second, we continue to expect international same-store sales growth to be 1% to 2% due to potential global macro and geopolitical uncertainty. Third, we continue to expect 175-plus net stores in the US and internationally net store growth to be in line with what we had in 2024. Lastly, at current exchange rates, we now expect foreign currency to be a headwind of approximately 1% on operating income growth. But this remains volatile. We continue to expect operating income growth of approximately 8%, excluding the impact of foreign currency, approximately $5 million in service expenses related to the organizational realignment we announced in Q1, and the $3.9 million in refranchising gain. Thank you. We will now open the line for questions.

Operator: Certainly. And our first question for today comes from the line of David Palmer from Evercore ISI. Your question, please.

David Palmer: Great. Thank you. And great to see the acceleration in same-store sales. I wanted just to bring up sort of the pushback or the big discussion that we often hear on Domino's and maybe get your broad take on it. And that is largely the view that you're entering, you know, perhaps this last year of a third-party marketing lift and that the menu news has been fantastic here with stuffed crust, and this is your perhaps, your biggest best bet. So people have this feeling that, you know, we're entering a really a golden year for Domino's, and it's gonna be tough for you to keep, you know, a 3% plus comp going longer term after this time period.

You see your pipeline. You see initiatives and other sorts of scale advantages, your driver economics that'll be reinforced by the things you're doing, the wider net is being cast, maybe some digital platforms that are being built. But, you know, what are the big reasons that you could say that you feel confident looking at what your plans are and the things that you see that can make people feel better today about sustaining 3% plus? And thank you again.

Russell Weiner: Good morning, David. You know, you talk about the last year, and your words, I'll use golden when I talk to my mom after the call, definitely. But, you know, to me, what would be helpful is just to take a look at the last decade. You know, the last decade, essentially, a SharePoint a year every year for the last decade. You're right. What we didn't have at that point was aggregators. What we didn't have at that point was stuffed crust or even New York style pizza. What we did have were the strongest economics for our four walls. For franchisees, supply chain pricing that let them keep consumer prices low and value high.

And a large ad budget. And the ad budget is important because if you're gonna squeeze percent margins, you wanna throw a lot of volume kinda through that. And so essentially, you know, the last decade, that's what we had going for us. And I just think we're adding to it. So we added, you know, last year, Uber Eats, this year, DoorDash. Last year, New York style. This year, stuffed crust. We have a brand new loyalty program, you know, a couple years in, and by the end of the year, we have a new e-commerce program.

And none of these things are one-year events just like the last ten years were a series of events that build on each other. And I said this in my opening remarks, we've built this arsenal right now that I don't think we've ever been stronger. So, yeah, these things are new, but they're not going away, and they add to everything, all the pressure we can put on the competition. And all the value we can give to customers.

Operator: Thank you. And our next question comes from the line of Dennis Geiger from UBS. Your question, please.

Dennis Geiger: Great. Thanks, guys. I wanted to ask a bit more on the US sales outlook for the back half of the year specifically and that reiterated 3% comp guide. You guys both gave some good color on, you know, what's working and how you think about what continues to work. But anything more kind of on additional thoughts on the initiatives you've got, how they should hopefully help you to accelerate trends into the back half of the year? And I know you touched on stuff and on DoorDash. Anything more there on what you're seeing and how that gives confidence to the back half? Well, as all the other initiatives around loyalty and the promotions and other things? Thanks.

Russell Weiner: Yeah. Maybe, Sandeep, I'll start on this one. You know, the initiatives that, you know, we can talk about for the second part of the year, one's already going on, which is best deal ever. You know, we're really leaning into value at a time that consumers want that from restaurants. And obviously, DoorDash. So we got to 100% of stores participating at the end of Q2. But we expect the majority of the volume push to kinda be in the second half of the year. I'll remind folks that DoorDash is about twice as big as Uber in pizza sales.

Sandeep Reddy: And I think I'll just add on to that. Dennis, you heard in the prepared remarks, I talked about the carryout performance in the quarter at 5.8%. We're incredibly pleased with what's happening with carryout. And I think it's really testament to the loyalty program that Russell talked about earlier with Domino's rewards. We continue to acquire more customers into that loyalty program, and we are seeing the frequency build compounding over time with the carryout business. So super excited because I think that's a lot of what we expect to come in the back half. I think both delivery and carryout are expected to be positive for the year.

And we're not gonna tell you exactly how much because I think the initiatives that we have are gonna be a surprise to the competition.

Operator: Thank you. And our next question comes from the line of Brian Bittner from Oppenheimer. Your question, please.

Brian Bittner: Thanks. Good morning. Yeah. I'd like to go back to kind of David Palmer's question. It is the question that we just consistently get. And, you know, the debate building is kind of what he alluded to just that all those amazing things you're doing do create challenging laps in 2026 and 2027. And, you know, the work we've done specifically on DoorDash suggests that maybe this is a multiyear sales driver instead of, you know, perhaps creating tough comparisons. And I'd just like you to maybe enter the debate on DoorDash specifically. How do you think about DoorDash as the years go by as being a growth vehicle, and why will it be?

Russell Weiner: Yeah. Let me maybe break that into two parts. You know, when you talk about the challenging laps, I think what you're talking about is kind of the amalgamation of some really good programs this year. And I talked about before, some really strong programs for the last ten years. What I think you know, is important to understand is we compete in a category that's grown 1% to 2% essentially over the last, you know, as long as I've been working in pizza. So with that category growth, and with us being, call it, almost a quarter of pizza, there is a lot more for us to gain.

And so I think about this, certainly, what we need to lap, and we're lapping, you know, I think a strong program we had last year. But the strength building on strength, building on strength actually makes it a lot more difficult for the competitors to compete over time. And, you know, especially when you look at, you know, store-level economics, I think the longer both sides are trying to deliver this kind of value to customers, the harder it is to sustain.

And so I think it's important to look at us certainly, you know, certainly what we have to lap, and we've got programs to do that, but we're competing in a category that I think we're a lot stronger than other folks. With really not what I call a number one market share. Right? A number one usually in categories and restaurants are 40%, 50%. And so I think you gotta just look at it holistically when you think about our future growth. You know, as far as DoorDash, you know, our plan both for Uber and DoorDash is we think we should have our fair share on these platforms.

And so that means we got a lot to go on DoorDash, and we've got more to go on Uber. And per my last point, we're gonna continue to grow market share over the next few years. So that number is always gonna increase. I don't think it's farfetched to say that we should have the same or similar market share on aggregators as we do outside.

Sandeep Reddy: Yeah. And I'm gonna add one thing to this, which I think is super critical. We just talked about in the prepared remarks that essentially, the pizza QSR market is roughly flat, and we grew retail sales by 5.1% in that quarter. That just really puts an exclamation point on exactly what Russell is saying. And with all the tools at our disposal, starting with best-in-class economics for the franchisees, that ad budget is actually significantly higher than anybody else. The supply chain profits that we continue to generate and drive into the franchisee P&L is every reason to believe we'll continue to take share.

I think a lot of the same-store sales growth that you're gonna be seeing is us taking share from the competition. As they keep actually losing market sales to us and closing stores, which you've actually seen over the last decade.

Russell Weiner: And, you know, just maybe finally, when we talk about, you know, in Hungry for More most delicious food, we talked about doing two new product launches a year. I'm not saying we'll never do LTOs, but we don't really have a big history of doing LTOs. And the big reason is when we do the research, we've launched products that we think are gonna stick around for a while. We think are gonna grow for a while. That we think they're gonna help us take market share. So when we look at New York style and we look at Stuffed Crust, these are not LTOs.

And maybe that's something, you know, another thing to add to just the discussion around this. If these were LTOs, yeah, I'd be worried about maybe how do you lap them because, you know, whatever LTO this year, next year's has to be bigger. And at some point, you get smaller ideas, but these things aren't going away. And they're major pieces of share within the marketplace that we can go after for a long time.

Operator: Thank you. And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question, please.

Danilo Gargiulo: Thank you. I'd like to spend the same line of thinking on market share gains in international markets. So maybe Russell, if you think about your top five markets, can you give us a little bit more color on the state of competition over there? And I remember maybe a year or so ago, you were talking about the adoption of the More strategy yet to be deployed by other master franchisees. So what is the progress on that standpoint? Thank you.

Russell Weiner: Thanks, Danilo. Yeah. I think, you know, the best one that I'll point to is India. I think you can clearly see their success when they report their numbers. And what's driving their success? It's really all the elements of Hungry for More. When you look back at their last results, what did they report on most delicious food? Had the volcano pizza, a couple of other new products. On operations excellence, you know, they're really pushing for twenty-minute delivery times and in many cases, you know, guaranteeing that to customers. So that's the O. Renowned Value, they took away their delivery fee because they realized they could drive more volume that way.

And they are truly, you know, Jubilant, the best-in-class franchisees that we've got out there. So every single piece of Hungry for More they are adopting, and, you know, when that becomes successful, that begets other folks continuing to drive Hungry for More.

Sandeep Reddy: Yeah. And I'll add, Danilo. India is a fantastic story that we've talked about. The Canadian performance this year, which has been fabulous, and they've launched Stuffed Crust just like we did in the United States, and take-up on that has been fantastic. And I think even Alsea has been doing well. Mexico, yep, has a great value. So I think across the board, we're seeing a lot of adoption of the Hungry for More strategy. And I think with the progress of time, you'll see even more.

Operator: Thank you. And our next question comes from the line of David Tarantino from Baird. Your question, please.

David Tarantino: Hi, good morning. My question is on international unit development. And I know you guided this year net openings to be similar to last year. And that is reflecting a growth rate that's lower than your long-term target. So just wondering if you're starting to get line of sight beyond this year to getting towards that longer-term goal of 6% or higher. I know this year, you know, it's weighed down by some closures, but just wondering if we're starting to get to a point where those are behind you and you're gonna have the growth that you expect longer term. Thanks.

Sandeep Reddy: So, David, I think on international unit development, we're really speaking outside of DPE. We're really comfortable with where things are going, and they're tracking to the plans that we had. Both in India and China, we're expecting to see significant growth. I think Jubilant talked about for their fiscal year 250 stores in India. And I think China has talked about 300 stores for the current fiscal year. So that's a pretty material opening plan. And I think outside of those two markets, in the ex-DPE markets internationally, things on balance are going to plan. So we feel pretty good with where things are at.

And frankly speaking, with what visibility we have beyond 2025 to 2026, we feel pretty good about that too. I think specific to DPE, we actually knew about the store closures that were gonna be happening in Japan this year, and they happened in Q1. And based on events that have happened in the last few weeks, I think their executive chairman has reiterated that the strategic plan that was outlined by the previous CEO is still very much on track, but they continue to do evaluations of where things are at, and they may come back with more color as we go forward.

But I think pending any further updates, the plans that we had at the last quarter when we actually talked to you haven't really changed. Either for 2025 or in for 2026. But we just need to continue to work with their teams to get more clarity on where DPE is going, probably less so on the closures, more so on the opening plan. Because I think that was a part of the projection that we didn't have clear even the last time when we spoke, and there's more work to be done on that.

And it really ties back to unit economics of the stores because I think without unit economics being strong and that also is driven by same-store sales consistently being positive, then that opening plan becomes something that's a risk for them, and we're working with them to resolve that.

Operator: Thank you. And our next question will come from Gregory Francfort from Guggenheim. Your line is now open.

Gregory Francfort: Hey. Thanks for the question. My follow-up call is just my follow-up question was to the last one. Just on the international business, Sandeep. Last quarter, you expressed, I guess, some caution on the international consumer for the balance of the year. It sounds like that's not what played out this quarter. Guess I'm curious, as you look to the second half, do you still expect some caution there? And maybe what played out differently versus plan on the comps in the quarter? Thanks.

Sandeep Reddy: Yeah. No. So I think, Greg, when you go back to the prepared remarks, I talked about the fact that international same-store sales are 2.4%. Was in line with our expectations. So we did expect a sequential deceleration from the first quarter to the second quarter. 3.7% was Q1. 2.4% was Q2. We still are talking about the potential for the macro and geopolitical overhang in the back half. Now if we don't see that overhang materialize as we kinda go through the back half, then potentially there could be a bit of upside to this. But it's too early to tell. And frankly speaking, the sequential deceleration that we expected is exactly what we saw in the second quarter.

So it really hasn't been a change in our expectations relative to where we were in April when we talked to you.

Operator: Thank you. Our next question will come from Peter Saleh from BTIG. Your line is now open.

Peter Saleh: Great. Thanks for taking the question. Russell, I just wanted to ask, you know, you mentioned that as long as you've been in this industry, the category has been growing 1% to 2% per year. But the first half of the year so far has been flat with some pricing, which implies some negative traffic. So curious if you can comment on why you think the pizza category is, you know, struggling a little bit here at flat. And just if you can provide a little bit of context on income by cohort, that'd be helpful.

And any thoughts on, you know, do you anticipate the full year to be, you know, for the pizza category to still be in that 1% to 2% implying better back half or how do you think about that going forward? Thanks.

Russell Weiner: Yeah. Yeah. Sure. Obviously, you know, we're in this for the long haul, and 1% to 2% is what the category has done. There are headwinds within all of QSR. I think if you look at burger category growth, it's probably gonna be pretty similar. And so for me, Peter, the important thing is to know, understand these things come in cycles, and they will return to kinda traditional growth numbers would be my assumption. But I think the important thing is to see how we grow even during tough times.

And, you know, when you think about where the category is and you think about what our results were for the quarter and all the upside with all the share that's left to take, if this is our performance during times where there are some category headwinds, then, when the category has tailwinds, that's only gonna help us. And I'd let you know that, you know, we kept our 3% same-store sales. That's our 3% plus for the US. It's this year. It's next year despite, you know, what the category does. And I think maybe I'll add to that a little bit. I know this wasn't a direct question, but it maybe goes off some of the questions earlier.

I think the important thing to understand right now is whether it's pizza or burgers or QSRs in general, there is pressure because consumers are looking for value. And what you're seeing is a restaurant industry where we're providing a lot of value. The big difference with Domino's is when we provide value, we're going on offense. We're doing it because we think we can grow. And I think other folks are doing it because they're on defense. And a little bit treading water. How much longer, you know, do we need to do value? We're prepared. We're built to do this. So, you know, right now, there are headwinds, but actually the headwinds, I think, are tailwinds for us.

It's kind of a long answer to a short question. And then income by cohort was your other piece, and at least at Domino's, we've seen growth among all the cohorts, including the low-income cohort in Q2.

Operator: Thank you. Our next question will come from Andrew Charles from TD Cowen. Your line is open.

Andrew Charles: Great. Thank you. Russell, maybe just a follow-up or similar to the last question. You know, notwithstanding your long-term bullishness on the pizza category, I wanna see if Domino's has an opportunity in your view to dive deeper into the fast-growing chicken category. We already play, but could we see Domino's play deeper in the chicken category, not just from menu innovation and marketing, perhaps from other product upgrades or new equipment like fryers ultimately?

Russell Weiner: Yeah. Andrew, you know, we obviously have a pretty diverse menu. We actually had a chicken in a window in Q1 with loaded chicken. We're always listening to what consumers want, and, you know, as we said, we try to we're in the permanent product game, so we sell a lot of chicken today. If there are opportunities to make that, you know, significantly better, obviously, we're always gonna listen. You did bring up something a good point that, you know, I'll just follow-up on that the question of, hey, could there be another cooking platform in your future? And if there was, obviously, we'd be talking about it.

But this is more of a kind of a what would you need to think? And you'd need to think that there's room in a store for another cooking platform. You brought up fryers. Whatever it would be, if we chose to go that way, what you would need is you'd need more room in the stores. And the fact is the reinvention of our circle of operations, no more box folding in the back. All that stuff, we got more room in the stores.

You need a system like we have it with Domino's to be able to say, hey, if there is a second cooking platform, how do you line that up with things coming out of the regular oven? So nothing to talk about right now, but what I'd say is we're prepared to do whatever, you know, consumers think that we should be doing, we should be offering them in the long term.

Operator: Thank you. Our next question will come from John Tower from Citi. Your line is open.

John Tower: Great. Thanks for taking the question. Maybe just gonna ask, you know, Russell, earlier you hit up on the idea of the e-commerce platform and how it's rolling out this year. And I'm just curious in the stores where you've already rolled it out, can you talk about any sort of behavioral differences in the consumers who've moved over to it versus the legacy platform and what you've seen in terms of either consumer response or even at the store level how operations have performed at those stores that have adopted it?

Russell Weiner: Thanks, John. Yeah. We, you know, we finished building the platform last year. And so as we enter this year, what we're doing is simultaneously testing the old platform, you know, with the new platform. And, you know, then you look at things like conversion and sales and all that. And, you know, when the new site performs better than the old site, we increase and we have more customers going through that site. And what I can tell you, we've got more customers, you know, this month than we did the prior month than we did the prior month. So things continue to proceed the way we'd want it to.

And, you know, these are improvements off what I think is still one of the best e-commerce platforms in the business.

Sandeep Reddy: And, John, I'll just add that with us being 85% digital, we think it's very important for us to be very measured and cautious as we're rolling it out. Just make sure that there's no disruption in the transition as we're rolling out on the e-commerce platform. Everything's on plan. Everything's on track. This was exactly what we wanted to do.

Operator: Thank you. Our next question will come from Chris O'Cull from Stifel Financial Group Corp. Your line is open.

Chris O'Cull: Yeah. Thanks. Procurement productivity, I think you guys have cited, is the kind of the primary driver for the supply chain profit performance for the last several quarters. Can you just elaborate on the key factors that have kinda driven that productivity gain? And is there a point at which you begin lapping some of those improvements that might impact the year-over-year profit growth we should be thinking about over the remainder of the year?

Sandeep Reddy: Thanks, Chris. And look, I mean, I think as far as we're concerned, it's not just been this year, but I think the last two, three years, we've been seeing procurement productivity. We have a fantastic procurement team led by our chief supply chain officer. That's delivering all this value that's coming through. Obviously, a significant part of our cost structure is food, but there's much more beyond that as well. And I think that's what the gains have been, and we, you know, we did get the benefits of that in 2023 and 2024.

And I think even this year, with the agreements that we had lined up with suppliers, we knew that we're gonna get a bit more this year as well. The great news about all of this is everything's in the base, and we're building on the base. So just because we've achieved this incremental productivity, it doesn't mean it goes backwards. But I think the pace at which we've been building it up because we've had such good years of procurement productivity, I wouldn't say that this is the normal incremental assumption you should be making on procurement productivity. We'll be doing everything we can to drive more, but the magnitude probably will start tapering as we move forward.

Operator: Thank you. Our next question will come from John Ivankoe from JPMorgan. Your line is open.

John Ivankoe: Hi. Thank you. You know, obviously, you know, the system, you know, was really built on your delivery drivers, managers that became franchisees, very entrepreneurial system. I think correct me if I'm wrong, I think the average franchisee has ten stores, you know, but typically smaller in nature. So I wanted to know, bring up the point of, you know, you refranchising a company market thirty-six stores, I think, to one franchisee. Is it kind of a maybe a philosophical change of your bigger, more professional, you know, franchisees that have their own development teams, access to different levels of financing, what have you?

Do we have an opportunity to maybe, you know, consolidate some franchisees that have maybe been in the system twenty, thirty, forty years, getting them in the bigger systems, you know, that can maybe, you know, either maintain or even accelerate, you know, some of the US growth over time? How are we feeling about the overall composition of the franchise system and how that might, you know, change or evolve in the next three to five years?

Russell Weiner: Thanks, John. Yeah. Look. Franchise system strength is measured by, I think, two things. One is the strength of the relationship, and I don't think it's ever been better between franchisee and franchisor. And then the unit economics. And to your question before, the average franchisee has nine stores, so you multiply that by the $162 EBITDA, that's pretty nice cash flow for the average franchisee. We have larger franchisees and smaller franchisees. Interestingly enough, the person we sold to in Maryland, Suha Unal, who's been with Domino's for two decades. He worked for a franchisee, he's worked at corporate, he's worked internationally. It's just a great Domino's story.

He's become a new franchisee, so it's not someone who, you know, had the average of nine stores that moved up to that degree. It's someone who came in new. And each example is really kind of a snowflake. So in this case, you know, when you look at where the stores were for each other, the best way to manage it was one franchisee, and Suha will do a great job there. But you're not seeing any, you know, big departure in strategy, and what I'd say is, you know, I like the way that our franchise system is really diverse.

Because it also means there's no particular concentration risk, let's say, you know, on one side or the other. It really lets us continue to do what's best for the overall brand. And I think if you have too many large franchisees, maybe that's a little bit more difficult.

Operator: Thank you. Our next question will come from Sara Senatore from Bank of America. Your line is now open.

Sara Senatore: Thank you. Quick follow-up and then I have to ask on margins, of course. On the follow-up, I don't know if you gave the mix of 3P, but I was wondering if you're continuing to see growth in Uber even as you've rolled out DoorDash. I think that was something that, you know, kind of the overlap might be, you know, a question that we've heard. And then the question I have is about the margin components. Did you continue to price below inflation, which certainly I think would, you know, is helpful?

To the extent that, you know, you have, like, a pricing strategy going forward, will that kind of always be the case that the goal is to price, I think, below food away from home inflation or below your own inflation? Just trying to think about, I understand your profit dollars we've talked about is the primary focus as it should be, but, you know, thinking about the margin rate and how much faster you might have to grow revenues to maintain that the returns, you know, given where the margin rates are, you know, for you and franchisees. Thanks.

Sandeep Reddy: Hey, Sara. So I think I'll just take this two different questions to your point. Right? So the first was 3P mix and comps. We're not gonna be talking about mix specifically as we talked about on the Q4 call and even on the Q1 call. But we're really happy with where Uber is. Uber has continued to track to our expectations. Thrilled a bit with where that's going. And really happy that we've rolled out DoorDash. And I think by the end of the quarter, we actually did roll out DoorDash. So but DoorDash had a very modest impact on the Q2 comp.

But the real, a more material impact is expected to come in the back half as we're now that we're fully rolled out on DoorDash. So overall, really pleased about the delivery comp. It came from better performance both in our own channel as well as in 3P. And I'm pleased with where it's going as we move to the back half of the year.

Russell Weiner: And then I'm gonna now switch to your question on margins. Specifically on the pricing and pricing below inflation and rate versus dollars. Philosophically, I think we've been very consistent definitely since the time I've been here and even prior, where in the end, we want to make sure that we drive profit dollars to the franchisees and actually make sure that they continue to see that health coming through. The key over here is back to what Russell talked about on the first answer that he gave. We have best-in-class franchise economics, so let's start there.

Then you layer into that the fact that we have the biggest ad budget within Pizza QSR, that gives us enormous marketing muscle to actually out-advertise the competition. We have the biggest supply chain with fantastic economics. Which, again, with our profit-sharing mechanism, gets pushed into the franchisee P&L. And when you put all this together, as far as we're concerned, this is a long-term market share gain. Going back ten years, our pizza national competitors have closed close to 2,000 stores. And we've closed close to as many. So as far as we're concerned, that is the model. That is the economic model. We focus on getting better, best-in-class economics to our franchisees.

We use all the tools in our arsenal from our advertising budget and a supply chain perspective to enable them to out-compete the competition because we have way more room in our P&L with the modest pricing that we're taking to deliver great value to our customers, which is what we've been consistently doing over the last decade, and we will be doing it for the foreseeable future. And if we do end up pricing below inflation, fantastic, because I don't know that the competition is able to do that with where their P&Ls are at.

Russell Weiner: And, Sara, maybe it's just helpful to think about what the principles we have are behind pricing, at least promotional pricing. In no particular order, to me, one of them is consistency. You know, consumers don't want whiplash. And, you know, if you look at our mix-and-match deal, we launched it at $5.99 in 2009, and we changed it to $6.99. That's pretty consistent. Two is, the way we come up with pricing is through quantitative research that maximizes two things: franchisees' top line and bottom line. It's really important to know that order count growth is much more correlated to profit growth than ticket growth.

The third is we try to make sure that when we increase prices, they are at or below consumer income growth. If consumers aren't getting a raise, they don't want you to. They're pretty clear on that. And then I think the fourth for me is really what we changed in 2023 moving from value to renowned value. It's not just about the price, it's about value that drives talk value. And so if you wanna know what we're gonna do on price, if you think about those four principles, that'll give you a pretty clear map.

Operator: Thank you. Our next question will come from Christine Cho from Goldman Sachs. Your line is now open.

Christine Cho: Good morning, and thanks for taking my question. I was wondering if you can share kind of a rough sense of what percentage of the orders were tied to a deal or a promo and how that has trended over time. Both for Domino's specifically and across kind of the broader pizza industry. And, additionally, could you talk a little bit about your decision to bring back the best-ever deal? A best deal ever in July? Do you see this as more of a kind of a customer acquisition vehicle similar to the Boostpeak, or does it really drive more order frequency? Thank you.

Russell Weiner: Yeah. Christine, you know, I think on deals maybe without giving away too much, you know, our two major deals are mix and match and our carryout deal have been pretty consistent in their mix over time. And then as far as best deal ever, you know, the reason we brought that back was a couple of things. You know, obviously, consumers are looking for value right now. But, you know, this is where Hungry For More shows you that it's more than just value. The "M" in Hungry for More is about the most delicious food. And, you know, we certainly did that, you know, last quarter with Parmesan stuffed crust. Here we are with Best Deal Ever.

Well, there are two things that make this the Best Deal Ever. The price is fantastic. But this is delicious food. You can put up to seven toppings on these pizzas, and what we know is consumers love to put more toppings on their pizza, and they see this not only as a value, but as a way to drive deliciousness. And we're a brand that wants to do both. So that was the decision behind the decision to bring it back.

Operator: Thank you. Our next question will come from Lauren Silberman from Deutsche Bank. Your line is open.

Lauren Silberman: Hi. Thanks. Congrats on the quarter. I wanted to ask about stuffed crust. You talked about strong performance. Can you just give a bit more color on incrementality, what you're seeing in terms of traffic versus average ticket contribution? When you launch a new product like this, do you tend to see mix spike as you advertise and it settles over time? Or are you seeing more of a steady build as awareness grows? Any color on how that mixes versus, I think you've talked about 15% for peers. Thank you.

Russell Weiner: Yeah, Lauren. You know, we had high expectations for the launch, no doubt. Like you said, this is a big pizza type, you know, within the category. And I'm pleased to tell you that those high expectations were met. Operationally, all the training we did, our franchisees did an amazing job, and the consumer input we've gotten is better than, I think, any product that I can remember since maybe new and inspired. And so that's been really positive. Now the other nice thing about stuffed crust is what you said is it also drives ticket.

So you're driving deliciousness, but, you know, when you add this to your mix and match, you gotta pay four dollars more, and, you know, every penny is worth it. But four dollars more for mix and match. So it's not only driving deliciousness, the value is really good, but also driving profit. You know, you didn't directly ask this question, but I'll give you a little bit of insight as to how we thought about stuffed crust. You know, we came out with a medium, and a lot of questions have come up. Hey. Why a medium and not a large? A couple reasons.

One is we wanted to have a different dough type than our hand-tossed, and so we decided to use our pan dough, and that comes in a medium. Now we easily could have come out with a large, but we asked ourselves, is it really worth it? When we looked at the data, and not to say the data won't change and we can change our mind, but a big reason we came out with the medium was because we knew that the competition wanted to react to us coming up with stuffed crust. The majority of them have larges.

And the ability to react with competitive pricing versus a medium when all you have is a large is really, really difficult. And I think this is also a way over time, with great taste and relative value, that we're gonna continue to grow share.

Sandeep Reddy: And, Lauren, I'm just gonna add more of the financial dimension to everything that Russell was talking about. Because you go back into the comp for the quarter, the 3.4% comp that we had, it was driven by incremental traffic, which I think we talked about in transaction counts. And so it's definitely a traffic builder as we've driven trial with the new introduction to the menu. And we are now really confident that this is gonna be a very evergreen part of our menu, which is why we're saying it's a long-term catalyst. It's not just for this launch and this year.

It's we think it's we're taking a space in Pizza QSR from a menu perspective that others had occupied, and now we are there and we have what we believe is the best product of this crust type in the marketplace. So when you look at this, it's not just Q2. It's about the rest of this year and next year. Stuffed crust is here to stay. And maybe pass the way just back to some of the first questions on kind of what are the long-term drivers.

I mean, if what we're looking at is to continue to drive that one, call it, one SharePoint a year that we've done over the last ten years, that's macro within the category. But within the category, there are all these sub-components. Stuffed crust is a sub-component. And so we intend to drive significant share of stuffed-crust. So we're brand new to that, and that's gonna be driven over time. And so I think that's maybe the way to, you know, maybe push some more texture behind why we're so bullish about the long term. It's not just macro, there's a lot of share to be gained.

But within these categories that we're relatively new on, you know, aggregators, stuffed crust, New York style, they in and of themselves have lots of room for us to gain share.

Operator: Thank you. Our next question will come from Brian Harbour from Morgan Stanley. Your line is now open.

Brian Harbour: Yeah. Thanks. Good morning, guys. Maybe just to come back to the kind of the store margin topic. In the near term, is, you know, some of the pressure that you're still seeing kind of on the corporate stores, are franchisees seeing something similar directionally or, you know, I know that's a small store base, but anything idiosyncratic that you call out? And then, you know, food inflation has been a little bit higher in the first half. I mean, do you expect something similar in the second half or some moderation from here?

Sandeep Reddy: So, Brian, good question on this one. I wanna just start by saying the sample size on corporate stores is so small that it absolutely is not a read-through to franchisee profits and profit margins. And I think I've said this before, and I'll reiterate that again. We are in a very good place on a franchisee EBITDA perspective. Our economics continue to be very good over there, and we're very pleased with where that's going. And we are, as we said earlier, we expect to earlier this year, we expect to grow franchisee EBITDA, and that's always what we strive for.

And then I think coming back to corporate store margins, over here, there's a big insurance charge that we took in the quarter. You actually take out that insurance charge, it was relatively flat from a corporate store margins perspective. And so I think it's really a one-quarter impact that you're seeing that it's a little bit outsized on that business. And look, even on food inflation, yes, there was pressure from food inflation, but we expect that. We said earlier this year that we expect it to be heavier on food inflation in the first half and lighter in the second half. No change to the expectations for the year.

Expecting to be up low single digits, but so all this was what we expected. So just to reiterate, franchisee EBITDA in a good place. And we strive to continue the growth.

Operator: Thank you. Our next question will come from Jeffrey Farmer from Gordon Haskett. Your line is open.

Jeffrey Farmer: Yeah. Good morning, and thank you. Just a couple of big picture follow-ups. As you guys discussed on this call, the US pizza segment is definitely in the middle of an intensifying value push. Primary part of my question are, what would you guys consider to be the pros and cons of this value-focused backdrop for your Domino's brand?

Russell Weiner: Yeah. You know, it's I guess I need to first say, obviously, that we all want the best for our customers. So we'd love the country and the world to be in a place where, you know, there aren't headwinds on consumers because a pizza company. We think everyone should be able to get the food they want. You know, with that said, and if you just look at yourself as a restaurant, or if we look at ourselves as a QSR and, you know, maybe widen the lens, not just pizza, but overall QSR, Jeff, we were really built for this. You know, value requires a few things.

It requires strong economics that you can get through tougher times, a supply chain that has the volume and pricing that, you know, Sandeep talked about earlier. Folks keep asking about procurement efficiencies. Well, God bless, you know, supply chain. And then a large ad budget that pushes volume through a time where, you know, margins may be tighter. And so the pros and cons, you know, to me, of value, at least for Domino's, when consumers are looking for value, that's actually a big pro for us because I think we're set up. I don't think I know we're set up better than anybody else to get through this.

So when these are headwinds for other brands, they end up being tailwinds for Domino's. Which just means when things turn around, we'll be in a better place as well.

Operator: Thank you. Our next question will come from Jeff Bernstein from Barclays. Your line is now open.

Jeff Bernstein: Great. Thank you very much. Just looking at Russell, in your prepared remarks or at least in the press release, you talked about both the aggregators being a strong component of your growth and then the rewards program. So I just wanted to touch quickly just on the aggregator side. I know you're not giving the mixed shift for DoorDash, similar to how you did for Uber through last year, but should we assume a similar sequential growth rate acceleration for Uber or for DoorDash, I should say? I know it's twice the size, but just thinking directionally whether we should assume something similar. Then on the rewards business, I don't know if there's any color you could provide.

I know you say it's larger than ever. But whether there's any metrics you share in terms of the number of members or the frequency or spend. Any color without giving away too many secrets would be great. Thank you.

Russell Weiner: Yep. I think you answered your question, but let me try just because the question was so well put. Let me try to give you as many answers as I can before Sandeep kicks me under the table here. You know, what we do expect and we've been really clear on is that the second half of the year is gonna be where you see more growth out of DoorDash. And we said over time, what we expect to get out of this $5 billion, you know, pizza category with aggregators.

How that actually, you know, looks over the short term is something that I even if I told you I had the answer to it, I probably wouldn't be 100% correct. And so what we'll do is, you know, we'll continue to report this delivery category growth that we're seeing. And over time, you know, we'll be able to potentially break that out a little bit further with some more insights. But you're right. Uber is, you know, twice as or half the size of DoorDash. So I think over time, we'll see more out of that.

And then with the rewards program, you know, what I like about it and actually, you made me think of this whole comparison aggregates. If you think of aggregators, it tends to be a higher, you know, income customer, these are folks who, you know, we hope will eventually come to Domino's, but, you know, we're willing to meet them where they are. The economics are set up for them to stay aggregator customers should they need to. But there are customers out there who want value and want rewards. And, you know, the biggest change we did to the Domino's rewards program was made it a better program for light users.

You can do twenty or forty point redemptions now versus sixty in the past, and carryout users. So those tend more lower income. So those two things are working really well together. To drive renowned value, and I just throw out it's a good point on the loyalty program. One would think if you're giving out, you know, points or redemption to at twenty and forty points, you know, maybe that hurts ticket. It's actually the opposite. If, essentially, people are getting side items, and so the ticket on our twenty and forty point item checks tends to be higher than when you're getting a free pizza.

Operator: Thank you. And we'll take our last question from Alexander Slagle from Jefferies. Your line is open.

Alexander Slagle: Hey. Thanks for putting me in. Follow-up on Chris' question earlier on the supply chain and a sense for the opportunity to see these continued margin gains continue. It kinda seems like the Q3 is usually a bit lighter margin historically, and it was last year as well. So trying to think what we should think about your ability to maintain this current margin level going forward, or is there a unique dynamic in the Q3 we should think about?

Sandeep Reddy: So, Alex, thanks for the question. I think, look, on supply chain, we talked about at the beginning of the year. We expected to see margins improve slightly for the year, driven a lot by the procurement productivity. And so I think as you look into the back half, there's no real change in those expectations. And, yes, there's some seasonality based on what cost structures look like in the summer months, for example, where utility costs end up going up a little bit. But overall, it's in the comparison. So I think year on year, I think the trends should be pretty much what we talked about for the full year.

And so what we've seen in the first half should be pretty indicative of what we expect.

Greg Lemenchick: Thank you, Alex. That was our last question of the call today. I want to thank you all for joining, and we look forward to speaking with you all again soon. You may now disconnect. Thank you.

Operator: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.