Domino's Pizza Inc.
) recently started its first store in Nigeria, in association with
its master franchisee, Eat 'N' Go Restaurant Group. The group
believes that the Nigerian market has immense untapped
opportunities for Domino's, and intends to place the brand as a
leading one in the region over time.
Eat 'N' Go Restaurant Group boasts significant local market
knowledge and has a proven track record of operating quick service,
fast casual, fine dining restaurants as well as coffee shops in
that market. Further, the group enjoys the status of being the
franchisee for another U.S.-based ice cream parlor chain, Cold
Stone Creamery, in the African market.
Domino's has been riding on a growth trajectory. It generates more
than half of its global retail sales from international stores,
constituting over a third of its adjusted operating income. It
surpassed 5,000 international Domino's Pizza stores in the recently
concluded second-quarter of 2012. Its long-term global retail sales
outlook calls for 5-8% growth.
Following the continued traction in the overseas market, as evident
by the international same-store sales growth of 5.7% as against
1.7% domestic growth in second-quarter 2012, Domino's intends to
further widen its global footprint. Presently, Domino's has its
presence in over 70 international markets. The company targets to
maintain 3-6% growth in international same-store sales over the
Domino's is not the only quick service restaurant chain to focus on
the African region. Another U.S. restaurateur,
Yum! Brands Inc.
), is also expanding its business in that continent with its KFC
brand. Yum Brands is looking to expand mostly outside South Africa,
in countries where its presence is negligible. Yum! plans to have
about 1200 units in Africa by 2014.
Domino's unit economics remains strong, which in turn aids growth.
Moreover, the company's growth model does not involve substantial
investments as it concentrates on the master franchise structure.
Domino's currently holds a Zacks #3 Rank, implying a short-term
Hold rating. We also reiterate our long-term Neutral recommendation
on the stock.
DOMINOS PIZZA (DPZ): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis
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