In an effort to develop its international footprint,
Domino's Pizza, Inc.
) signed a 15-year license agreement with Taste Holdings. The
agreement, which includes a 15-year renewal alternative, pertains
to the development of Domino's brand in seven Southern African
countries - South Africa, Lesotho, Swaziland, Namibia, Botswana,
Zimbabwe and Mozambique. Thereafter, Zambia and Malawi will
follow, if certain conditions are fulfilled.
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Johannesburg-based Taste Holdings operates almost 150 restaurants
under the popular brands of Scooters Pizza and St. Elmo's Pizza
in Africa. As part of the agreement, most of the franchise stores
of Taste Holdings will be converted to Domino's Pizza outlets.
Domino's stepped into the Africa continent with a debut in
Nigeria in collaboration with its master franchisee, Eat 'N' Go
Restaurant Group, in 2012. The company has since then been
successfully operating in the region, fuelled by competitive
pricing and adapting its menu to the local culture and food.
Taste Holdings' agreement with Domino's comes on the back of a
Sub-Saharan Africa economic renaissance, which is fueling an
investment drive by fast-food joints looking to capitalize on the
continent's growing middle class income. Further, with growing
political and economic stability, foreign fast-food brands are
approaching the region with renewed optimism.
According to a 2012 report by consulting firm, McKinsey &
Company, consumer-facing industries across Africa are expected to
grow about $410 billion by 2020. Of this, roughly 45% or $185
billion is expected to come from apparel, consumer goods and food
In fact, Domino's Pizza has become the top pizza company in
several international markets like India, South Korea, Turkey,
Australia and France. The company's international operations have
an outstanding record of 20 consecutive years of positive
same-store sales growth. In our view, Taste Holdings stands to
benefit from the solid performance and expertise of Domino's'
Domino's Pizza is not the only fast-food joint seeking to tap
into the economic boom in the Sub-Saharan region. In 2013,
Yum! Brands, Inc.
) - the parent brand of KFC, Taco Bell and Pizza Hut - announced
plans to expand into Tanzania, Uganda and Zimbabwe. Additionally,
the company has plans to strengthen its footprint in South
Burger King Worldwide, Inc.
) also started operations in South Africa in May, last year,
) is already an established brand in South Africa.
Domino's, currently, carries a Zacks Rank #3 (Hold).