Ann Arbor, Michigan-based Domino’s Pizza, Inc (DPZ) recently franchised 30 company-owned restaurants in Atlanta to four experienced local owner-operators. The company operated 38 company-owned restaurants in Atlanta and further expects to franchise the remaining restaurants going forward.  

Mike Orcutt, one of the leading franchisee of Dominos in U.S, purchased 14 restaurants and thus became the second largest franchisee of the company in the U.S with ownership totaling 93 restaurants. Other franchises Greg Fox, Todd Dyrda and Tim Garrett purchased 9, 7 and 2 restaurants, respectively.

Domino’s is primarily a franchise company with 9,009 stores out of 9,436 franchised. The company has 50% franchised stores in the domestic market and 50% in the international market. During the first quarter of 2011, Domino’s franchised 26 Minneapolis-based company owned units.

Domino’s continues to focus on expansion through franchising as it reduces capital employed and increase cash flow generation. Additionally, growing free cash flow will allow the company to further invest for enhancing brand recognition as well as shareholders’ return. The margin of the company is also expanding due to a change in the revenue mix attributable to fewer company-owned stores and increased franchise royalty revenue.

Moreover, the company continues to expand in the international market based on its master franchise model, which provides international franchisees with exclusive rights to operate stores, sub-franchise the store in agreed-upon market areas, as well as operate their own supply chain systems. Domino’s currently boasts a presence in over 70 markets outside the U.S with more than 4500 franchised international stores.

During the second quarter of 2011, Dominos further expanded in Turkey by opening additional 30 stores. Domino’s international stores have generated positive quarterly same-store sales growth for 70 consecutive quarters.

Domino’s competitors including McDonald’s Corp. (MCD) also continues to focus on refranchising strategy, which involves a shift to a greater percentage of franchised restaurants. Currently, around 81% of McDonald’s total restaurants are franchised.
 
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