Joe Jordan’s first earnings call as CEO of Domino’s Pizza started on a high note.
He pointed to higher orders in delivery and carryout, while the pizza chain continues to gain market share in the quick-service segment.
But the most revealing moments came later, in the analyst Q&A.
The talk shifted from customers to the people who own the stores, and that is where the call got interesting.
Domino’s orders rise, but tickets shrink
Jordan steps into the top job from Russell Weiner, who will soon be the Executive Chairman.
The new CEO wasted no time naming his priorities: getting closer to the customer and protecting franchisee profits.
Also Read: Domino’s value deals reveal shift in pizza lovers behavior
Domino’s (DPZ) holds about 23% of the pizza market by his estimate, and he said there is “a lot of opportunity” left.
Then came the catch.
- U.S. same store sales rose just 0.3% in the third quarter.
- While orders increased, the average order value was much lower year over year in Q3.
- It seems that customers are watching discretionary spending amid a challenging macro backdrop and rising inflation.
Jordan said shoppers were “managing their ticket by managing items per order.”
Domino’s franchisee profits are under pressure
Domino’s reported an operating income of 8.5% in Q3, after adjusting for currency fluctuations.
CFO Sandeep Reddy credited franchise royalties and fees, plus supply chain gross profit growth for the higher operating income.
What corporate earns and what owners keep are two different numbers.
Analyst Jeff Farmer asked directly how much U.S. franchisees are earning at the store level this year.
Related: Pizza chain struggling after losing hundreds of locations
Reddy said franchisee profits are down in actual dollars from a year ago, but did not provide an exact number.
Reddy stated:
“Until we get franchisee profits to move in the right direction, there will be incremental pressure going forward.”
That pressure is already visible in store growth. Domino’s cut its U.S. net new store outlook to 125 to 150 for the year and opened 26 net new stores in the third quarter.
Analyst John Ivankoe noted this was the second trim this year. Reddy said the issue is not closures, which have been in the single digits for the last couple of years.
Instead, it is owners holding back on new openings.
Here is what the call confirmed:
- U.S. same-store sales rose 0.3%, with the full year heading toward the low end of low single digits.
- Fewer items per order hurt tickets in carryout and first-party delivery.
- The U.S. net new store outlook now sits at 125 to 150.
- Franchisee profits are down in dollars, with no figure given.
- Full-year franchisee profit details are expected on the fourth-quarter call.
Domino’s says it has a fix
To be fair, Jordan laid out a plan for the popular pizza chain.
He wants to stabilize owner profits through the marketing calendar, better ticket size, and more consistent stores.
He also mentioned Dom.OS, a technology test aimed at consistency.
The new Domino is a product built for people who want to share pizza but pick their own.
It launched for just one week in the third quarter. Jordan said it also helps on delivery apps, where customers often want their own meal. Reddy said the rollout is deliberate, which is to protect franchisee profits.
International owners are feeling the heat too.
Comps rose just 0.2%, held back by master franchisee Domino’s Pizza Enterprises.
Jordan said a recent meeting with new DPE CEO Andrew Gregory left him more encouraged about the business than he had been in quite some time.
He said Gregory is cutting back on promotions, which had hurt order counts, and refocusing on profit through high volume.
Jordan also set a limit. If DPE can run those markets well, he said, it can keep them. If not, Domino’s will work to make sure the markets succeed “in someone else’s hands.”
My take on Domino’s franchisee risk
I have covered restaurants and retail for more than a decade and one pattern repeats itself. Brands chase traffic, and operators carry the bill.
Analyst Brian Bittner asked whether the pressure on tickets is something Domino’s can fix. Jordan said these are “still profitable orders for our stores.”
He added that Domino’s can afford to keep offering value to customers. When the pressure on shoppers eases, he said, the company can potentially pull back on some of those deals.
Then there is the money split.
Reddy said supply chain profits are shared 50/50 with U.S. franchisees. Looking to 2027, he said Domino’s will focus on growing gross profit dollars in that business and passing that growth on through the profit sharing checks it sends owners.
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Jordan also pointed to history. Franchisee profits came under pressure in 2021 and 2022, he said, and recovered in 2023.
Store openings reacted quickly when they did. Reddy added that Domino’s has always offered incentives for new stores and will keep doing so.
But here is my view. Strong order counts with smaller tickets are a hard way to grow. Value deals bring people in but do not fill the cash register.
Meanwhile, Domino’s repurchased about $305 million of its own stock in the first nine months of the year. Shareholders are being paid and owners should be next in line.
Weiner called franchisees and team members the company’s “competitive moat.” A moat only protects you if the people behind it keep investing.
The next test comes early next year. Domino’s will report fourth-quarter results and, as Reddy said, give a fuller view of franchisee profits.
Budgets are being set now and I will be watching the 2027 store outlook closely.
