Domino's says $5 pizzas are profitable and reveals how much its stores make

Photo: Joe Raedle/Getty Images

The rise and dominance of Domino’s Pizza was revealed earlier today, with profit for the first half of FY17 up 31% to a record $59.7 million, leading the company to also upgrade its profit forecast for the full-year.

Domino’s added 76 new stores globally over the last six months of 2016, including 27 in Australia, 30 in Europe and 19 in Japan, which now makes up more than a third of the business.

The company sold more than $1 billion in pizza for the first time in that six-month period, with Australian and New Zealand sales hitting a staggering $521 million.

That’s a lot of $5 pizza and in the wake of claims that workers had been underpaid, Domino’s CEO Don Meij was quick to defend the business during today’s profit announcement, saying there was “no correlation between store profitability and the underpayment of staff wages”.

Domino’s says a $5 pizza is “profitable in its own right” and that the average customer still spends $17.75 when they buy one.

The company also revealed the profitability of individual Australian stores, saying break-even was as low as $10,000-$12,000 per week in some stores, while for the majority, it sits between $15,000 and $21,000 a week.

It also supplied this chart, showing the rising profitability of its stores, which jumped by around 30% on the previous financial year to $137,000 EBITDA in FY16.

Source: Domino’s investor update

However, 22 stores were unprofitable in FY16 and received financial assistance from the company.

But following allegations last week of some operators demanding kickbacks from people employed under foreign worker visas, the company also detailed its compliance program to make sure people are being paid properly.

Meij said they only became aware of the employment visa fraud claims last week and the company is investigating.

But the business already has a program in place, conducting 456 spot checks on stores over the past three years.

Meij said “proactive compliance” found some franchisees “wilfully breached their obligations”.

Third party auditing of 102 stores had resulted in $4.2 million in wages and superannuation being recovered from franchisees for employees. There are 42 investigations ongoing.

“This amount represents 0.8% of the labour costs in our franchise network for the period,” Meij said.

There were another 88 individual complaints, with 25 ongoing, and a further $257,000 had been recovered.

As part of the crackdown, the company removed four franchisees, running seven stores, from the network. Domino’s said another 22 “chose” to leave after IR compliance audits.

Last month the pizza chain introduced a Sunday surcharge to offset some of the cost of higher wages and Meij said that despite the extra cost, sales had remained stable or increased.

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