Domino's is no longer a B2C business
I am Aarihant Aaryan! Welcome to the Iron Sharpen Iron newsletter,
I share my weekly homework from my startup journey, learning about human behavior, and sometimes decoding industries and business models for fun.
I can’t control my curiosity :) )
I generally don’t mention about businesses, brands and categories unless they have done something exceptional.
Few weeks back i visited domino's, I started thinking how were they able to build a long lasting brand, be a market leader and how many do they really make "selling pizza's"
I spent quality time researching an trying to understand their business, that’s when i figured out how good they are what they do and they executed the hardest part in a franchise business very well.
Let me explain you in the most easiest way
The franchising opportunity:
Franchises have long been the backbone of the USA economy, creating jobs and wealth for millions of people.
A FMCG business can scale in 3 ways:
Build brand owned stores and scale, this is what starbucks did.
Sell franchises, outlets and scale - Tea time, Domino’s do it well.
Build brand owned stores + sell franchises
Insight: The reason Starbucks never sold franchises is because Starbucks sells you experience. Starbucks has primarily focused on company-owned stores rather than franchising because, this strategy allows the company to maintain a consistent brand experience and have greater control over factors such as product quality, store design, and customer service.
Franchising model can help you to scale fastly with low capital requirements, but fails terribly to maintain brand image and experience.
This is the same problem domino’s solved very well, in the process of solving this problem they cracked for their highest source of revenue
Economics of domino’s:
The bulk of Domino's revenue doesn't come from franchise fees or delivering pizza to your door. Domino's' biggest earner is its supply chain business
They make close to a billion dollar per quarter, but if you really deep dive into their numbers - it's because of the large franchise distribution they were able to build which grows 80% YoY
Domino's franchises its business to the international market. Currently, the company has more than 10,000 locations across 90 global markets.
Domino's charges franchisees a 5.5% royalty fee based on sales + Domino's' biggest earner is its supply chain business catering to its franchisees.
Domino’s supply chai business makes them close to 65% of revenue
They sell stuff like toppings, sauce, dough to their franchises, The Domino supply chain operates 19 dough manufacturing centers across the United States and five in Canada.
This makes me wonder is Domino’s still a B2C business? I believe it is a B2B business - would love to know what you think, please share in comments.
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