Lessons from the Poster Boy of the Indian Restaurant Business - Dominos Pizza India

Jubilant Foodworks (the company which operates Dominos Pizza in India, Sri Lanka & Bangladesh through a master franchisee agreement with Dominos Pizza International) is, without contention, THE success story everyone in India in the restaurant business wants to emulate, especially after their blockbuster IPO in 2010. At one point of time the value (market capitalization) of Dominos India was larger than the value of Dominos worldwide.

If we were to evaluate Dominos India (Jubilant Food Works) as a business, what would their key metrics look like?

Note: All the data below is based on analysis of publicly available information about Jubilant Foodworks, including their annual report. Data is based on Mar 2011 operations. The numbers may vary slightly from the figures in their annual report due to certain assumption I have made to make the analysis and the presentation of the data easier to understand.

* - Employee Costs include Salaries, Bonuses, Benefits (Allowances, PF, ESIC, Gratuity, Superannuation) & Staff Welfare related expenses

What is the break-up of their Operating Expenses?

Important Data to Note in the table above:
1) Dominos India pays Dominos International a franchise fee of 3.31% of Net Sales (it was 3.30% the previous financial year). In addition, there seems to be a small charge paid to Dominos International for every store that is opened.
2) They have been able to get great properties at attractive rentals (7.87% of net sales). Actual store rentals will be slightly lower than this, as the rent shown above includes rentals of non revenue generating space such as the corporate office and commissaries.
3) For all the advertising they do (TV, Flyers in Newspapers etc.) they spend only about 4% of their sales on advertising. This is where their scale of operations is really helping them.

If Dominos were a single store, how would their numbers look like?

Note 1: In true financial terms ROI (Return on Investment) is calculated on Profit After Tax (PAT) and not on EBITDA. But as you can see from the numbers above, Dominos has got their unit level economics really right.
Note 2: The numbers above are based on a number of assumptions I have made to make the analysis and presentation of the data easier.
Note 3: I have assumed that it will cost about 60 lakhs to set-up a standalone store like Dominos. The actual cost may be higher depending on the location and back-end support requirements.