Domino’s Pizza Group PLC on Monday said it had reached an agreement for a new five-year framework with its franchise partners as it said it will face a £3.0 million a year hit from measures in the UK budget.

Milton Keynes, England-based Domino’s Pizza Group is the master franchise holder in the UK and Ireland for US pizza delivery brand owner Domino’s Pizza Inc.

The group said its new ‘profitability and growth framework’, which will replace the existing ‘memorandum of understanding’ on January 3, will support the company’s growth plans to 2028 and 2033.

The company is targeting 1,600 stories and £2.00 billion of system sales by 2028, and 2,000 stores with £2.50 billion of system sales by 2033, supporting profit growth.

Under the new agreement, franchise partners will continue to contribute 4.0% of system sales to the national advertising fund used to promote the brand. In the new system, the group will contribute a fixed 0.2% of system sales to the fund.

Franchise partners will now contribute 1.0% of system sales, up from 0.75%, to the e-commerce fund to support digital investment, with the group contributing 0.25%.

The group said the agreement had ‘unanimous support’ from its franchise partners.

Overall, Domino’s Pizza said it expects its direct contribution to the framework will be between £3.0m to £4.0m per annum from 2025.

The company also said it expects changes in the UK budget to cost it around £3.0 million per year, as the increase to employers’ national insurance contributions and the national minimum wage had ‘significantly increased the cost of labour’.

Domino’s Pizza said it traded in line with expectations in the first nine weeks of the fourth quarter. It said total orders were up 5.3% compared to a 3.5% increase in the third quarter.

Like-for-like sales were up 2.7%, compared to a 0.7% increase in the third quarter.

The group also said it will invest an additional £4.0 million to £5.0 million per year in its technology platform, cyber security and supply chain capacity.

The new framework lasts for an initial term of five years, but Domino’s Pizza said it is intended to last longer with periodic reviews and adjustments by mutual consent.

Chief Executive Officer Andrew Rennie said: ‘This new framework is a vital step in driving the future growth of both DPG and our franchise partners...Having a five-year framework in place provides a strong platform for the long-term, sustainable growth of the brand, and will help us build a larger and more cash-generative business which will deliver stronger returns. It also means we will be well placed to address the headwinds all consumer-facing businesses will inevitably face in 2025 and will ensure we are in a strong position to thrive in the years that follow.’

Shares in Domino’s Pizza were down 3.0% to 341.40 pence in London on Monday morning.

Copyright 2024 Alliance News Ltd. All Rights Reserved.