Financial Information - Dominos Pizza - Case Study Example

Financial Information for Business Decisions Executive Summary The company saw a considerable growth in revenue at an average rate of thirteen percent per year from 2007 to 2011. In the year 2010, revenue increased remarkably by sixteen percent largely due to the increase in the demand of high quality pizza. The company saw an increased demand in its services particularly in the years 2009 and the year 2010, which led to it recording a 61.6 and 33.5 percent in total returns respectively. In the year 2007, revenue was 14.3 percent, and then performed better in the years 2009 and 2010 whereby it stood at 61.6 percent, and 33.5 percent respectively. There was a remarkable growth in the total return at an average rate of twenty seven percent per year from 2007 to 2011, and this was mainly as a result of the expansion of market, which has been driven by demand. Domino’s Pizza Business Model The Domino’s Pizza is a multinational pizza delivery company that has its headquarters in Michigan, United States of America. The corporation started its business way in 1960, and is the second largest chain of pizza-restaurants in the United States of America. It comes second after the Pizza Hut, and has over ten thousand franchised and corporate stores in over seventy countries and all of the fifty states in America. The company was then sold to the Bain Capital in 1998. The corporation operates its business via three different segments: domestic supply chain, domestic stores and international stores. In the domestic segment there is the domestic franchise operations’ department that supervises an interconnection of franchise stores that are situated in the contiguous America. The segment of domestic supply chain runs regional food supply chain center and dough manufacturing, thin crust center of manufacturing and the supply chain center that offers supplies and equipment to particular international and domestic stores, as well as vegetable processing center. Nevertheless, the segment of international deals supervises a network of global franchise stores. In this segment, there is also the distribution of a limited or small number of six supply chain centers and dough manufacturing in Hawaii, Canada and Alaska (Gasparro, 2012). The company intends to attain further growth as well as strengthen her competitive position via the continued implementation of her business model, which includes elements like having exceptional franchisees together with the team members who are on a mission of being the best company in pizza delivery worldwide. This is implemented by putting the stores that are owned by the company and franchisees at the basis of all decisions and thinking; stressing the ability to choose, develop and retain remarkable franchisees and team members; offering a strong infrastructure for supporting the stores and building exceptional operations of stores to create devoted or loyal clients. Over the past five years, the business model of the company has not changed in anyway so as to adapt to the current changes in the business environment, even when it goes into the foreign markets, and this has greatly worked to its advantage. Profitability of the company over the past five years In £s millions 2007 2008 2009 2010 2011 Revenue cost of sales Gross profit distribution costs administrative costs share of post tax profits of associates Operating profit Profit before interest and taxation Finance income Finance expense Profit before taxation Taxation Profit for the period 209,863 -132939 76924 -13026 335 39031 335 39366 39366 334 -911 38789 -12323 26466 188,149 -117495 70654 -11539 -23671 35444 219 35663 35652 196 -644 35204 -11,139 24065 155,044 -95597 59447 -9993 -23949 25505 553 26058 41328 165 -525 40968 -7475 33493 135977 -85153 50824 -9185 -18141 23498 187 23685 22527 584 -962 22149 6485 15664 113891 -70736 44155 -9246 -16746 18163 158 18321 18667 528 -619 18576 -5337 13239 The revenue generated by the Domino Pizza over the period under review is set out in the table below: Revenue In £s millions 2007 2008 2009 2010 2011 Revenue 209,863 188,149 155,044 135,977 113,891 The following table shows the year on year growth: 2007 2008 2009 2010 2011 Growth in Revenue% 14% 10% 18% 14% 13% Why Revenue Has Behaved as It Has Done so over the past 5 Years The revenue for the corporation has behaved in different ways over the past five years, and these are as a result of various factors. The company saw a substantial increase in the total profit between 2007 and 2011. The provision of good returns for the shareholders of the company has been her major goal, and also with the purchase of two million, six hundred thousand shares for 7.6 million pound as well as the dividends paid during the year, a total of 69.9 million pounds have been returned over the past five years. The success of the company is as a result of her franchisees, and the in-store employees, as well as the head office employees. This is has lead to a considerable growth in the sales and specifically store profitability during the year 2009, and also supported by the assistance that the franchisees receive from the head office team, and the positive trend is expected to continue (Gasparro, 2012). The company benefits from a wonderful team from board room to store together with a robust and successful business model. A combination of these factors together with its consistent growth over the past few years, as well as the accelerated plans for expansion, has placed the organization in a pole position of capitalizing on the past and coming years of business in the world. The company has also been able to do well and realized increased revenue over the past five years as a result of the continued focus on the quality of the products, which is pizza, intense dedication to service, and also by carrying out intense marketing by informing the clients where, when and how to get the products. This is actually what has enabled the company to survive even in the tough economic times that has faced the world, and the United Kingdom and United States of America in particular. Behavior of other Key Aspects of the Income Statement Look at the company’s statement of cash flows, we can clearly see that the money that has been going out, overall between the year 2007 and the year 2011, is less as compared to the income that has been generated over the same period of time. As one of the major aspects of the income statements of the company, statement of cash flow has seen or experienced this kind of trend as a result of a number of factors, like some slight reshuffles in the management which have taken place during the five year period. This has brought about integrity and accountability within the accounting department as well as some other important departments within the corporation (Gasparro, 2012). In addition, adherence to the business model and strategy of the company which is to be the provider of best pizza in the whole world has enabled the company to reach its great heights of achievement. This good performance is in average, as the company has seen a positive trend in its financial performance. The company’s asset valuation has also seen a substantial growth, which is mainly as a result of the expansion of market, which has been driven by demand. Acquisitions and mergers have also played a significant role in seeing the steady rise in the company’s gross and net revenues over the past five years. For instance, in the year 2007, the country had a gross profit of forty four thousand, one hundred and fifty five million pounds, and seventy six thousand, nine hundred and twenty four million pounds in the year 2011. Therefore, we can say that increasing demand for the company’s pizza, which it has struggled to make to be one of the best in the world, is one of the factors that have had huge effects on the behavior of the key elements of the financial statement (Gasparro, 2012). Comparison between the Domino’s Pizza and Hut Pizza Domino’s Pizza and Hut Pizza are among the largest companies that deal in food industry particularly in the field of the provision of pizza whole of the United States of Americana and the United Kingdom. Collectively, they control a substantive percentage of the total market share due to their big investments. Of the two companies, we find that Pizza Hut is the biggest with an estimated total investment of 2,974,000 million dollars, whereas the Domino’s has a total investment of about 461,700 million dollars. Being the two biggest companies in the United States and the world in the provision of pizza, both the companies have been able to use everything at their disposal in order to register good performance. Over the past five years; that is from the year 2007 to the year 2011, the companies have experienced a steady and positive trend in both their gross incomes and net profits before taxation. The companies have also been able to perform in the way they have done largely due to their dedication and commitment to their goals and missions by strictly adhering to their business models, as well as diversification, which has seen them engage in many other activities or ventures (Gasparro, 2012). Pizza Hut provides remarkable franchise support, which includes advertisement, training, business coaching, and development strategy, together with cooperative sourcing. In addition, the company offers programs of performance improvement as well as support, to every new franchise along with twelve to sixteen weeks of essential training. On the other hand, we find that the Domino’s Pizza provides all-inclusive training programs that cover marketing, operation of stores, human resources and finance. The training programs that are offered by the company consist of a 5-day program of franchise development and 4 days of Pizza prep school. Summary From the financial statements of the Domino’s Pizza recorded above, we can confidently conclude that the corporation is steadily growing in line with its business model in order to attain its set goals and objectives. For instance, the total amount of funds in the operating activities has been lowest during the year 2011 as compared to the previous four financial years or periods. The company’s strategy which partly is about being the leading provider of best pizza in order to attract or cover the largest client base as possible, which is done via optimal financing and joint ventures; seems to be working well, and the substantial growth of the company, which can be seen from its good performance can be attributed to this. One of the major factors that have led to the good performance of the company is the considerable growth in the United States and the United Kingdom food industry, which has been propelled by the demand for good nutrition. Its strong financial position greatly enabled the company to navigate through or survive the global recession that nearly tumbled several economies. This means that with the ways things are going on, it is projected that the performance of the company within the coming five years will be remarkable, the way the goals and objectives have been attained in part or in full. Reference Gasparro, A 2012, "Dominos Sticks to Its Ways Abroad". Wall Street Journal 259 (89): B10. Read More