Shares in Domino’s Pizza Group have dived 7% amid reports of an escalating row between the firm and its franchisees.
According to the Sunday Times, 11 of the company’s biggest franchisees have written to the board threatening to “declare war” on the firm unless they get a bigger slice of the company’s profits.
They warned they could stop opening new stores if their demands were not met.
Domino’s declined to comment.
In total the firm has about 70 franchisees to whom it supplies ingredients and other goods and services.
But the disgruntled operators, which have set up a group called Domino’s Franchise Association UK & Ireland, say they face rising costs and want more support from the company.
They also say they are being asked to open more sites in existing locations – something that benefits the wider company and customers but eats into their profits.
A record 95 new Domino’s stores were opened in 2017 – mostly by the biggest franchisees – but the firm is targeting a more modest 60 this year, in part because of the row.
It’s put pressure on the FTSE 250 firm’s shares, which are down by about a third since June. Some analysts believe Domino’s will be unable to meet a goal of having of 1,600 stores in the UK – up from the current 1,060 – while the conflict rumbles on.
Despite the market moves, sales at the group sales have been growing, climbing 6% to £303.3m in the third quarter.
The firm also continues to open stores despite a wider consumer spending slowdown driven by concerns about Brexit and a rise in inflation.
BBC
