Domino s Pizza Have you ever wondered why there are three dots in by yaosaigeng


									                                       Domino’s Pizza

Have you ever wondered why there are three dots in the Domino’s Pizza logo? It’s because
when the company first started in the US, the original owner set himself the objective of
owning three pizza delivery stores. Considering Domino’s Pizza now has 8,000 stores in 50
countries, that seems a modest dream. Domino’s has achieved rapid growth in the UKL
recently and predictions are this will continue. One reason for Domino’s rapid growth is the
fact that most of the branches are franchises. The right to set up a Domino’s pizza outlet
in the UK is owned exclusively by Domino’s Pizza UK plc. This company sells franchises to
individuals who operate Domino’s outlets as separate businesses. There are about 400
Domino’s Pizza franchises operating in the UK and the company has a target of 1,000 UK
outlets by 2015.

In order to take advantage of market growth, Domino’s needs more franchises. But it has
to decide whether to allow existing franchisees to open the new stores or invite new people
to start them up. Existing franchisees are less risky as they already successfully sell the
brand. They know the systems and are better able to maintain quality levels. New
Franchisees are more likely to fail as they have to learn the systems and might struggle
initially to achieve the efficiency and high quality of established franchises. However there
are certain advantages to using new franchisees, notably that with a fresh perspective they
may be more entrepreneurial leading to greater growth.

There are potential constraints on Domino’s UK growth. There are concerns that a rapidly
growing franchise network might be more difficult to control from the centre, especially as
some of the franchises are themselves growing into large businesses.

Domino’s is confidence of its future growth potential. The UK pizza market as a whole grew
by 60% in the last five years and is set to double by 2010. With a 20% market share,
Domino’s position looks unbeatable and the target of 1,000 outle4ts in the UK by 2015 looks
achievable. ‘We are confidence that the company’s growth is sustainable into the long-term.
We’re not even close to the end of the opportunities in this market’, said Domino’s Chief
Executive Stephen Helmsley recently.

1. What is meant by market share?                                                 (2 marks)

2. Calculate the percentage increase in Dominoes Pizza outlets if the company is to meet its
2015 target.                                                       (3 marks)

3. Explain the risks that a franchisee may take on when purchasing a Dominoes Pizza
franchise.                                                                      (8 marks)

4. Explain the benefits to Dominoes of becoming a franchise rather than operating all the
stores directly.                                                               (10 marks)

5. Discuss whether Domino’s should expand its network by selling to existing or new
franchisees                                                                      (12 marks)

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