finance

A PROJECT REPORT ON FINANCE OF DOMINO’S PIZZA

Submitted in partial fulfillment for the degree of

PGDM POST GRADUATE DIPLOMA IN MANAGEMENT (2009-2011) Submitted To: Mrs. Mukta Keskar

Submitted By: Jyoti Mishra PGDM (HR)

SINHGAD INSTITUTE OF MANAGEMENT VADGAON PUNE -411041

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CERTIFICATE

This is certifying that the project entitled “FINANCE” is a bonafide work done under the guidance of MRS. MUKTA KESKAR by JYOTI MISHRA in the partial fulfillment of requirement for the award of PGDM of SINHGAD INSTITUTE OF MANAGEMENT (SIOM).

She has worked under our guidance and direction. Her work is found to be satisfactory and complete in all respect.

GUIDED BY:

DIRECTOR

(Mrs. Mukta Keskar)

(Daniel Penkar)

DATE:

DATE:

PLACE: PUNE

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ACKNOWLEDGEMENT

It is a great pleasure and privilege for me to present report entitled “FINANCE ASPECT” I would like to express my sincere gratitude to Mrs. Mukta Keskar who has very kindly guided me for this project report. I

extend

my

gratitude

towards

my

institute

SINHGAD

INSTITUTE

MANAGEMENT for helping me to successfully complete the project work.

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COMPANY PROFILE DOMINO’S PIZZA

Domino's Pizza is an international fast food pizza delivery corporation. It was founded by Tom Monaghan. There are currently about 8,500 corporate and franchised stores in 55 countries, including all 50 US states. It was the second-largest pizza chain behind Pizza Hut in the United States. In 1967, the first Domino's Pizza franchise store opened in Ypsilanti. Domino’s continued to grow and in 1978 opened its 200th store. On May 13, 1983, Domino's opened its first international store, in Winnipeg, Canada.That same year, Domino's opened its 1,000th store overall, and by 1995 Domino's had 1,000 international locations. In 1998, after 38 years of ownership, Domino's Pizza founder Tom Monaghan announced his retirement and sold 93 percent of the company to Bain Capital, Inc. for about $1 billion and ceased being involved in day-to-day operations of the company. A year later, the company named David A. Brandon Chairman and Chief Executive Officer. Involved in day-to-day operations of the company. A year later, the company named David A. Brandon Chairman and Chief Executive Officer. In a simultaneous celebration in 2006, Domino's opened its 5,000th U.S. store in Huntley, Illinois and its 3,000th international store in Panama City, making 8,000 total stores for the system. Also that the Domino's Pizza store in Tallaght, Dublin, Ireland, became the first in Domino's history to hit a turnover of $3 million (€2.35 million) per year. As of September 2006, it has 8,238 stores which totaled US$1.4 billion in gross income. In 2007, Domino's introduced its Veterans and Delivering the Dream franchising programs and also rolled out its online and mobile ordering sites. In 2001 the company's stores in New York

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City and Washington D.C. provided more than 12,000 pizzas to relief workers following the September 11 attacks on the World Trade Center and The Pentagon. Through a matching funds program, the corporation donated $350,000 to the American Red Cross' disaster relief effort. Leading industry publication Pizza Today magazine named Domino’s Pizza "Chain of the Year" in 2003.

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KEY INFORMATION  Type - Public (NYSE: DPZ)  Founded - Ypsilanti, Michigan, U.S. (1960)  Headquarters - Ann Arbor, Michigan, U.S.  Founder - Tom Monaghan  Chairman & CEO - David Brandon.  Industry - Restaurants  Products Pizza - · sandwiches ·pasta · chicken wings ·desserts  Employees - 145,000  Website-http://www.dominos.com/

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DOMINO’S PIZZA TIMELINE 1960 Tom Monaghan and his brother James purchase "Dominick’s," a pizza store in Ypsilanti, Michigan. Monaghan borrowed $500 to buy the store. 1961 James trades his half of the business to Tom for a Volkswagen Beetle. 1965 Tom Monaghan is sole owner of company, and renames the business "Domino's Pizza, Inc." 1967 The first Domino's Pizza franchise store opens in Ypsilanti, Michigan. 1968 Company headquarters and commissary are destroyed by fire. First Domino's store outside of Michigan opens in Burlington, Vermont. 1975 Amstar Corp., maker of Domino Sugar, institutes a trademark infringement lawsuit against Domino's Pizza. In 1980, Federal court rules Domino's Pizza did not infringe on the Domino Sugar trademark. 1983 Domino's first international store opens in Winnipeg, Canada. The 1000th Domino's store opens. The first Domino's store opens on the Australian continent, in Queens land, Australia. 1990 Domino's Pizza signs its 1,000th franchise. 1992 Domino's rolls out Breadsticks, the company's first national non-pizza menu item.

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1995 Domino's Pizza International opens its 1,000th store.First store opens on African continent, in Cairo, Egypt. 1996 Domino's launches its Web site (www.dominos.com). 1998 Domino's launches another industry innovation, Domino's Heat Wave, a hot bag using patented technology that keeps pizza oven-hot to the customer's door. 2000 Domino's Pizza International opens its 2,000th store outside the United States.Domino's Pizza celebrates 40 years of innovation and delivering pizza to homes around the world. 2006 Domino’s Pizza introduces Brownie Squares — warm, delicious, bite-sized brownies delivered with a fudge dipping sauce. 2007 Domino’s rolls out online and mobile ordering.

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Domino’s Pizza India Limited OVERVIEW

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Domino's Pizza India Limited (DPIL) is the master franchisee for India, Srilanka, Bangladesh and Nepal from Domino’s Pizza International Inc., USA. The company had been promoted by Mr.Shyam S. Bhartia and Mr. Hari S.Bhartia of the Jubilant Organosys Group (Formally Vam Organic Group).

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The Company was incorporated in March 1995.

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The First Domino's Pizza store in India as opened in January 1996, at New Delhi and today after nine years Domino's Pizza India has grown into a countrywide network of over 227 outlets in 42 cities.

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Domino’s has a young and enthusiastic team of over 2,100 employees.

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Domino’s Pizza India has been consistently rated amongst the top 2 pizza chains worldwide in the Domino’s family by Domino’s International, in terms of quality of operations.

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Customers can order their pizzas by calling the single countrywide "Hunger Helpline" - 1600-111-123 and Domino’s was the first one to start this facility for its customers.

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FINANCE REPORT

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CEO REPORT At the beginning of 2008-09, Domino’s Pizza was aware of the looming uncertainty in the economic environment and the flow- on effect if may have with consumers, particularly in the food space. We knew we had the ability to offer great value, through product, service and image, but what we wanted to do was create a whole new experience for customers which they may not have expected from number one pizza maker. .  22.5% of sales now coming from online ordering.  Website is ranked number one for “Food and Beverage Restaurants and Catering”.  France opens its 150th store.33% of stores convert to online ordering in Europe.  Average delivery time has dropped by more than 21%.  Choc Lava Cake was a finalist in the Food Magazine Challenge Awards 2009 and has sold more than 1.5 million units.  Unassisted brand recognition has increased 35% in France.  Over the past 12 months Domino’s has created more than 3,000 jobs across Australia and New Zealand

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KEY FINANCIAL INDICATORS The selected financial data below, with the exception of store counts and same store sales growth, have been derived from the audited consolidated financial statements of Domino’s Pizza,Inc. and subsidiaries are on next page.

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Business Performance In 2008, global retail sales, which are total retail sales at Company-owned and franchise stores worldwide, increased 1.4% as compared to 2007. This increase in global retail sales was driven by strong international same store sales growth as well as growth in worldwide store counts, offset in part by a decrease in domestic same store sales and negative foreign currency translation impacts on their international sales. In 2007, global retail sales increased 6.6% as compared to 2006.This increase in global retail sales was driven by strong international same store sales growth as well as growth in worldwide store counts, offset in part by a decrease in domestic franchise same store sales

Revenues increased $25.6 million or 1.8% in 2007 and decreased $37.8 million or 2.6% in 2008.The increase in revenues in 2007 was largely due to higher domestic supply chain revenues, due primarily to higher food prices, including cheese. The decline in 2008 was due primarily to lower Company-owned store and domestic franchise revenues, driven primarily by Company-owned store divestitures, lower same store sales and lower volumes in our domestic supply chain operations. Worldwide store counts have increased from 8,079 at the beginning of 2006 to 8,773 at the end of 2008. This growth in store counts can be attributed to the growing global acceptance of the brand and pizza delivery concept as well as the economics inherent in their system which attracts new franchisees and encourages existing franchisees to grow business.

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Domestic same store sales decreased 4.1%, 1.7% and 4.9% in 2006, 2007 and 2008, respectively. International same store sales increased 4.0%, 6.7% and 6.2% during the same periods. The Company’s domestic same store sales results in 2006, 2007 and 2008 reflected the underperformance of their product and promotional offerings during those years, continued challenges in domestic business and a weak consumer environment. Internationally, same stores sales growth continues to result from the growing acceptance of delivered pizza around the globe and the successful execution of the concept.

It is highly leveraged primarily as a result of its recapitalization in 2007.As of December 28, 2008, consolidated long-term debt was $1.7 billion. Since 1998, a large portion of its cash flows provided from operations has been used to make principal and interest payments on its indebtedness as well as distributions to shareholders in the form of dividends and stock repurchases. Its securitized debt requires no scheduled principal payments until anticipated maturity in 2012. Overall, It believes that its ability to consistently produce significant free cash flows allows the flexibility not only to service its significant debt but also to invest in their growing business as well as return cash to shareholders.

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Critical accounting policies and estimates Revenue recognition. They earn revenues through their network of domestic Companyowned and franchise stores, dough manufacturing and supply chain centers and international operations.

Allowance for uncollectible receivables. They closely monitor their accounts and notes receivable balances and provide allowances for uncollectible amounts as a result of reviews. These estimates are based on, among other factors, historical collection experience and a review of receivables by aging category.

Long-lived and intangible assets. They record long-lived assets, including property, plant and equipment and capitalized software, at cost. For acquisitions of franchise operations,They estimate the fair values of the assets and liabilities acquired based on physical inspection of assets, historical experience and other.

Insurance and legal matters. If estimation relating to legal matters proved inaccurate for any reason, they may be required to increase or decrease the related expense in future periods. At December 30, 2007 and December 28, 2008, They had approximately $8.2 million and $2.9 million, respectively, accrued for legal matters. For certain periods prior to December 1998 and for periods after December 2001,they maintain insurance coverage for workers’ compensation, general liability and owned and non-owned auto liability under insurance policies requiring

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payment of a deductible for each occurrence up to between $500,000 and $3.0 million, depending on the policy year and line of coverage.

Income taxes. Their net deferred tax assets assume that they will generate sufficient taxable income in specific tax jurisdictions, based on estimates and assumptions. The amounts relating to taxes recorded on the balance sheet, including tax reserves, also consider the ultimate resolution of revenue agent reviews based on estimates and assumptions. If these estimates and assumptions change in the future, They may be required to adjust their valuation allowance or other tax reserves resulting in additional income tax expense or benefit in future periods.

Same Store Sales Growth

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Store Growth Activity

2008 compared to 2007 Revenues. Revenues include retail sales by Company-owned stores, royalties from domestic and international franchise stores and sales of food, equipment and supplies by supply chain centers to certain domestic and international franchise stores.Consolidated revenues decreased $37.8 million or 2.6% in 2008. This decrease in revenues was due primarily to lower Company-owned store and domestic franchise revenues, driven primarily by Company-owned store divestitures, lower same store sales and lower volumes in domestic supply chain operations offset in part by higher international revenues. These decreases in revenues are more fully described below.

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Domestic stores. Domestic stores revenues are comprised of retail sales from domestic Company-owned store operations and royalties from retail sales at domestic franchise stores, as summarized in the following table.

Domestic Company-owned stores. Revenues from domestic Company-owned store operations decreased $36.9 million or 9.3% in 2008. This decrease was due primarily to store divestitures, primarily to existing franchisees, during 2008 and lower same store sales. Domestic Company-owned same store sales decreased 2.2% in 2008 compared to 2007. There were 571 and 489 domestic Company-owned stores in operation as of December 30, 2007 and December 28, 2008, respectively.

Domestic franchise. Revenues from domestic franchise operations decreased $4.2 million or 2.7% in 2008. This decrease was due primarily to lower same store sales and a decrease in the average number of domestic franchise stores open during 2008. There were 4,584 and 4,558 domestic franchise stores in operation as of December 30, 2007 and December 28, 2008, respectively. Domestic franchise same store sales decreased 5.2% in 2008 compared to 2007.

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Domestic supply chain. Revenues from domestic supply chain operations decreased $12.2 million or 1.6% in 2008. This decrease was due primarily to lower volumes, related to decreases in domestic same store sales and were offset in part by an increase in overall food prices, including cheese prices. Cheese prices positively impacted revenues by approximately $11.1 million in 2008. International. International revenues are primarily comprised of royalties from our international franchise stores and sales of food and supplies by international supply chain centers to certain franchise stores.

Interest income. Interest income decreased $2.6 million to $2.7 million in 2008. This decrease was primarily due to $1.5 million of tax-exempt interest income that was earned in 2007 on funds received in connection with the Company’s 2007 recapitalization.

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DOMINO’S PIZZA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)

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CONCLUSION It has successfully established its market because of Their best services  Pricing strategy  Delivery System

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