It’s a good job Andy Emmerson never tires of getting asked for free pizza. Whether he is at a dinner party, out for drinks or chatting to fellow passengers on the train – as soon as people find out what he does for a living, they try their luck for a freebie.
But they needn’t worry too much about persuading him, says Domino’s Pizza’s head of property and acquisitions. “I will give anyone a voucher, no problem at all,” says Emmerson in a Yorkshire accent that skims the line between unquestionably jolly and utterly no nonsense. “Each person who asks could be a potential new customer. The frequency order rate at Domino’s for our most loyal customers is only every six weeks. That’s very low. So I don’t mind people asking me for free pizza at all.”
Customer frequency rates might be low, but the group’s sales figures are anything but. In its most recent interim results, for the six months ending June 2011, the group reported an 11% rise in sales to £286m, a 15% jump in pre-tax profit to £23m and announced a plan to open 72 new outlets before the end of the year in the UK and Germany.
Emmerson has been spearheading Domino’s property expansion since he joined the group in 2006, and says the next three years, at least, will see more growth, more outlets and, presumably, more free pizza.
Here the 50-year-old, who gave up on a career in law to build a CV that now includes roles at Millie’s Cookies and Dunkin’ Donuts, talks about expansion, opportunities for the property sector and why he thinks links made between the Domino’s chain and obesity are “nonsense”.
Supersize expansion
One could argue that strong results for a takeaway food retailer such as Domino’s in a tough economic climate are not all that unexpected, or even impressive. Many people have responded to the downturn by cutting back on their food spending, and a value-for-money takeaway is a more affordable treat than dinner at a pricey restaurant.
“That’s true,” concedes Emmerson. “But we’re looking at our like-for-like sales figures [a 5.2% increase for the six months to June 2012 compared with 3.4% in 2011]. So you’re comparing against yourself. And we are setting ourselves a higher benchmark every year despite having a comparatively tough year last year and the year before.”
The group is on target to open 72 new premises by the end of 2012 – 60 in the UK and 12 in Germany. The current figures are 19 and four, respectively. That seems a lot left to do in four months.
“We are on track to deliver,” insists Emmerson. “You can never be certain, but we are looking to achieve those targets. I don’t see any reason why we won’t.”
The group aims to have increased its number of UK outlets from 732 to 1,200 by 2021, focussing on the South East and London. In the capital, the number of outlets looks set to double over the next 10 years from 93 to 170. “This is where the main gaps are because there is a higher demand for the product in London and the South East – a stronger economy, greater levels of opening sales,” explains Emmerson.
German growth
Domino’s is also pursuing a massive expansion in Germany, where it plans to open more than 400 premises in the next 10 years. It might seem like an odd move on the face of it but Germany has a similar social set-up to the UK, a comparably large student population and only a 4% knowledge of the Domino’s brand (compared with 96% in the UK).
There is also a lack of serious competition, says Emmerson. “There is very little pizza penetration in Germany, so this is a good market with a strong economy.
“We will be able to offer opportunities there to our existing UK franchisees as well as new German ones. We think it will be a massive success within 20 years – which is about as long as it has taken here after the brand was introduced in 1985.”
Could this be the first move in a bigger plan for world domination by Domino’s? “There are no plans to enter any other foreign markets right now,” says Emmerson. “But you never know. We remain opportunistic.”
Working with Domino’s
Domino’s’ company structure gives it the exclusive right to own, operate and franchise branches of the chain. Prospective franchisees are required to pay almost £300,000 to the parent company for the right to operate their own outlet.
The company currently has 127 franchisees and, although prospective candidates can apply, the odds are stacked against them. The group took on only five new franchisees in 2011, a figure it does not expect to increase in 2012. “We would rather give new opportunities to existing franchisees, people we know,” says Emmerson. “That is not to say we won’t take on new people, but they need to be flexible. There will never, for example, be an opportunity to be a franchisee in London. But if someone is prepared to move elsewhere, that is an option.”
And Domino’s quest for new space does open up a pipeline of potential opportunities for the property sector. “We have agents and property developers working on our behalf,” says Emmerson. “At any one time, we will be looking at around 250 potential outlets, so there are opportunities for new companies to join in our ongoing search.
“Agents and developers can visit our website, browse our target town requirement schedule and submit details to us online, which is dealt with by our property team to see if the opportunity is suitable.”
The eight-minute rule
Asked what makes a good site, Emmerson says it takes all sorts, shapes and sizes. From challenging older properties in excellent locations, though to brand new spaces right next to a planned supermarket development, everything is considered, as long as there are enough potential customers within an eight-minute drive to make the outlet commercially viable.
Emmerson confirms he is only looking for takeaway spaces. There are no plans to open the first Domino’s restaurant any time soon: “We are a pizza delivery service. We can’t be all things to all men.”
So what about the possibility of a pure delivery offering? “Not even with the rise of online ordering on iPhones and iPads,” he says. “In the right location, there is a lot of passing traffic and I want to continue to capture that carry-out service.”
‘Not trying to make the UK fat’
So, the great Domino’s expansion may be on track, but it is far from hurdle free. Planning remains one of the biggest challenges for A5 classed hot food takeaway properties, which is clearly a source of frustration for Emmerson. “It’s OK at a local level,” he says. “The planning officers generally get it. It’s the planning committees that are the problem. The mindset can be one of nimbyism and ‘we don’t want another hot food outlet’. They forget we’re going to create jobs, another rates revenue stream for the local community and that we’re going to invest in upgrading a property. So many times they say ‘no’ with no grounds, we appeal, everyone spends money, we win and, six months later, we open a store anyway. It’s a waste of time.”
Emmerson says opposition is fuelled by the obesity debate, with some planners arguing that a Domino’s outlet too near a school could exacerbate the problem. “It’s nonsense,” he says. “We don’t believe that if you ban A5s from within 400 metres of a school, everyone will miraculously get healthy. We are caught up in a blanket A5 ban and while kids are being sold sausage rolls, chocolate and crisps elsewhere with no restrictions, they ban us because we happen to sell hot food. We are seen as a treat, not a meal replacement. I am not trying to make the UK fat.”
Additional reporting by Ben Stupples
See also Domino’s set for rising figures.
