Domino's Pizza Enterprises Limited (DMP) Earnings Call Transcript & Summary

Okay. I can see the participants have now populated into the investor Q&A. Good afternoon. Thank you for joining us. My name is Nathan Scholz, I'm the Chief Communications and Investor Relations Officer for Domino's Pizza Enterprises. Joining us today is our Executive Chair, Jack Cowin; and our incoming Group CFO, George Saoud. We will have some brief introductory comments from both the Executive Chair and the incoming Group CFO, and then we will hand over to a Q&A session, which analysts will have the opportunity -- analysts and shareholders will have the opportunity to ask their questions live. As in our previous Q&As, what I will do is I will take those questions in turn. I will ask the participants to unmute and to ask their question and provide an opportunity for a follow-up question. And then in fairness, we'll then rotate those questions through so that everyone has an opportunity to have their questions answered. With that, I'm going to hand over to our Executive Chair, Mr. Jack Cowin. Jack, over to you.

Thank you, Nathan. In trying to see what might be appropriate way to kind of get into the subject I thought, I'd give you a little history lesson as to my exposure to the business. I became a shareholder in a four-store home delivery pizza business in Brisbane by the name of Silvio's Dial-a-Pizza in 1985. We paid $400,000 to buy -- make an investment because I was interested in the home delivery business. That business merged with the U.S. Domino's business in the early '90s, and it was a joint -- we picked up the name Domino's, the business expanded slowly with that merged entity and in 2005, that company went public at $2.20 listed on the stock exchange. And here we are 20 years later. So I'd say that to let you know that I've had a fair exposure to this business during that time. I continue to invest in the business. And I think at one stage of game, I was an 85% shareholder when we went public and things like that, I obviously got diluted as we issued more shares, but I have been stalwart in my ownership and maintain the faith that I have in this company. I might also add that I became -- I put USD 5 million into the US franchisor when that company bought out the founder in the early 2000s. That $5 million grew, today the value of that is $255 million. I sold 400 to 500 as time has gone on. I still have 100,000 shares or $45 million in the US franchisor. So I've had a fair representation and understanding of this industry through a direct personal involvement. The Domino's business in the U.S., the listed company in the U.S. was -- the 2008 recession in the U.S. was $3 a share. Today, it is $450 a share. And it shows that the ups and downs of the ownership of -- in a public company can be dramatic. And in the case of Domino's, as I say, $3 to $455 today shows that the mothership, the parent where the company started and is still the franchisor that the basic business is sound and has a good growth poster. Warren Buffett just became a shareholder, as you may have read, in that franchisor company of which DPE is the master franchisee for the business that we ran. Don Meij was the CEO of this business for 20-odd years. We replaced -- he left in last October of '24. Mark van Dyck had been with us for a year as a consultant to the business. And we -- when Don left, we appointed him as the CEO. He resigned a week ago. And we have -- I've taken on the role as the Executive Chairman versus prior being the Chairman, and we are actively in search of a replacement to come in as a full-time employee as with the company. I have great faith that this business is solid. We've had in the last 24 hours since we made the announcement, we've had lots of conversations with analysts and investors, some of which described, as you would have read in today's paper as a company being in disarray. And I substantially refuted that statement. This business is solid. If we look at the growth, this business earns $100 million after tax. We're coming out of a period of relatively flat earnings the last couple of years. But I think there is enough momentum that we have a very positive outlook with the future, and this company is not in disarray. And the future, in my opinion, is bright. I'm sure you're going to have lots of questions, so -- which I'm anxious to be able to deal with and welcome. And so Nathan, maybe you could introduce George and come back.

Absolutely. With that, I'll hand over to George. Welcome to Domino's George on day 2.

Thank you, Nathan. George Saoud, day 2. Obviously, day 1 was a very -- lot's happened on day 1. I'll just make a brief statement of what I've seen to date. We have some amazing fantastic people in the business. All the people that I've met are very much committed in the spirit that I've seen is top quality, and they're committed to take the business forward. At the heart of what we have and what we're working through and what I've seen in the couple of days, it's really all about driving customer value both through product quality and service, and that's a large part of what they're talking about internally in the organization. And what you'll hear in a moment from Jack and the background to the business and the changes are around -- we've sort of had flat sales over a period of time. But we've had the inflationary environment with costs. So it's all about driving productivity across Domino's and also the franchisees driving value back to franchisees. Day 2, as I said, not much more to add. And hopefully, I'll get to meet a lot of you in due course. Thank you, Nathan.

Thanks, George. And now I'm going to hand over the first question to Tom Kierath from Barrenjoey.

Jack, I just really want to understand why Mark is leaving. He was your guy. You knew him before. He became CEO and it's quite sudden to have left so quickly. So it might be helpful for you to explain, was he not performing? And maybe particularly -- in particular, what was he not doing that you wanted to see or the Board wanted to see because it is, I guess, a pretty surprising announcement. I just -- yes, like some more color on that, please.

Well, first of all, Tom, this was Mark's decision to resign. He was not pushed or asked to leave, he made the decision to leave. I think the reality is he put together the strategy, which has been accepted. Secondly, the -- we've closed a number of loss-making stores, particularly in Japan and the requirement of the business now that, that has been put into place is to act and try and get this business into a form that requires traction in the field of restructuring the business in a manner that it's profitable. The manner in which we hope that will happen will be through increased sales, but we got no guarantee even though there is some positive results that are starting to emerge in the business. We've got no guarantee that we can have a sales-driven recovery, we hope we can. If that is not able to be done, then the second alternative is that we do have control over is the cost structure of the business. And that will be something that is under examination and we are taking active steps on to make sure that we can deliver the results that this company needs in order to be financially viable to the shareholders, but also to the franchisee community that they have -- if we are overstaffed and got too much expense then that means that money cannot -- it's got to be redirected back into advertising and things like this to be more competitive in the marketplace. So I think to answer your question, it's probably a question that you have to direct to Mark. But my view is that we're in 11 different countries, travel time away. He's committed to the company through until December. But there's a lot of work that has to -- putting the plan together is one thing, getting the traction in the field is the other, and there's a lot of work that has to be done. And I think he made an assessment that the cost reduction program, the travel in these different markets is not easy. So he decided to resign. So that's where we stand.

And can I just clarify, this is not a performance issue. So I think you've said yesterday that you're happy with where the market consensus is for '25, I presume, '26 as well. But there's no performance issue, something that we're not aware of?

Yes. There is performance issues in that we've had flat results where this is going into the fourth year, which is unacceptable. And what we require is change in where we have been. And as I say, the best way to get there is if we can successfully get the sales growth going, which will obviously impact the profitability for franchisees and for the company, there's no guarantee. We don't have any given right to think that we're going to get that. If you look at our kind of performance and you compare it with Collins, for example, which has been flat, McDonald's in Australia, which is negative, McDonald's around the world if you look at -- to have a business which has same-store sales, which are relatively flat, that's okay if you look at us, but we've been there now for -- this will be year 4. So if you say performance-wise, business has got to do better. We've got -- we're custodians of other people's money, and we have to get a better return as this goes along. There's been decent dividends paid, but to make this business successful, we have to have growth, and we have to do it now rather than on a long-term basis. So if there's any issue, it's how quickly can we get this done. And to get -- as I said, when I say that, get the cost in line with regard to what we need to make this business profitable. If we get the sales results, that is a much easier road to go down, but we had no guarantee of that.

The next question is from Shaun Cousins.

Maybe just a question on the pace of cost savings. It seems to be what you're alluding to that you want to go faster on cost savings and Mark did not. Did Mark believe that accelerating the pace of cost savings would -- was not possible? Or would it damage the business? Or did Mark have enough sort of leeway to execute the strategy that he wanted. I'm just curious just digging into Tom's question a bit more, just the reason that Mark has gone, and it appears to be the pace of cost savings. Why would he not want to agree with that? Because it seems rather sensible, but he's saying no for some reason.

Well, I mean, his plan, which he put together was a 5-year plan. And there was nothing wrong with it. We agreed with the plan. But I think the -- if there was an area of where the Board wanted to do it differently, it was the pace. And that is -- if there's a difference, that's where it laid. And I think, Mark, would have taken the position that this is a lot of hard work to do today. As I said, there was -- I think we had a common philosophy as to what had to be done. The difference is how do we do it quickly.

And maybe just on cost -- sorry, pardon me, Jack.

Yes. Does that answer your question?

Somewhat. I mean -- sorry, I would have thought he would have been okay with that and he knew what he signed up for. So again, goes to the broader idea this is a surprise. Maybe what are the costs that can be cut that you would like to see being cut quicker? Is it IT? Is it marketing? Is it people? And to be fair, why have -- okay, why have they not been cut before? You've had flat sales for a period of time as you've highlighted, your performance has been, I think, disappointing to many. Why has the company only now chosen to accelerate cost savings where arguably, there would have been some urgency and some necessity previously?

Yes. There have been costs taken out, but -- for example, Japan that's probably the most vivid example, the earnings in Japan went down, which more than compensated for the cost that were taken out. What we are looking at is the net cost to run this business. If you look at what the net cost of running DPE is versus the comparable companies in this interest, we're right up at the top. We've got -- we are well staffed and the G&A in our business as a percentage of sales is high. I think it's a very good question to say why does this not happen faster? I don't think anybody planned on the demise of the Japanese business coming back as it did. And as I say, the loss of profitability more than offset. So if you look -- if you were running this business, you'd say, yes, we have made some cost reductions, but the cost reductions were offset and more than offset by some of the decreases in the other markets. Now what we're saying today is -- and the question is, take IT, for example, IT is probably the biggest cost in our cost structure. We have tried to develop our own cost IT systems. There is another way of doing that, you use outside suppliers to be able to do it. That's a lot cheaper to do. If you go back in the history of Domino's, if you go back 10 years ago, the other question was is it a tech company because we're at the forefront of some of the technology that was evolving in the takeaway business. We built up a pretty sizable IT staff and business. As the business has changed and things like that, that's -- these are some of the things that we have to modify in order to take the overall net cost down. So when you say why there have been reductions in various places. We set up a system of trying to have -- got offices in Malaysia and Poland, which our support systems to try and consolidate things, but the net result is what's the total cost around the business. Now that's too high, that means you have that expense, which we're trying to refilter that back down into the field to the franchisee community and making them more profitable. If they're profitable, they'll open more stores rather than building this cost-heavy head office, well-manned business. So that's -- no one has been asleep at the switch here, but they've been doing -- trying to do the right thing. But that's the way this thing has evolved. But we still have a business, which is a -- if you look at the industry, as a percentage of sales, what we put into G&A, which then things like the IT business is high. So that's what we've got to bring it back down. To get more money under the sales we got to go back into the field, supporting franchisees and to support our earnings structure, which also we want to take up as shareholders.

The next question is from Michael Simotas from Jefferies.

Hi, everyone, and thank you, Jack, George and Nathan for your time. First question from me, ultimately, it looks like the biggest issue in this business is the franchisees don't make enough money because the unit economics aren't good enough. Can you get the unit economics to where they need to be through cost reduction alone? Or do you need average sales per store to increase to get you there?

Michael, the answer is the average franchisee in the system makes $95,000 per store. That is on an average probably of the existing business about a $400,000 investment, which has been -- which continues to grow the cost to open a new store. So the plan was how do we get that to 130, which was set back by the no profit in France and a decrease in profit in Asia. So if you look at the individual markets, you got different results in different countries, obviously. But we can go a long way. In my opinion, there are significant costs that can be redirected into other areas of this business, which will benefit and enhance the ability to take the sales up. If that -- if the sales don't go up, which I said earlier, we don't have control over, we can still make a significant difference in the results that the company and the franchisee we get. So we're trying to do both. And if we don't get the sales results, then the cost will still take us into a better ground than where we sit today.

Okay. That's helpful. And the second one for me is you sort of talked about Mark's 5-year plan that was broadly accepted by the Board. Presumably, there was some sort of growth algorithm in that plan. If you can get this business to where it needs to be, what does that growth look like?

Yes. We hope that in this next 12 months to be able to run in the range of a 3% sales growth. And that's not mission impossible. In today's market, as I said, there is a very mixed sort of bag of results taking place in the business. Yes, I think the Collins numbers they just released was flat or 1% kind of idea. McDonald's are negative, GYG is positive, Hungry Jacks it's positive. So you got a mixed bag. And so to try and predict what the sales are, we can do. And I think we are looking at -- we hope to be able to have a sales growth of 3%. If we do that, we will show some substantial results going forward.

Yes. And I guess I'm sort of thinking a little bit longer term, like how do you think about same-store sales growth potential for a little bit of unit growth and operating leverage and margin expansion over a 5-year period?

Well, unit growth, Michael, will come from profitability of the franchisees. If they're not making the money that they hope to be able to make or make a return, then the sales growth will be very modest. But if we can get a number in the range of 3% of sales growth, then I think there are -- there's a lot of expansion potential in this business if you get the profitability right from a franchisee point of view. And that's -- if you said, what's the one kind of priority that we've got is, how do we get these franchisees in a position whereby they are profitable, which means they will want to open more stores. And if we can get a number in that range of 3% as a sales growth number, that will flow through to the bottom line as DPE, our company as well as that. So that's the plan.

And now before I move on to Bryan Raymond, just to clarify, I've had some people asking me, the 3% that the Executive Chair has referred to is like-for-like or same-store sales growth, not a network number. So that's same-store sales growth, just to clarify for those asking. If I can now hand over -- so I'm doing 2 things at once. I hand over to Bryan Raymond from JPMorgan.

Thanks. Thank you, Jack, George and Nathan. Just on the path forward from here, you talked to cost out to fund this reinvestment, which makes total sense. But do you think you need -- given the pace you're trying to move at, do you think you need to restate earnings lower in, say, '26, '27 that sort of time period in order to drive that sales momentum, and get that 3%-plus type sales level that you need? And the second part of it is, are more store closures -- larger way of store closures required to do that? Or is that not really possible, given DPZ and all the others sort of considerations you might have?

Yes. I don't think DPZ comes into this. They'd obviously like more stores open, but I don't think they're a factor in this discussion. I guess your question is, do you say take a lower -- don't reduce the cost quite as fast. We think the costs can come down at a more reasonable rate without impacting on the sales growth number. But that is yet to be achieved. So our challenge is we got to be able to do this. And we've got to be able to have -- if this doesn't work, if we're not getting the sales growth, we obviously got to play it different. We're giving you a by play as we sit here today. We are hopeful that there's no reason why this business cannot -- we have some -- out in the greater metropolis of this pizza world, we've got some very successful franchisees. We have a franchisee, I think the average is around $30,000 a week in the business. We got franchisees doing $100,000 a week. And there are a number of them that are in that category. How do we get that same sort of -- and they have no exclusive tariff, there's nothing magic other than the fact that they execute this business really well. We think in front of us, the major challenge is make sure we execute, right. And then the response -- at the franchisee level, then the -- then how -- what's the most efficient manner that DPE can supply services, marketing, to the broader field so that everything will grow. But the real challenge here is making these franchisees, and this is during a period of flat, as I say, you've got some real exceptional people. You got some down at the button that aren't making any money. And you say, could there be more store closures. We hope that it's not, but they could if some of these guys run out of money and fail, and can't get the sales increase then they will. But we're hopeful that we can lead a renaissance of this business by an execution level by -- how do you make somebody go from $100,000 a week down to probably less than $15,000, $20,000 down there. So there's a big, big variance in the store results, which have the same product, the same people, the same name, the same everything, how can you get that wide spread of results. And so that's where -- to me, that's where the focus is, down at the field, that's where this thing will be won or lost. From a company point of view, how do we efficiently supply services to those. And I think I can tell you that I think we've provided lots of service at an expensive cost, which we should be revisiting and that's the intent of what we're doing. And that's the new plan of how do we make this strategy plan that we're on, how do we make it happen faster.

Appreciate that and agree. Certainly, execution by the franchisees is critical. Just to reframe that question slightly, what I'm referring to is there's a bucket of cost out that you can generate from head office and other areas. And then there's a bucket of reinvestment that you need to make in advertising and product design and other things that you need to do to drive sales momentum. Is the bucket of reinvestment bigger than the bucket of cost out in the next few years, which will drive the DPE earnings level down year-on-year from here in order -- i.e., do you need to go backwards before you move forward?

No. As I think I said earlier, this business produces $100 million of after-tax earnings. So the earnings are there. The money is there. We don't have to raise any more money. The balance sheet is solid. So we don't have to go backwards. It's a matter of how do we better do what we're required to do in a more efficient and cost-effective way, which impacts on the business. So I don't know if that's question answered properly or not, but that's, kind of, how I see it.

Yes. And just my second question was just around the balance sheet. But I think you've addressed that, in terms of you don't see any need for an equity raising here. You think your capital position is solid. Is that a fair statement?

Yes. No, I think the EBITDA to debt ratio of like 2.5 today and the projection is by the end of the year, if the budget is met, it will still be lower than that. But that is yet to be determined, but there's no plan or need to raise money externally, have a fundraise.

The next question is from Sam Teeger from Citi.

Sam, I read your report today. I thought you had a different sort of approach to us than you did for Collins in sales results wearing a whole lot different than ours.

We can discuss Collins and Domino's in more detail after if you would like. But my question, Jack, is you mentioned before that Domino's sales have been flat for some time. And you called out Collins and McDonald's also having similar subdued results. So it's sounding like there is a broader category issue at play here. So keen for your thoughts as to, is this a sign that consumption frequency for old school QSR is under pressure potentially due to competition from newer players, younger consumers eating healthier, GLP-1s or the operator is just no longer able to offer a product where the value proposition resonates with consumers after an inflationary period?

No. On the latter bit, no. There is a fundamental change, however, in the industry. Pre-COVID -- COVID, we got a free kick because up until COVID if you're in -- if you wanted food delivery at home, pizza was kind of the default. You've gone up and you ordered, your pizza be delivered. COVID came in, we got a free kick because it was one of the few. The advent and growth of Uber and Uber look-alikes have made some dramatic changes in this industry in that now the little corner pizza shop can also have a delivery service, and you don't have to employ those people. They pay as a percentage of at the bottom line to Uber, but that has made a dramatic change. McDonald's, KFC, Hungry Jack's, all that previously were really not in the home delivery business, these businesses now are doing upwards to 10% to 20% of their volume now in home delivery. So there's been a fairly dramatic change in the overall kind of industry where home delivery of food comes into this, and that has had some impact. I think we are -- and in particular, when we look at Australia, we did the biggest part of -- the largest part, now the fact that we have flat business, all these other people got into the home delivery business. The fact that we are relatively flat in Australia, we've got relatively -- we're going to have positive results in our same-store sales, but the fact that with all this other -- the home delivery business is something that's not going to go away. It's going to continue to grow. And there are more players in it, and the fact that the Ubers and the look-alikes have been able to supply that service has definitely had -- has been a factor over the last couple of years. And so we just have to continue to find a better way, be more competitive and run this business better. We got to do it on a more cost-effective way than what we may have done in the past. Domino's went through a very interesting stage in which they said, we're not going to use the Uber because they're going to be our competitor. We're going to do it all ourselves. I think the customer then said, "I like this broader menu of items where I can go and pick and choose what I'm going to have delivered rather than just one single app that I'll go to and order. And that's reality. So there's been a change in that. The Domino's business now also uses the outside services of Uber. So there's been a stated change, and I'm relatively comfortable that we've been through that. And where we sit today is a good platform to be able to continue to grow on. So as I say, we're flat. We have been for a number of years. I think that potentially is we got growth possibility.

And that kind of leads into my second question. Given technology has historically been the key part of Domino's competitive advantage, if you replace your own proprietary systems with third-party systems to save on costs, what competitive advantage do you see the business having going forward?

Yes, I think your question is correct. 1 stage a game, we are a leader in the technology. I think as we sit here today, I don't think we're necessarily -- our technology is not any better than the Ubers and the other people that we have to deal with. And if we don't have a competitive advantage, I think part of the previous management has spent a lot of money on trying to come up with better ways to be to the IT side of the business. What can we come up with, which is a better way of doing it. And that costs a lot of money to do that. Here we are in 2025. I think the competition is -- there's largely a much more level playing field today. We don't think we have a competitive advantage today in our -- the technological side of the business compared with the Ubers and some of these other people who spend a lot of money to get out there. So if you don't have a competitive advantage, let's stop trying to recreate the wheel here coming up. So let's do what we can do in the most cost-effective manner rather than trying to create -- or reinvent the wheel. Does that answer your question?

Yes, yes, that's helpful. I'm still just trying to think if it's not technology, what will your competitive advantage be over the next 5 years?

Our competitive advantage is being which we are today, the biggest, strongest pizza company in this marketplace, we hold that position very strongly. And as we get as the sales increase and as we get more units into the market, we have the advertising power to be able to -- that will be our competitive advantage. And to get there, we also have to be able to execute as a market leader. We got to have lots of stores, but if they don't run right, and they don't produce the right product and the right service times and things like that, so that will be our -- the execution at store level will be our competitive advantage with distribution into the marketplace of the most advertising, the most stores, the most convenient locations, that's our competitive advantage. I don't think the technological carrier will be the answer. As I say, you've got other players in this now who are doing the same thing.

The next question is from Caleb Wheatley from Macquarie.

Good afternoon, Jack, George and Nathan. Just maybe to dig into the prior question in a little bit of a different way. Jack, can you get your thoughts on the trajectory of the Domino's brand and the offering in Australia and in some of those offshore markets perhaps over the last 5 years. We're starting to hear from sort of customer surveys that there's maybe permanent loss of some of those customers. Clearly, you called out a few of the brands that are growing in sort of GYG or fresh part of the market does seem to be winning share. So yes, just really keen to get your thoughts on how you think the business has changed from a reputational and branding perspective in how consumer preferences have changed perhaps since that COVID period outside of some of those issues around Uber Eats, et cetera?

I think your question is the customer preference change. I don't think it has. People talk about health, food, this and that. I don't think that has been attributable to what we're talking about. The McDonald's has a big grand -- we focus on Australia. McDonald's has a big drill in this market. They have been negative sales. We're flat. So at least we're doing better with the company that even -- are many times bigger than us from an advertising point of view. Why haven't we grown more? As I said, we just had this discussion about the advent of the competition into the delivery market. I think that has been much more of a factor than the change in eating habits of the general public and customers. We measure customer satisfaction. I don't think that is the issue as much as the competitive influx of other people that are in the home delivery. And I think that's been the major future slide. We watch this. We've watched this. I can tell you in the other business that I'm involved in, there's a particular market for people. We try to sell plant-based meat in our Hungry Jack's business, and had a bit of rough. But some of the basics -- you say what determines where the Peter's going to go. Taste is the number one sort of thing. Then convenience. Where is the nearest store? What's the delivery time? So on and so. So I don't think there's been a dramatic change in kind of the factors that determine whether you're going to go to Domino's or to a competitor. The competition level, I think, has probably been much more significant.

Yes. So maybe to use the other business that's quite familiar with HJs, probably closer to we call them those traditional businesses. And I appreciate there is a cyclical and competitive component and maybe faces more at risk from Uber Eats, but it is still possible to obviously have some positive growth in one of those more kind of legacy brands. Like how should we think about sort of the sales upside that isn't sort of driven by cyclical components? How do you think about the delta that may come through just on execution outside of kind of a change in the consumer environment?

This is your question, where do we see sales growth coming from?

Yes. I mean, more just around sort of from a Domino's specific perspective as opposed to sort of market-wide comments about where the consumer is at.

Well, look, I mean, I don't know whether I know the answer to that. My personal view is that this company has kind of been flat. And I think from an investment way, I think it's significantly undervalued to where it has been. And I think if we can get the -- I'm talking about now from a shareholder point of view, if we can get the franchisees making more money, they will open more stores, we will have more advertising money. We'll have more income into the business into their hands and our hands, and that will make us the strongest player in the market. My comment, if you look at Domino's around the world, they're the largest pizza company in the world. We're not talking about little backyard sort of business. They are the strongest pizza business in the world. And Pizza Hut in Australia once held that and they have shrunk significantly. So there's nothing wrong. There's nothing wrong with this base business, and I think that with the proper execution at store level, getting the profits into the hands of the franchisees so that they can grow and make more profit at their level, then this business has a bright future.

The next question is from Phil Kimber from E&P.

Guys, can you hear me okay?

Yes.

Jack, just on the sales comment that you talked about this sort of 3% target for same-store sales, if nothing else changed in terms of what Domino's provided the franchisees, I would have thought that just holds their profit. So they don't go backwards anything at a 3% same-store sales growth, but they don't grow either. So I'm just wondering, for their franchise profits to get up, are you going to have to dip into your pockets and hopefully, you can pay for that out of cost savings and basically supplement their profitability in the near term to get them closer from 95 to 130-odd. Is that sort of the plan and you're hoping to pay for that out of cost savings? Or did I misread what you're saying?

No, you have not misread. We are already doing that. We've made a commitment to the franchisees that with the growth that we're getting that we have given an undertaking that there will be a significant amount of money flow back to them, so we understand. You got some that are doing really well, that's not a factor. But we also have stores, again, as I said, the average is 95. We've got stores that we want to keep in business. We don't want them failing. So we've given an undertaking to be able to provide money back to franchisees to make sure that they have a stronger financial position where required.

And in the very short term, I mean, is that going to be the majority of those cost savings that are going to have to flow back?

No, it's not. But I think the number of -- if we have a total cost savings, it will be a substantial number, but it will not be the majority, that's something which time will tell as to how much and where. One of the issues that we have to wrestle with is how do you give money to one party and not to another. In France, last year, we gave $6 million to the franchisees, we gave to everyone. And some where it was a gift, it didn't need it. Now you've got others that are struggling. And the problem is, how do you do something in a business like this, whereby you held things fairly for everyone. And so that's one of the challenges we've got to deal with.

And maybe if I could just ask, all the markets that you're in at the moment, is your intention at this stage just to stay in them? Is that the plan? I mean, I saw some articles in the paper where you were suggesting that...

There are some which are under review. Cambodia as an example. We've got 20 stores. Luxembourg, I think we got 4, neither of those make money. And so I think there's a review. I think on an overall basis, my personal view, there's a school of thought that says maybe we should be focusing on the stores and the countries that make money and sell off or get out of the countries that are marginal or don't make money, so we can have a stronger focus. There's a school of thought within the company that deals with that. My personal view is that management is getting this business structured right so that we run this thing in a most efficient manner that these market brands, and one of the ones that has had something to do with in the last 12 months, there's been mismanagement and we have to correct that. And that's our fault. So if we get -- France, Germany, those are 1,000 store markets. They got 400 stores each today. You can only advertise if you get 1 message that goes over the whole country. So a significant thing. It's getting the numbers up so that you've got the money to be able to advertise it back. And so my view is the potential of this company is making sure we got everything running right that they don't have a mismanagement, and we'll go from there. So that's kind of -- I don't think there's any silver bullet here that's going to solve all the problems or lead us to add in. But I do think that if we can get the formula right, get the management structures right, moving in -- part of the plan that we have going forward is moving some of the -- this business has basically been run out of stride and what we have to do -- and that's suited the Australian business as well. But when you get into Japan and the European countries and as we have to move some of the strength back to those markets rather than trying to think you're going to make all those decisions out of the head office. So the center will probably become not the dominant kind of force that has been in the past. You've got to move some of the financial strength, the decision-making strength back into the field, that's kind of the direction where we're headed as far as the strategy is concerned.

And we've got 2 more people who haven't asked a question yet. I'm just going to hand over to Ben Gilbert from Jarden.

Jack, obviously, Domino's is a great business, but one of the criticisms has been it's been death by 1,000 cuts in terms of strategy updates over the last couple of years. There seems to be another iteration of the strategy every quarter, every few months. I suppose if we're now looking into -- you're going to look to appoint a new CEO in time. What's to say that what actions do you take over the next 3, 6 months, we don't then have to start again in 6 to 12 months' time. It just feels like we just keep kicking the can down the road. And I wonder if the business seems to be more fundamentally broken near term? Do you stop doing delivery yourself, you go to Uber Eats, lead on those guys more, you exit France, do you potentially look at selling Japan. It just feels that we're going to have another 6 to 12 months of uncertainty.

Yes, I don't think that's correct. I think we've had -- you talked about strategy. I mean the Don Meij era was growth and into new markets, new countries and things like that. And I think the realization we came to was that, we didn't need to have more -- any new country anymore and that had to stop, and we had to consolidate and do what we already have better rather than kind of continue to expand. And I think Mark's kind of tenure was, how do we come up with what are some of the things that we required to do in the business, i.e., kind of dealt with things like to make it simpler, shrink the menu, put as much -- get some of the costs that's impacting the -- and get more money for advertising so that we can have a stronger voice, particularly some of these markets, some of these foreign markets where we need the units in the market in order to get the advertising money. So I don't think there's been any kind of -- you said a cut, but 1,000 cuts. I don't think there hasn't been any -- as I said, we have the growth strategy, and now we're into how do we execute better. And I think where we sit today, I threw in mismanagement on some of these markets that I don't think we handled properly. So I think that we get on top of some of these things, there's not 1,000 cuts here. It's how do we run this business better. There's nothing wrong with the base business. This is a profitable business. And the potential if we can get it right, and I think we're positioned in a position where there is significant growth from what I think is an undervalued company today.

And just a final one for me, maybe to you, George, just around the balance sheet. I appreciate your comments, Jack, that you don't need to raise money, but you still got the DRP underwrite on, which is effectively raised by stealth. Why not just rip the band-aid around that and just raise what you need to stop the DRP underwrite, put the balance sheet out of question out of debate and then just sort of move forward?

Yes, Ben, definitely a consideration. I won't talk to that today. It won't be appropriate to talk to that today. But definitely looking at all those options and scenarios is in the plan over the next 3 to 4 weeks.

I'm just going to hand over to Michael Toner from RBC for the last questions.

Can you hear me okay?

Yes.

Great. I'm just trying to understand, Jack, sort of what we'd be looking for from a new CEO. I mean the business has experienced quite significant exact turnover in the past 12 months. And it sounds like Mark was sort of perhaps mostly but not completely aligned on that cost-out trajectory. So are you effectively kind of looking for, I guess, complete strategic alignment? And sort of if so, how do you balance that against kind of relying on the judgment of sort of experienced and professional leadership?

As I say, I think the Board's position was, we want to increase sales. We're going to do our best to be able to do that. In order to do that, we have to execute properly. In order to do that, we have to have motivated franchisees in the field who are running this business right. We get those things happening. I don't think there's any kind of strategic difference between where we were in market being the recent departed other than the fact that we want it to happen faster. And we think that taking cost out, as I said earlier, can be done without impacting the business and the funds that are being spent now in overheads, put that back into the field put that back into reinvest back out into the field, not necessarily into franchisees and, but we've got more money that goes into advertising, promotion and things like that, that will assist on the objective of getting sales up. So I don't think there's been any kind of dramatic change in what the direction that the business is going in. It's a matter of want to see the results improve faster. And I think as a shareholder, as most of you probably are, we're looking for that. In order to get there, this is a business which is somewhat dependent on franchisee success and so it's a sharing success that we have to get so that they can -- both parties got to win on this. So we're looking for a win-win, for the franchisees and the company.

Okay. And sorry, if I -- just a quick follow-up, if I may. I guess I'm sort of curious as to how you get that alignment piece right as well to kind of attract talent? Would you need to provide perhaps sort of like an outsized incentive package? And sort of maybe you could link it to that 3% same-store sales target that you've just outlined, linking it to franchise profitability, linking it to cost out. There are fundamentally the things that investors pretty much care about for the long-term success.

Are you talking about how do we attract the right CEO, is that the question?

And just how do you align their incentives with the business as well? I mean you've talked to same-store sales, franchise profitability cost out. I mean, there's probably things that investors fundamentally care about for the business at the moment on a long-term view.

Well, one of the things that I think we are blessed with right now is an undervalued stock. And I think there's an opportunity in which we're going to deal with in, can we come up with incentive systems in which there's an auto dealer here who has a system in which the employees buy shares in the company, a company loan, part of that goes back to offset that loan. And if the share value goes down, then they steer back, that has produced some great results. So how do we incentivize? I think an important part of making this business go ahead is incentivizing and coming up with the right incentive plans for people within the company, and secondly, for the franchisees and their employees. So I've been in this industry long enough to know that incentivization is a really key factor get results, and that's something that we're going to be working on going forward to make sure that we can do that the best of our ability. We've had dramatic improvements in the Hungry Jack's business by being able to provide significant incentives with people, and I remain amazed that some of the results have happen when people are giving the opportunity to make more money if they get the results and do the right thing. And I think we can apply those same factors in this business, and I'll be surprised if that doesn't give us a significant lift in it.

Okay. Thank you, Michael. And with that, we are now out of time. So I want to thank our Executive Chairman, Jack Cowin, and our incoming Group CFO, George Saoud, for joining us this afternoon and for all the questions. We've given an opportunity for all of those to have a first round of questions and gone through that time. We'll obviously be updating market -- we're going through a blackout period now, we'll be updating the market in the last week of August with our full year results. The log in details of those will be provided on the investor website. Thank you all for your time today. Bye.

Thank you.