Some current and former restaurant owners say they have struggled since the recession hit, as customers spent less and ordered out less. They say central decisions, voted on by the franchisees and supported by management, have made life harder, like when they slashed the prices of pizzas roughly in half back in 2009, to $5.99. That boosted business for a while, one franchisee explained, with a blitz of national TV advertising that the franchisees pay for. But it also means they have to sell more pizzas to make money, at the same time prices for the ingredients have been soaring.
“They drove me into the ground,’’ said one former franchisee whose business failed last year. “If I could have sold my pizzas for the price my market could bear, I might have made it.’’ The franchisee spoke on condition that his name not be used, for fear of retaliation by the company.
Other franchisees said it’s true they need to sell more pizzas now, but they attribute that to competing in a tough economy, not to pressure from the front office.
Jeffrey Litman, who with his wife owns 20 Domino’s stores in the Denver area and has been in the business for 37 years, said there was concern back when Monaghan sold the company that the franchisees might suffer. But, he said, “In general they recognize they can’t do anything to weaken the franchise. We drive the sales.’’
Bain says it helped Domino’s raise standards, and that it brought better marketing and new discipline to the company that helped store owners sell more pizza. There were updated uniforms, new computer systems, redesigned stores, and new product rollouts.
At the same time, the company took on some of the trappings of corporate America, with top executives enjoying personal use of the company’s private jet and directors earning fees of $180,000 a year.
Meanwhile, the quality of the pizza itself had become a big problem. In 2009, near the end of Bain’s involvement, the company had to overhaul its core product, after Domino’s pizza ranked last among its competitors in taste.
“You can’t be a pizza delivery company that’s just strong with delivery,’’ the company’s marketing chief, Russell Weiner, said during an investor conference earlier this month.
Domino’s pizza has since received high taste marks. Company executives are counting on growth overseas in places such as Malaysia and India. They also said they have become accustomed to being a company with high leverage.
“We’re comfortable with debt,’’ said Michael Lawton, Domino’s chief financial officer, at the investment conference. He described the 2007 “monster dividend’’ in which investors, led by Bain, received a $897 million payout from the company. The management team is used to living within the constraints of financial leverage, he said. “We can handle this.’’
