# DOMINOS PIZZA INC (DPZ) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from DOMINOS PIZZA INC's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1286681/000095017025025223/dpz-20241229.htm
Accession: 0000950170-25-025223
Filing date: 2025-02-24
Report date: 2024-12-29
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/DPZ/
All MD&A years: /company/DPZ/mda/
Previous year: /company/DPZ/mda/fy2023/ (FY 2023)
Next year: /company/DPZ/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Our fiscal year typically includes 52 weeks, comprised of three twelve-week quarters and one sixteen-week quarter.

In this section, we discuss the results of our operations for the fiscal year ended December 29, 2024 compared to the fiscal year ended December 31, 2023. For a discussion of the fiscal year ended December 31, 2023 compared to the fiscal year ended January 1, 2023, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Description of the Business

Domino’s is the largest pizza company in the world with more than 21,300 locations in over 90 markets around the world as of December 29, 2024, and operates two distinct service models within its stores, with a significant business in both delivery and carryout. We are a highly recognized global brand, and we focus on value while serving neighborhoods locally through our large worldwide network of franchise owners and U.S. Company-owned stores through both the delivery and carryout service models. We have been selling quality, affordable food to our customers since 1960. We became “Domino’s Pizza” in 1965 and opened our first franchised store in 1967. Over more than 60 years, we have built Domino’s into one of the most widely-recognized consumer brands in the world. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.

We are primarily a franchisor, with approximately 99% of Domino’s global stores owned and operated by our independent franchisees as of December 29, 2024. Franchising enables an individual to be a business owner and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global brand and operating system with limited capital investment by us.

Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. We also have a global agreement with Uber Technologies, Inc. to allow customers to order Domino’s products through their marketplace. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees.

Domino’s generates revenues and earnings by charging royalties and fees to our franchisees. Royalties are ongoing percent-of-sales fees for use of the Domino’s® brand marks. We also generate revenues and earnings by selling food and other products to franchisees through our supply chain operations primarily in the U.S. and Canada and by operating a number of Company-owned stores in the U.S. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza stores. We believe that everyone in the system can benefit from the franchise model, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically.

Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, through an asset-light model. We have historically returned cash to shareholders through dividend payments and share repurchases. At Domino’s, we believe we have a proven business model for success that has historically driven strong returns for our shareholders.

Domino’s financial results are driven largely by retail sales at our franchised and Company-owned stores. Changes in retail sales are primarily driven by same store sales growth and net store growth. We actively monitor both of these metrics, as they directly impact our revenues and profits, and we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees, as well as Company-owned store and supply chain revenues.

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Critical accounting estimates

The following discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, our management evaluates its estimates, including those related to long-lived assets, casualty insurance reserves and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates, and changes in estimates could materially affect our results of operations and financial condition for any particular period.

We believe that our most critical accounting estimates are:

Long-lived assets

We record long-lived assets, including property, plant and equipment and capitalized software, at cost. For acquisitions of franchise operations, we estimate the fair values of the assets and liabilities acquired based on physical inspection of assets, historical experience and other information available to us regarding the acquisition. We depreciate and amortize long-lived assets using useful lives determined by us based on historical experience and other information available to us. We evaluate the potential impairment of long-lived assets at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Our periodic evaluation is based on various analyses, including, on an annual basis, the projection of undiscounted cash flows. If we determine that the carrying amount of an asset (or asset group) may not be recoverable, we compare the net carrying value of the asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. For Company-owned stores, we perform related impairment tests on an operating market basis, which we have determined to be the lowest level for which identifiable cash flows are largely independent of other cash flows. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows of that asset, we estimate the fair value of the asset. If the carrying amount of the asset exceeds the estimated fair value of the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value.

We have not made any significant changes in the methodology used to project the future market cash flows of Company-owned stores during the years presented. Same store sales fluctuations and the rates at which operating costs will fluctuate in the future are key factors in determining projected cash flows used to evaluate recoverability of the related assets. If our same store sales significantly decline or if operating costs increase and we are unable to recover these costs, the carrying value of our Company-owned stores, by market, may not be recoverable and we may be required to recognize an impairment charge. There were no triggering events in 2024, 2023 or 2022, and accordingly, we did not record any impairment losses on long-lived assets in 2024, 2023 and 2022.

Casualty insurance reserves

For certain periods prior to December 1998 and for periods after December 2001, we maintain insurance coverage for workers’ compensation, general liability and owned and non-owned automobile liabilities. We are generally responsible for up to $1.0 million per occurrence under these retention programs for workers’ compensation and up to $2.0 million per occurrence under these retention programs for general liability, depending on policy year and line of coverage. We are generally responsible for up to between $500,000 and $5.5 million per occurrence under these retention programs for owned and non-owned automobile liabilities, depending on policy year and line of coverage. The related insurance reserves are based on undiscounted independent actuarial estimates, which are based on historical information along with assumptions about future events. There is inherent uncertainty in the ultimate cost for known claims under our insurance coverages, and for incidents that have occurred that will be subject to a claim, but have yet to be reported to us. Analyses of historical trends and actuarial valuation methods are utilized to estimate the ultimate claim costs for claims incurred as of the balance sheet date and for claims incurred but not yet reported. When estimating these liabilities, several factors are considered, including the severity, duration and frequency of claims, legal cost associated with claims, healthcare trends and projected inflation.

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Our methodology for determining our exposure has remained consistent throughout the years presented. Management believes that the various assumptions developed, and actuarial methods used to determine our casualty insurance reserves are reasonable and provide meaningful data that management uses to make its best estimate of our exposure to these risks. Changes in assumptions for such factors as medical costs and legal actions, as well as changes in actual experience, could cause our estimates to change in the near term which could result in an increase or decrease in the related expense in future periods. A 10% change in our casualty insurance liability at December 29, 2024 would have affected our income before provision for income taxes by approximately $5.1 million in 2024. We had accruals for casualty insurance reserves of $50.7 million and $56.3 million at December 29, 2024 and December 31, 2023, respectively.

Income taxes

The U.S. Federal statutory income tax rate was 21% in each of 2024, 2023 and 2022. Our Federal income tax provision calculated based on the Federal statutory rate was $151.7 million, $137.0 million and $120.3 million in 2024, 2023 and 2022, respectively.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We measure deferred taxes using current enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid. Judgment is required in determining the provision for income taxes, related reserves and deferred taxes. These include establishing a valuation allowance related to the ability to realize certain deferred tax assets, if necessary. On an ongoing basis, management will assess whether it remains more likely than not that the deferred tax assets will be realized. Our accounting for deferred taxes represents our best estimate of future events. Except with respect to certain foreign tax credits and interest deductibility in separately filed states, our deferred tax assets assume that we will generate sufficient taxable income in specific tax jurisdictions, based on our estimates and assumptions. As of December 29, 2024 and December 31, 2023, we had total foreign tax credits of $21.0 million and $16.8 million, respectively, each of which were fully offset with a corresponding valuation allowance. We also had valuation allowances related to interest deductibility in separately filed states of $1.4 million and $1.4 million as of December 29, 2024 and December 31, 2023, respectively. We believe our remaining deferred tax assets will be realized. Changes in our current estimates due to unanticipated events could have a material impact on our financial condition and results of operations.

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Fiscal 2024 Highlights

•
MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 5.9% as compared to 2023. U.S. retail sales increased 5.3% and international retail sales, excluding foreign currency impact, increased 6.5%, as compared to 2023. Same store sales increased 3.2% in our U.S. stores and increased 1.6% in our international stores (excluding foreign currency impact).

•
MORE Stores: Global net store growth of 775 stores, including 160 net store openings in the U.S. and 615 net store openings internationally.

•
MORE Profits: Income from operations increased 7.3%.

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during 2024, driven by same store sales growth and net store growth in both our U.S. and international businesses. These factors, as well as gross margin dollar improvement within supply chain driven primarily by procurement productivity, also contributed to an increase in income from operations. Overall, we believe our global retail sales growth, excluding foreign currency impact, marketing initiatives, operations and emphasis on technology have combined to strengthen our brand. These financial and statistical measures are described in additional detail below.

Statistical Measures

The tables below outline certain statistical measures we utilize to analyze our performance. This historical data is not necessarily indicative of results to be expected for any future period.

Global Retail Sales

Global retail sales is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales refers to total worldwide retail sales at Company-owned and franchised stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand, and we believe they are indicative of the financial health of our franchisee base. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. As a result, sales by Domino’s franchisees have a direct effect on our profitability. Retail sales for franchised stores are reported to us by our franchisees and are not included in our revenues. The amounts below are presented in millions of U.S. dollars.

[[GREPCENT_TABLE]]
[["","","2024","","","2023","","","2022"],["U.S. stores","","$","9,500.1","","","$","9,026.1","","","$","8,751.7"],["International stores","","","9,624.1","","","","9,249.7","","","","8,788.2"],["Total","","$","19,124.2","","","$","18,275.8","","","$","17,539.9"]]
[[/GREPCENT_TABLE]]

Global Retail Sales Growth, Excluding Foreign Currency Impact

Global retail sales growth, excluding foreign currency impact is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales growth, excluding foreign currency impact, is calculated as the change of international local currency global retail sales against the comparable period of the prior year. Changes in global retail sales growth, excluding foreign currency impact are primarily driven by same store sales growth and net store growth.

[[GREPCENT_TABLE]]
[["","","2024","","","2023","","","2022"],["U.S. stores","","","+ 5.3%","","","","+ 3.1%","","","","+ 1.3%"],["International stores (excluding foreign currency impact) (1)","","","+ 6.5%","","","","+ 7.7%","","","","+ 6.3%"],["Total (excluding foreign currency impact) (2)","","","+ 5.9%","","","","+ 5.4%","","","","+ 3.9%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","","2024 fiscal year figure excludes the impact of the Russia market. Including the impact of the Russia market, international stores retail sales growth, excluding foreign currency impact, was 6.1%."],["(2)","","2024 fiscal year figure excludes the impact of the Russia market. Including the impact of the Russia market, total global retail sales growth, excluding foreign currency impact, was 5.7%."]]
[[/GREPCENT_TABLE]]

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Same Store Sales Growth

Same store sales growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Same store sales growth is calculated for a given period by including only sales from stores that also had sales in the comparable weeks of both periods. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported on a constant dollar basis, which reflects changes in international local currency sales. Same store sales growth for transferred stores is reflected in their current classification.

[[GREPCENT_TABLE]]
[["","","2024","","2023","","2022"],["U.S. Company-owned stores","","+ 3.5%","","+ 5.4%","","(2.6)%"],["U.S. franchise stores","","+ 3.2%","","+ 1.4%","","(0.7)%"],["U.S. stores","","+ 3.2%","","+ 1.6%","","(0.8)%"],["International stores (excluding foreign currency impact)","","+ 1.6%","","+ 1.7%","","+ 0.1%"]]
[[/GREPCENT_TABLE]]

U.S. same store sales increased 3.2% during 2024, rolling over an increase in U.S. same store sales of 1.6% in 2023. The increase in U.S. same store sales was primarily driven by higher orders resulting from our Domino’s Rewards loyalty program and other national offers, as well as from Uber’s order aggregation marketplace. International same store sales (excluding foreign currency impact) increased 1.6% during 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 1.7% in 2023. The increase in international same store sales was attributable to higher customer transaction counts, as well as a slightly higher average ticket per transaction.

Net Store Growth

Net store growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Net store growth is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth.

[[GREPCENT_TABLE]]
[["","","U.S. Company- owned Stores","","","U.S. Franchise Stores","","","Total U.S. Stores","","","International Stores","","","Total"],["Store count at January 2, 2022","","","375","","","","6,185","","","","6,560","","","","12,288","","","","18,848"],["Openings","","","5","","","","136","","","","141","","","","1,135","","","","1,276"],["Closings","","","(3",")","","","(12",")","","","(15",")","","","(229",")","","","(244",")"],["Transfers","","","(91",")","","","91","","","","\u2014","","","","\u2014","","","","\u2014"],["Store count at January 1, 2023","","","286","","","","6,400","","","","6,686","","","","13,194","","","","19,880"],["Openings","","","4","","","","174","","","","178","","","","892","","","","1,070"],["Closings","","","(1",")","","","(9",")","","","(10",")","","","(349",")","","","(359",")"],["Transfers","","","(1",")","","","1","","","","\u2014","","","","\u2014","","","","\u2014"],["Store count at December 31, 2023","","","288","","","","6,566","","","","6,854","","","","13,737","","","","20,591"],["Openings","","","7","","","","159","","","","166","","","","868","","","","1,034"],["Closings","","","(1",")","","","(5",")","","","(6",")","","","(253",")","","","(259",")"],["Transfers","","","(2",")","","","2","","","","\u2014","","","","\u2014","","","","\u2014"],["Store count at December 29, 2024","","","292","","","","6,722","","","","7,014","","","","14,352","","","","21,366"],["Fiscal 2024 net store growth","","","6","","","","154","","","","160","","","","615","","","","775"]]
[[/GREPCENT_TABLE]]

Russia Market

On August 21, 2023, our master franchisee that owned and operated Domino’s Pizza® stores in Russia announced its intent to file for bankruptcy with respect to the stores in that market. Therefore, as of August 21, 2023, we have considered the stores in the Russia market to be closed and they are excluded from our ending store count as of the end of the third quarter of 2023. We have presented our statistical measure of global retail sales growth, excluding foreign currency impact for fiscal 2024 excluding the retail sales from the Russia market from the 2023 retail sales base. We believe the impact of the Russia market on our statistical measure of global retail sales growth, excluding foreign currency impact for the other periods presented was immaterial. We believe the impact of the Russia market on our statistical measure of same store sales growth for the periods presented was immaterial, and we also believe the impact of the Russia market on our consolidated statements of income related to international franchise royalties and fee revenues and general and administrative expenses for the periods presented was immaterial. We have not received any royalties and fees from the operations of the Russia market subsequent to the Russian invasion of Ukraine in February 2022.

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Income Statement Data

(tabular amounts in millions, except percentages)

[[GREPCENT_TABLE]]
[["","","2024","","","2023","","","2022"],["Revenues:"],["U.S. Company-owned stores","","$","393.9","","","","","","$","376.2","","","","","","$","445.8"],["U.S. franchise royalties and fees","","","638.2","","","","","","","604.9","","","","","","","556.3"],["Supply chain","","","2,845.8","","","","","","","2,715.0","","","","","","","2,754.7"],["International franchise royalties and fees","","","318.7","","","","","","","310.1","","","","","","","295.0"],["U.S. franchise advertising","","","509.9","","","","","","","473.2","","","","","","","485.3"],["Total revenues","","","4,706.4","","","","100.0","%","","","4,479.4","","","","100.0","%","","","4,537.2","","","","100.0","%"],["Cost of sales:"],["U.S. Company-owned stores","","","328.0","","","","","","","314.7","","","","","","","378.0"],["Supply chain","","","2,529.9","","","","","","","2,437.3","","","","","","","2,510.5"],["Total cost of sales","","","2,857.9","","","","60.7","%","","","2,751.9","","","","61.4","%","","","2,888.6","","","","63.7","%"],["Gross margin","","","1,848.5","","","","39.3","%","","","1,727.4","","","","38.6","%","","","1,648.6","","","","36.3","%"],["General and administrative","","","459.5","","","","9.8","%","","","434.6","","","","9.7","%","","","416.5","","","","9.2","%"],["U.S. franchise advertising","","","509.9","","","","10.8","%","","","473.2","","","","10.6","%","","","485.3","","","","10.7","%"],["Refranchising loss (gain)","","","0.2","","","","0.0","%","","","0.1","","","","0.0","%","","","(21.2",")","","","(0.5",")%"],["Income from operations","","","879.0","","","","18.7","%","","","819.5","","","","18.3","%","","","767.9","","","","16.9","%"],["Other income","","","22.1","","","","0.5","%","","","17.7","","","","0.4","%","","","\u2014","","","","0.0","%"],["Interest expense, net","","","(178.8",")","","","(3.9",")%","","","(184.8",")","","","(4.1",")%","","","(195.1",")","","","(4.3",")%"],["Income before provision for income taxes","","","722.2","","","","15.3","%","","","652.4","","","","14.6","%","","","572.8","","","","12.6","%"],["Provision for income taxes","","","138.0","","","","2.9","%","","","133.3","","","","3.0","%","","","120.6","","","","2.6","%"],["Net income","","$","584.2","","","","12.4","%","","$","519.1","","","","11.6","%","","$","452.3","","","","10.0","%"]]
[[/GREPCENT_TABLE]]

2024 compared to 2023

(tabular amounts in millions, except percentages)

Revenues

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["U.S. Company-owned stores","","$","393.9","","","","8.4","%","","$","376.2","","","","8.4","%"],["U.S. franchise royalties and fees","","","638.2","","","","13.6","%","","","604.9","","","","13.5","%"],["Supply chain","","","2,845.8","","","","60.4","%","","","2,715.0","","","","60.6","%"],["International franchise royalties and fees","","","318.7","","","","6.8","%","","","310.1","","","","6.9","%"],["U.S. franchise advertising","","","509.9","","","","10.8","%","","","473.2","","","","10.6","%"],["Total revenues","","$","4,706.4","","","","100.0","%","","$","4,479.4","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Revenues primarily consist of retail sales from our Company-owned stores, royalties and fees and advertising contributions from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food and other products from our supply chain centers to substantially all of our U.S. franchised stores and certain international franchised stores. Company-owned store and franchised store revenues may vary from period to period due to changes in store count mix. Supply chain revenues may vary significantly from period to period as a result of fluctuations in commodity prices as well as the mix of products we sell.

Consolidated revenues increased $227.1 million, or 5.1%, in 2024 due primarily to higher supply chain revenues, higher global franchise royalties and fees and higher advertising revenues. The increase in supply chain revenues was primarily attributable to higher order volumes, as well as an increase in the Company’s food basket pricing to stores. Global franchise royalties and fees increased primarily as a result of higher same store sales and net store growth, and U.S. franchise advertising revenues increased primarily as a result of the increase in the advertising contribution rate, higher same store sales and net store growth. These changes in revenues are described in more detail below.

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U.S. Stores

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["U.S. Company-owned stores","","$","393.9","","","","25.5","%","","$","376.2","","","","25.9","%"],["U.S. franchise royalties and fees","","","638.2","","","","41.4","%","","","604.9","","","","41.6","%"],["U.S. franchise advertising","","","509.9","","","","33.1","%","","","473.2","","","","32.5","%"],["Total U.S. stores revenues","","$","1,541.9","","","","100.0","%","","$","1,454.3","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

U.S. Company-owned Stores

Revenues from U.S. Company-owned store operations increased $17.7 million, or 4.7%, in 2024 primarily due to higher same store sales and net store growth.

U.S. Company-owned same store sales increased 3.5% in 2024 and increased 5.4% in 2023.

U.S. Franchise Royalties and Fees

Revenues from U.S. franchise royalties and fees increased $33.3 million, or 5.5%, in 2024 primarily due to higher same store sales and net store growth. Additionally, U.S. franchise royalties and fees benefited from an increase in digital transactions which resulted in an increase in fees paid by our franchisees for the use of our technology platforms, but this increase was partially offset by a net $0.04 decrease in the digital per transaction technology fee to $0.355 effectuated as of March 25, 2024.

U.S. franchise same store sales increased 3.2% in 2024 and increased 1.4% in 2023.

U.S. Franchise Advertising

Revenues from U.S. franchise advertising increased $36.7 million, or 7.7%, in 2024 primarily due to higher same store sales and net store growth, as well as the return to the standard 6.0% advertising contribution rate at the beginning of the second quarter of 2024 following the end of the temporary reduction to 5.75% which began in the second quarter of 2023.

Supply Chain

Supply chain revenues increased $130.8 million, or 4.8%, in 2024 due primarily to higher order volumes, as well as an increase in our food basket pricing to stores. These increases were partially offset by a shift in the relative mix of products we sell, as well as the transition of our equipment and supplies business to a third-party supplier. Our food basket pricing to stores increased 1.4% during 2024, which resulted in an estimated $34 million increase in supply chain revenues. The food basket pricing change, a statistical measure utilized by management, is calculated as the percentage change of the food basket (including both food and cardboard products) purchased by an average U.S. store (based on average weekly unit sales) from our U.S. supply chain centers against the comparable period of the prior year. We believe this measure is important to understanding Company performance because as our food basket prices fluctuate, our revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate.

International Franchise Royalties and Fee Revenues

Revenues from international franchise royalties and fees increased $8.6 million, or 2.8%, in 2024 due primarily to net store growth and same store sales growth (excluding foreign currency impact), but this increase was partially offset by the negative impact of changes in foreign currency exchange rates of approximately $5.8 million in 2024. The impact of changes in foreign currency exchange rates on international franchise royalty revenues, a statistical measure utilized by management, is calculated as the difference in international franchise royalty revenues resulting from translating current year local currency results to U.S. dollars at current year exchange rates as compared to prior year exchange rates. We believe this measure is important to understanding Company performance given the significant variability in international franchise royalty revenues that can be driven by changes in foreign currency exchange rates.

International franchise same store sales, excluding the impact of changes in foreign currency exchange rates, increased 1.6% in 2024 and increased 1.7% in 2023.

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Cost of Sales / Gross Margin

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Total revenues","","$","4,706.4","","","","100.0","%","","$","4,479.4","","","","100.0","%"],["Total cost of sales","","","2,857.9","","","","60.7","%","","","2,751.9","","","","61.4","%"],["Gross margin","","$","1,848.5","","","","39.3","%","","$","1,727.4","","","","38.6","%"]]
[[/GREPCENT_TABLE]]

Consolidated cost of sales consists of U.S. Company-owned store and supply chain costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food and labor costs, as well as other costs including delivery, occupancy costs (including rent, telephone, utilities and depreciation) and insurance expense. Consolidated gross margin (which we define as revenues less cost of sales) increased $121.1 million, or 7.0%, in 2024 due primarily to higher global franchise revenues, as well as gross margin dollar growth within supply chain, discussed below. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. We generally update our supply chain gross margin structure on an annual basis. However, as food basket prices fluctuate, revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate, and further, cost of sales, gross margins and gross margin percentages for our U.S. Company-owned stores also fluctuate.

As a percentage of revenues, the consolidated gross margin increased 0.7 percentage points to 39.3% in 2024 from 38.6% in 2023. U.S. Company-owned store gross margin increased 0.3 percentage points in 2024, and supply chain gross margin increased 0.9 percentage points in 2024. Changes in the significant components of gross margin are described in more detail below.

U.S. Company-Owned Stores Gross Margin

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Revenues","","$","393.9","","","","100.0","%","","$","376.2","","","","100.0","%"],["Cost of sales","","","328.0","","","","83.3","%","","","314.7","","","","83.6","%"],["Store gross margin","","$","65.9","","","","16.7","%","","$","61.5","","","","16.4","%"]]
[[/GREPCENT_TABLE]]

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) increased $4.4 million, or 7.2%, in 2024. As a percentage of store revenues, U.S. Company-owned store gross margin increased 0.3 percentage points in 2024. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

•
Food costs decreased 0.1 percentage points to 29.0% in 2024.

•
Labor costs decreased 0.3 percentage points to 31.3% in 2024 due to labor cost improvements as a result of store level productivity and sales leverage driven by higher order counts. These improvements in labor cost were partially offset by higher wage rates in our U.S. Company-owned stores.

Supply Chain Gross Margin

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Revenues","","$","2,845.8","","","","100.0","%","","$","2,715.0","","","","100.0","%"],["Cost of sales","","","2,529.9","","","","88.9","%","","","2,437.3","","","","89.8","%"],["Supply chain gross margin","","$","315.9","","","","11.1","%","","$","277.7","","","","10.2","%"]]
[[/GREPCENT_TABLE]]

Supply chain gross margin increased $38.2 million, or 13.7%, in 2024. As a percentage of supply chain revenues, supply chain gross margin increased 0.9 percentage points in 2024. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

•
Food costs decreased 1.1 percentage points to 71.3% in 2024 driven primarily by procurement productivity. The increase in the commodity costs within our food basket sold to stores partially offset this improvement.

•
Labor costs increased 0.1 percentage points to 9.2% in 2024 due primarily to higher wage rates in our supply chain centers in 2024.

42

General and Administrative Expenses

General and administrative expenses increased $24.9 million, or 5.7%, in 2024 due primarily to higher labor costs, partially offset by a shift in the timing of investments.

U.S. Franchise Advertising Expenses

U.S. franchise advertising expenses increased $36.7 million, or 7.7%, in 2024, consistent with the increase in U.S. franchise advertising revenues as discussed above. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated not-for-profit advertising fund is obligated to expend such revenues on advertising and other activities that promote the Domino’s brand, and these revenues cannot be used for general corporate purposes.

Other Income

Other income was $22.1 million and $17.7 million in 2024 and 2023, respectively, representing the net realized and unrealized gains on our investment in DPC Dash. The recorded amount of our investment is based on the active exchange quoted price for the equity security. Additional information related to our investment in DPC Dash is included in Note 1 and Note 4 to our consolidated financial statements.

Interest Expense, Net

Interest expense, net, decreased $5.9 million, or 3.2%, in 2024 driven by higher interest income earned on our cash equivalents in 2024. Our weighted average borrowing rate was 3.8% in both 2024 and 2023.

Provision for Income Taxes

Provision for income taxes increased $4.7 million, or 3.5%, in 2024 due to an increase in income before the provision for income taxes, partially offset by a lower effective tax rate. The effective tax rate decreased to 19.1% during 2024, as compared to 20.4% in 2023. The lower effective tax rate in 2024 was driven by a 2.6 percentage point favorable change in the impact of excess tax benefits from equity-based compensation, which is recorded as a reduction to the provision for income taxes. Lower foreign derived intangible income deductions partially offset the decrease in the effective tax rate.

43

Segment Income

We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization and other, referred to as Segment Income. Segment Income for each of our reportable segments is summarized in the table below.

[[GREPCENT_TABLE]]
[["","","2024","2023"],["U.S. Stores","","$","565.4","","","$","521.0"],["Supply Chain","","","280.6","","","","245.4"],["International Franchise","","","260.7","","","","259.6"]]
[[/GREPCENT_TABLE]]

U.S. Stores

U.S. stores Segment Income increased $44.4 million, or 8.5%, in 2024, primarily due to higher U.S. franchise royalties and fees revenues, as well as the $4.4 million increase in U.S. Company-owned store gross margin, each as discussed above. U.S. franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income.

Supply Chain

Supply chain Segment Income increased $35.2 million, or 14.3%, in 2024, primarily due to the $38.2 million increase in supply chain gross margin, discussed above.

International Franchise

International franchise Segment Income increased $1.1 million, or 0.4%, in 2024, primarily due to higher international franchise royalties and fees revenues, as discussed above. International franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on international franchise Segment Income. The increase in international franchise Segment Income was partially offset by travel expenses for our Worldwide Rally that takes place every two years.

44

New Accounting Pronouncements

The impact of new accounting pronouncements adopted and the estimated impact of new accounting pronouncements that we will adopt in future years is included in Note 1 to the consolidated financial statements.

Liquidity and Capital Resources

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. As of December 29, 2024, we had negative working capital totaling $904.4 million, which primarily included $1.14 billion of current portion of long-term debt associated with our 2018 7.5-Year Notes and 2015 Ten-Year Notes (each as defined below) for each of which the anticipated repayment date is October 2025. Our working capital amount excludes restricted cash and cash equivalents of $195.4 million, advertising fund assets, restricted of $103.4 million and advertising fund liabilities of $101.6 million. Working capital includes total unrestricted cash and cash equivalents of $186.1 million.

Our primary sources of liquidity are cash flows from operations and availability of borrowings under our variable funding notes. During 2024, we experienced global retail sales growth, excluding foreign currency impact, in both our U.S. and international businesses. These factors contributed to our continued ability to generate positive operating cash flows. In addition to our cash flows from operations, we have two variable funding note facilities. The facilities include our 2022 Variable Funding Notes (defined below), which allows for advances of up to $120.0 million, as well as our 2021 Variable Funding Notes (defined below), which allows for advances of up to $200.0 million and certain other credit instruments, including letters of credit (the 2021 Variable Funding Notes and the 2022 Variable Funding Notes, the “2022 and 2021 Variable Funding Notes”). The letters of credit primarily relate to our casualty insurance programs and certain supply chain center leases. As of December 29, 2024, we had no outstanding borrowings and $120.0 million of available borrowing capacity under our 2022 Variable Funding Notes. As of December 29, 2024, we had no outstanding borrowings and $143.6 million of available borrowing capacity under our 2021 Variable Funding Notes, net of letters of credit issued of $56.4 million.

We expect to continue to use our unrestricted cash and cash equivalents, cash flows from operations, any excess cash from our recapitalization transactions and available borrowings under our 2022 and 2021 Variable Funding Notes to, among other things, fund working capital requirements, invest in our business and other strategic opportunities, repay outstanding borrowings under our securitized debt, pay dividends and repurchase and retire shares of our common stock.

Our ability to continue to fund these items and continue to service our debt could be adversely affected by the occurrence of any of the events described in Item 1A. Risk Factors. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under our 2022 and 2021 Variable Funding Notes or otherwise to enable us to service our indebtedness, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our Notes (defined below) and to service, extend or refinance our 2022 and 2021 Variable Funding Notes will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Restricted Cash

As of December 29, 2024, we had $144.0 million of restricted cash and cash equivalents held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, $51.2 million of restricted cash equivalents held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of $195.4 million of restricted cash and cash equivalents. As of December 29, 2024, we also held $80.9 million of advertising fund restricted cash and cash equivalents which can only be used for activities that promote the Domino’s brand.

45

Long-Term Debt

2022 Variable Funding Notes

On September 16, 2022, certain of our subsidiaries issued a variable funding note facility which allows for advances of up to $120.0 million of Series 2022-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2022 Variable Funding Notes”). Additional information related to our 2022 Variable Funding Notes is included in Note 3 to our consolidated financial statements.

2021 Variable Funding Notes

In connection with the 2021 Recapitalization, certain of our subsidiaries issued a variable funding note facility which allows for advances of up to $200.0 million of Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 Notes and certain other credit instruments, including letters of credit (the “2021 Variable Funding Notes”). Additional information related to our 2021 Variable Funding Notes is included in Note 3 to our consolidated financial statements.

2021 Recapitalization

On April 16, 2021, we completed the 2021 Recapitalization in which certain of our subsidiaries issued notes pursuant to an asset-backed securitization. The notes consist of $850.0 million Series 2021-1 2.662% Fixed Rate Senior Secured Notes, Class A-2-I with an anticipated term of 7.5 years (the “2021 7.5-Year Notes”) and $1.0 billion Series 2021-1 3.151% Fixed Rate Senior Secured Notes, Class A-2-II with an anticipated term of 10 years (the “2021 Ten-Year Notes”, and, collectively with the 2021 7.5-Year Notes, the “2021 Notes”). Gross proceeds from the issuance of the 2021 Notes were $1.85 billion. Additional information related to the 2021 Recapitalization is included in Note 3 to our consolidated financial statements.

2019 Recapitalization

On November 19, 2019, we completed the 2019 Recapitalization in which certain of our subsidiaries issued $675.0 million Series 2019-1 3.668% Fixed Rate Senior Secured Notes, Class A-2 with an anticipated term of 10 years (the “2019 Notes”) pursuant to an asset-backed securitization. Gross proceeds from the issuance of the 2019 Notes were $675.0 million. Additional information related to the 2019 Recapitalization is included in Note 3 to our consolidated financial statements.

2018 Recapitalization

On April 24, 2018, we completed the 2018 Recapitalization in which certain of our subsidiaries issued notes pursuant to an asset-backed securitization. The notes consist of $425.0 million Series 2018-1 4.116% Fixed Rate Senior Secured Notes, Class A-2-I with an anticipated term of 7.5 years (the “2018 7.5-Year Notes”), and $400.0 million Series 2018-1 4.328% Fixed Rate Senior Secured Notes, Class A-2-II with an anticipated term of 9.25 years (the “2018 9.25-Year Notes” and, collectively with the 2018 7.5-Year Notes, the “2018 Notes”). Gross proceeds from the issuance of the 2018 Notes were $825.0 million. Additional information related to the 2018 Recapitalization is included in Note 3 to our consolidated financial statements.

2017 Recapitalization

On July 24, 2017, we completed the 2017 Recapitalization in which certain of our subsidiaries issued notes pursuant to an asset-backed securitization. The notes consisted of $300.0 million Series 2017-1 Floating Rate Senior Secured Notes, Class A-2-I with an anticipated term of five years (the “2017 Floating Rate Notes”), $600.0 million Series 2017-1 3.082% Fixed Rate Senior Secured Notes, Class A-2-II with an anticipated term of five years (the “2017 Five-Year Notes”), and $1.0 billion Series 2017-1 4.118% Fixed Rate Senior Secured Notes, Class A-2-III with an anticipated term of 10 years (the “2017 Ten-Year Notes” and, collectively with the 2017 Floating Rate Notes and the 2017 Five-Year Notes, the “2017 Notes”). Gross proceeds from the issuance of the 2017 Notes were $1.9 billion. The 2017 Floating Rate Notes and the 2017 Five-Year Notes were repaid in connection with the 2021 Recapitalization. Additional information related to the 2017 Recapitalization is included in Note 3 to our consolidated financial statements.

46

2015 Recapitalization

On October 21, 2015, we completed the 2015 Recapitalization in which certain of our subsidiaries issued notes pursuant to an asset-backed securitization. The notes consisted of $500.0 million of Series 2015-1 3.484% Fixed Rate Senior Secured Notes, Class A-2-I (the “2015 Five-Year Notes”), $800.0 million Series 2015-1 4.474% Fixed Rate Senior Secured Notes, Class A-2-II (the “2015 Ten-Year Notes” and collectively with the 2015 Five-Year Notes, the “2015 Notes”). Gross proceeds from the issuance of the 2015 Notes were $1.3 billion. The 2015 Five-Year Notes were repaid in connection with the 2018 Recapitalization. Additional information related to the 2015 Recapitalization is included in Note 3 to our consolidated financial statements.

2021, 2019, 2018, 2017 and 2015 Notes

The 2021 Notes, 2019 Notes, 2018 Notes, 2017 Notes and the 2015 Notes are collectively referred to as the “Notes.”

The Notes have original scheduled principal payments of $1.18 billion in 2025, $39.3 million in 2026, $1.31 billion in 2027, $817.9 million in 2028, $631.0 million in 2029, $10.0 million in 2030 and $912.5 million in 2031. However, in accordance with our debt agreements, the payment of principal on the outstanding senior notes may be suspended if our Holdco Leverage Ratio is less than or equal to 5.0x total debt to Consolidated Adjusted EBITDA, each as defined in the indenture governing our securitized debt, and no catch-up provisions are applicable.

As of the end of each of the fiscal quarters in 2024, we had a Holdco Leverage Ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payments for our outstanding notes beginning in the second quarter of 2024. Accordingly, the outstanding principal amounts of our 2021 Notes, 2019 Notes, 2018 9.25-Year Notes and 2017 Ten-Year Notes have been classified as long-term debt in the consolidated balance sheet as of December 29, 2024.

The anticipated repayment date for each of the 2018 7.5-Year Notes and the 2015 Ten-Year Notes is October 2025 and accordingly, the outstanding principal amounts for these notes have been classified as current portion of long-term debt in the consolidated balance sheet as of December 29, 2024. We expect to refinance the 2018 7.5-Year Notes and the 2015 Ten-Year Notes prior to the anticipated repayment date. If we do not refinance the 2018 7.5-Year Notes and the 2015 Ten-Year Notes prior to the anticipated repayment date, additional interest of at least 5% per annum will accrue and our cash flows other than technology fees and a weekly management fee to cover certain general and administrative expenses would be directed to the repayment of the securitized debt.

The Notes are subject to certain financial and non-financial covenants, including a debt service coverage ratio calculation. The covenant requires a minimum coverage ratio of 1.75x total debt service to securitized net cash flow, as defined in the indenture governing our securitized debt. In the event that certain covenants are not met, the Notes may become due and payable on an accelerated schedule.

Leases

We lease certain retail store and supply chain center locations, supply chain vehicles, various equipment and our World Resource Center under leases with expiration dates through 2045. Refer to Note 5 to the consolidated financial statements for additional information regarding our leases, including future minimum rental commitments.

Capital Expenditures

In the past three years, we have spent approximately $305.5 million on capital expenditures. In 2024, we spent $112.9 million on capital expenditures which primarily related to investments in our technology initiatives, supply chain centers and corporate store operations. We did not have any material commitments for capital expenditures as of December 29, 2024.

Investments

We hold a non-controlling interest in DPC Dash, our master franchisee in China that owns and operates Domino’s Pizza stores in that market.

As of December 29, 2024 and December 31, 2023, the fair value of our investment in DPC Dash was $82.7 million and $143.6 million, respectively. The fair value of our investment in DPC Dash was based on the active exchange quoted price for the equity security of HK$79.25 per share as of December 29, 2024 and HK$61.95 per share as of December 31, 2023. We owned 8,101,019 and 18,101,019 ordinary shares as of December 29, 2024 and December 31, 2023, respectively. We sold 10,000,000 ordinary shares of our investment in DPC Dash in the fourth quarter of 2024 for net proceeds of $82.9 million. We recorded a total net adjustment to the net carrying amount of our investment in DPC Dash of $22.1 million and $17.7 million in 2024 and 2023, respectively, with the net realized and unrealized gains recorded in other income in our consolidated statements of income.

47

Share Repurchase Programs

Our share repurchase programs have historically been funded by excess operating cash flows, excess proceeds from our recapitalization transactions and borrowings under our variable funding notes. We used cash of $327.0 million in 2024, $269.0 million in 2023 and $293.7 million in 2022 for share repurchases.

On February 21, 2024, our Board of Directors authorized an additional share repurchase program to repurchase up to $1.0 billion of our common stock, in addition to the $141.3 million that was previously remaining under our previous July 20, 2021 authorization for a total authorization of $1.14 billion for future share repurchases as of that date. As of December 29, 2024, we had $814.3 million remaining under this authorization for repurchases of shares of our common stock.

Dividends

We declared dividends of $210.7 million (or $6.04 per share) in 2024, $170.4 million (or $4.84 per share) in 2023 and $157.5 million (or $4.40 per share) in 2022. We paid dividends of $209.9 million, $169.8 million and $157.5 million in 2024, 2023 and 2022, respectively.

Subsequent to the end of fiscal 2024, on February 19, 2025, our Board of Directors declared a quarterly dividend of $1.74 per common share payable on March 28, 2025 to shareholders of record at the close of business on March 14, 2025.

Sources and Uses of Cash

The following table illustrates the main components of our cash flows:

[[GREPCENT_TABLE]]
[["","","Fiscal Year Ended"],["(In millions)","","December 29, 2024","","","December 31, 2023"],["Cash flows provided by (used in):"],["Net cash provided by operating activities","","$","624.9","","","$","590.9"],["Net cash used in investing activities","","","(31.2",")","","","(106.9",")"],["Net cash used in financing activities","","","(532.2",")","","","(476.4",")"],["Effect of exchange rate changes on cash","","","(2.2",")","","","0.3"],["Change in cash and cash equivalents, restricted cash and cash equivalents","","$","59.3","","","$","7.9"]]
[[/GREPCENT_TABLE]]

Operating Activities

Cash provided by operating activities increased $34.0 million in 2024 primarily as a result of higher net income, excluding non-cash operating activities and a positive change in advertising fund assets and liabilities, restricted. Net income increased $65.1 million and non-cash adjustments increased $17.5 million, resulting in an overall increase to cash provided by operating activities in 2024 as compared to 2023 of $82.6 million. Additionally, a $45.8 million positive impact of changes in advertising fund assets and liabilities, restricted, in 2024 as compared to 2023 was a result of receipts for advertising contributions outpacing payments for advertising activities. These increases were partially offset by the negative impact of changes in operating assets and liabilities totaling $94.4 million, primarily related to the timing of payments on accrued liabilities, income taxes and accounts payable in 2024 as compared to 2023.

Investing Activities

Cash used in investing activities was $31.2 million in 2024, which consisted primarily of capital expenditures of $112.9 million (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations). These investing cash outflows were partially offset by net proceeds from the sale of 10,000,000 ordinary shares of our investment in DPC Dash for $82.9 million.

Cash used in investing activities was $106.9 million in 2023, which consisted primarily of capital expenditures of $105.4 million (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations).

48

Financing Activities

Cash used in financing activities was $532.2 million in 2024. We repurchased and retired $327.0 million in shares of our common stock under our Board of Directors-approved share repurchase program, as well as made $2.6 million in excise tax payments related to our share repurchase programs. We also made dividend payments to our shareholders of $209.9 million. We made repayments of long-term debt and principal amounts related to our financing obligations and finance leases of $17.6 million and had tax payments for the vesting of restricted stock of $11.1 million. These uses of cash were partially offset by proceeds from the exercise of stock options of $36.0 million.

Cash used in financing activities was $476.4 million in 2023. We repurchased and retired $269.0 million in shares of our common stock under our Board of Directors-approved share repurchase program, and we also made dividend payments to our shareholders of $169.8 million. We also made repayments of long-term debt and principal amounts related to our financing obligations and finance leases of $55.7 million and had tax payments for the vesting of restricted stock of $5.4 million. These uses of cash were partially offset by proceeds from our failed sale leaseback transaction of $14.9 million and from the exercise of stock options of $8.7 million.

Impact of Inflation

Given the inflation rates in recent years, there have been and may continue to be increases in food costs and labor costs which have and could further impact our profitability and that of our franchisees and which could impact the opening of new U.S. and international franchised stores and adversely affect our operating results. Factors such as inflation, increased food costs, increased labor and employee health and benefit costs, increased rent costs and increased energy costs may adversely affect our operating costs and profitability and those of our franchisees and could result in menu price increases. The impact of inflation is described with respect to our food basket pricing to stores and our labor cost, in the discussion of supply chain revenues and U.S. Company-owned store and supply chain gross margins, above. Severe increases in inflation could affect the global and U.S. economies and could have an adverse impact on our business, financial condition and results of operations. Further discussion on the impact of commodities and other cost pressures is included above, as well as in Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

49

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Form 10-K includes various forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) that are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act.

These forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “predict,” “project,” “seek,” “approximately,” “potential,” “outlook” and similar terms and phrases that concern our strategy, plans or intentions, including references to assumptions. These forward-looking statements address various matters including information concerning future results of operations and business strategy, the expected demand for future pizza delivery and carryout, our expectation that we will meet the terms of our agreement with our third-party supplier of pizza cheese, our belief that alternative third-party suppliers are available for our key ingredients in the event we are required to replace any of our supply partners, our intention to continue to enhance and grow online ordering, digital marketing and technological capabilities, our expectation that there will be no material environmental compliance-related capital expenditures, our plans to expand U.S. and international operations in many of the markets where we currently operate and in selected new markets, our expectation that the obligation for advertising fees payable to DNAF will remain in place for the foreseeable future, and the availability of our borrowings under the 2021 Variable Funding Notes and 2022 Variable Funding Notes for, among other things, funding working capital requirements, paying capital expenditures and funding other general corporate purposes, including payment of dividends.

Forward-looking statements relating to our anticipated profitability, estimates in same store sales growth, store growth and the growth of our U.S. and international business in general, ability to service our indebtedness, our future cash flows, our operating performance, trends in our business and other descriptions of future events reflect management’s expectations based upon currently available information and data. While we believe these expectations and projections are based on reasonable assumptions, such forward-looking statements are inherently subject to risks, uncertainties and assumptions about us, including the risk factors listed under Item 1A. Risk Factors, as well as other cautionary language in this Form 10-K.

Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including but not limited to, the following:

•
our substantial increased indebtedness as a result of the 2021 Recapitalization, 2019 Recapitalization, 2018 Recapitalization, 2017 Recapitalization and 2015 Recapitalization and our ability to incur additional indebtedness or refinance or renegotiate key terms of that indebtedness in the future;

•
the impact a downgrade in our credit rating may have on our business, financial condition and results of operations;

•
our future financial performance and our ability to pay principal and interest on our indebtedness;

•
the strength of our brand, including our ability to compete in the U.S. and internationally in our intensely competitive industry, including the food service and food delivery markets;

•
our ability to successfully implement our growth strategy, including through our participation in the third-party order aggregation marketplace;

•
labor shortages or changes in operating expenses resulting from increases in prices of food (particularly cheese), fuel and other commodity costs, labor, utilities, insurance, employee benefits and other operating costs or negative economic conditions;

•
the effectiveness of our advertising, operations and promotional initiatives;

•
shortages, interruptions or disruptions in the supply or delivery of fresh food products and store equipment;

•
the additional risks our international operations subject us to, which may differ in each country in which we and our franchisees do business;

•
the dependence of our earnings and business growth strategy on the success of our franchisees;

•
our ability and that of our franchisees to successfully operate in the current and future credit environment;

•
the impact of social media or a boycott on our business, brand and reputation;

•
the impact of new or improved technologies and alternative methods of delivery on consumer behavior;

50

•
new product, digital ordering and concept developments by us, and other food-industry competitors;

•
our ability to maintain good relationships with and attract new franchisees and franchisees’ ability to successfully manage their operations without negatively impacting our royalty payments and fees or our brand’s reputation;

•
our ability to successfully implement cost-saving strategies;

•
changes in the level of consumer spending given general economic conditions, including interest rates, energy prices and consumer confidence or negative economic conditions in general;

•
our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation and maintain demand for new stores;

•
the impact that widespread illness, health epidemics or general health concerns, severe weather conditions and natural disasters may have on our business and the economies of the countries where we operate;

•
changes in foreign currency exchange rates;

•
changes in income tax rates;

•
our ability to retain or replace our executive officers and other key members of management and our ability to adequately staff our stores and supply chain centers with qualified personnel;

•
our ability to find and/or retain suitable real estate for our stores and supply chain centers;

•
changes in government legislation or regulation, including changes in laws and regulations regarding information privacy, payment methods, advertising and consumer protection and social media;

•
adverse legal judgments or settlements;

•
food-borne illness or contamination of products or food tampering or other events that may impact our reputation;

•
data breaches, power loss, technological failures, user error or other cyber risks threatening us or our franchisees;

•
the impact that environmental, social and governance matters may have on our business and reputation;

•
the effect of war, terrorism, catastrophic events, geopolitical or reputational considerations or climate change;

•
our ability to pay dividends and repurchase shares;

•
changes in consumer taste, spending and traffic patterns and demographic trends;

•
changes in accounting policies; and

•
adequacy of our insurance coverage.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-K might not occur. All forward-looking statements speak only as of the date of this Form 10-K and should be evaluated with an understanding of their inherent uncertainty. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission, we will not undertake, and specifically disclaim any obligation to publicly update or revise any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-K, whether as a result of new information, future events or otherwise.

Readers are cautioned not to place undue reliance on the forward-looking statements included in this Form 10-K or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

51