I'm like most of you I want to see this materialize into a winner. First I get to know my competition and see where we have to go to rank up with them. That means Dominoes and so I tore through their financials. I sure some of you have done the same thing. Here's my view of were we need to go in a few short lived years. My guess it will take 4 years to get there.
Dominoes has outstanding 55M shares Pie Five 8.25M
Dominoes has 4535 Franchise stores and 388 company owned stores
Earnings Dominoes projection $2.25 for the year. PE on dominoes 27.5
A company owned Dominoes has sales of $867,000 a year or $16.7T per week
A Dominoes franchise pays $41,234 in revenues to dominoes. For Pie Five to match that they would need sales of $687,233 a year from franchise stores or $13,216.00.
We have about 1/7 the outstanding shares as Dominoes. So to be on par with Dominoes we need 647 Franchises and 55 company owned stores.
Dominoes has a great second source of revenues, they have a supply chain distribution that is set up that deliveries can be made to any store within 8 hours driving. 99% of franchise buy from this supply chain. I wonder if Atlanta and Denver are our moves to being a supply chain distributor?
Last year Dominoes made $97M profit from supply dough and all the supplies. From reading our statements, it sounds like this current farmed out. There's 11% profit margin on supply this stuff. Maybe one day we are large enough to get into it. In fact most of dominoes profits come from this single move. I'm sure pie five gets a percentage of whoever supplies franchisee's.
So basically Pie Five has to match weekly store sales of $13,000 to keep pace with Dominoes. Since it's early in the growth, signing up franchises is a major money maker. $20K is nothing to sneeze at and annual revenues around $35K-$40K with each store open a year.
Number of shares is meaningless, as a company may choose to have 10 million shares at $30 or 100 million shares at $3 and it changes nothing about the state of the company (assuming both share count numbers provide enough shares for trading liquidity) which is why companies are free to split or reverse split your stock. So any conclusions drawn from comparing share count are not very meaningful. Market Cap is the more true comparison, which would have Dominos at 3.4B vs PZZI at 58 million so rather than a 7:1 compare, it is almost 59:1.
Missing my point. I called this fun facts for a reason. Do we differ from dominoes, I hope so. I just pointed out how dominoes creates value. They sell franchise just like we do, they have about the same revenues we can expect from our franchise's to contribute. Roughly $40K if the stores have $13K a week in sales. The point each of you missed is that dominoes gets most their revenues from selling the supplies to the stores. Which we farm out. I believe we are somewhere in between a Panera set up and a dominoes, but we will be viewed from an analyst perspective more of a pizza franchise and compared to.
Bottom line P5 has to make money. I compare it to dominoes, because we will have to duplicate some of their success our own way. I pointed out how almost 75% of dominoes earnings came from supply the product with domestic supply chain. You all missed that point. To get to the values some of you think we are headed for, takes some very good luck. For a smart investor, you need as much info you can gather. I start with PE's and how a competitor makes theirs. Maybe ours differs slightly, but it will have some similarities. I want to know what it takes to get to $10,$20,$40,$60 a share. Right now they only have opened 3 franchise's stores. We have a long ways to go and so I feel this is the time to start understanding how this value will come.
I just pointed out these facts as a starting point. Because in reality we have just started. To match Dominoes $60 share price, today we would need $18.5M in profits. How are we going to get there?
From reading your replies, not a single person can tell any of us how they are going to do that. But you can tells us we're the next Panera's. Wow you have no problem taking giant leaps, but have some issue that I looked at how dominoes does it. I would be embarrassed if I were so one dimensional. You dream, I'll do the math.
Respectfully, pff, I disagree. You're not in marketing I take it. But don't believe me, go with the Pizza Inn CEO. From a recent article - Tasting Pie Five in Kansas City:
Another reason Gier thinks his fast casual concept is taking off is because it's not just another pizza joint.
"We don't compete with Domino's or Pizza Hut; we are a totally different occasion," he said. "We've found a way to make pizza quick and affordable, so we compete with the Chipotles and Paneras."
I agree if you are looking at this as demographics. A meal is a meal. A dominoes customer want cardboard and cheese at a $5-$8 pie cost. However we cannot compare chipotle revenue picture and draw any reasonable facts from it and apply to P5. But if you want to take a shot, an educated guess on revenues looking at Noodles and Panera, take it. I would wager that a noodles or Panera do about $2M per store and P5 will do about $700K per store. If you look at the dominoes stores they do about $700K per store and contribute about $40K in franchise revenues per store.
We maybe somewhat upscale from a dominoes, but don't fool yourself into believing that we are in the same league as Chipolte. This is a fast food concept. It may even fail, if they don't find the right locations. This is not a Panera fairy tail.
Our sales are going to come from stealing some market share from Subway, Mickeyd's, Dominoes, Wendy's, Five guys and ect. We are after the customer willing to pay $10 for lunch or dinner. If you think the average chipotle customer is headed to P5, then whatever you're smoking I want some.
The closest example out there to take a look at the numbers is Dominoes. Sour apples compared to apples maybe. We are pizza at the end of the day. The biggest key to success is that the franchisee makes some profits. That's the real focus for success. I just don't believe we are in the league to bring a Panera/noodle/chipotle customer in. Maybe a few.
Have you ever done any research on these franchises and can share a similar path and demographic to support your opinion. Can you explain why their customer base would want pizza?
The diamond ring on the average patron will explain it all. Pizza is not something that average rich snob wants to say, let's go to lunch at P5. When you understand that, then you will have a clearer picture on growth.
Last year Dominoes had supply chain revenues of $875,517,000 and Supply chain expenses of $778,510,000. Giving them $97M profit. Divide that by 55M shares and of the 2.00 they earned last year, a $1.76 came from delivering the supplies to stores.
Here's from the 10-k explaining how important this is:
Domestic supply chain
During 2008, our domestic supply chain segment accounted for $771.1 million, or 54%, of our consolidated revenues. Our domestic supply chain segment is comprised of dough manufacturing and supply chain centers that manufacture fresh dough on a daily basis and purchase, receive, store and deliver quality pizza-related food products and complementary side items to all of our Company-owned stores and over 99% of our domestic franchise stores. Each regional dough manufacturing and supply chain center serves approximately 300 stores, generally located within a one-day delivery radius. We regularly supply approximately 5,000 stores with various supplies and ingredients, of which, eight product groups account for over 90% of the volume. Our domestic supply chain segment made approximately 575,000 full-service deliveries in 2008 or between two and three deliveries per store, per week; and we produced over 273 million pounds of dough during 2008.
We believe that our franchisees voluntarily choose to obtain food, supplies and equipment from us because we provide the most efficient, convenient and cost-effective alternative, while also providing both quality and consistency. In addition, our domestic supply chain segment offers a profit-sharing arrangement to stores that purchase all of their food from our domestic dough manufacturing and supply chain centers. This profit-sharing arrangement generally provides domestic Company-owned stores and participating franchisees with 50% of their regional supply chain center’s pre-tax profits. Profits are shared with the franchisees based upon each franchisee’s purchases from our supply chain centers.
If Dominoes ran their company like pizza inn, they would be struggling also. They would not have grown like they have without setting up these supply chains. I believe Atlanta and Denver will be the company owned stores and also the beginning of a hub to supply chain. Pie Five can go without supplying, since their growth comes from landing additional franchises. But as this peaks, they can then move towards a supply chain concept and retain earnings with profits from that side. Last year Dominoes made on average profits per store of $19K on supply product to their stores.
It looks like Pizza inn gets a kick back from the current suppliers, but I'm sure it's not anywhere near $19K. If it was longs here wouldn't be crying about earnings. The problem with pizza inn is that they couldn't continue to sell franchises and too small to deliver product.
I have one real concern. Obamacare costs, will that dampen franchise growth? Second is the democrats new rally call to strength the low wage turn out in 2014. You see promising $15 a hour as a minimum wage, is a strong running campaign slogan. Well it will also nail the coffin shut on USA.