Investing.com -- Shares of Domino’s Pizza Group PLC (LON:DOM) (NYSE:DPZ) was down over 2% on Monday as the company announced a series of updates, including a revised franchisee framework, additional cost investments, and insights into current trading.
Analysts at RBC (TSX:RY) Capital Markets described the update as containing “plenty of moving parts,” with the overall sentiment weighing on investor confidence despite some positive signals.
The most important update was the introduction of a new five-year profitability and growth framework designed to replace the previous Memorandum of Understanding with franchisees.
The plan, set to take full effect from the 2025 financial year, is expected to cost the company £3-4 million annually.
Key elements include an enhanced marketing contribution, with franchisees continuing to pay 4% of system sales to the National Advertising Fund, while Domino’s will now disclose its contribution at 0.2%.
Digital investment commitments will also rise, with franchise partners increasing their share of system sales allocated to eCommerce from 0.75% to 1%, alongside a new 0.25% contribution from Domino’s itself.
Incentives for opening new stores were adjusted under the framework, with payouts for virgin territories and split territories now extended over five years instead of three.
The company also introduced additional, undisclosed incentives for stores expected to generate lower average weekly sales.
Separately, Domino’s flagged the financial impact of the UK budget, estimating a £3 million annual hit. In addition, the group has earmarked £4-5 million in annual costs for upgrades to its technology platform, cybersecurity measures, and supply chain capacity expansion.
RBC noted that the scale of this cost increase was unexpected and likely contributed to investor caution.
Over the first nine weeks of the fourth quarter, total orders rose by 5.3%, and like-for-like sales grew by 2.7%, marking an improvement from the 3.5% total order growth recorded in the third quarter. However, this progress came against a relatively soft comparative period.
RBC Capital Markets analysts suggested that the £3-4 million incremental spend tied to the franchisee framework might help mitigate concerns about a larger financial reset following the budget’s impact.