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The company’s share price went parabolic in 2021 as lockdowns drove customers to order food at home. With contact-free delivery and online infrastructure already in place, the ASX-listed company with more than 3,500 stores across Australia, New Zealand, Europe and Asia was well-positioned for a global pandemic. The share price peaked at $163, but then came the hangover: a more than 77 per cent decline over the past four years. That’s a remarkable fall - even worse than Guzman y Gomez’s tumble after that chain’s euphoric IPO in June last year. And it’s been one battle after another for Domino’s since those 2021 highs. In August the company reported its first loss in 20 years, hampered by poor performance in France and Japan. Six months earlier it had shut down 172 Japanese stores to improve profitability. Domino’s says the loss was related to the write down of closed stores and its underlying performance remains strong. Now the American private equity giant Bain Capital is reportedly eyeing up all or part of the company in a deal worth up to $4 billion. The Domino’s share price got a boost when the Australian Financial Review revealed the potential acquisition last week, citing “people were briefed on the matter”. But Domino’s executive chairman Jack Cowin has dismissed the report, insisting there had been no contact with Bain Capital. News.com.au understands there have been no further developments. Mr Cowin, the billionaire fast food veteran and Hungry Jacks founder, has been filling in as CEO since the departure of former Coca-Cola executive Mark van Dyck late last year. Mr van Dyck closed 200 underperforming stores during a tenure of just seven months. There was further intrigue on Tuesday when Ivor Ries claimed in Rampart that a “significant number of the company’s 829 Australian stores are in deep financial difficulty”. “Franchisees tell me that it is widely accepted among them that around a third of Domino’s franchise stores are struggling to meet ATO tax instalments and are on distressed business payment plans for GST and employee superannuation obligations,” Mr Ries wrote. Domino’s disputed the one third claim as “incorrect” and said a “significantly smaller” number of franchisees were on ATO payment plans. Gary Mortimer, Professor of Consumer Behaviour and Retail Marketing at Queensland University of Technology, said the Bain Capital acquisition was a “possibility” because of the company’s lagging growth. “Private equity firms will always look at businesses where the value hasn’t been realised or leveraged,” Professor Mortimer told news.com.au. “When you consider the significant fall in share price since 2020, Domino’s would be a target for a private equity firm that would cut costs, remove replication and cannibalisation, strip back menu options, and drive profitability.” Domino’s decline a ‘warning sign’ The professor said the company’s troubles might have resulted from overselling franchises which then cannibalised each other’s business. The extreme competitiveness of the fast food sector could also be playing a role, and the entrance of new cuisines into the space, including Mexican and Asian offerings. A broader push in the industry to offer more variety to customers might also have hurt the pizza chain’s bottom line. In 2012 the American parent company dropped “Pizza” from its name to reflect an expanded menu that has since grown to include wings, chicken nuggets and desserts. Competitors like McDonald’s and KFC have also branched out as they chase broader appeal and increased average spend, though menu dilution risks quality. The current Domino’s menu is a maze of premium, traditional and value pizzas along with add-ons including fried chicken and doughnuts. “The challenge it creates for franchisees is that if you make your menu incredibly complex there are more costs involved,” Professor Mortimer said. “The complexity means the franchisee has to buy all that inventory, and they end up throwing it out at the end of the week.” The problem with the “everything for everyone” strategy is it can lead to mediocrity across the board. More ingredients and prep methods can also make consistency difficult and become a drag on a fast food brand built on speed and reliability. “Brands think consumers want choice, but it’s best to stick to your core product, your core value proposition,” Professor Mortimer said. “I think it’s a warning sign for fast food players: stick to your knitting. If you’re just bolting something on, people aren’t going to go for that.” ‘We have taken action’ Domino’s said it had grown sales by more than 5 per cent over the past three years, from $3.9 billion to $4.1 billion. “Our earnings performance has been lower, including due to post-Covid trading in Japan,” a spokesperson said. “We have taken action, including by closing loss-making stores in Japan, and to deliver cost savings that are being passed through to our franchise partners, without sacrificing the quality of our meals. “Globally, our franchise network remains strong, with average store profitability of around $95,000 a year and Australian stores performing, on average, about 20 per cent above that.” Results varied across the network, but in FY2025 the Australian business had “delivered its strongest financial performance in three years”. “Our priority is on delivering high quality meals, at an affordable price - which our customers increasingly appreciate during global cost-of-living pressures.”
