Domino’s has sold 114 company locations in Arizona and Utah to franchisees for $41.1 million, the company said on Thursday.
The locations represent more than a quarter of the 401 corporate locations the Ann Arbor, Mich.-based pizza chain operated as of the end of last year.
Domino’s also said Thursday that its same-store sales increased 2% in the U.S. in the third quarter ended Sept. 11. The company had declines in the key sales metric in three of the past four quarters. “I’m encouraged with our performance and the sequential improvements we made in the third quarter,” CEO Russell Weiner said in a statement.
The news sent Domino’s stock up 10% in morning trading on Thursday.
Company executives said on Thursday that the stores are in Phoenix and Salt Lake City and were sold to 11 franchisees, three of them first-time operators. They also said that the deal enabled the company to bring in existing franchisees who can grow the market. “The refranchising strategy for us is really more of a growth strategy,” Weiner told investors.
Domino’s is not a big operator of its restaurants to begin with. It operated 6% of its more than 6,600 U.S. locations as of the end of the third quarter. The sale was made since the end of the reporting period, the company said.
Yet same-store sales at corporate locations have lagged behind that of franchisees. Last quarter, for instance, company store same-store sales declined 1.9%, compared with a 2.2% increase at franchise locations.
The gap was even more pronounced a year ago, when same-store sales at corporate stores declined 8.9% and franchise restaurants declined 1.5%.
Company stores have also seen margins thin lately amid higher labor and food costs. The company said its operating income decreased 2.1% in the quarter in part due to those thinner company store margins.
Weiner suggested that the company refranchises its restaurants to promote growth. He referred to an earlier deal in Michigan in which the company acquired stores and refranchised some of them to encourage more growth.
Domino’s sales challenges over the past year-plus have come as the company has struggled with a driver shortage that has hurt its ability to deliver pizzas. Until a year ago, same-store sales at the chain had increased consistently for about a decade. The sales problems led to a change in corporate management earlier this year with Weiner taking over as chief executive from Ritch Allison.
Those sales problems have also hammered Domino’s stock, which is down 47% from its 52-week high hit early this year. The company’s stock price briefly fell below $300 a share on Wednesday for the first time since March 2020.
Revenues at the company increased 7.1% to $1.07 billion, the company said on Thursday. Net income declined 16.5% in the quarter, due largely to income taxes. Diluted earnings per share declined 13.9% to $2.79 per share.
International same-store sales declined 1.8% in the quarter, the second straight decrease in that metric after more than 100 straight quarters of increases.
UPDATE: This story has been updated to add new information.
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