Dominos Pizza UK & IRL plc Case Study Example | Topics and Well Written Essays - 2000 words

Dominos Pizza UK & IRL plc - Case Study Example The company focuses on selling only one product - pizza - and throughout the year, as it has been doing in the UK and Ireland in the last 20 years, minor improvements are made to get the product to the customer in the shortest possible time. In 2006, the company launched an 'out-the-door' campaign that cut the time from order taking to the start of the delivery down to 15 minutes. Thus, by combining the quality of the product with speed of service, Domino's was bale to increase its repeat orders, which is a key driver of like-for-like sales increases that, at least in theory, could last forever. The profit margin went up by 10% on the basis of several possible factors like better marketing, improved economic conditions in the UK and Ireland where the economy is growing each year by 3-4% (Heritage, 2007, p. 381). The margins for the Group most likely reflect the profits earned from selling to franchisees the ingredients used for making pizzas and from the franchise fees paid by those who opened new stores during the year. Offhand, 13-15% margins are rather small for a food operation, where profit margins are in the range of 20-30% as shown by the margins of McDonald's (2007, p. 20) in the last eleven years, which means that Domino's gets most of its profit margins from franchise fees and not from sales of ingredients or pizzas through its own stores. The asset turnover was calculated using the sales figure of  £94.965 million and the total capital employed of  £18.265 million which is the total assets less the current liabilities as clearly stated in the balance sheet (p. 30). This means that every  £1 invested in the company’s assets returned sales of  £5.19 or over five times the total capital employed in the business. ... The profit margin went up by 10% on the basis of several possible factors like better marketing, improved economic conditions in the UK and Ireland where the economy is growing each year by 3-4% (Heritage, 2007, p. 381). The margins for the Group most likely reflect the profits earned from selling to franchisees the ingredients used for making pizzas and from the franchise fees paid by those who opened new stores during the year. Offhand, 13-15% margins are rather small for a food operation, where profit margins are in the range of 20-30% as shown by the margins of McDonald's (2007, p. 20) in the last eleven years, which means that Domino's gets most of its profit margins from franchise fees and not from sales of ingredients or pizzas through its own stores. As the Domino's report also shows (p. 27), the company spends 14 million on administrative expenses and 8 million for distribution. Asset Turnover = 5.19 times (3.61 times in 2005) The asset turnover was calculated using the sales figure of 94.965 million and the total capital employed of 18.265 million which is the total assets less the current liabilities as clearly stated in the balance sheet (p. 30). This means that every 1 invested in the company's assets returned sales of 5.19 or over five times the total capital employed in the business. This figure is high, and it has increased quite substantially since the previous year. This figure shows that the company generates revenues with a small amount of assets. This is quite expected given that the main business of the Group is to distribute franchises, carry out quality control processes, and plan the marketing of a product portfolio that is focused on pizzas. The increase from 2005 to 2006 is also interesting, a