Q3 2020 Domino's Pizza Inc Earnings Call
Earnings Conference call at this time, all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during that portion of the call you wouldn't need to press star one on your telephone to remove yourself. Please press the hash key.
If you require any further assistance. Please press star Antero and now I will hand, the conference over to your speaker today creates Brenda director of Investor Relations. Please go ahead.
Appreciate that Carmen and good morning, everyone. Thank you for joining us for our conversation today regarding the results of our third quarter 2020, I'm also joined today by our Vice President of Finance, Michelle Hook, who recently took on an expanded role within our finance organization that includes oversight of our Investor relations function.
In addition to her other responsibilities.
Today's call will feature commentary from Chief Executive Officer, Rich, Allison and Chief financial officers to leave it at that.
As this call is primarily for our investor audience I ask all members of the media and others to be in a listen only mode.
I want to remind everyone that the forward looking statements in this morning's earnings <unk> earnings release, and 10-Q also apply to our comments on the call today both of.
Both of those documents are available on our website.
Actual results or trends could differ materially from our forecast for more information. Please refer to the risk factors discussed in our filings with the FCC.
In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call are.
Requests to our coverage analysts, we as always want to do our best to accommodate all of you today. So we encourage you to ask only one one part question on this call. If you would please.
Today's conference call is being webcast and is also being recorded for replay via our website with that I'd like to turn the call over to our Chief Executive Officer Rich Allison.
Thank you, Chris and good morning, everyone first.
First this morning, I'd like to welcome stew Levy to the call. This will be stews first earnings call as our new CFO is.
As all of you know, Jeff Lawrence announced his retirement from Domino's on our Q2 call and while we will Miss jobs and we wish him well, we're excited to welcome stew as our new CFO.
Steve brings a very successful operational track record and a strong connection to the Domino's culture, having led our supply chain Division since January of 2019 under Steve's leadership, we have significantly improved the operational and financial performance of our son.
Fly chain business.
Who also has deep experience in strategy and planning from his work at Republic services and at Bain and company.
Stuart supported here at Domino's by a very talented and experienced group of finance professionals I know all of you will enjoy working with Stuart and his team in the months and years ahead.
Now before I turn the call over to Stu I do want to take a moment. This morning to express a very well deserved. Thank you and that's first to our customers for continuing to give us and our franchisees the privilege to serve you around the world.
To our franchisees and operators I want to thank you for your continued energy hustle and for the passion you have for this brand for your teams and for your customers.
And finally to our corporate teams for your incredible efforts in support of the brand our customers our franchisees and our many operators around the world.
In the face of this unprecedented pandemic you have all continued to lead with our values first and I am extremely proud to serve you as your CEO, so with that I'm going to turn the call over to Stu for his remarks on the third quarter, and then I'll come back to share my thoughts on the quarter.
More broadly on the Domino's business around the world Stuart over to you.
Thank you rich and good morning, everyone I'm really excited to step into this role and I'm looking forward to working with all of you in the coming months and years.
In the third quarter, we continued to lead the broader restaurant industry with 38 straight quarters of positive U.S. comparable sales and 107 consecutive quarters of positive international comps.
Truly outstanding accomplishment and a testament to the overall strength of the Domino's brand and the incredible hard work of our franchisees and team members around the world.
We also continued to increase our global store count opening 209, gross new stores and 83 net new stores in Q3.
Our diluted EPS in Q3 was $2.49 an increase of 21.5% over Q3, 2019, primarily resulting from strong operational results and partially offset by covert related expenses.
Let me provide a bit more detail regarding our financial results for Q3.
Global retail sales grew 14.4% as compared to Q3 2019 press.
Pressured by a stronger dollar when excluding the negative impact of foreign currency global retail sales grew by 14.8%.
Same store sales in the U.S. grew 17.5% in the quarter lapping a prior year increase of 2.4% and same store sales for our international business grew 6.2% rolling over a prior year increase of 1.7%.
Breaking down the U.S. comp our franchise business increased 17.5%, while our company owned stores were up 16.6%.
The U.S. comp this quarter was driven by a healthy mix of both ticket and order growth.
During the quarter, we continue to see a benefit from remaining relentlessly focus on providing good value for our customers and doing so in a safe and convenient way both through our delivery and carry out channels. This has resulted not only in overall order growth, but also an increase in items per order, which drove our overall ticket.
Growth in the quarter.
In our international business, we were pleased to see a sequential improvement over Q2, and retail sales, reflecting fewer temporary store closures and in some markets fewer service method and other operating our restrictions relative to those seen earlier during the pandemic.
The 6.2% international comp was driven by ticket growth, which was largely a result of a shift to more delivery orders, which tend to include more items and the delivery fee, thus, yielding a higher ticket.
Shifting to unit count we added 44 net stores in the U.S. during the third quarter, consisting of 47 store openings and three closures our international business added 39, net new stores. During Q3 comprised of 162 store openings and 123 closures with those closures price.
Merrily occurring occurring in India.
We believe the pandemic has had a net negative impact on store openings globally in part due to government restrictions as well as general permitting and construction delays.
Overall, our unit economics remain strong, particularly in the US and we continue to work with our franchisees to sustainably grow their businesses.
Turning to revenues and operating margins.
Total revenues for the third quarter were up 17.9% from the prior year quarter, driven primarily by higher retail sales in the U.S., which in turn drove higher revenue in our supply chain and us store businesses.
Our consolidated operating margin as a percent of revenues decreased to 37.4% from 38.5% in Q3 2019, due primarily to investments made related to the COVID-19 pandemic.
Partially offset by higher revenues from our U.S. franchise business.
Company owned store margin as a percent of revenue was down year over year and was negatively impacted by higher cobot related labor and supplies costs.
Sequentially operating margin saw additional pressures from higher food costs as we've continued to see significant fluctuations in commodity prices throughout the pandemic.
So supply chain operating margin as a percent of revenue was also down year over year and was negatively impacted by higher food costs as well as similar covered related expenses.
DNA expenses increased approximately 8 million as compared to Q3 2019, primarily due to higher variable performance based compensation expense.
Net interest expense increased approximately $6 million in the third quarter, driven primarily by a higher weighted average debt balance, resulting from our 2019 recapitalization transaction and to a lesser extent borrowings under our variable funding notes during the quarter.
Our reported effective tax rate was 19.9% for the quarter down 1.8 percentage points from the prior year quarter.
The reported effective tax rate included a 2.8 percentage point positive impact from tax benefits on equity based compensation, we expect to see.
We expect to see continued volatility in our effective tax rate related to these equity based compensation tax benefits.
When we combine all of those positive elements, our third quarter net income was up $12.8 million or 14.8% over Q3 2019.
Our diluted EPS in Q3 was $2.49 versus $2.05 in the prior year, an increase of 21.5%.
Let me break down the 44% increase a bit.
Most notably our improved operating results benefited us by 35 cents.
Our lower effective tax rate, resulting primarily from higher tax benefits on equity based compensation as I mentioned previously positively impacted us by six cents.
A lower diluted share count driven by share repurchases prior to the pandemic benefited us by 13 cents.
And finally higher net interest expense, resulting primarily from higher average debt balances negatively impacted us by 10 cents.
Shifting to cash.
Our financial standing remains strong.
We continued to generate positive cash from operations during the third quarter and as of the end of the quarter, we had more than $330 million and available cash and an additional $160 million of available borrowing capacity under our variable funding notes.
During the third quarter, we generated net cash provided by operating activities of approximately $158 million after.
After deducting for Capex, we generated free cash flow of approximately $141 million.
During Q3, we also returned $31 million to our shareholders in the form of a 78 cents per share quarterly dividend.
Finally, while we have not repurchased any shares under our board authorized share repurchase program. Since the first week of January we have 327 million remaining under the under the program for future repurchases.
Before wrapping up the financial update I'd like to walk you through the impact of the COVID-19 pandemic on our Q3 results.
As we've mentioned previously we are steadfast in our commitment to do the right thing for our team members, our franchisees our customers and our communities.
During Q3, the total impact from safety and cleaning equipment enhanced sick pay and other compensation for our team members and support for our franchisees and our communities was $11 million.
Separately, the estimated Q3 impact on international royalty revenues from partial store closures was $2 million.
And while we withdrew our original annual guidance measures earlier this year due to the uncertainty surrounding the business in light of the COVID-19 pandemic given the growth in our overall business and the corresponding increase in gene a expense from Q2 to Q3 I wanted to provide some visibility on the anticipated full.
Year GE in a number.
We currently expect our full year gionee expense to be in the range of $405 million to $410 million for the 53 week fiscal year.
Keep in mind, the DNA expense can vary in either direction, depending on among other things our performance versus our plan as that impacts our variable performance based compensation expense.
In addition to the DNA guidance, we currently estimate that FX for the 2020 full fiscal year could have a $5 million negative impact on royalty revenues, which is lower than previous estimates driven by the strengthening of foreign currencies relative to the us dollar.
In closing our business continued its strong performance in the third quarter and we remain in very good shape financially. Obviously, we will continue to closely monitor all aspects of our business operations given these uncertain times and five.
And finally I'd be remiss, if I didnt take a minute to thank our incredible team members and franchisees around the world. It is their dedication and commitment to our customers and our communities that allows us to generate these results. Thank you.
Thank you again for joining the call today.
And now I'll turn it over to rich.
Thank you Sue and once again, congratulations on the new role I'm certain our analysts and investors are going to enjoy getting to know you better in the days ahead.
Now moving on to our results I'll briefly discuss our us and international businesses before we take some questions. So let's get started with the discussion about the us business.
During the third quarter, the pandemic continued to drive a favorable tailwind for food delivery, coupled with a challenging operating environment.
Our focus as a brand across our corporate and franchise stores remained squarely on serving our customers and our communities with a convenient affordable and safe food and service experience.
We continue to put our people first making investments in our teams across our corporate stores, our supply chain centers and our support resources around the country. We were also pleased to see our franchisees stepping up to support their teams.
The third quarter marked our 30 eightth consecutive quarter of positive same store sales growth.
And 17.5% is the strongest same store sales number we've posted in our us business over the course of that almost decade long run.
We achieved this remarkable level of growth without running any aggressive promotions during the quarter. During Q3 of last year, we ran 250% off boost week promotions.
Now while we expect these boost weeks will continue to be an important part of our customer acquisition strategy in the future the underlying demand and our strong everyday value messages allowed us to focus on store level profitability and on service during the quarter.
Now we still have work to do on service levels, but I am very pleased with our execution in absorbing the unprecedented volume in both our stores and our supply chain centers.
During the quarter, we launched some terrific new products, our new chicken wings with improved sauces launched on July 7th and we launched two new specialty pizzas, our cheeseburger pizza and our chicken Taco Pizza on August 24th customer.
Customer feedback thus far has been very positive on these new products and I have I have to tell you that as one of our most frequent customers my new personal favorite pizza is our chicken Taco pizza with Jalapeno is added to it.
We continue to rollout technology to enable contact was service methods and to improve the operations of our stores.
Our dominoes car side delivery has been overwhelmingly embraced by our franchisees and is available today and over 95% of our U.S stores, providing a convenient contract loss carry out experience across the US we are working to continue to drive customer awareness of contact.
Delivery.
Our GPS technology is now in place and approximately 90% of our U.S stores, giving customers, a better experience and allowing our operators to better optimize the routing and dispatching of our deliveries.
Our enhanced make line tools are rolling out across the country and are now president and nearly 80% of our U.S stores, allowing us to get pizzas in the oven faster and improving our service levels.
These are just a few of the many innovations our team is driving to improve the customer and the team member experience.
Now we've talked a lot about the opportunity to create frequency and loyalty with customers that have discovered or reengaged with the Domino's brand. During this time, we buy.
We believe value convenience quality and our new product news are bringing customers to us and hope it will continue to bring them back did.
Digital and loyalty adoption give us a good proven opportunity to drive additional customer frequency and we continue to see strong growth and performance in both areas during the third quarter.
And we have to continue to focus on service as our category remains fragmented and customers often switch brands executing the blocking and tackling of service is critical for us as anything else.
Unit growth remains a challenge given the many obstacles that the pandemic has placed on construction and permitting across the country.
But given those circumstances I'm very pleased with the efforts of our franchisees and our corporate teams collectively we still manage to open 44, net new stores in the US consisting of 47 openings and only three closures during the quarter. This is.
This is a terrific result, when you consider what is happening across the category and more broadly across the U.S restaurant industry.
Our development team and our franchisees continue to work closely on data driven assessments around fortress, which continues to prove out strong results tied to carry out to delivery service delivery cost tons per hour for drivers and most importantly, a great economic return for our France.
Ladies who are making an investment in the brand.
Now while obstacles presented by the pandemic will create uncertainty in the short term for unit growth.
For the foreseeable future I remain highly optimistic around our us unit growth potential for the medium and the long term.
So to close out our discussion on the us business and while we don't have all the answers on the future.
We're going to continue to execute on our fundamental strengths and as a work in progress brand. We will work diligently on the areas, where we can and need to improve.
All in all I'm proud of our third quarter use performance and very optimistic about our ability to continue driving profitable retail sales growth for our franchisees and for Domino's over the long term.
Now, let's move on to international.
Where I was pleased to see the momentum build across the business during the quarter.
Thanks to the great work of our international Master franchisees, we have now achieved 107.
107 consecutive quarters of positive same store sales ended at 6.2% the highest international same store sales result, since the third quarter of 2016 as.
As the pandemic continues to evolve around the world, we continue to see wide variations in performance across the international business.
Forward visibility continues to be quite challenged compared to normal.
We had a number of markets that continue to generate strong retail in same store sales growth, including China, Japan, and Germany, among others in these markets our ability to remain open and operating throughout the pandemic has allowed us to benefit from the delivery tailwind in these markets.
In several other markets, we're still fighting our way back from significant temporary unit closures and service restrictions to regain our sales momentum indeed.
India, and Spain are too small to large markets, where our master franchisees and operators have worked diligently to reopen stores and continued to build order counts during the quarter.
In markets, where we have been disproportionately impacted we've stepped in to support our master franchisees in true Alliance for the long term success of the brand.
Now turning our attention to stores.
Coming off a peak of approximately 2400 temporary closures in late March we have reopened the vast majority of those stores and now have fewer than 300 that are still temporarily closed.
We regain some momentum and new store openings during the quarter with 162 gross store openings. However, those were offset with a higher than unusual not higher than usual number of closures, resulting in 39 net new stores.
Those closures were concentrated in India, where our master franchisee took the necessary steps to close underperforming units that were also negatively impacted by the pandemic.
In the near term our retail sales growth will continue to be pressured by the slower pace of store growth that we've seen thus far and anticipate for the foreseeable future.
Visibility, we will continue to be difficult and the unit growth environment could remain choppy.
While I am highly optimistic regarding the growth potential for our brand given these delays and the choppiness in international store openings that we've seen as the pandemic has to continue to persist over the past months. We are currently reassessing, whether we will be able to achieve the timing of our previously our two.
Circulated goal of having at least 25000 stores opened by 2025 now I want to be very clear I see this is a timing as opposed to a capacity matter and I have a great deal of confidence in our international business and in our master franchisees they are eager to ramp.
The pace of store growth back up to our pre pandemic pace as we continue to pursue our long term goals.
All things considered I'm very pleased with the resiliency and performance of our international business and I applaud our best in class Master franchisees. It is their incredible commitment to invest in the brand that has allowed us to serve our customers and our communities across the globe at a high level even in the face.
So many challenges.
The global fundamentals around delivery adoption and market share upside coupled with our strong value positioning service delivery and unit economics, all position us well for long term growth and success in our international business and.
And to sum it up the third quarter was a true Testament to the unquestioned strength of our international business model and I remain very optimistic about the future of this business.
Stepping back to look across the global Dominoes enterprise, the global backdrop around food delivery digital ordering and the pizza category, specifically continues to be favorable now we don't.
Now, we don't know how long the pandemic will continue and we.
And we don't know how long will continue to feel the related demand tailwinds and operational challenges Hello.
However, make no mistake, we will continue to build on our strengths and we will continue to invest to persist position ourselves to win in the long game will be leading with our values delivering high quality menu offerings to our customers.
Delivering a strong consistent and reliable value proposition driving sustainable order and transaction growth.
Investing in technology to support the consumer and our store operators really.
Relentless focus on unit economics, and franchisee Hell and continuing to fortress, our market positions in the U.S and around the world.
These are the areas regardless of the external economic and competitive landscape, where I believe we will continue to differentiate ourselves from the competition and drive shareholder value over the long term income.
In closing our global op, our global franchisees and operators continue to rise to the challenge every day and it continues to motivate me and my team I am proud to serve them each and every day.
And with that we'll be happy to open the line and take your questions.
Thank you and sorry mind, ladies and gentlemen.
Joseph time, we ask that you please limit your questions to one.
And our first question comes from Brian Bittner with Oppenheimer. Please go ahead.
Good morning, Rich and good morning, Steve Congratulations on your new role as CFO.
Your domestic comps continue to be very impressive, but I want to focus my question on the profit.
Flow through constraints this.
This quarter that caused the EBIT to grow to trend below revenue growth, we haven't seen that in many many quarters the financial model can you.
Can you talk a little bit more about the nature of.
These covert expenses, how much is potential structural changes to costs for is transitory.
And separately on the Gionee outlook, Steve gave are still gave for Fourq fourth quarter. It looks to be stepping up in a material way about $20 million year over year on the DNA line can you also just flush out the inflection and that expense in the fourth quarter. Thanks.
Hey, Brian Good morning.
I'll I'll start with the with your question around the U.S stores side and the flow through is due outlined in his in his discussion earlier, we did see some significant costs in the quarter related to operating in the pandemic and that relates to front line.
Hourly compensation.
Team member in.
Enhanced sick pay benefits.
Protective equipment cleaning supplies.
Saturated that are just a reality of operating in a in a pandemic.
Environment in the position that we've taken there is that we are going to focus on serving our customers taking care of this demand that has been presented to us.
In the face of Cove, It and also very much on supporting our team members and taking care of our team members in the store.
If we do if we do those two things then we believe that we position ourselves for the long term to continue to accelerate growth in the business on the back of this unprecedented short term boost in demand as long as we're operating in a pandemic environment I do expect to see an elevated level.
Of operating costs in the stores.
But we don't see structural changes in the business over the long term it simply the reality of operating in a in a pandemic environment and the second part of your question around GE and I'll, let Steve comment on that yen actually before I do that let me add just a little bit more color on the margin.
And and this is detailed a little bit more in the in the Q, but relative to Q2, the food basket for US was up significantly in Q3 and that's been a.
And the fact that we've seen just volatility in the commodity markets during the pandemic. So.
In Q2, we the basket a decrease year over year, 1.2%.
Q3, it was up 3.8% and if you if you break that down a little bit cheese, which is obviously a huge input for us was.
It was at an all time low in Q2 and has been at all time highs in Q3, and we've seen similar volatility across a lot of other commodities. So that obviously puts a headwind on the business both in terms of store operations and our supply chain business.
On the DNA side the law.
The largest driver there is.
Higher variable performance based compensation, but the other the other driving force here is a 50 threerd week, which obviously drives increased gionee <unk>.
Year over year, so that yeah, thats something we get once every handful of years, but we happen to have it this year in the middle of a pandemic. So it it adds a little bit of additional complexity there.
Thank you guys.
Thank you. Our next question comes from Eric on Salads with Keybanc. Please go ahead.
Hey, just a quick question on the international store closures I think given the number of closures in this segment to date should we expect to see an elevated number of closures. The next few quarters do you think those master franchisees in the fall and those volatile markets like India already made the necessary adjustments.
Yes, great question and yes, we have been.
We've been very pleased to see the resiliency in that international business and as you know we had about 2400 temporary closures back about six months ago and as the teams have worked very hard to get those stores reopened they've also taken a look in assessed our their stores in the portfolio that are structurally challenged.
Just in the near term and the long term and I applaud the team in India for taken the necessary steps to go ahead and take some of those closures and we were we were supportive of that.
No as I look broadly across the business.
We still have a great deal of optimism around the medium and long term growth potential in international but as we look out across the near term I do expect to see some continued choppiness as it relates to getting stores open due to construction and permitting delays and then also we expect.
See you know a few more.
Closures as as the market's reassess.
Reassess their portfolios and make sure that we're focus and resources going forward on the stores that are going to they are going to drive growth.
Thank you.
Thank you. Our next question is from Gregory Francfort with Bank of America. Please go ahead.
Hey, Thanks for the question I had a question for Stuart.
And I think most companies in the space of kind of pause the share buyback.
And I guess you guys I don't think bought back any stock in the quarter.
What are you looking for I guess to consider restarting that program.
And is it just conservatism for maybe why you Havent started back up so far.
Thanks for the thoughts.
Sure No problem I appreciate the question.
Yeah for for US, we're always going to look at what the right way to deploy our cash is weather.
And how to return that to our shareholders, where its appropriate I think earlier in the in coated with the uncertainty and as a lot of companies did we wanted to preserve cash and figure out.
You know until we kind of had a better understanding of how things looked like they were going to play out.
And obviously now we've got better visibility and we will continue to evaluate the best ways to deploy that cash to the business or or how to return that to our shareholders.
Thanks. Thanks.
Thank you. Our next question is from Sara Senatore with Bernstein. Please go ahead.
Thank you.
I was just trying to understand a little bit more on on the margin question, obviously investing.
Investments in people are are absolutely the right thing Okay now on the front lines and I think you said you didn't see this structural change that just sounds like a practical standpoint, our modeling how do we think about that.
Building to reverse.
Andy I think that when.
That when when.
Pandemic proceeds just having.
Some kind of maybe color on whether whether.
Whether these are increases in.
Range rates, which I assume would be really hard to turn back.
That's kind of the order of magnitude of cricket Frank.
Factors that are contributing to that this is really just from a practical mathematical.
Mathematical perspective from next year. Thanks.
Sure Hi, Sarah Thanks, Thanks for the question.
As as Stu as do outlined in his remarks, we had during the quarter you about $11 million in cost that were associated with with this cobot related operating environment and.
As you think about how to look at that going forward as as long as we're operating in a pandemic environment, we're going to continue to see some elevated costs around.
Safety and cleaning equipment enhanced sick pay.
And then also during the pandemic we've continued to make sure that we are taking care of our frontline team members with some enhanced compensation as well and so as long as we're operating in a pandemic environment. We expect to see that also now over the long term certainly yes.
We will continue to take a look at the overall value proposition for our frontline team members and that Thats certainly evolved overtime some of that driven by.
Minimum wage increases across the country and changes such as that but also with us taking a look at the value proposition that we offer our team members and making sure that we are an employer of choice going forward. So you will see you will certainly see post pandemic. Some of these cost pair back and.
And what we'll do is as a management team is we'll focus then from there on continuing to make sure that this is a great place to work for our team members and that our team members are appropriately rewarded for their efforts.
Thank you.
Thank you our next question.
It's from Chris Ocull with he felt please go ahead.
Yes, Thanks, good morning, guys and congratulations do.
Rich would you talk about the performance in market in the us that have largely lifted restrictions and in particular, how order size and transaction performance has been impacted points restrictions are lifted.
Yes, sure Chris Yes, it it's interesting and if I look across if I look across the us business and where we've had kind of differential levels of performance. You know it's interesting as you know our our our brand new tends to be less urban focused then.
A lot of other brands and we've got higher concentrations of our stores in.
Rural and second city type of markets and certainly those markets have performed better than the urban and suburban markets have overtime.
So we saw throughout the third quarter, we saw that in the second quarter as well that dynamic continued to persist and then some of the other dynamics that we've talked about in the past you know also continue we continue to see a higher ticket.
Both our delivery and our carry out businesses and I'm really pleased that that higher ticket was not coming from price increases price increases around food and delivery charges had been really moderate and in line with inflation over the course of the third quarter, but but really what we've seen is that continued.
Increase in.
We've continued to see that increase in basket size and then the other dynamic around the ticket overall is just a higher mix of delivery orders relative to carry out orders in the business and delivery just by its very nature comes with a higher ticket and.
And with that delivery all.
Albeit modest that delivery charge still.
Still added to the to the ticket so thats a little bit about the dynamics and what we've seen across the course of the quarter.
Thank you.
Thank you. Our next question is from Lauren Silverman with Credit Suisse. Please go ahead.
Thanks for the question and congrats on the new role how do you expect the return of Vienna.
Paul.
Ongoing restrictions.
The country and then are you willing to provide.
Throughout the quarter.
You're welcome.
Quarter to date trends given above.
Quarter end.
Yes, So hi, Lauren we won't comment on any any quarter to date trends. This morning, but most certainly we are we are glad to see televised sports back.
Yes, it certainly creates occasions for people to gather and when people have occasions together they love order in Domino's Pizza.
And so I'm certainly happy to see that coming back and as you know for us it's less about.
Fans being able to set in the seats than it is about the sports being on TV and folks being able to gather and watch it so without.
Without the ability really.
At this point to parse out any results based on I can tell you that we certainly view it as favorable relative to not having not have.
Not having those sports on television for us.
Great.
Okay.
Okay.
Im sorry, and I could not hear your question.
The cadence.
The quarter.
No.
What I can tell you is yes, we had strong growth throughout the quarter, but I won't comment on period by period spin.
Specifics.
Okay. Thank you very much.
Thank you. Our next question is from Peter Lang with boutique Inc. Please go ahead.
Thanks.
Congrats on your first conference call.
I wanted to ask about loyalty.
Okay memberships I know earlier when discussing you guys had about 85 million unique users your database, but about 23 million.
23 million or so loyalty members can you talk about the cadence.
Signing up more or any more loyalty members throughout the year has that accelerated through the pandemic. What exactly are you guys seeing from the loyalty guests in terms of their behavior in terms of spending recently.
Hey, Pete Thanks for the question yes.
We certainly saw as the as the pandemic hit we saw we saw a pickup in loyalty enrollments at the beginning of the pandemic and that leveled off some during the third quarter, but interestingly also we saw fewer folks who were ex who were exiting are becoming.
Inactive and loyalty program over time, so the overall number of customers in our in our piece of the Pie rewards program continued to increase and then as we took a look at.
What was happening with our heavy and medium and light users and we're also pleased to see over the course of the quarter that customers in each of those buckets were ordering from us more often.
And the ticket was higher also in each of those buckets and that.
That occurred in the third quarter. Despite the fact that we didn't run any boost weeks in the third quarter of 2020 and that compares to running two of them of our 50% off promotion back in the third quarter of 2019.
All right. Thank you very much.
Thank you. Our next question is from John Glass with Morgan Stanley. Please go ahead.
Good morning, and thanks, Thanks for the question.
Graduations.
Two.
Rich you talked to a couple of times about service and service opportunities obviously challenges in the business I wasn't sure if both as a comment about you saw some service slipping for some reason or this is just a work in progress company, but can you just talk about it there are some unique challenges that have created service delays for example in the business.
And can you get that into how you think the performance of some of the new products are doing does that create greater complexity or maybe how do you. How do you grade yourself or how do you think the new wins and new Pizza launch has contributed to sales to date.
Sure John first on the on the service piece most.
Definitely at the beginning of the pandemic when volumes in our business jumped up significantly we definitely slipped a little bit on our.
Estimated average delivery times, we have sense, thanks to the great work of our franchisees and operators over the over the second and third quarter. We have we've improved our service and gotten back to where we are as good or better than we were pre pandemic, which is which is pretty sick.
Inefficient when you think about the overall increase in the business that we've seen in the fact that we deliver our own food.
So we were making sure that we've got trained in uniform delivery experts, bringing that product to the customer.
I suspect that you know as long as I'm. The CEO of this company you will always hear me talk about wanting to improve service at Domino's, because you know until we are getting to a place where we're delivering pizzas and.
Not not 30 minutes, not 25 minutes, but 20 minutes or less I'll never be satisfied with where we are on service. So we're always going to be a work in progress there.
Second part of your question around new products I am very pleased with the with the new products we've launched.
Our wings and our two new specialty pizzas have been very.
Well received by our customers you Havent seen us promote wings because were selling all the wings that we can get our hands on today. So.
So very very positive performance in the wings business and then we launched the specialty piece is obviously just within the last couple of weeks of of the third quarter, but those specialty pizzas are already at the top end in terms of mix of our specialty pizza range. So very pleased with where we are today.
And also really pleased and I think you asked you asked a great question. These do not add operational complexity within our within our stores in fact, the wings actually reduced operational complexity in the store given how we package. It in each of the two specialty pizzas required only one incremental ingredient that we didnt have on to make.
Line already.
Okay. Thank you.
Thank you. Our next question is from David Tarantino with Baird. Please go ahead.
Hi, Good morning, Rich I was hoping you could elaborate a bit on your comments about the 25000 unit target you laid out a few years ago and in particular I understand the issues with the.
With delays in terms of international market openings, but you also mentioned potential for some closing so I wonder if you could talk about how much of your.
Pulled back on on the on the target might be related to the closings you expect to see and whether you're willing to frame up the magnitude of those.
Sure David It really does relate to the pace of openings.
Much much more so than concern about.
Closures going forward not yet hitting the closures first we've certainly seen a higher number of closures in 2020 relative to normal in our international business, but I expect that we will we will work through those over the short term so the real issue around the pace to getting to 25000.
Is just the pace of the gross openings, which it slowed during 2020 given.
Some of the similar.
Construction and permitting challenges that we've seen in markets all over the world, but also for those countries that had temporary closures. You know the effort is really been directed in the short term on getting those stores reopened and ramping them back up to excuse me to their full run rate so I'm optimistic.
Over the medium to long term you know that we will that will get back to the very strong pace of unit growth that we had in the international business. It's just that the step back that we've had to take in 2020 does cause us to take a look at reassess the timing of that 25000 milestone not them.
Milestone, but just the timing of reaching it.
Makes sense and I guess, one follow up I guess, a lot of companies have talked about potentially accelerating.
The pace of openings given the opportunities they see on the other side of the pandemic. So I guess your comments might imply that that that might not be possible or might not be desirable in the international markets in a sense the catch up for the lost ground and Tony Tony.
No I wouldn't I wouldn't take it that way, David and if I break it down a little bit.
First of all starting on the us side of the business I see a heck of a lot of opportunity to accelerate our unit growth on the on the us side of the business, where while we've been in a difficult operating environment. If you look at our trailing four quarter net unit openings in the U.S, it's still very strong and consistent with where.
We were a year ago, the international business. When you take a look at that you really have to break it down because if you talk about it just in total you lose some of the nuances of it and we have multiple markets in international that in fact have maintained pace and are accelerating on unit growth is just when you take into account.
Some of those countries that had to take a step back with respect to temporary closures I just expect it to take a bit more time to ramp back up in those markets, but all around the world. Our teams are taking a look at the real estate opportunities that are that are presented to us by the by the fact that there are quite a few other restaurant and.
Retail businesses that are that are closing out there certainly at a much higher rate than we see inside our own business.
Great. Thank you very much.
Okay.
Our next question is from Daniel Geiger with yes. Please go ahead.
Great. Thank you rich you gave some really good color on the loyalty program, but just wondering if you could talk a bit more about new customer acquisition and in recent months.
How that's trended since since Twoq, you and and how you're thinking about the stickiness of those new customers as as we look ahead. Thanks.
Sure Dennis will.
We've had if you look if you break our business down and I talk about it a lot in terms of the two businesses that we run inside each of our boxes, which is one is the delivery business and the other is a carry out business.
If we take a look at our delivery business. What we've seen is a nice tailwind in customer acquisition, but also just as important in and a lot of cases more so.
Our retention of customers and order frequency has also increased as well in the delivery business and then if we look at the carry out business. The story is a little bit different weve.
We've not seen a tailwind on customer acquisition and carry out and thats not surprising as customers stayed in their homes much more often during the pandemic, but what we've seen is increasing in retention and in the frequency of orders of on the carry outside for our customers now.
One of the reasons that we have rolled out our domino's car side delivery.
Frankly, a lot earlier than than than we had originally planned to was so that we could get out there and you've seen us on TV talking to customers about a very safe and convenient way to come and and get carry out at Domino's and the the early results that we've seen in car side delivery.
You know in the in the in the third quarter have been very positive in terms of the customer receptivity to that service method.
Thanks Rich.
Thank you. Our next question is from Chris kind of rail with RBC capital markets. Please go ahead.
Hi, Thanks, good morning, and thanks for the question.
Can you provide any further detail around how the value platforms performed over the course of the quarter and did you see any change in utilization of the 599 and 799 platforms.
Hey, Thanks, Thanks, Chris Yes, the 599 platform continued in the quarter to be incredibly important.
Statement of value and driver of the business and in fact, it was more more important in Q3 three than probably any time, because we didnt run any boost week promotions during during the third quarter. So very important in terms of customer acquisition.
And we're also we're always kind of taking a look at and thinking about how can we enhance that value platform and as you've seen with the launch of our two new specialty pizzas. We took a look at how those could integrate into that value platform and.
The customer research that we did.
Gave us a high level of confidence that we could offer those pieces at a $3 or up sell to the 599, which gives great value to the customer and also really a nice margin opportunity for our stores as well.
Those pieces.
You will also see him on our if you go on our homepage at 11 99 for a large which again our research tells US is a great value for the high quality those high quality specialty pizzas and also gives our operators a terrific opportunity for a.
Very.
Profitable offerings, and then if I shift gears on the carry out value proposition in the 799, you saw us bring our our wings to that platform at 799 for carry out as well, which you can now get wings you along with all of our cross types three three topping pizza across all of our cross types in that.
Fivenine platform.
When I think about what's happening with the consumer right now and looking forward with this recession that we are setting in today and the fact that there has been no incremental stimulus brought to the consumer I look forward and believe that our our value platforms and sticking to those platforms will only be more important as we look out into the.
Months and quarters ahead.
Thank you.
Thank you. Our next question comes from Brett Levy Rand's and partner.
Partner. Please go ahead.
Hey, good morning, Thanks for taking the call and do best of luck in the new role.
You started to discuss a breakdown of where you are in some of your.
Customer facing investments would you.
Would you care to give any quantification in terms of how there have there.
How they're doing in terms of either.
Fishes see savings are driving sales and also how should we think about the what.
The what's next in terms of.
New initiatives that you're investing in thanks.
Sure sure Brett we are we are very pleased with the with the roll out and adoption.
These technology platforms, and it's actually it's an interesting.
Kind of a.
Pivot for us and how we're thinking about innovation at Domino's. So.
Much of the innovation, if you think back to 2000.
2010 and forward when we were driving rapid increases in digital adoption in our business much of the innovation was around the ordering platforms and what we put in the hands of customers. We're still doing that but weve also significantly ramped up our efforts around technology innovation to support the operation.
One of our stores and Thats, where you get to you get to GPS you get to our enhanced make line tools you get to our car side delivery certainly they have customer benefits, but they've got frankly benefits to our operators that I'm, even more excited about the customer facing.
Aspects, there and as we think about that innovation pipeline going forward a good bit of what we're going to be focused on is it.
Innovation that does make our stores at the incredible volumes that were managing today that makes our stores easier to run for our operators and our store managers, resulting in a better quality of life for them, but also ultimately a better service experience for for our customers.
All right. Our next question, John I don't call them.
Please go ahead I'm high thank you.
Just a follow up in any question defaults quick.
You mentioned that delivery fees I think basically increased in line with inflation.
That surprises me a little bit considering some of the delivery and service fees, specifically being taken by third party do you think thats an opportunity.
As we go forward to kind of think about your delivery and service charge being put together, maybe having a little bit more of a sliding scale going forward versus the fixed cost that is now so thats the follow up in the <unk> and the question.
Could you talk about the competitive.
Intensity, if there's a way for you to measure it in terms of the customer acquisition by third party, whether in the us or any particularly important international markets, whether you think that intensity is getting.
Getting more intense or perhaps even easing.
Great Hi, John Yeah, and the other delivery fees, yes, we look at this as a competitive advantage for us going forward. When we think about the relatively low and transparent delivery fee that we charge our customers versus what you're seeing with the Aggregators and this really is a key part of our.
Our value proposition for our customers and.
All of US have ordered third party delivery and.
Most of the time, it's really hard to figure out what you are being charged because you might be getting a free delivery. But then you go in and you see a line that says.
Taxes and fees and then if you if your industry is enough to click on the little question Mark you figure out that it's not just taxes to the government, but you're also be in charge to service fee and for those of us that have been in the delivery business forever. We don't know what the service fee is if it's not paying for having the delivery brought to you. So.
So I think it's an area that we've got to continue to be out there and educating our customers around the fact that this is that we're a transparent brand and if we tell you the deliveries $3.49, we're not going to be lumping on any additional fees. There certainly are delivery fees do vary market by market.
Based on labor rates, we operate in places, where we've got $7 in a quarter and our labor in places, where we have $15 plus so they we do adjust those fees are franchisees adjust those fees up up and.
Up and down, but but transparency is going to continue to be a big part of of how we present.
Present ourselves to our customers, yes, the second.
Part of your question around the competitive intensity.
I would I would say John it's every bit as intense as.
It was in the second quarter and as it was in the first quarter you know the.
In particular with the third party Aggregators continue to be very aggressive in the offers that they have out in the market place and in their in their advertising and when we take a look at our competitive set in pizza delivery.
Yes, it's a it's a different game than the game that we were play in five years ago. The the number one competitor. We look at is not any of the pure play pizza players, but it really is competing against delivery from the third party aggregators.
Thank you.
And our next question from Jeffrey Bernstein with Barclays. Your line is open.
Great. Thank you very much and congrats do on your new role.
Question on the outlook we hear.
We hear a lot the peers of yours that maybe operate their own restaurants are talking about doing more with less on the heels of I guess efficiency learning through the pandemic and maybe achieving pre cobot EBITDA dollar is that.
Sales levels well below the prior 100%.
So as I think about your business.
You are running a franchise model, obviously, but is that an opportunity there I mean, and your sales being well above Clara sales levels I'm. Just wondering what are the greatest drivers to further enhance your profitability.
For the unique cobot quest is kind of any efficiency opportunities that you seem to be more efficient in terms of learning through covance or if maybe that's just not realistic when you're running the franchise business versus the flow through of a company operated model. Thank you.
Hey, Jeff Thanks, Thanks for the question.
Most certainly we are we're very focused on.
Driving dollar profitability at the store level, then we talk about that all the time and we've been fairly transparent.
About it over time as well so in our corporate store business and then also you know as we work with our franchisees were absolutely looking at ways that we can more efficiently operate our businesses coming out of coming out of Cove. It some of that store technology tools that I talked about earlier.
Part of that are a part of that you all take GPS for example.
By utilizing the GPS technology inside our stores, our store managers know exactly where the drivers are at any given time and that allows us to get more efficient in how we do our routing.
You know, how we pre bag and get the orders ready to go once the delivery driver returns and then also and in cases of our best run stores today.
Our drivers aren't even come in at the rush back into the stores our operators because they know the drivers coming back are running those pieces out to the to the cars handing them into the drivers and you save in a minute maybe two minutes on on the turn which ultimately results in better service and better.
Labor that you run in the stores. We're also working on some advanced forecasting and labor scheduling tools in our corporate stores, where the early results of our our pilots and tests there have been very positive to help us to get better on service while reducing.
The labor costs associated with that service all of that gets thrown into a little bit of disarray. You know as we talked about earlier in in a pandemic when youve got all of these additional costs that are layered on onto the business, but as we look forward coming out a coded our expectation is that we will continue to drive it.
We should see and therefore, a higher levels of EBITDA and operating cash flow in the stores.
And just to add to that the one thing we won't do is reduce the quality of what we're providing as a way to cut costs you mentioned.
Thinking about the menu as we launched new wings that was to improve the quality of the product that we were providing.
Not because we thought we could.
Take a little money out of out of the cost of the ingredients.
Thank you.
Hi, Carol.
Our next question from John Koller with Wells Fargo. Please go ahead.
Awesome, great. Thanks for making the time just.
Real quick clarification, rich I think earlier in the conversation in your prepared remarks, you mentioned.
The idea that the company stepped in to support Master franchisees in international markets. So I was hoping one you could expand upon that and then two can you discuss in the U.S. side of the business, how perhaps the delivery versus the carryout mix might have impacted store level labor.
During the quarter, particularly relative to the second quarter or even last year and perhaps maybe the curbside.
Business stepping up the cost of labor in the stores during the period. Thank you.
Thanks, John.
So first on support on our with our International Master franchisees. We've had we have had several of our.
International markets that were disproportionately hit by Cove, It had to have either a whole or substantially partial shutdown and in those cases, we have we have a very long term view on the partnership that we have with these international Master franchisees in so there have been some instances where.
We have leaned in with royalty and fee relief for some of our international franchisees because it's just the right thing to do in the short term for our partners that are around with us for decades.
Over the over the long term.
Second at par.
Part of your question.
Delivery and carry out mix, yes, certainly we've seen in terms of order mix delivery.
In the third quarter was certainly a higher percentage by a couple of percentage points of our order mix versus what we were running pre pandemic and certainly no delivery orders bring with them on a per order basis higher dollar labor costs, but those are also associated with higher ticket.
As well.
And also the the the delivery fee that comes along with it.
And then finally.
To your question on on Curbside, the terrific thing about.
Our car side delivery is we've been we've been able to handle that business really without any significant increase in labor costs at the store level ultimately you know so.
Somebody when a customer walks into the store is going back to the rack and grabbing that pizza and greeting the customer and handing it to him well with this technology, we know when the customer pulls into the parking lot a team member can get out and back into the store very quickly and were not used in incremental labor to do that.
Great. Thanks, and then just one quick one on can you quantify the amount of royalty or fever lease you provided for the franchisees in the international markets during the period.
No.
Okay. Thank you.
Thank you our next question from Todd CL King.
CL King and associates. Please go ahead.
Hey, Thanks for the question Rich I was wondering now that were back eight months into this pandemic window.
What are your thoughts on the US business as you look out to 21 and beyond about.
Selling general survivor bias in the pizza industry as far as.
Over over half the half the units out there being independently owned and operated and thoughts on market share opportunities due to competitive closures, but also we will stay.
Real estate opportunities and how that supports maybe an enhanced unit growth rate and the medium term.
Yes, Mark thanks.
Sure.
We we certainly look at too.
2021, and forward as an opportunity to continue to gain share in the pizza category now and I'll I'll I'll preface it by saying none of us want to see independent pizza restaurants, close due to the pandemic weve to compete and fight it out every day.
Hi.
But we also love to go out needed independent restaurants, as well and I feel for.
The challenge is that a lot of these independent restaurants are going through and they're proprietors that have put their livelihoods into those into those businesses.
But but the reality is fewer operating and independent pizza restaurant with a significant amount of your business dine in and if you were relying on beverage mix and alcohol to bring a good bit of margin to your business.
That business has now been shifted to where you have to do most of it off Prem and if most of that has to come by paying very high fees to third party Aggregators. It's just a really difficult operating environment and I know all of you see a lot of the same industry.
Analysts and Prognosticators, who predict the percentage of independent restaurants that may not reopen or may close permanently we don't know where that ultimately lands, but I do believe that.
That the shakeout in the turmoil is going to create opportunity for us to further take share and continue to grow our teams both our corporate store team and our franchisees are out there every day looking for real estate opportunities that are opening up as a result of the pandemic and also in some cases opportunities.
Where weve shifted in some cities and towns from a more sort of landlord friendly rental environment for to more of a.
A renter friendly rent rental environment and opportunity for us to get potentially some more favorable terms on lease is going forward as well for some of the stores that we continue to operate.
The other thing that I would add is our development team is.
Working pretty rigorously with our franchisees.
Going through a ton of analysis in pretty detailed modeling in determining where we actually want to be opening those stores. So.
And Thats got to be for for the long term value of the business that has to be the priority and if where we want to be there are real estate opportunities that that gets evaluated the same we the same way we would look at do we build something freestanding do we take existing real estate do we take advantage of.
Other business that may have been less fortunate et cetera, but it starts with where we want to be and.
And then shifts to what are the real estate opportunities there.
Great. Thank you bye.
Thank you our next question from Andrew Charles with Cowen and company. Please go ahead.
Great. Thank you congrats to enrich I'd echo the jalapeno hack on that you can talk a bit that's very good.
Terrific.
Hi, can you help rectify that 12.6% supply chain growth with domestic system sales growth of about 21%, there's about $6 million gap. There I was curious if theres efficiencies or inefficiencies or additional costs, we should be thinking about potentially with the two distribution center openings in the back half of 2020, and maybe it's a mix issue just given.
Obviously, more and more wings diesel to that as well.
No you said no two part question. So I'm afraid is an extension my question.
Longer term what is your broad observation, having run supply chain or where you think you could see margin percentage for the supply chain segments settle out longer term.
Yes, thanks for the thanks for the questions I like the extension part that you did hear that was that was effective.
You know the pressure and supply chain.
And first of all let me just comment you mentioned that you know the the center openings. So we do obviously opened a new center in in.
In Q2.
We have a new center that we intend to open in Texas. In Q4, we also added capacity to our thin crust production in Q3, so and that for US is an investment we're more than happy to make because that means we can we're continuing to grow and we need that capacity.
On the margin side, it's it's an interesting dynamic because what were what were trying to do is provide the best value for our franchisees. If they can grow profitably we as a company are going to benefit from that so we're not trying to take advantage generally speaking when we drive operating efficiency.
These or other improvements in the business, we are trying to share that with our franchisees to that they.
Our arent negatively impacted during.
During the course of Cobiz, we saw a couple of things one of which was the high increase in commodities and what we were attempting to do with our franchisees again with share in a little bit of that pain. So we were we were passing through commodity increase but not taking additional margin on it so as.
As the food basket goes up the margin percentage comes down so we're generating more margin dollars, but at a lower percentage so.
So that that savings can be passed along to the franchisee base.
So that was one piece of it the second thing that we did was all of the additional supplies that were related to co vid.
We were basically passing through to our franchisees at cost.
We didn't feel we should be layering on additional cost for them again trying to make sure. We can drive profitability to the stores and then in turn that Hell.
That helps the system overall so are there.
Are there other efficiency opportunities, yes, it's impossible to run a supply chain the size of ours and not always have other opportunities for efficiency and and that's what our team works. At every single day is how do we get more efficient remained safe be more efficient and more effective in delivering for for for our franchisees.
Thanks.
Sure.
Thank you our next question from James before.
Please go ahead.
Hey, Thanks for taking the question I just was curious Directionally, how you think about the demand picture for Domino's and how that will evolve as the country reopened now there was a question about this earlier, but we do have a few states in a completely removed restrictions on dine in capacity more will follow.
That of course is in the works. So just what have you observed about consumer behavior as certain markets have lifted restrictions and what Directionally does that tell you about the normalized steady state aid lease for Dominoes post pandemic. Thank you.
Sure James you know it.
It's still it's still really early on you know in terms of cities and states reopening and given the purchase frequency in cycle in our business. It's still it's still early for us to draw any observations from from cities that may have flipped from 25% couple.
So I need a 50% capacity over the course of the last.
Last month.
A month or two but so what I'll do is I'll step back a little bit just kind of give a perspective, a little bit more broadly and.
One of the I think some things that have happened here during the pandemic.
Im really been the.
The acceleration of some trends that were in place already so when we think about how customers want to order food there was a trend toward digital ordering pre pandemic and that significantly accelerated during the pandemic I don't expect customers to go back to call. It another.
I expect digital ordering to continue to grow post pandemic and I feel that we are very well positioned in that space today with 75% of our sales in the us digital.
As we sit here today I also think that the trend around off premise consumption, which was their pre pandemic has accelerated during the pandemic and I don't think we're going to see an immediate snap back certainly people are going to go are some people are going to want to go and sit down at a restaurant again I'm one of those.
People you know for sure for sure, but I think.
I think we're going to continue to see a movement in the QSR space toward off Prem consumption and I think our business with the strength and delivery and carry out I believe also positions us very well for that trend to continue going forward. So.
So what we're trying to stay focused on here is.
Taking.
The opportunity that we've been given through customer acquisition during cove, it and to convert those customers into long term loyal customers of Domino's pizza. So far the early results in that have been very positive as I mentioned earlier, our retention is up.
Our frequency is up across.
Medium heavy and even light users and really the challenge for me and my team ahead and for our franchisees and operators is we've got to continue to do a great job serving those customers and we believe they will continue to come back to us going forward and honor.
Honestly.
At.
Given the share that we have the restaurant industry today, even as the number one player. We've got so much room for upside and share growth within a growing category that I am far less concerned about the reopening of sit down restaurants than I am about us doing a great job on execution every day.
Excellent. Thank you for the thoughts.
Thank you and our last question comes from Karen Garber with Goldman Sachs. Please go ahead.
Good morning. Thanks.
Thanks for all the color on the call today really great commentary most of my questions have been asked and then.
Answered, but just want to get on a little bit more color on China, maybe obviously, we heard the news last quarter of the strategic investment there and maybe.
Maybe any color on how the business is trending or how you're saying.
An opportunity shape up there, especially versus some of the commentary today on the timing of the 25.
By 2025 thanks.
Thanks, Jerry was yes, China is really has been a.
Terrific success story in 2020, while we've had some slowdown in some of our markets around the world China is definitely not one of them sales growth and unit growth had been very strong in China. This year.
We've got a terrific management team over there in place with our Master franchise, the dash and we've got a lot of optimism around the future growth of our business in China and China also back at the beginning of the year when the when the when the pandemic, obviously hit China first.
China really was our leaders over there really where the architects of a lot of the contact lists service methods that we're using in the U.S. and around the world. So not only have they delivered great results, but theyve also stepped up to be.
To be thought leaders in our business and you know as I look forward on you on China.
I expect that there will be a point in the future.
Where China will be the second largest domino's pizza business in the world behind the U.S.
Thank you.
Thank you and this concludes our Q and a session for today I would like to turn the call back to rich Sun for his closing remarks.
Thank you and and thanks, everybody for joining us on the call. This morning, we look.
We look forward to speaking with you again on November 12, when we host our virtual investor Q at a event. So we hope we'll get a chance to talk to all of you in just a month's time and then of course in February we will get back together to discuss our fourth quarter and our full year 2020 results and until then.
I hope all of you stay safe and healthy and we'll talk to you again next month.
Thank you, ladies and gentlemen for participating in today's program you may now disconnect.
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