Domino’s is the largest pizza chain in the world, claiming over 20,000 locations worldwide. In the U.S. alone, Domino’s recorded $8.8 billion in sales in 2022 across its 6,686 domestic locations.

But the corporation, Domino’s, doesn’t make all that much money off of direct pizza sales. Just 1% of the brand’s units are company-owned, and those 200 or so stores generated about $400 million in sales.

Of course, Domino’s does charge royalties to all of its franchisees, but even that isn’t where most of its revenue comes from, reports The Motley Fool via Sixty percent of Domino’s revenue comes from its supply chain. While franchisees are not contractually obligated to use the Domino’s-owned supply chain in order to source ingredients, they almost always do as Domino’s offers a 50% “profit-sharing” model to its franchisees.

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In other words, Domino’s supply-chain is so large and the margins are so strong, it can offer franchisees a huge price break. That sets up a situation where it would make nearly zero sense for franchisees to source ingredients elsewhere, and thus, Domino’s supply chain grows—and on and on. There’s a snowball effect at play.

Over the past 12 months, Domino’s HQ has made an estimated $2.7 billion in revenue on its supply chain alone, reports the Motley Fool, which accounts for about 60 percent of its total revenue. The publication notes that the company’s gross-profit margin on the supply chain is about 10% year-to-date—or $270 million in profit, for those scoring at home.

The cited article also notes that this is hardly a unique business model. The largest franchisors in the world all find ways to generate copious amounts of revenue outside of food sales and direct royalties. For example, McDonald’s famously owns its own buildings and charges rent to franchisees. This way, it’s easier for franchisees to buy into the system and stay in the system—and by doing so they become profitable entities for the franchisor.

Franchisees seem to be content with the system. The article notes that 99% of franchisees who were up for a contract renewal signed on the dotted line. That’s good news for Domino’s—and it’s ever-growing supply chain.

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