Chapter 23, Problem 2ADM

Domino's Pizza: Franchise segment return on investment

Domino's Pizza, Inc. is the second-largest pizza chain in the world. In the United States, Domino’s has 377 company-owned restaurants and 4,690 franchised restaurants. In addition, Domino's lias a supply chain that manufactures and delivers dough and other food products to all the domestic restaurants. Franchisees are required to purchase food products from the Domino's supply chain as part of their franchise agreement. Thus, in the United States, Domino's has three segments: Company-Owned Restaurants, Franchised Restaurants, and Supply Chain. Operating data for these three segments in the United States are as follows (in millions):

	Company-Owned Restaurants	Franchised Restaurants	Supply Chain
Sales	$348	$230	$1,262
Cost of sales	267		1,132
General and administrative expenses*	25	125	100
Invested assets**	32	30	146

*Allocation to segments assumed

**Allocation between Company-Owned and Franchised assumed

1. A. Determine the income from operations for each segment.
2. B. Determine the profit margin for each segment. (Round percentages to one decimal place.)
3. C. Determine the investment turnover for each segment. (Round to one decimal place.)
4. D. Use the DuPont formula to determine the return on investment for each segment. (Round to nearest whole percent.)
5. E. Explain Domino’s business model and how it is related to ROI in each segment.