Domino's Isn't Just Selling Pizza -- It's Building Wealth

Domino's Pizza (NASDAQ: DPZ) may be best known for its 30-minute delivery promise, but for investors, it has quietly become one of the most consistent value creators in the restaurant industry. Over the past two decades, Domino's has not only built a global footprint of more than 21,000 stores but also rewarded investors with market-beating returns.

The key question today is: What makes Domino's such an effective compounding machine? The answer lies in two interconnected forces -- a business model built for long-term expansion and a disciplined approach to capital return.

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1. Long-term business expansion

At the heart of Domino's success is a model designed to scale without straining its resources. About 99% of Domino's stores are franchise-owned, which allows the company to collect royalties and supply chain revenue while franchisees handle the costs of running each location. That structure creates high-margin, recurring revenue with minimal capital intensity -- and becomes more powerful as the system grows.

The consistency of Domino's demand adds fuel to this flywheel. For instance, the company has delivered 31 consecutive years of same-store sales growth in its international business, showing that pizza remains one of the most resilient categories in food service. This kind of track record attracts franchisees, who are more willing to invest when they see reliable returns.

Scale then reinforces efficiency. Domino's vertically integrated supply chain -- covering dough production, distribution centers, and store operations -- benefits from operating leverage. Each new store adds volume to the system, lowering per-unit costs and widening margins for the corporate parent.

International markets extend this opportunity even further. While the U.S. is approaching saturation with more than 7,000 stores, countries like China, India, and those in Southeast Asia still represent decades of growth runway. Domino's China, for example, crossed 1,000 stores in 2024. As the second largest player in China by market share and with 30 million loyalty members, Domino's China proves that this business model can scale profitably abroad.

Taken together, the franchise structure, resilient demand, supply chain leverage, and international runway form a self-reinforcing cycle that continues to expand Domino's business without requiring heavy corporate investment.

2. Sustained capital return to shareholders

If Domino's expansion story explains how the business grows, its capital return strategy shows how that growth benefits shareholders. Management has consistently balanced reinvestment with meaningful returns of cash, creating a compounding effect over time.

Dividends provide a steady payout, but the real value driver has been Domino's aggressive share repurchase program. Over the past decade, the company has substantially reduced its share count, directly boosting per-share earnings and free cash flow.

To illustrate, Domino's weighted average diluted shares outstanding fell from about 56.9 million in 2014 to 35.0 million in 2024. That's a reduction of nearly 21.9 million shares -- or about 38% of the total base. By shrinking the denominator, Domino's has ensured that each remaining share represents a larger claim on the company's earnings power.

This discipline reflects confidence in the durability of the business model. Even as Domino's funded rapid international expansion and invested in strengthening its supply chain, it returned billions to shareholders through dividends and buybacks without compromising financial stability. Few consumer companies manage to compound value so effectively on both sides of the ledger -- growth and capital return.

Put together, the twin combination of business growth and share buyback drove earnings per share (EPS) from $2.90 in 2014 to $16.70 in 2024, a compound annual growth rate of 19% over the decade.

What does it mean for investors?

Domino's may sell pizza, but for investors it offers something even more appetizing: a repeatable playbook for long-term value creation. Its franchise-driven model allows for global expansion without overextending resources, while its consistent capital return strategy compounds shareholder wealth year after year.

It's a combination that explains why Domino's has outpaced the market for decades -- and why long-term investors may want to keep it on their radar.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Domino's Pizza. The Motley Fool has a disclosure policy.