DOMINOS PIZZA INC

Previous wording

Domino’s is the largest pizza company in the world with more than 20,500 locations in over 90 markets around the world as of December 31, 2023, and operates two distinct service models within its stores, with a significant business in both delivery and carryout. We are a highly recognized global brand, and we focus on value while serving neighborhoods locally through our large worldwide network of franchise owners and U.S. Company-owned stores through both the delivery and carryout service models. We have been selling quality, affordable food to our customers since 1960. We became “Domino’s Pizza” in 1965 and opened our first franchised store in 1967. Over more than 60 years, we have built Domino’s into one of the most widely-recognized consumer brands in the world. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.

Current wording

Domino’s is the largest pizza company in the world with more than 21,300 locations in over 90 markets around the world as of December 29, 2024, and operates two distinct service models within its stores, with a significant business in both delivery and carryout. We are a highly recognized global brand, and we focus on value while serving neighborhoods locally through our large worldwide network of franchise owners and U.S. Company-owned stores through both the delivery and carryout service models. We have been selling quality, affordable food to our customers since 1960. We became “Domino’s Pizza” in 1965 and opened our first franchised store in 1967. Over more than 60 years, we have built Domino’s into one of the most widely-recognized consumer brands in the world. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.

Previous wording

Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees.

Current wording

Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. We also have a global agreement with Uber Technologies, Inc. to allow customers to order Domino’s products through their marketplace. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees.

Previous wording

Domino’s generates revenues and earnings by charging royalties and fees to our franchisees. Royalties are ongoing percent-of-sales fees for use of the Domino’s® brand marks. We also generate revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations primarily in the U.S. and Canada and by operating a number of Company-owned stores in the United States. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza stores. We believe that everyone in the system can benefit from the franchise model, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically.

Current wording

Domino’s generates revenues and earnings by charging royalties and fees to our franchisees. Royalties are ongoing percent-of-sales fees for use of the Domino’s® brand marks. We also generate revenues and earnings by selling food and other products to franchisees through our supply chain operations primarily in the U.S. and Canada and by operating a number of Company-owned stores in the U.S. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza stores. We believe that everyone in the system can benefit from the franchise model, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically.

Previous wording

Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases. At Domino’s, we believe we have a proven business model for success that has historically driven strong returns for our shareholders.

Current wording

Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, through an asset-light model. We have historically returned cash to shareholders through dividend payments and share repurchases. At Domino’s, we believe we have a proven business model for success that has historically driven strong returns for our shareholders.

Previous wording

Domino’s financial results are driven largely by retail sales at our franchised and Company-owned stores. Changes in retail sales are primarily driven by same store sales growth and net store growth. We monitor both of these metrics very closely, as they directly impact our revenues and profits, and we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees, as well as Company-owned store and supply chain revenues.

Current wording

Domino’s financial results are driven largely by retail sales at our franchised and Company-owned stores. Changes in retail sales are primarily driven by same store sales growth and net store growth. We actively monitor both of these metrics, as they directly impact our revenues and profits, and we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees, as well as Company-owned store and supply chain revenues.

Previous wording

For certain periods prior to December 1998 and for periods after December 2001, we maintain insurance coverage for workers’ compensation, general liability and owned and non-owned automobile liabilities. We are generally responsible for up to $2.0 million per occurrence under these retention programs for workers’ compensation and general liability, depending on policy year and line of coverage. We are generally responsible for up to between $500,000 and $5.5 million per occurrence under these retention programs for owned and non-owned automobile liabilities, depending on policy year and line of coverage. The related insurance reserves are based on undiscounted independent actuarial estimates, which are based on historical information along with assumptions about future events. There is inherent uncertainty in the ultimate cost for known claims under our insurance coverages, and for incidents that have occurred that will be subject to a claim, but have yet to be reported to us. Analyses of historical trends and actuarial valuation methods are utilized to estimate the ultimate claim costs for claims incurred as of the balance sheet date and for claims incurred but not yet reported. When estimating these liabilities, several factors are considered, including the severity, duration and frequency of claims, legal cost associated with claims, healthcare trends and projected inflation.

Current wording

For certain periods prior to December 1998 and for periods after December 2001, we maintain insurance coverage for workers’ compensation, general liability and owned and non-owned automobile liabilities. We are generally responsible for up to $1.0 million per occurrence under these retention programs for workers’ compensation and up to $2.0 million per occurrence under these retention programs for general liability, depending on policy year and line of coverage. We are generally responsible for up to between $500,000 and $5.5 million per occurrence under these retention programs for owned and non-owned automobile liabilities, depending on policy year and line of coverage. The related insurance reserves are based on undiscounted independent actuarial estimates, which are based on historical information along with assumptions about future events. There is inherent uncertainty in the ultimate cost for known claims under our insurance coverages, and for incidents that have occurred that will be subject to a claim, but have yet to be reported to us. Analyses of historical trends and actuarial valuation methods are utilized to estimate the ultimate claim costs for claims incurred as of the balance sheet date and for claims incurred but not yet reported. When estimating these liabilities, several factors are considered, including the severity, duration and frequency of claims, legal cost associated with claims, healthcare trends and projected inflation.

Previous wording

Our methodology for determining our exposure has remained consistent throughout the years presented. Management believes that the various assumptions developed, and actuarial methods used to determine our casualty insurance reserves are reasonable and provide meaningful data that management uses to make its best estimate of our exposure to these risks. Changes in assumptions for such factors as medical costs and legal actions, as well as changes in actual experience, could cause our estimates to change in the near term which could result in an increase or decrease in the related expense in future periods. A 10% change in our casualty insurance liability at December 31, 2023 would have affected our income before provision for income taxes by approximately $5.6 million in 2023. We had accruals for casualty insurance reserves of $56.3 million and $57.6 million at December 31, 2023 and January 1, 2023, respectively.

Current wording

Our methodology for determining our exposure has remained consistent throughout the years presented. Management believes that the various assumptions developed, and actuarial methods used to determine our casualty insurance reserves are reasonable and provide meaningful data that management uses to make its best estimate of our exposure to these risks. Changes in assumptions for such factors as medical costs and legal actions, as well as changes in actual experience, could cause our estimates to change in the near term which could result in an increase or decrease in the related expense in future periods. A 10% change in our casualty insurance liability at December 29, 2024 would have affected our income before provision for income taxes by approximately $5.1 million in 2024. We had accruals for casualty insurance reserves of $50.7 million and $56.3 million at December 29, 2024 and December 31, 2023, respectively.

Previous wording

The U.S. Federal statutory income tax rate was 21% in each of 2023, 2022 and 2021. Our Federal income tax provision calculated based on the Federal statutory rate was $137.0 million, $120.3 million and $131.4 million in 2023, 2022 and 2021, respectively.

Current wording

The U.S. Federal statutory income tax rate was 21% in each of 2024, 2023 and 2022. Our Federal income tax provision calculated based on the Federal statutory rate was $151.7 million, $137.0 million and $120.3 million in 2024, 2023 and 2022, respectively.

Previous wording

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We measure deferred taxes using current enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid. Judgment is required in determining the provision for income taxes, related reserves and deferred taxes. These include establishing a valuation allowance related to the ability to realize certain deferred tax assets, if necessary. On an ongoing basis, management will assess whether it remains more likely than not that the deferred tax assets will be realized. Our accounting for deferred taxes represents our best estimate of future events. Except with respect to certain foreign tax credits and interest deductibility in separately filed states, our deferred tax assets assume that we will generate sufficient taxable income in specific tax jurisdictions, based on our estimates and assumptions. As of December 31, 2023 and January 1, 2023, we had total foreign tax credits of $16.8 million and $13.5 million, respectively, each of which were fully offset with a corresponding valuation allowance. We also had valuation allowances related to interest deductibility in separately filed states of $1.4 million and $1.5 million as of December 31, 2023 and January 1, 2023, respectively. We believe our remaining deferred tax assets will be realized. Changes in our current estimates due to unanticipated events could have a material impact on our financial condition and results of operations.

Current wording

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We measure deferred taxes using current enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid. Judgment is required in determining the provision for income taxes, related reserves and deferred taxes. These include establishing a valuation allowance related to the ability to realize certain deferred tax assets, if necessary. On an ongoing basis, management will assess whether it remains more likely than not that the deferred tax assets will be realized. Our accounting for deferred taxes represents our best estimate of future events. Except with respect to certain foreign tax credits and interest deductibility in separately filed states, our deferred tax assets assume that we will generate sufficient taxable income in specific tax jurisdictions, based on our estimates and assumptions. As of December 29, 2024 and December 31, 2023, we had total foreign tax credits of $21.0 million and $16.8 million, respectively, each of which were fully offset with a corresponding valuation allowance. We also had valuation allowances related to interest deductibility in separately filed states of $1.4 million and $1.4 million as of December 29, 2024 and December 31, 2023, respectively. We believe our remaining deferred tax assets will be realized. Changes in our current estimates due to unanticipated events could have a material impact on our financial condition and results of operations.

Previous wording

Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide) increased 5.4% as compared to 2022. U.S. retail sales increased 3.1% and international retail sales, excluding foreign currency impact, increased 7.7%, each as compared to 2022.

Current wording

MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 5.9% as compared to 2023. U.S. retail sales increased 5.3% and international retail sales, excluding foreign currency impact, increased 6.5%, as compared to 2023. Same store sales increased 3.2% in our U.S. stores and increased 1.6% in our international stores (excluding foreign currency impact).

Previous wording

Income from operations increased 6.7%.

Current wording

MORE Profits: Income from operations increased 7.3%.

Previous wording

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during 2023, driven by global net store growth and same store sales growth in both our U.S. and international businesses. These factors also contributed to an increase in income from operations. Overall, we believe our global retail sales growth (excluding foreign currency impact), emphasis on technology, operations and marketing initiatives, have combined to strengthen our brand. These financial and statistical measures are described in additional detail below.

Current wording

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during 2024, driven by same store sales growth and net store growth in both our U.S. and international businesses. These factors, as well as gross margin dollar improvement within supply chain driven primarily by procurement productivity, also contributed to an increase in income from operations. Overall, we believe our global retail sales growth, excluding foreign currency impact, marketing initiatives, operations and emphasis on technology have combined to strengthen our brand. These financial and statistical measures are described in additional detail below.

Previous wording

Global retail sales is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales refers to total worldwide retail sales at Company-owned and franchised stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand and are indicative of the financial health of the franchisee base. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. As a result, sales by Domino’s franchisees have a direct effect on the Company’s profitability. Retail sales for franchised stores are reported to us by our franchisees and are not included in our revenues. The amounts below are presented in millions of U.S. dollars.

Current wording

Global retail sales is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales refers to total worldwide retail sales at Company-owned and franchised stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand, and we believe they are indicative of the financial health of our franchisee base. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. As a result, sales by Domino’s franchisees have a direct effect on our profitability. Retail sales for franchised stores are reported to us by our franchisees and are not included in our revenues. The amounts below are presented in millions of U.S. dollars.

Previous wording

Global retail sales growth (excluding foreign currency impact) is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales growth, excluding foreign currency impact, is calculated as the change of international local currency global retail sales against the comparable period of the prior year. Global retail sales growth, excluding foreign currency impact, in 2021 reflects the impact of the 53 rd week in 2020. Changes in global retail sales growth, excluding foreign currency impact are primarily driven by same store sales growth and net store growth.

Current wording

Global retail sales growth, excluding foreign currency impact is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales growth, excluding foreign currency impact, is calculated as the change of international local currency global retail sales against the comparable period of the prior year. Changes in global retail sales growth, excluding foreign currency impact are primarily driven by same store sales growth and net store growth.

Previous wording

Same store sales growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Same store sales growth is calculated for a given period by including only retail sales from stores that also had sales in the comparable weeks of both periods. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported on a constant dollar basis, which reflects changes in international local currency sales. Same store sales growth for transferred stores is reflected in their current classification.

Current wording

Same store sales growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Same store sales growth is calculated for a given period by including only sales from stores that also had sales in the comparable weeks of both periods. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported on a constant dollar basis, which reflects changes in international local currency sales. Same store sales growth for transferred stores is reflected in their current classification.

Previous wording

U.S. same store sales increased 1.6% during 2023, rolling over a decrease in U.S. same store sales of 0.8% in 2022. The increase in U.S. same store sales in 2023 was attributable to a higher average ticket per transaction resulting from increases in menu and national offer pricing. International same store sales (excluding foreign currency impact) increased 1.7% during 2023, rolling over an increase in international same store sales (excluding foreign currency impact) of 0.1% in 2022. The increase in international same store sales in 2023 was attributable to a higher average ticket per transaction across our international markets.

Current wording

U.S. same store sales increased 3.2% during 2024, rolling over an increase in U.S. same store sales of 1.6% in 2023. The increase in U.S. same store sales was primarily driven by higher orders resulting from our Domino’s Rewards loyalty program and other national offers, as well as from Uber’s order aggregation marketplace. International same store sales (excluding foreign currency impact) increased 1.6% during 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 1.7% in 2023. The increase in international same store sales was attributable to higher customer transaction counts, as well as a slightly higher average ticket per transaction.

Previous wording

Net store growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Net store growth is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth. Net store growth during fiscal 2023 reflects the closure of the remaining 159 net stores in the Russia market.

Current wording

Net store growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Net store growth is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth.

Previous wording

On August 21, 2023, our master franchisee that owned and operated Domino’s Pizza® stores in Russia announced its intent to file for bankruptcy with respect to the stores in that market. Therefore, as of August 21, 2023, we have considered the stores in the Russia market to be closed and they are excluded from our ending store count as of the end of the third quarter of 2023. We have presented our statistical measure of global retail sales growth, excluding foreign currency impact, for fiscal 2023 excluding the impact of the retail sales from the Russia market. The 2023 global retail sales growth measures excluding the Russia market are calculated as the growth in retail sales excluding the retail sales from the Russia market from both 2023 retail sales and the 2022 retail sales base. We believe the impact of the Russia market on our statistical measure of global retail sales growth, excluding foreign currency impact, for the fiscal years 2022 and 2021 were immaterial and prior amounts have not been adjusted to conform to the current year presentation. We believe the impact of the Russia market on our statistical measure of same store sales growth for the periods presented was immaterial, and we also believe the impact of the Russia market on our consolidated statements of income related to international franchise royalties and fee revenues and general and administrative expenses for the periods presented was immaterial. We have not received any royalties and fees from the operations of the Russia market subsequent to the Russian invasion of Ukraine in February 2022.

Current wording

On August 21, 2023, our master franchisee that owned and operated Domino’s Pizza® stores in Russia announced its intent to file for bankruptcy with respect to the stores in that market. Therefore, as of August 21, 2023, we have considered the stores in the Russia market to be closed and they are excluded from our ending store count as of the end of the third quarter of 2023. We have presented our statistical measure of global retail sales growth, excluding foreign currency impact for fiscal 2024 excluding the retail sales from the Russia market from the 2023 retail sales base. We believe the impact of the Russia market on our statistical measure of global retail sales growth, excluding foreign currency impact for the other periods presented was immaterial. We believe the impact of the Russia market on our statistical measure of same store sales growth for the periods presented was immaterial, and we also believe the impact of the Russia market on our consolidated statements of income related to international franchise royalties and fee revenues and general and administrative expenses for the periods presented was immaterial. We have not received any royalties and fees from the operations of the Russia market subsequent to the Russian invasion of Ukraine in February 2022.

Previous wording

Revenues primarily consist of retail sales from our Company-owned stores, royalties and fees and advertising contributions from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food, equipment and supplies from our supply chain centers to substantially all of our U.S. franchised stores and certain international franchised stores. Company-owned store and franchised store revenues may vary from period to period due to changes in store count mix. Supply chain revenues may vary significantly from period to period as a result of fluctuations in food and commodity prices as well as the mix of products we sell.

Current wording

Revenues primarily consist of retail sales from our Company-owned stores, royalties and fees and advertising contributions from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food and other products from our supply chain centers to substantially all of our U.S. franchised stores and certain international franchised stores. Company-owned store and franchised store revenues may vary from period to period due to changes in store count mix. Supply chain revenues may vary significantly from period to period as a result of fluctuations in commodity prices as well as the mix of products we sell.

Previous wording

Revenues from U.S. Company-owned store operations decreased $69.6 million, or 15.6%, in 2023 primarily due to a decrease in the average number of U.S. Company-owned stores open during the period resulting from the 2022 Store Sale, but this decrease was partially offset by higher same store sales. U.S. Company-owned same store sales increased 5.4% in 2023 and declined 2.6% in 2022.

Current wording

U.S. Company-owned same store sales increased 3.5% in 2024 and increased 5.4% in 2023.

Previous wording

Revenues from U.S. franchise royalties and fees increased $48.6 million, or 8.7%, in 2023 primarily due to an increase in fees paid by our franchisees for the use of our technology platforms, an increase in the average number of U.S. franchised stores open during the period resulting from net store growth and the 2022 Store Sale as well as higher same store sales. U.S. franchise same store sales increased 1.4% in 2023 and declined 0.7% in 2022.

Current wording

Revenues from U.S. franchise royalties and fees increased $33.3 million, or 5.5%, in 2024 primarily due to higher same store sales and net store growth. Additionally, U.S. franchise royalties and fees benefited from an increase in digital transactions which resulted in an increase in fees paid by our franchisees for the use of our technology platforms, but this increase was partially offset by a net $0.04 decrease in the digital per transaction technology fee to $0.355 effectuated as of March 25, 2024.

Previous wording

Supply chain revenues decreased $39.7 million, or 1.4%, in 2023 due primarily to a shift in the relative mix of the products we sell. Our market basket pricing to stores decreased 0.5% during 2023 which did not have a significant impact on supply chain revenues. The market basket pricing change, a statistical measure utilized by management, is calculated as the percentage change of the market basket purchased by an average U.S. store (based on average weekly unit sales) from our U.S. supply chain centers against the comparable period of the prior year. We believe this measure is important to understanding Company performance because as our market basket prices fluctuate, our revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate.

Current wording

Supply chain revenues increased $130.8 million, or 4.8%, in 2024 due primarily to higher order volumes, as well as an increase in our food basket pricing to stores. These increases were partially offset by a shift in the relative mix of products we sell, as well as the transition of our equipment and supplies business to a third-party supplier. Our food basket pricing to stores increased 1.4% during 2024, which resulted in an estimated $34 million increase in supply chain revenues. The food basket pricing change, a statistical measure utilized by management, is calculated as the percentage change of the food basket (including both food and cardboard products) purchased by an average U.S. store (based on average weekly unit sales) from our U.S. supply chain centers against the comparable period of the prior year. We believe this measure is important to understanding Company performance because as our food basket prices fluctuate, our revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate.

Previous wording

Revenues from international franchise royalties and fees increased $15.1 million, or 5.1%, in 2023 due primarily to an increase in the average number of international franchised stores open during the period, resulting from net store growth and same store sales growth (excluding foreign currency impact). The negative impact of changes in foreign currency exchange rates of approximately $5.8 million in 2023 partially offset the increases in international franchise royalties and fees. The impact of changes in foreign currency exchange rates on international franchise royalty revenues, a statistical measure utilized by management, is calculated as the difference in international franchise royalty revenues resulting from translating current year local currency results to U.S. dollars at current year exchange rates as compared to prior year exchange rates. We believe this measure is important to understanding Company performance given the significant variability in international franchise royalty revenues that can be driven by changes in foreign currency exchange rates.

Current wording

Revenues from international franchise royalties and fees increased $8.6 million, or 2.8%, in 2024 due primarily to net store growth and same store sales growth (excluding foreign currency impact), but this increase was partially offset by the negative impact of changes in foreign currency exchange rates of approximately $5.8 million in 2024. The impact of changes in foreign currency exchange rates on international franchise royalty revenues, a statistical measure utilized by management, is calculated as the difference in international franchise royalty revenues resulting from translating current year local currency results to U.S. dollars at current year exchange rates as compared to prior year exchange rates. We believe this measure is important to understanding Company performance given the significant variability in international franchise royalty revenues that can be driven by changes in foreign currency exchange rates.

Previous wording

Excluding the impact of changes in foreign currency exchange rates, international same store sales increased 1.7% in 2023 and increased 0.1% in 2022.

Current wording

International franchise same store sales, excluding the impact of changes in foreign currency exchange rates, increased 1.6% in 2024 and increased 1.7% in 2023.

Previous wording

Consolidated cost of sales consists of U.S. Company-owned store and supply chain costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food, labor, delivery and occupancy costs. Consolidated gross margin (which we define as revenues less cost of sales) increased $78.8 million, or 4.8%, in 2023 due primarily to higher global franchise royalty and fee revenues, as well as improved procurement productivity within supply chain. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. Additionally, as our market basket prices fluctuate, our revenues and gross margin percentages in our supply chain segment also fluctuate; however, actual product-level dollar margins remain unchanged.

Current wording

Consolidated cost of sales consists of U.S. Company-owned store and supply chain costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food and labor costs, as well as other costs including delivery, occupancy costs (including rent, telephone, utilities and depreciation) and insurance expense. Consolidated gross margin (which we define as revenues less cost of sales) increased $121.1 million, or 7.0%, in 2024 due primarily to higher global franchise revenues, as well as gross margin dollar growth within supply chain, discussed below. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. We generally update our supply chain gross margin structure on an annual basis. However, as food basket prices fluctuate, revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate, and further, cost of sales, gross margins and gross margin percentages for our U.S. Company-owned stores also fluctuate.

Previous wording

As a percentage of revenues, the consolidated gross margin increased 2.3 percentage points to 38.6% in 2023 from 36.3% in 2022. Company-owned store gross margin increased 1.2 percentage points in 2023 and supply chain gross margin increased 1.3 percentage points in 2023. These changes in gross margin are described in more detail below.

Current wording

As a percentage of revenues, the consolidated gross margin increased 0.7 percentage points to 39.3% in 2024 from 38.6% in 2023. U.S. Company-owned store gross margin increased 0.3 percentage points in 2024, and supply chain gross margin increased 0.9 percentage points in 2024. Changes in the significant components of gross margin are described in more detail below.

Previous wording

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) decreased $6.3 million, or 9.3%, in 2023 due primarily to the 2022 Store Sale. As a percentage of store revenues, the U.S. Company-owned store gross margin increased 1.2 percentage points in 2023. These changes in store gross margin as a percentage of revenues are discussed in additional detail below.

Current wording

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) increased $4.4 million, or 7.2%, in 2024. As a percentage of store revenues, U.S. Company-owned store gross margin increased 0.3 percentage points in 2024. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Previous wording

Supply chain gross margin increased $33.5 million, or 13.7%, in 2023. As a percentage of supply chain revenues, the supply chain gross margin increased 1.3 percentage points in 2023, primarily due to lower food cost as a result of procurement productivity. This improvement in supply chain gross margin as a percentage of supply chain revenues was partially offset by higher labor costs as a percentage of supply chain revenues.

Current wording

Supply chain gross margin increased $38.2 million, or 13.7%, in 2024. As a percentage of supply chain revenues, supply chain gross margin increased 0.9 percentage points in 2024. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Previous wording

Labor costs increased 1.1 percentage points to 31.6% in 2023 due primarily to higher wage rates in our U.S. Company-owned stores in 2023.

Current wording

Labor costs increased 0.1 percentage points to 9.2% in 2024 due primarily to higher wage rates in our supply chain centers in 2024.

Previous wording

General and administrative expenses increased $18.0 million, or 4.3%, in 2023 primarily due to higher labor costs.

Current wording

General and administrative expenses increased $24.9 million, or 5.7%, in 2024 due primarily to higher labor costs, partially offset by a shift in the timing of investments.

Previous wording

U.S. franchise advertising expenses decreased $12.1 million, or 2.5%, in 2023, consistent with the decrease in U.S. franchise advertising revenues as discussed above. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated not-for-profit advertising fund is obligated to expend such revenues on advertising and other activities that promote the Domino’s brand, and these revenues cannot be used for general corporate purposes.

Current wording

U.S. franchise advertising expenses increased $36.7 million, or 7.7%, in 2024, consistent with the increase in U.S. franchise advertising revenues as discussed above. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated not-for-profit advertising fund is obligated to expend such revenues on advertising and other activities that promote the Domino’s brand, and these revenues cannot be used for general corporate purposes.

Previous wording

Other income was $17.7 million in 2023, representing the unrealized gains recorded on our investment in DPC Dash based on the active exchange quoted price for the equity security. We did not record any adjustments to the carrying amount in fiscal 2022. Additional information related to our investment in DPC Dash is included in Note 1 to our consolidated financial statements.

Current wording

Other income was $22.1 million and $17.7 million in 2024 and 2023, respectively, representing the net realized and unrealized gains on our investment in DPC Dash. The recorded amount of our investment is based on the active exchange quoted price for the equity security. Additional information related to our investment in DPC Dash is included in Note 1 and Note 4 to our consolidated financial statements.

Previous wording

Interest expense, net, decreased $10.3 million, or 5.3%, in 2023 driven by higher interest income earned on our cash equivalents and restricted cash equivalents in 2023. Our weighted average borrowing rate was 3.8% in both 2023 and 2022.

Current wording

Interest expense, net, decreased $5.9 million, or 3.2%, in 2024 driven by higher interest income earned on our cash equivalents in 2024. Our weighted average borrowing rate was 3.8% in both 2024 and 2023.

Previous wording

Provision for income taxes increased $12.8 million, or 10.6%, in 2023 due to an increase in income before the provision for income taxes, partially offset by a lower effective tax rate. The effective tax rate decreased to 20.4% during 2023, as compared to 21.0% in 2022. The lower effective tax rate in 2023 was driven primarily by higher foreign tax credits. This decrease in the effective tax rate was partially offset by the release of certain unrecognized tax benefits related to one of our foreign subsidiaries during 2022 that did not recur in 2023 and a higher proportion of non-deductible expenses associated with covered officer compensation in 2023 as compared to 2022.

Current wording

Provision for income taxes increased $4.7 million, or 3.5%, in 2024 due to an increase in income before the provision for income taxes, partially offset by a lower effective tax rate. The effective tax rate decreased to 19.1% during 2024, as compared to 20.4% in 2023. The lower effective tax rate in 2024 was driven by a 2.6 percentage point favorable change in the impact of excess tax benefits from equity-based compensation, which is recorded as a reduction to the provision for income taxes. Lower foreign derived intangible income deductions partially offset the decrease in the effective tax rate.

Previous wording

We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization and other, referred to as Segment Income. Segment Income for each of our reportable segments is summarized in the table below. Other Segment Income primarily includes corporate administrative costs that are not allocable to a reportable segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.

Current wording

We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization and other, referred to as Segment Income. Segment Income for each of our reportable segments is summarized in the table below.

Previous wording

U.S. stores Segment Income increased $82.4 million, or 18.8%, in 2023, primarily due to the change in allocation methodology for certain software development costs, as well as higher U.S. franchise royalties and fees revenues, each as discussed above. These increases were partially offset by the $6.3 million decrease in U.S. Company-owned store gross margin, as discussed above. U.S. franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income.

Current wording

U.S. stores Segment Income increased $44.4 million, or 8.5%, in 2024, primarily due to higher U.S. franchise royalties and fees revenues, as well as the $4.4 million increase in U.S. Company-owned store gross margin, each as discussed above. U.S. franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income.

Previous wording

International franchise Segment Income increased $23.5 million, or 9.9%, in 2023, primarily due to higher international franchise royalties and fees revenues as well as the change in allocation methodology for certain software development costs, each as discussed above. International franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on international franchise Segment Income.

Current wording

International franchise Segment Income increased $1.1 million, or 0.4%, in 2024, primarily due to higher international franchise royalties and fees revenues, as discussed above. International franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on international franchise Segment Income. The increase in international franchise Segment Income was partially offset by travel expenses for our Worldwide Rally that takes place every two years.

Previous wording

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. As of December 31, 2023, we had working capital of $67.0 million, excluding restricted cash and cash equivalents of $200.9 million, advertising fund assets, restricted of $106.3 million and advertising fund liabilities of $104.2 million. Working capital includes total unrestricted cash and cash equivalents of $114.1 million.

Current wording

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. As of December 29, 2024, we had negative working capital totaling $904.4 million, which primarily included $1.14 billion of current portion of long-term debt associated with our 2018 7.5-Year Notes and 2015 Ten-Year Notes (each as defined below) for each of which the anticipated repayment date is October 2025. Our working capital amount excludes restricted cash and cash equivalents of $195.4 million, advertising fund assets, restricted of $103.4 million and advertising fund liabilities of $101.6 million. Working capital includes total unrestricted cash and cash equivalents of $186.1 million.

Previous wording

Our primary sources of liquidity are cash flows from operations and availability of borrowings under our variable funding notes. During 2023, we experienced global retail sales growth, excluding foreign currency impact, in both our U.S. and international businesses. These factors contributed to our continued ability to generate positive operating cash flows. In addition to our cash flows from operations, we have two variable funding note facilities. The facilities include our 2022 Variable Funding Notes (defined below), which allows for advances of up to $120.0 million, as well as our 2021 Variable Funding Notes (defined below), which allows for advances of up to $200.0 million and certain other credit instruments, including letters of credit (the 2021 Variable Funding Notes and the 2022 Variable Funding Notes, the “2022 and 2021 Variable Funding Notes”). The letters of credit primarily relate to our casualty insurance programs and certain supply chain center leases. As of December 31, 2023, we had no outstanding borrowings and $120.0 million of available borrowing capacity under our 2022 Variable Funding Notes. As of December 31, 2023, we had no outstanding borrowings and $157.8 million of available borrowing capacity under our 2021 Variable Funding Notes, net of letters of credit issued of $42.2 million.

Current wording

Our primary sources of liquidity are cash flows from operations and availability of borrowings under our variable funding notes. During 2024, we experienced global retail sales growth, excluding foreign currency impact, in both our U.S. and international businesses. These factors contributed to our continued ability to generate positive operating cash flows. In addition to our cash flows from operations, we have two variable funding note facilities. The facilities include our 2022 Variable Funding Notes (defined below), which allows for advances of up to $120.0 million, as well as our 2021 Variable Funding Notes (defined below), which allows for advances of up to $200.0 million and certain other credit instruments, including letters of credit (the 2021 Variable Funding Notes and the 2022 Variable Funding Notes, the “2022 and 2021 Variable Funding Notes”). The letters of credit primarily relate to our casualty insurance programs and certain supply chain center leases. As of December 29, 2024, we had no outstanding borrowings and $120.0 million of available borrowing capacity under our 2022 Variable Funding Notes. As of December 29, 2024, we had no outstanding borrowings and $143.6 million of available borrowing capacity under our 2021 Variable Funding Notes, net of letters of credit issued of $56.4 million.

Previous wording

As of December 31, 2023, we had $149.1 million of restricted cash and cash equivalents held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, $51.6 million of restricted cash equivalents held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of $200.9 million of restricted cash and cash equivalents. As of December 31, 2023, we also held $88.2 million of advertising fund restricted cash and cash equivalents which can only be used for activities that promote the Domino’s brand.

Current wording

As of December 29, 2024, we had $144.0 million of restricted cash and cash equivalents held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, $51.2 million of restricted cash equivalents held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of $195.4 million of restricted cash and cash equivalents. As of December 29, 2024, we also held $80.9 million of advertising fund restricted cash and cash equivalents which can only be used for activities that promote the Domino’s brand.