DOMINOS PIZZA INC

Previous wording

(tabular amounts in millions, except percentages)

Current wording

(Unaudited; tabular amounts in millions, except percentages and store data)

Previous 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.

Current wording

Domino’s is the largest pizza company in the world with more than 22,100 locations in over 90 markets around the world as of December 28, 2025, 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 the past 65 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. 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.

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. 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 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.

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 to a lesser extent, other products 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 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.

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 consistent franchise royalty and supply chain revenue streams, all within an asset-light model. We have historically returned cash to shareholders through dividend payments and share repurchases. 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

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.

Current wording

At Domino’s, we believe we have a proven business model for success that has historically driven strong returns for our shareholders. Our Hungry for MORE strategy aims to generate MORE sales, MORE stores and MORE profits. The strategic imperatives of our Hungry for MORE strategy are as follows:

Previous wording

We record long-lived assets, including property, plant and equipment and capitalized software, at cost. For acquisitions of franchise operations, we estimate the fair values of the assets and liabilities acquired based on physical inspection of assets, historical experience and other information available to us regarding the acquisition. We depreciate and amortize long-lived assets using useful lives determined by us based on historical experience and other information available to us. We evaluate the potential impairment of long-lived assets at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Our periodic evaluation is based on various analyses, including, on an annual basis, the projection of undiscounted cash flows. If we determine that the carrying amount of an asset (or asset group) may not be recoverable, we compare the net carrying value of the asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. For Company-owned stores, we perform related impairment tests on an operating market basis, which we have determined to be the lowest level for which identifiable cash flows are largely independent of other cash flows. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows of that asset, we estimate the fair value of the asset. If the carrying amount of the asset exceeds the estimated fair value of the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value.

Current wording

We record long-lived assets, including property, plant and equipment and capitalized software, at cost. For acquisitions of franchise operations, we estimate the fair values of the assets and liabilities acquired based on physical inspection of assets, historical experience and other information available to us regarding the acquisition. We depreciate and amortize long-lived assets using useful lives determined by us based on historical experience and other information available to us. We evaluate long-lived assets, including property, plant, equipment and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Our periodic evaluation is based on various analyses including the projection of undiscounted cash flows. If we determine that the carrying amount of an asset (or asset group) may not be recoverable, we compare the net carrying value of the asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group.

Previous wording

We have not made any significant changes in the methodology used to project the future market cash flows of Company-owned stores during the years presented. Same store sales fluctuations and the rates at which operating costs will fluctuate in the future are key factors in determining projected cash flows used to evaluate recoverability of the related assets. If our same store sales significantly decline or if operating costs increase and we are unable to recover these costs, the carrying value of our Company-owned stores, by market, may not be recoverable and we may be required to recognize an impairment charge. There were no triggering events in 2024, 2023 or 2022, and accordingly, we did not record any impairment losses on long-lived assets in 2024, 2023 and 2022.

Current wording

For Company-owned stores, we perform related impairment tests on an operating market basis, which we have determined to be the lowest level for which identifiable cash flows are largely independent of other cash flows. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows of that asset, we estimate the fair value of the asset. If the carrying amount of the asset exceeds the estimated fair value of the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value. We have not made any significant changes in the methodology used to project the future market cash flows of Company-owned stores during the years presented. Same store sales fluctuations and the rates at which operating costs will fluctuate in the future are key factors in determining projected cash flows used to evaluate recoverability of the related assets. If our same store sales significantly decline or if operating costs increase and we are unable to recover these costs, the carrying value of our Company-owned stores, by market, may not be recoverable and we may be required to recognize an impairment charge.

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 $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.

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 $2.0 million 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. Casualty insurance reserves are based on undiscounted actuarial estimates. These estimates are based on historical information and on certain 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 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.

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 28, 2025 would have affected our income before provision for income taxes by approximately $5.1 million in 2025. We had accruals for casualty insurance reserves of $51.2 million and $50.7 million at December 28, 2025 and December 29, 2024, respectively.

Previous 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.

Current wording

The U.S. Federal statutory income tax rate was 21% in each of 2025, 2024 and 2023. Our Federal income tax provision calculated based on the Federal statutory rate was $161.8 million, $151.7 million and $137.0 million in 2025, 2024 and 2023, 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 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.

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 28, 2025 and December 29, 2024, we had total foreign tax credits of $25.1 million and $21.0 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 $1.2 million and $1.4 million as of December 28, 2025 and December 29, 2024, 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

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).

Current wording

MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 5.4% as compared to 2024. U.S. retail sales increased 4.8% and international retail sales, excluding foreign currency impact, increased 5.9% as compared to 2024. Same store sales increased 3.0% in our U.S. stores and increased 1.9% in our international stores (excluding foreign currency impact).

Previous wording

MORE Stores: Global net store growth of 775 stores, including 160 net store openings in the U.S. and 615 net store openings internationally.

Current wording

MORE Stores: Global net store growth of 776 stores, including 172 net store openings in the U.S. and 604 net store openings internationally.

Previous wording

MORE Profits: Income from operations increased 7.3%.

Current wording

MORE Profits: Income from operations increased 8.5%.

Previous 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.

Current wording

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during 2025, 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, 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

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.

Current wording

U.S. same store sales increased 3.0% during 2025, rolling over an increase in U.S. same store sales of 3.2% in 2024. The increase in U.S. same store sales was primarily driven by both higher customer transaction counts and higher average ticket, each driven in part by the launch of our Parmesan Stuffed Crust pizza. Multiple windows of our “Best Deal Ever” promotion also drove higher customer transaction counts during 2025. International same store sales (excluding foreign currency impact) increased 1.9% during 2025, rolling over an increase in international same store sales (excluding foreign currency impact) of 1.6% in 2024. The increase in international same store sales was attributable to higher customer transaction counts.

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 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.

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, to a lesser extent, 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

Consolidated revenues increased $227.1 million, or 5.1%, in 2024 due primarily to higher supply chain revenues, higher global franchise royalties and fees and higher advertising revenues. The increase in supply chain revenues was primarily attributable to higher order volumes, as well as an increase in the Company’s food basket pricing to stores. Global franchise royalties and fees increased primarily as a result of higher same store sales and net store growth, and U.S. franchise advertising revenues increased primarily as a result of the increase in the advertising contribution rate, higher same store sales and net store growth. These changes in revenues are described in more detail below.

Current wording

Consolidated revenues increased $233.6 million, or 5.0%, in 2025 primarily due to higher supply chain revenues, higher U.S. franchise advertising revenues and higher U.S. franchise royalties and fees. The increase in supply chain revenues was primarily attributable to higher order volumes and an increase in our food basket pricing to stores, but these increases were partially offset by a shift in the relative mix of products we sell and the transition of our equipment and supplies business to a third-party supplier in 2024. The increases in U.S. franchise advertising revenues and U.S. franchise royalties and fees were driven primarily by same store sales growth and net store growth. U.S. franchise advertising revenues also increased as a result of a decrease in advertising incentives and the increase in the advertising contribution rate. These changes in revenues are described in more detail below.

Previous wording

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

Current wording

U.S. Company-owned same store sales increased 1.5% in 2025 and increased 3.5% in 2024.

Previous wording

U.S. franchise same store sales increased 3.2% in 2024 and increased 1.4% in 2023.

Current wording

U.S. franchise same store sales increased 3.0% in 2025 and increased 3.2% in 2024.

Previous wording

Revenues from U.S. franchise advertising increased $36.7 million, or 7.7%, in 2024 primarily due to higher same store sales and net store growth, as well as the return to the standard 6.0% advertising contribution rate at the beginning of the second quarter of 2024 following the end of the temporary reduction to 5.75% which began in the second quarter of 2023.

Current wording

Revenues from U.S. franchise advertising increased $49.6 million, or 9.7%, in 2025 primarily due to a decrease in advertising incentives, higher same store sales, an increase in the average number of U.S. franchised stores open during the period resulting from net store growth and the return to the standard 6.0% advertising contribution rate at the beginning of the second quarter of 2024 following the end of the temporary reduction to 5.75%.

Previous 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.

Current wording

Supply chain revenues increased $143.7 million, or 5.1%, in 2025 due primarily to an increase in our food basket pricing to stores and higher order volumes. These increases were partially offset by a shift in the relative mix of products we sell and the transition of our equipment and supplies business to a third-party supplier in 2024. Our food basket pricing to stores increased 3.5% during 2025, which resulted in an estimated $142 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 $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.

Current wording

Revenues from international franchise royalties and fees increased $20.0 million, or 6.3%, in 2025 primarily due to an increase in the average number of international franchised stores open during the period resulting from net store growth and higher same store sales (excluding foreign currency impact). These increases were partially offset by the negative impact of changes in foreign currency exchange rates of approximately $0.6 million in 2025. 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

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.

Current wording

International franchise same store sales, excluding the impact of changes in foreign currency exchange rates, increased 1.9% in 2025 and increased 1.6% in 2024.

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 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.

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), insurance expense and other. Consolidated gross margin (which we define as revenues less cost of sales) increased $125.1 million, or 6.8%, in 2025 due primarily to higher U.S. franchise advertising, royalties and fees revenues, as well as gross margin dollar growth within supply chain discussed herein. 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 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.

Current wording

Consolidated gross margin as a percentage of revenues increased 0.7 percentage points to 40.0% in 2025 from 39.3% in 2024. U.S. Company-owned store gross margin decreased 2.4 percentage points in 2025 and supply chain gross margin increased 0.4 percentage points in 2025. 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) 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.

Current wording

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) decreased $12.4 million, or 18.8%, in 2025. As a percentage of store revenues, U.S. Company-owned store gross margin decreased 2.4 percentage points in 2025. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Previous 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.

Current wording

Supply chain gross margin increased $28.9 million, or 9.1%, in 2025. As a percentage of supply chain revenues, supply chain gross margin increased 0.4 percentage points in 2025. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Previous wording

Food costs decreased 1.1 percentage points to 71.3% in 2024 driven primarily by procurement productivity. The increase in the commodity costs within our food basket sold to stores partially offset this improvement.

Current wording

Food costs decreased 0.4 percentage points to 70.9% in 2025 driven primarily by procurement productivity, partially offset by the increase in the cost of our food basket.

Previous 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.

Current wording

U.S. franchise advertising expenses increased $49.6 million, or 9.7%, in 2025, 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 $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.

Current wording

Other expense was $2.5 million in 2025, while other income was $22.1 million in 2024, each representing the net realized and unrealized losses and 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 $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.

Current wording

Interest expense, net, increased $2.2 million, or 1.3%, in 2025, due to lower interest income on our cash equivalents. Our weighted average borrowing rate was 3.8% in both 2025 and 2024.

Previous 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.

Current wording

Provision for income taxes increased $30.6 million, or 22.2%, in 2025 due to a higher effective tax rate, as well as an increase in income before provision for income taxes. The effective tax rate increased to 21.9% during 2025, as compared to 19.1% in 2024. The increase in the effective tax rate was driven by a 2.7 percentage point unfavorable change in the impact of excess tax benefits from equity-based compensation, which is recorded as a reduction to the provision for income taxes.

Previous 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.

Current wording

U.S. stores Segment Income increased $10.0 million, or 1.8%, in 2025, primarily due to higher U.S. franchise royalties and fees revenues as discussed above, but this increase was partially offset by the decrease in U.S. Company-owned store gross margin as discussed above, as well as a shift in the relative mix of labor cost associated with internally developed software. 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

Supply chain Segment Income increased $35.2 million, or 14.3%, in 2024, primarily due to the $38.2 million increase in supply chain gross margin, discussed above.

Current wording

Supply chain Segment Income increased $39.5 million, or 14.1%, in 2025, primarily due to the increase in supply chain gross margin as discussed above.

Previous 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.

Current wording

International franchise Segment Income increased $27.9 million, or 10.7%, in 2025, primarily due to higher international franchise royalties and fees revenues as discussed above. In addition, lower general and administrative expenses also contributed to the increase in international franchise Segment Income in 2025. The decrease in general and administrative expenses primarily related to our Worldwide Rally in the second quarter of 2024, which did not reoccur in 2025 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.

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 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.

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 28, 2025, we had working capital of $134.4 million, excluding restricted cash and cash equivalents of $216.1 million, advertising fund assets, restricted of $117.5 million and advertising fund liabilities of $115.4 million. Working capital includes total unrestricted cash and cash equivalents of $125.7 million.

Previous 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.

Current wording

Our primary sources of liquidity are cash flows from operations and availability of borrowings under our variable funding notes. During 2025, we experienced an increase in both U.S. and international retail sales (excluding foreign currency impact). Additionally, both our U.S. and international businesses grew store counts during 2025. These factors contributed to our continued ability to generate positive operating cash flows. In addition to our cash flows from operations, we have a variable funding note facility. Our Series 2025-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2025 Variable Funding Notes”), allows for advances of up to $320.0 million and issuance of certain other credit instruments, including letters of credit. The letters of credit primarily relate to our casualty insurance programs. As of December 28, 2025, we had no outstanding borrowings and $263.6 million of available borrowing capacity under our 2025 Variable Funding Notes, net of letters of credit issued of $56.4 million.

Previous wording

Our ability to continue to fund these items and continue to service our debt could be adversely affected by the occurrence of any of the events described in Item 1A. Risk Factors. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under our 2022 and 2021 Variable Funding Notes or otherwise to enable us to service our indebtedness, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our Notes (defined below) and to service, extend or refinance our 2022 and 2021 Variable Funding Notes will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Current wording

Our primary sources of liquidity could be adversely affected by the occurrence of any of the events described in Item 1A. Risk Factors. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under our 2025 Variable Funding Notes or otherwise to enable us to service our indebtedness, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our Notes (defined below) and to service, extend or refinance our 2025 Variable Funding Notes will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.