In this episode, Bryce and Alec talk to someone who successfully climbed the entire corporate ladder. Don Meij has worked at Dominos for 3 decades, having started as a delivery driver in 1987, and working his way up to become CEO and Managing Director of Domino’s Pizza Enterprises – where he oversaw an ASX listing in 2005, and an international expansion throughout the 2010s. Domino’s now enjoys a network of over 2800 stores in 10 countries, and is a true Australian success story. He’s one of Australia’s great entrepreneurs and during this episode we get stuck into the conversation about the story to date, the technological developments of the company, and his approach to people and culture, as well as his answer to some of your community questions.
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Bryce Leske: [00:00:14] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going? [00:00:29][14.6]
Alec Renehan: [00:00:30] I'm very good. Bryce very excited for this interview. You started the financial year by saying you want to interview all ASX 200 CEOs. I thought that was a big, lofty goal, but I loved it. And it's really exciting that we're starting to chip away at it. [00:00:45][15.5]
Bryce Leske: [00:00:45] Yes, we are. We're slowly getting through it. And we have an absolute ripper of an interview today, Ren, you know, that there's that sort of workplace mythology around people who started in the mailroom, you know, those that started in the low paid positions of a company and really climbed the ranks all the way to the top job. Well, today, we are talking to one of these people who successfully climbed the entire corporate ladder. Don May has worked at Domino's for three decades, having started as a delivery driver in 1987 and working his way to become CEO and managing director of Domino's Pizza Enterprises, where he oversaw an ASX listing in 2005. International expansion through the 2010s. And now Domino's enjoys a network of over 2800 stores in ten countries and is a true Australian success story. Don is one of Australia's great entrepreneurs and we can't wait to get stuck into this conversation about story today, the technology developments of the company and his approach to people and culture. So it is an absolute pleasure to welcome Don May. [00:01:46][60.7]
Don Meij: [00:01:47] It's great to be here. [00:01:47][0.6]
Alec Renehan: [00:01:48] Thank you. Now, Don, we do like to start these interviews by having the CEO describe their company in their own words. So to kick us off today, what is Domino's? [00:01:58][10.0]
Don Meij: [00:01:59] Yes, a Domino's is the world's largest and most loved pizza company that's pioneered the home delivered food market globally. And it's still what we're best at today. Digital delivery is the essence of what drives the underlying growth for our business globally. Domino's itself is the brand and where Domino's Pizza Enterprises. So we're just about to open our three thousand store, which clearly makes us the biggest Domino's group within the world. [00:02:26][26.9]
Bryce Leske: [00:02:26] Now, before we get into the nitty gritty about the actual company, we've got to ask and I'm sure you've had this thousands of times before, but what is your favourite pizza topping? [00:02:34][7.9]
Don Meij: [00:02:35] Yeah, pepperoni. It's bizarre, but I do eat a lot of pizza when I'm travelling, particularly throughout our business. You're always testing all the new products. I just got back from Europe, so I had a lot of pizza and pepperonis. Always my go to in the with with Filipino's. [00:02:49][13.7]
Bryce Leske: [00:02:50] Oh, nice addition. [00:02:50][0.6]
Alec Renehan: [00:02:53] I guess we have to ask the most controversial question when it comes to pizza. Does pineapple belong on a pizza? [00:02:58][5.3]
Don Meij: [00:02:59] Absolutely. Absolutely. I think I mean, it's not a supreme without a pineapple pineapple on there. And of course, the ham and pineapples just iconic in Australia. [00:03:08][9.0]
Alec Renehan: [00:03:08] So, Don, if Bryce gave a little bit of your background there, starting as a pizza delivery driver in 1997, working all your way up to leading this massive global business, but we'd love to hear it in your own words. Can you can you tell us that story, how how it started and how you got to where you were? [00:03:26][17.5]
Don Meij: [00:03:27] Sure. Like most of our team members would be getting towards a hundred thousand team members around the world right now. But I started as a pizza delivery driver while I was studying at university, studying to be a high school teacher. And I actually delivered pizza for two years, which isn't as common. Many of our drivers are maybe with us for 12 months. And then I the progress with the business or at least part time work. So two years is buy time is actually quite long in our business. Yeah, I got towards the end of my degree, I realised I didn't want to teach and so I just took a full time job thinking I was going to start a new degree, nine months to go. And my kids always remind me that I didn't graduate from college or university, although I expect them to. And but yeah, we were a little company then called Silvio's Pizza, which was only based in south east Queensland. We had 15 stores and so I took a manager's job. I did that and loved it and my father was a businessman. So just all these memories and the thrill of creating things and turning something that was wasn't successful into something successful really motivated me. So I was manager of the year for that little business that year. Then I became a supervisor and operations manager and a small shareholder in Silvio's and then in nineteen ninety three. So six years later we acquired the rights to Domino's and it it closed down everywhere else in Australia to Sydney, and we didn't have any stores in Sydney. So the founder of Silvio's remained running Silvio's and I actually went down to Sydney and Ren Domino's. And that was the most incredible period of my whole career where I really got to understand the pizza business because he was is this originally a US founded business that, like a lot of US companies, was failing all over the world except for in the US. And yet so, you know, when we can. Pitted against dominoes, we always thought that it wasn't a great concept, but actually was a great concept that just had not been applied in an Australian way and having the Australian pizza knowledge added to a great concept. After two years of running two separate brands in ninety five, we decided, look, it's silly buying all these different media and creating different products. We had to merge and become one brand. And I was the smaller shareholder, but I fought really hard. It should be Domino's because I just believe that in those days we had two big competitors in Pizza Hut and another company called Pizza Haven. And if we're ever going to be seriously competitive, we needed to tap into the global insights of Domino's and so convinced my my fellow shareholders and and between ninety five, ninety six, we converted all the super stores to Domino's. And because I fought so hard, I also thought that I should lead by example. So I went and franchise and I bought my first store in Morayfield, Caboolture, which is just north of Brisbane in January nineteen ninety six with a dream that I have a 15 or 20 years, I'd have 20 stores, which was model of another franchisee in the US and well, overnight that first or Mark Caboolture became the second biggest Domino's store on the planet. For the next three years, we we would go to the US to a rally and I kept getting knocked off by a store in Iceland, believe it or not, know which is which is really interesting. And we just kept I mean, this was a really, really busy pizza store, said it was the second biggest in the world for Domino's and Australia had never seen anything like it in our company. So then all over the next five years, I grew to 17 stores, went up into Toowoomba and the Sunshine Coast and parts of Brisbane. And and I was the 20 store plan was happening really quickly. This little business making a couple of million a year selling pizza. And so by 2001, whilst myself and some other franchisees were doing quite well, the company still was quite small. We were one hundred and seventy four stores. There was another company called Eco Boys, which was one hundred and sixty eight, also basically the same size company called Pizza Heideman, which was a copy of Pizza Hut, which was two hundred and eighty four stores, and then pizza that four hundred and twenty seven stores at that time. And so I was down in Sydney going to the city to finally treat myself. And I caught up with the the, the chairman and the largest shareholder who's Mr Jacquemin and still our chairman today. And Elijah and his family is our largest shareholder. And he said, look, Don, you've had a lot of fun, but it's time to come in and get back into the company, which which took a lot of a lot of thought and stress, because when you're running your own little franchise, you're your own boss. I had 500 team members loving life, master of your own destiny. Getting back into a bigger company and driving and leading through others is is a different kind of journey. But there's a competitive nature in who I am. And so the idea that if we could be market leader in our own communities, why couldn't we be the biggest pizza company in Australia? And so in 2001, one another franchisee, Granpa, still a director and a significant shareholder in our board. He used his eight stores. I use my 17 stores and we ended up buying twenty and then twenty five per cent of Domino's Australia. Then that's we were only in Australia. In fact, we hadn't even gone into Melbourne yet. And within two years we became the market leader. I became the CEO a year later and it was just extraordinary. That closed about 130 stores. We opened a lot of stores ourselves, went so well and that was a hell of a journey. So we we started to expand around Australia. We went into New Zealand. We became the market leader there within a very short period of time as well, which was quite extraordinary. And then being as the country was getting so big so quickly, Grant decided that you didn't want to be part of the leadership team directly. I still like to be involved in the business. So rather than we keep buying each other out over time, we decide, well, why don't we list this business then? We'd have and you know, as an entrepreneur, I just have this insatiable appetite for growth and and the enjoyment of building teams and building products and building a business. And so so two thousand five, we listed the business. I think I share prices to Dollars twenty. We had a market cap of one hundred and twenty million. And then we were a little bit concerned in two thousand five, six that would we eventually grow out of Australia and New Zealand. And we had to make a decision because we were worried that there'd be only so much pizza Australians and New Zealanders would eat, which, by the way, we're very naive to because we're still growing today. But we did this model called one degree of separation, that is, should we remain Australian, New Zealand and do other brands, which can be quite common. Other franchise brands, it may be including creating our own or do we are we really good at Domino's? And would we like to take another Domino's Pizza around the world? And the Domino's model is is a really, really amazing model. And it's it's there's very few like it in the world. We're not the only successful group around the world. There are other quite successful master franchisees. We're the biggest. So anyway, we convinced ourselves that the one degree should be that we should be continuing to grow Domino's. And and so we really listed. Twenty million dollar market cap to Dollars, 20 share price, and we acquired the rights to France, the Netherlands and Belgium in 2006 for eight point seven million euro, roughly 12 million Australian dollars at a time. It's probably worth four or five billion today in our portfolio. But it was it was challenging because, you know, Australian retailers have got a poor track record travelling overseas. And so we had a lot of shareholders who questioned us and rightfully so, because we could have been naive. And, you know, we bought a business that basically was losing money and it still hadn't paid any royalty to dominate in the US. And we bought France and were given the Netherlands and Belgium for free, which is the population of Australia, New Zealand. I learnt as a young franchisee whenever this opportunity to take territory grab as much as you can, you probably never regret it. Mr Draw Farms into the maps around the stores when I was buying them, because you never know. There could be houses one day and that's worth money because that's the value and Dollars is your territory. So anyway, long story short, we acquired France, Netherlands and Belgium. The irony of all of it is that the Netherlands was the one that took off first and the Benelux outside of Australia, New Zealand was historically our second most successful business until recent years. Just incredible. The reason we were given it for free is because a lot of people didn't think the Dutch would eat pizza and a very frugal market. Well, we're not only the biggest pizza company in the Netherlands, we're now bigger than McDonald's by store count, not by sales yet. In fact, we're bigger than McDonald's in Belgium as well into account. And we will beat them in sales and our own belief in years to come. And then we went into Japan nine years ago, September nine years ago. A lot of people said, what are you doing this time? You know, the Japanese don't eat pizza. We believe that they would. But at least in the near term, there was enough market share to go after. Today, it's the fastest growing business we own. It's extraordinary what's happening in Japan. And then, yeah, we went into Germany four years ago, four and a half years ago. Dollars had never made it in Germany. It's the second fastest growing business we have today. Also extraordinary. Just came out of Germany a few weeks ago. What a business. It's going to be huge. And in more recent years, we've acquired Denmark a couple of years ago, Luxembourg, and we take on Taiwan at Ten Country in thirty first of August. So, yeah, you know, we are now betting on three thousand stores. And it's really interesting, you know, today where as we take on Taiwan will be three hundred sixty five million population. When I grew up in this business, I had two members of the world as an Australian. There's not that many Australians. And the Aussie peso, you know, it was one minute you'd be parity over my lifetime. And next thing you could be down to forty eight cents really hard on a global scale when you've got US investors and international investors that that fluctuation as a business. And and when we what we have today is we have a business of three hundred and sixty five million people. That's a bigger population in the US. And when you add those ten countries together, it's a bigger GDP than China. So and it's mostly euro yen denominated, of course, that take on a Taiwanese currency and Kiwi and Danish krona. But the big nuts and bolts of our business today in growth is your own yen. So these are really solid, historically global strong currencies or currencies fluctuate. But yeah, it's nice to have those. And and the irony as well as that, in the in the last decade, the 60 million Australia, New Zealand and the Benelux was the main driver of our business credit the core of our earnings. But in the last couple of years, it's Japan, Germany and France. It's 280 million people and they're just on a tear. And shareholders, I can't talk about our results and so on because we report next week. But our shareholders can track our store, count live on our website. So as the store opens, it goes on there live and we open two hundred eighty five stores in the last financial year, which was a it was a huge record in Japan. France and Germany led the charge. So it's exciting days ahead. [00:14:19][652.5]
Alec Renehan: [00:14:20] Yeah, it's it's an incredible story. And it's probably one of Australia's best business stories, both you personally and what Domino's has done. And I think people just look at it as a pizza store and and look past the incredible story that you're building overseas as well. We'd love to sort of unpack some of the lessons that you've learnt over the journey and growing, growing this business. If we start in Australia, you know, you mentioned there that when you came in to head up Domino's, it was very you had big competitors that were bigger than you. But very quickly, you took market leadership roles. So what were some of the things that you employed to to get there? And I guess these days you're you're the big fish in the pond and you've got competitors nipping at your heels. How do you think about competing with new pizza upstarts? [00:15:10][49.7]
Don Meij: [00:15:11] Yeah, so. Here in the value, business and value of Domino's is you take product, service and image, you divide it by price equals value. So the better productivity a service, the better your image in the eyes of the customer. Then you can be a little even being a price control and you can actually be a little bit more expensive and be great value in that retail model we believe applies to everything. And so we continue as a business focus on our product, service and image. And that's what we did right back in those early days to what we still do today as we enter a new country. We've never arrived as the market leader and we have we're not yet in Taiwan, but we're the market leader in every of the other nine countries we've been in and operated so far. And so we underline that we have a business model called high volume mentality. And high volume mentality is all about removing all the mental and physical bottlenecks in a business and your sales will go up. I'll give you a really simple example is that when we went into France, the French franchisees would say we're not even allowed to sell beer or wine. Euro Disney sells beer and wine. And historically, Domino's didn't sell alcohol because we're in the delivery business and the idea of drink driving would ever be a risk control. But that was sort of a US Australian view of the world. That was a European where Europeans are far more responsible with alcohol. They don't have anywhere near the bingeing culture that Australia and Britain and America has. And and so the the idea of of removing a mental bottleneck by letting the franchisees sell beer and wine was an enabler. We didn't think it was going to make the business the most successful piece, but it was a mental barrier. If we can't sell beer and wine, we can't be successful. Okay, well, let's sell beer and wine, by the way. He's a bunch of other things that we think of actually even more important at delivery times and and so on. So in Australia, that was very much the early journey, was how do we differentiate? We've got the that the attitude of an eighteen to twenty four year old Dollars was born in universities. And and so with that attitude, with this high volume mentality and then intensely focussed on product service and image of the brand, these are some of the key things. And obviously there's a lot more than that. But there's some of the key things that drive that business. [00:17:18][127.9]
Bryce Leske: [00:17:19] So then moving overseas. You've mentioned that you've reached into Asia, obviously Europe, you know, Germany, Belgium, France, you know, you've mentioned them all. You said there that at most instances your shareholders didn't believe that it could be possible and there was a lot of pushback. So how do you approach these different markets? Was it was your mentality, the whole build it and they will come you or so you are. So I guess trusting in the product that you had or what was your approach to each individual market? [00:17:49][29.9]
Don Meij: [00:17:50] And by the way, especially in the early days, we were very nervous because there is no guarantee. And the first thing is that when we travel, we travel as entrepreneurs, not as Australians. Our competitors in France are the the other French pizza players. All of us are in the Netherlands and Belgium. And one of the most offensive things for any company when it travels and it tries to take its brand or business overseas, is to continue to refer to the mothership in the name of that country, you know, in America or in America or in Australia. In Australia. Well, guess what? When you look outside, it's France. And if you if you use the national identity where you come from as your lead, in most cases that's alienating because people go on to shutting down because you're very narrow, you're Australian and this is France, but with an entrepreneurial model and you just talk to a high volume mentality. Products services provided by price equals value is that we speak pizza. We speak, we speak the laws of philosophies around business. And therefore these are, as I've turned out, now tried and tested business models. Inevitably, people want to compare the countries because there is some competitive spirit. Great. But the primary focus is on the entrepreneurial models today. That's our technology as well and so on, that we had that innately because we were used to the Americans coming into Australia and and actually filing the first three times. And it was a good business. They just were. It's not America. You know, Australians have a is a socialist country. We don't like to always admit that, but we're very, very heavily socialised country, by the way. So in nearly all the ten countries that we operate in and we have a we have minimum wages, we're an island. We don't have a third workforce that works for below minimum wages and tips at tastebuds. The same Australians watch a lot of American content, but Americans don't watch any Australian content. In fact, Australian content is American content. That's for Australian Crocodile Dundee or or Australian movie stars that move overseas and become, you know, in a sense, American actors. And and so it's very easy to misjudge us. Well, that's the same as us. If we travel to France, it's easy to have all of these tourist ideas of what is real, France or Germany or Japan. And I'll give you another example is that going into France, our philosophy is always fresh, is best making fresh dough toppings fresh and so on. Will the French believe Frozen is better than fresh, that when you when you freeze something at the point of picking a vegetable, by the way, scientifically, they're right. [00:20:10][139.8]
Bryce Leske: [00:20:11] They go. [00:20:11][0.2]
Don Meij: [00:20:13] So it's not it's not for me to change Australians view of the world because that they're right in their own minds, but and this whole change in France called Picards, which are frozen freezers full of incredible meals, and the French love them. And it's a hugely successful chain because the mentality is frozen is better than fresh. Now, I was having arguments with our when I first arrived and I went to second go back to a philosophy. If the French belief is better, why am I arguing this? And technically it is anyway. So you got to be very careful with your philosophies and be very firm on business models and be careful to have those blinkers because you'll get caught out. I mean, when we go into Taiwan, Taiwan's obviously clearly influenced by China and historically by Japan and so on, but it's still Taiwan. And so we still got to look through the lens of of it as a market. And and that will be differences. And we've got to keep our open eyes, [00:21:08][54.8]
Alec Renehan: [00:21:09] I guess, on that on that point, with the international expansion, you know, it feels like you've built a good team or you yourself have built and develop skills to really understand markets in ways that, you know, the Americans coming to Australia haven't. What I guess, what are some of the key things you do when you're scoping out a new market? So if we take Taiwan as an example, is it about finding the best people in the local market? Is it about spending a lot of time there? How do you actually understand these markets better than a lot of your competitors have historically. [00:21:43][34.0]
Don Meij: [00:21:45] So one of the first things we do is we do some pretty extensive research often in history, some of the most in-depth research probably ever done on the pizza category, but with a number of questions where we're not predicting the outcomes of those questions, we're very open minded because donors isn't the same product all over the world. Our product is very adaptable to whichever country or in the way we take the brain could be quite different. For example, in France, in the Netherlands, when we first went there, France food is life to the Dutch, food is fuel. In France, more women eat pizza than men, in the Netherlands, more men than women. So really dramatic cultural things. Now, if you're having one Domino's brand and you apply in exactly the same way, you're missing a lot of really important relevance to the consumer. So our early days in France was very much a very feminine brain and really enjoying some of the delightful menu development and brain development that really put women at the front centre of our thinking. Whereas in the Netherlands it was functional food and it was all of the very service and price and and stomach filled. Now, the Dutch have moved on. It was really ironic when we were in the Netherlands in that first year, the I read an article where the Australians were being fed in Afghanistan by the Dutch army and food was unacceptable, was inedible. And culturally, that's where the Netherlands was in those days. And said the Netherlands now has is is a far more global and cuisine and so on. But so doing really extensive research to find where could you differentiate against who's in the market. We also a lot of companies look at the market size and shape and then run to the rules of the market. We look at it and say, well, what rules haven't been applied yet to this market and could they work? We went into Japan, the whole pizza delivery business, sorry, the whole pizza business was a delivery business and it was founded in the eighties when rents were so expensive that all the pizza shops were in and Domino's that had gone there. First we're in the garages under buildings for no carry out. So they were doing five percent out. Well, decades of change, deflation, rents in Tokyo were cheaper than in Brisbane and years and years of deflation. So and Japan is dominated by convenience store operators like 7-Eleven and family Martin Lawson's, which are these big multi thousand store chains. And they were changing their model, moving from 100 to 120 square metre shops to 300 square metre shops of convenience. And a couple of thousand of these sites were hitting the streets every year. So perfect Domino's stores on the high street where we could do carry out and franchising hadn't been applied heavily in Japan. So there was all these sort of philosophies of what was missing around changing the model, relocating all the stores from the dungeons of Japan to the high street, looking stores more approachable, you know, franchising the model as well today, where half franchise, half corporate going and looking at pizza was considered an exceptional food because it was only ever marketed at Christmas, New Year and Golden Week. And that's when it did all. Its business was considered a treat when we started chasing the customer in different areas and growing consumption. So if you just look at the power of the market, yes, I will have. Can you be will we look at the market, all the research and then say, well, what's missing that we think we can bring? Cultures also value, especially the Japanese. What authentic things are you bringing if you want to be successful here? We're Japanese, but we do also value if you're going to bring something to our culture and we're going to reward you for that. And and it's trial and error and testing and lots of innovation is hundreds and hundreds and hundreds, if not thousands of tests to get ones that crack through. And then you become like a crazy person to bring them to life. And that's what we've been doing. [00:25:35][229.6]
Bryce Leske: [00:25:36] Well, speaking of innovation, Don and Antec, we'd love to dig into all of that. But before we do, we'll just take a quick break to hear from our sponsors. So, Don, there's no doubt that Domino's has often been spoken about as a tech business that sells pizza Ren and I witnessed the incredible growth in share price of Domino's while we were at university and completely missed the boat on the whole thing. So spewing about that. But no doubt at the time it was tech, tech, tech. And so how do you think about Domino's unique value proposition and what role does tech actually play within your business? And I guess is this is the phrase tech business that sells pizza, is that right? [00:26:24][47.7]
Don Meij: [00:26:24] Yeah, it's really interesting. That's something the media gave us and I've quoted it endlessly. But for the record, for all of your investors, which are hopefully becoming sophisticated investors, we are absolutely a pizza company first. Absolutely. But like any successful retailer in the last 15 years, we embrace technology. But it was all of that technology was to help us sell pizza. And we're passionate about pizza. We had to build a lot of technology skills as an innovative business. We use technology to help us innovate and bring and enable so many of these products, service and image tools. And so that's why it's probably confused so many. And yet it's funny how the media works. It's something that's quoted by journalists. And then someone refers to that article. And as if Domino's had said and then from then on, it's alive and look at the end and it's not the biggest thing. But but we genuinely a pizza company first. We're obsessed with pizza. It's in our purpose. We we believe pizza. Our pizza brings people closer is our purpose. It's all in our values. We live and breathe it all day. And we love pizza. And that's who we are first. So thanks for asking you. [00:27:34][69.7]
Alec Renehan: [00:27:34] You may be a pizza company first, but you have trialled and tested some pretty cool pieces of tech. My mind goes to drone delivery in New Zealand and also the pizza delivery robot, which was I think was nicknamed Drew as a new way to sort of deliver pizza. I mean, there's some pretty cool technology that you wouldn't expect pizza company to be sort of on the forefront of. So I guess what have you learnt from those trials? Autonomous vehicles and drone delivery? And how do you think about the tech pipeline for Domino's going forward? [00:28:11][36.7]
Don Meij: [00:28:11] Yes, a lot of people think that these are gimmicks and that we just sort of pushing the envelope and playing with technologies for fun and gimmickry. But you raised Drew - Domino's Robotic Units - and that's absolutely not a gimmick. One of the problems that we will face as a business and our facing is that we're in this age of delivery. So the boom in delivery pre Covid during Covid and will be post Covid. You know, different analysts around the world are predicting that half of all retail by the end of this decade will be delivered. It's just so convenient. And and the problem is there's not enough human beings on the planet to deliver the number of packages required from all retail. Forget pizza, forget aggregators, but think everything retail, a large proportion being delivered. So when you say it could be half, it doesn't mean it's whole. So they're still going to be, you know, omni channel locations. But the sitting in Silicon Valley on one of our tours and understanding where we were going, I had one of those Kodak slash Blockbuster moments where, if we can't deliver our product, there's not enough people in years to come, we're out of business. So that's why we started playing with these tools and we still are today. We still got a robotic trial in Germany. We're about to reignite our drone training in New Zealand, the business part of that, to build a much bigger drone that could travel further into a bigger payload because our average order is bigger than a lot of people think. But know that these things are really important to us because pre Covid, we'd already hit the wall. So we're in Japan, we're in Europe. We're suffering that. We couldn't stop our stores. Now, unfortunately, Covid unleashed a lot of drivers into the market. But as we see, as we've seen that open up again, Australia pre this recent lockdown's we're back to type delivery driver market, the US is having a nightmare. Europe started to return. And and so therefore, we're going to see wage inflation. And then that leads us to innovate a lot. If you see our three ten delivery model where we our ambition is to deliver pizzas another ten minutes, and in many cases we do, that's all about how do we do more deliveries per hour because inevitably going to pay our drivers more. And if you do for deliveries an hour and you're paying twenty five dollars, well, you can pay more if you can do five deliveries per hour or six deliveries per hour and at the same cost base per order. So we're obsessed with a faster delivery efficient, makes us more able to pay more. It's got a huge benefit of. Convenience to the customer, but it's also delivers a better product, because the quicker we can get from our ovens to your door, it almost becomes restaurant quality food. And our goal is to get within a three to five minute window, which our competitors don't even come close. And these are the things that we obsess around and technology around that. So the technology that was very consumer facing in the last 15 years, you know, our apps and all of the cool things we brought to that, then we became good marketers around that. A lot of the innovation isn't as obvious to shareholders, to consumers, but they're getting the benefits because they're things like we have a thing called the future or screen, which predicts when you're in the app, we're predicting if you're going to make you're going to place that order and we stop making and baking it to give ourselves a head start faster. Oven's on and on and on. A lot of the technology we're creating is operational technology. It's not as sexy to talk about to customers, but they're getting the benefit because that's why Domino's is delivering a lot of fresher pizza more consistently. [00:31:43][211.3]
Bryce Leske: [00:31:44] Alec and I have a retail background. Both I worked for Woollies and Ren was at Kohl's. And so, you know, that last mile is always has always been a challenge for that, for the delivery space. So it's it's fascinating what the technology is is helping in that area. I remember when we were I was living with a housemate, though you'd be pleased to know, Don, I think from memory, if the delivery was outside that 10 minute window, there was some sort of money back or some sort of guarantee. And as much as we tried to push those drivers to be outside, that 10 minutes never happened. We always got that paid. So they were on their own to. [00:32:22][38.2]
Don Meij: [00:32:23] And that is a stupid thing to do. [00:32:24][1.1]
Bryce Leske: [00:32:25] Well, we were pushing let's have a chat about the franchise networks. So how do you think about balancing a network of company owned versus franchise stores? [00:32:35][10.0]
Don Meij: [00:32:36] Yeah, so as I said earlier, we're in the pizza business and then the way that we've grown that throughout the world is using the model of franchise and franchisee health and wellbeing and success is as critical as being the best thing in the value equation for pizza in our market. And you'll see a report on franchisee profitability in the coming year and just the success of our franchisees. The reason we have corporate stores is we want to be the biggest franchisee in each market in our corporate stores because we want to walk in the shoes of our franchisees. We want to do a lot of our own testing and failing in our own stores rather than fail in our franchise stores. It also helps us grow future franchisees. So when we're when we're expanding the markets rapidly in Asia and Europe is, you know, yes, we've got some franchisees growing, but we're growing managers. They're our future franchisees. So the more successful cooperatives we have in these high growth phases of our business, then they will feed more store openings as well. So most of our corporate store growth will be in Asia and Europe. Australia is at a scale now. We still have about 350 stores to open in Australia and New Zealand, but we already have enough of a franchise base. And so our corporate store base will be more modest in years to come, circa 40 to 60 stores in Australia and which do put us as the biggest franchisee, which is the first priority. [00:34:00][84.2]
Alec Renehan: [00:34:01] The growth rate you're talking about, Don, is pretty incredible. You know, you say, oh, it's pretty saturated in Australia, but we still have three hundred and fifty per Bryce. And I come from, you know, obviously the stores were bigger, but we're talking about store networks of 1000 that might open, you know, 20 to 50 a year. So it's it's pretty incredible the growth that you're still saying in an already saturated market, I guess. I guess the question is, you know, once Australia's saturated, once you have a dominant market share in the country you're in, what how do you think about growth from there? Is it just is it more more countries just opening up new markets? [00:34:42][40.4]
Don Meij: [00:34:43] We are fortunate enough that we do have some pretty big geographies that are a long way from penetration. So in our existing geographies, we've got at least 10, most likely more than 15 years of growth. If you look at Japan, Germany and France, particularly the Benelux, in Australia, New Zealand, they'll get there a lot sooner. And fortunately, that's only 60 million of the three hundred sixty five million today. So the the other three hundred million once we had Taiwan is still a lot. It's still a bigger share of our business, at least 10 to 15 years of growth. But we are still pursuing more countries as well. You know, we have the management. We have, you know, at one digital platform, which is our technology platform is globally adapted. And as we turn it on, it's been successful in every country created in Brisbane and killing it in Japan and Germany and France, you know, places that you would think surely that some of the more sophisticated. But, you know, we've done a good job with the team. So, yeah, we think that we can apply our model to more countries. You know, if you said to me in in the next five to ten years, I'd be surprised if we got any more than four or five countries in our network. Because we still have so much to do with what we've got, you'll also note that as time goes on and we hit new penetration models and new tipping points, we do upgrade the outlooks for countries. So when we bought Japan was 800, then it was a thousand and fifteen hundred. And who knows in the future. Even Australia, when we listed, I think we said it'd be 500 odd stores. And now we believe Australia, New Zealand is going to be twelve hundred stores. So I think Australia, New Zealand will probably be maxing out at around twelve hundred stores. But the other countries, my gosh, we've got a lot of growth to come. [00:36:18][95.2]
Bryce Leske: [00:36:20] So, Don, one of the important parts of understanding a business when it comes to investing and particularly for retail investors, is to understand management. So do you have a leadership philosophy as CEO? [00:36:32][12.0]
Don Meij: [00:36:33] Yeah, and it has changed over the years as I've matured, especially in my role today. I see myself as a servant leader and that. Was a key part of our job is living in the next five to 10 years, so make sure we're seeing the potholes, the things that can kill us so that we're investing and navigating the the environment. So that's a big part of my job. But the other part of my job is that I don't I don't physically operate any of the business units. We've got a CEO in every country. So my job is to is to support them and equip them and give them the tools and enable them and challenge them so much more of a servant role. As much as I may be their boss, in many cases, it's not the culture of our business. I mean, these these CEOs are very empowered to run their business units. We have we have global products. And, you know, the things that we do with our technology and our strategy and insight tools and some of the ESG work we're doing, we're aggregating some of the global news and finance, of course, because we consolidate onto the ASX. But in market, you're marketing your development, your operations, your products, very local, the main driving things of any country. And so, yeah, I feel like my job as a servant leader to to to be there for my team at the same time, challenge them to be the best they can possibly be and enable that with the tools that we're bringing forward globally to give them and make them the best in their markets. [00:37:57][84.6]
Alec Renehan: [00:37:58] I love I love that comment you made there about your feet, your living three to five years in the future. There's a Jeff Bezos quote that said something similar that has always stuck with me. And, you know, he would say, don't congratulate me on my current quarter because I delivered that three years ago. And so, you know, fast growing CEOs, you love to say that they're thinking so far ahead. But I guess with that comes the fact that you need to build the right team to deliver the current quarter and live in the moment. How do you think about, you know, building a team across all these different geographies and and building a consistent company culture across across the business? [00:38:34][35.7]
Don Meij: [00:38:35] Most of the CEOs have been ex franchisees. And that's a key part of our model, is that we look at any country in business and we look for the leading sub franchises and that can get Groundhog Day Afterpay a time. You know, you call rooms broken down today. I drive it in turn up to work. There's been a safety or security issue that you've got to be all over. And after time, it's, you know, it's the same day. And so when we get our best, we challenge them and say, well, why don't you roll some of that into equity in the public company and come and be a leader. And then you've really engaged, you know, at another level. And so we've got a really good pipeline of franchisees that are CEOs or head of franchise operations. And they're the future CEOs, you know, will announce pretty soon one of our key members who's going to be the CEO of Taiwan. And he's a 20 year veteran. I'm thirty four years. And you look at our leadership, you know, fifteen years young. And by the way, there might be thirty five years of age because I'm old. Nick Nine started as a wall of water, fifteen years of age and runs Australia and New Zealand. He's still only in his 30s. So much depth of experience. So so we have really good tenure, really good cultural understanding of this business because you've grown up and understand high value mentality. Our value model. You understand a culture of franchising. You were an ex franchisee. You had a walk in the shoes and the emotion of a franchisee. Then we we we assist these entrepreneurial leaders with technical people that we do bring from outside the company, you know, financial people, marketers, highly skilled data scientists and so on that are other than that, we can feed this entrepreneurial drive in each country. So but the key the key is actually that leader, somebody who's embedded in our culture, who really understands and has watched us do this now. So we do these live calls every week. And the global leadership team are listening to each other's challenges and sometimes they're irrelevant. Something going on in Japan may be completely relevant to France. You know, we're doing ESG and, you know, the Japanese culture is concerned for animal welfare is not the same intensity as it is in, say, Europe. And that's just that's different cultures. And we respect that. Or or, you know, what is diversity reflecting in your communities as a board and as a and a different country? You know, because diversity is very different by by by location around the world. The CEOs, because they become so well aware and their blinkers are opened up that we've got a really strong pipeline. It's actually the biggest reasons why we've become the largest Domino's group, because we've had the lowest turnover, the longest tenure, in other words. And we've highly skilled leaders and many of them are famous throughout the Domino's world and in their own countries. They're rock stars. Yeah. [00:41:24][168.5]
Bryce Leske: [00:41:25] Wow. Rock stars, Domino's franchise. They they know it sounds similar to the experiences I had. It was, you know, you'd say the store managers who were really great at leading people and then worked their way up corporate ladders and were there for. Thirty five years and we're 35 years old, [00:41:43][18.3]
Don Meij: [00:41:45] one of the benefits of dominance is you can get to own a piece of the pie on the way in. That's harder in some of the burger chains and that you can change that a bit. Capital investments. It's hard for someone who's flipping a burger one day to say I'm definitely an owner, whereas we have a thing called the path to excellence and pizza delivery driver. A day two or three years from now, you can actually own your own franchise 10 years from now on. Several schools would be a very wealthy individual if you choose that journey. And that's one of the journeys, you know, our path to excellence goes all the way from interview P to make a delivery driver, manager, franchisee or executive. But it is a little bit more unique to Domino's. There's a few other businesses like ourselves, but the fact that you get to be an owner, there's something about being an owner versus being a corporate type. Yeah, when you live and die on your pencil, I could tell you feed your family. It's a really interesting psychology that goes through your head. You're probably living. Yeah. With this. [00:42:33][48.6]
Bryce Leske: [00:42:34] Well, it's just going to say we quit our corporate jobs and now we're living and dying on our panel. So we understand [00:42:41][6.6]
Alec Renehan: [00:42:42] and I think we could talk pizza all day, but we want to we want to, first of all, say thank you for taking the time and joining us today. I think this was a great interview. We've certainly got a lot out of it. I'm sure a lot of our audience will as well. We do always like to finish these interviews by, I guess, looking to the future. Well, you're already three to five years in the future. So joining you in the future and I guess what the future holds for Domino's. So if we if we start short term and if you think about what the next 12 months looks like are what does that look like for Domino's? Is there anything in the product pipeline that you can talk to us about today? [00:43:19][37.0]
Don Meij: [00:43:19] Yes, our products are more specific to countries. And so rather than rattle off all 10, there is an underlying current in our menu developments that ultimately come to us for a treat so that food is indulgent. And we and customers always tell us what have you do? Domino's never take out treat away from us, but where possible, how do we make that treat better and better for you in the way that we're working with ingredients, with crusts, healthier crusts. And this is the beginning of our it's part ESG as well, in that, you know, the impact that that dairy has on the planet, you know, that cows have on the planet. And and what is the future? What is what does that look like in the journey to the future products? So that's a really, really big focus on my trip overseas. I'm very fortunate to stay in government. Let me travel, because obviously we're looking at other countries. But I was also meeting with business partners about future products for our holiest platform as well, for example, at our dairy partner. And it's so exciting to play in the space of knowing that we could be one of the people that bring the future forward because of our scale and our customers. Give us a lot more right to do so because we have a much younger consumer that's attitudinally who we are. So 18 and 24 year olds, that sort of attitude, much more adaptive to change than someone in their 40s in about an hour, because that's the core of who we are. It's how we got technology rolled out so much faster than most. Wholefoods the same. We think that there's really exciting things coming in the food space. Better for you, better for the planet. Still indulgent that you love about Domino's. That's first. It's got to be indulgent. But all these other great things, the great positive attributes. [00:44:56][96.6]
Alec Renehan: [00:44:57] Yeah, that's that's great. I mean, I was I was working in food waste and sustainability and you just the same the same thing that you're saying, the scale that these businesses operate on, the ability to affect change. So that's great that you're thinking about it. And we're excited to see what you do in that space. I guess if you think about, you know, businesses are always facing different risks. And I'm sure a business that's operating in ten countries is facing plenty. If you think what would be the biggest risk for Domino's right now? [00:45:27][30.1]
Don Meij: [00:45:27] Yeah, when you're a fast growth company, you've got to make sure you're you are still keeping an open mind and looking at a wider net, a very focussed company, a very high growth focussed company, so engaged every day on the challenges of putting a lot more stores on the ground and executing and developing people. And what we've seen in the past, and we're always trying to get ahead of that now, is you get speed bumps, you you know, and it's self-inflicted. Most of Domino's issues in our history have been self-inflicted, where we broken away from some of our own rules because we think it's a different environment and, you know, and a different place only to learn that now that the rules still apply. And and so being disciplined but open minded at the same time to change, it's these ebbs and flows, you know, when is it time that you have to change and when it doesn't hold a second? That's a golden rule. It's been it's been around for 60 years at Domino's. I just interviewed four of the four presidents of the history of Domino's, including the founder in the US and literally in the last few weeks. And you know, what's the same? What's different for each of the ten years? You know, and it's amazing what's the same. But yet it's entrepreneurs. We want to change it all. It's. Know, like I have it now is different, and these are the things that get you, is that you you don't realise that there's something you're not taking care of and about you and it can be really hard. So, you know, for me, looking at the succession throughout the group, I mean, I still I hope I'm here for many, many years to come. I have no intention of time. I'm only 52 years of age. And I know most of the leadership that want to be here for many years to come. But who are the next generation coming to the next generation? Because none of us want to build a business over a 50, 60 year timeframe to hand it over and then it collapses. What was your life's work all about? So we're having fun. We're building this great business. But how are we also making sure it's going to be for decades to come? And what is the how are you seeing the right culture for that list? Tight, open for innovation, especially? They could have predicted Covid who some of the things that we've had to cross out of nowhere. Sometimes it's you get two things collide. You know, a government brings a big VAT increase and inflates wages at the same time to get a tax on your sales. And and you're sitting there going, oh, my gosh, we just took half the first level. How we innovate against that, you know, and and now everybody's in the same game, you competitors are as well. So it actually is a time when you can take a low share because it did do constructive, positive reactions to that. Like in Covid, we positive Lenta.ru Covid we invested we tore up our budget and said we're keeping all franchises whole. If that means we got to subsidise them, we we invested more in marketing and we invested more in technologies to enable quickly. I'm so proud of the way the team rallied, but it was literally invest, whereas a lot of companies shrunk, cut costs, didn't pay. Their landlords did do this. You know, we did take some job, keep it originally for our print. We have a printing company and it was a way to keep them whole. But once we realised how well the Dominos business was doing, we ended up shopkeep it back, all of it from from our US and we one of the first to do so. And we were thankful the government did it because in that very one window and they gave it, it stopped us laying off people in a pretty business that literally halved in volume. So it did its job. But then the second we were really profitable as a company. Thank you, Australia, for doing this for us. We really appreciated it. It definitely changed our thinking in the time. But we're so profitable. Why are we keeping it? Here it is. Have it back. [00:49:03][215.3]
Alec Renehan: [00:49:03] So, Don, final question. You know, your your life has has been incredible. Like your your story is an Australian success story and Domino's is a success story as a business. But as an entrepreneur, you're always thinking about the future and thinking about how can we keep growing and keep having more success. So if you look and you think ten years into the future, what does success look like for Domino's [00:49:26][23.0]
Don Meij: [00:49:27] that more people share in our success in this decade, that shareholders have done very well? Our franchisees have done very well, and in many cases their communities have. But we can even do more that the planet can do a lot better as a result of Domino's existing team members and so on. So we look at all stakeholders and say that this is a future, this next ten years, really pushing the envelope to at the size and scale and where we're going that more people get to share in this pie than May, maybe even in the last decade. When we think about the business itself, as I mentioned, there's significantly more delivery. It must be the driver of our business. That delivery will look different. A lot more on the journey from, you know, to electric that that all of our vehicles get electric, mostly electric bikes. The odd scooter in the car, then autonomous, autonomous, not exclusively. I don't think by the end of the decade, I think we'll still probably employ more drivers than we do today. But with the total volume, a large proportion that will be done autonomous, as will some of the roles in the business. But we'll employ a lot more people. So it's not like it's all about getting rid of jobs. A lot of these are co piloting, you know, to to our business. And our food, you know, will be will be very different to at the end of this decade to what it is today, continuing the journey up in quality. But the that the health and wellbeing with that quality, with that indulgence and its impact on the planet, a light year away from where we are today and knowing the projects that we've already got in the works and what we expect to achieve. So I couldn't be more excited. You know, after thirty four years, I sit here and go, we're in the best decade out of those thirty four years, it's for us to screw up and inevitably will still trip somewhere. It's just the nature of humans. And we've got a lot of humans in business that we're going to we're going to make some mistakes. But I'm sure that stakeholders that are involved in dominos will be far happier that we existed and did what we did at the end of the decade then then started. [00:51:25][117.8]
Bryce Leske: [00:51:26] I'd love to hear it, Don. And I'm sure while the food may be different in 10 years, those two pineapples, as I'm sure, so very hot pants. It's been a fascinating conversation whilst the growth story. It's been pretty unbelievable to date. It certainly sounds like there's plenty more to come. So we're very much looking forward to watching this story play out over the next few years, Don. Thank you so much for the time and sharing your experience and the story of dominoes with our community. So thank you very much. [00:51:58][32.5]
Don Meij: [00:51:58] It's been awesome, my honour, and thank you. It's been a pleasure. [00:51:58][0.0]