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How to Finance a Domino’s Franchise

If you’ve been working at Domino’s for a while, you might wonder what it takes to own your own franchise. Domino’s pizza only allows people who’ve worked as a store manager or supervisor for at least a year to become franchisees.

Domino’s has a long history of making pizza. The chain started with a single restaurant in 1960, opening its first franchise That’s a tall order, considering you’ll need to renovate your leasehold, in 1967. Since then, it’s grown to almost 16,000 locations worldwide, with franchisees owning 93% of them. The company reported almost $6.6 billion in U.S. retail sales in 2018. Same-store U.S. sales grew by almost 7% in 2018 — and have grown every quarter for almost eight years.

The public delivery and carryout company is accepting new applications to become a franchisee, but it’s not as simple as signing your name on the dotted line. Your responsibilities will change as a franchise store owner versus an employee.

With hard work and a little bit of luck, you too can succeed with your own Domino’s franchise.

Cost of buying a Domino’s franchise

Domino’s stores don’t come cheap. You’ll need to pony up a hefty amount of cash to open. There will be a lot of costs involved going forward as well.

Initial costs

Domino’s estimates that the cost of opening a new franchise ranges from $145,950 to $569,000 for a traditional store. Traditional stores are what normally come to mind when you think of a Domino’s location: tucked into a strip mall or other retail location with a full-service menu. Here’s how it breaks down:

  • Initial franchise fee: Up to $10,000 (or $1,500 if you’re buying an existing business)
  • Leasehold improvements: $25,000-$225,000
  • Furniture, fixtures and equipment: $81,000-$145,000
  • Signage: $5,200-$35,000
  • 3 months’ rent: $3,000-$25,000
  • 3 months’ additional funds: $10,000-$73,000
  • Security deposit: $1,000-$10,000
  • Opening inventory and supplies: $2,750-$6,500
  • Opening advertisements and promotions: $0-$3,000
  • Training expenses: $1,000-$3,000
  • Pulse (point-of-sale) training: $1,500
  • Insurance: $13,000-$25,000
  • Other opening costs: $2,500-$7,000

In some cases, Domino’s may require you to pay a fee of up to $25,000 so that it can hire project managers to oversee the construction and outfitting of your new store, according to its specifications. If this is the case, your initial fee will be rolled into this cost.

One thing that’s newer is the company’s Pizza Theater concept. This allows customers visiting the restaurant to see their food being made. If you’re building a new Domino’s location, you’ll be required to incorporate this into your design. If you’re buying an existing location, however, you’ll be required to retrofit your restaurant to add a Pizza Theater. The company estimates this will cost around $50,000.

Ongoing costs

Once your store is open, there’ll be several ongoing costs you’ll need to pay each year:

  • Royalty fee: 5.5% of gross sales
  • Advertising fund: 4% of gross sales
  • Pulse initial license fee: $4,923
  • Software enhancement fee: $582.23 a year
  • Help desk support: $32 a call
  • Connectivity fee: $1,200 a year
  • Google Chrome access fee: $130 a device
  • Application processing: $29.50 a month
  • Transaction fee: 25 cents per digital order
  • Credit card transaction fee: Nearly 5 cents per swipe
  • Spanish language call center: $2.50 a call (your first 65 calls are free)
  • Inspections: Cost of travel expenses for Domino’s employees
  • Food safety audits: $179
  • Training fees: $1,000 per session

There may also be a regional Domino’s cooperative in your area. If so, you may be required to contribute an additional 1-4% of gross sales to it to support regional advertising efforts.

Becoming a Domino’s franchise

Aside from already having at least a year of management experience, Domino’s requires that you have a certain net worth, with a percentage of that in cash and readily available. Domino’s doesn’t publish those numbers, however, so you’ll need to contact the company to find out the specifics. You’ll also need to be able to speak English well, and the company will check your credit score and criminal record.

As a Domino’s employee, you’ll get access to dLive, the company’s employee website. You’ll find a link to the Franchise Management School (FMS) within your account, and from there, you can learn how to apply to become a franchisee.
Before you can apply for a specific franchise location, you’ll need to go through a prequalification process, which includes completing various stages in the FMS, both online and in person at Domino’s Ann Arbor, Mich., training facility. This training can cost up to $1,000, and you’ll be responsible for transportation and lodging expenses while at the training.
That’s a tall order, considering you’ll need to renovate your leasehold,
Once you complete the prequalification process, you’re free to find a suitable location for a new store and submit a franchise application to the company. If approved, you’ll have up to six months to get your store up and running. That’s a tall order, considering you’ll need to renovate your leasehold, order starting inventory and equipment, train your new employees and get ready to launch.

Domino’s doesn’t provide a lot of hand-holding after you’ve opened your business. You’ll have access to franchisee support tools, such as call-in phone lines and an operating manual, but the company seems to assume that you already know what you’re doing by now since you’ve already managed a store.

Domino’s will also assign you a delivery territory, although it won’t grant you territory exclusivity. This means you could find yourself competing with a neighboring store owned by someone else. Last but not least, your franchise agreement will last for 10 years, after which you can choose to renew.

How to finance a Domino’s franchise

Taking on a franchise is a big deal for anyone. Even though you’ll have a solid name backing you up and previous experience working in a store, you’ll still need to evaluate the decision carefully. It’s a good idea to speak with a fee-only financial advisor about whether your financial position is strong enough to buy a franchise, and whether that makes sense for your long-term plans.

Also, it’s a good idea to get the help of a lawyer to review the contracts you’ll be signing, and hire an accountant to help you navigate the complex business tax laws.

The International Franchise Association estimates that it’ll cost you $50,000 out of pocket to open a Domino’s franchise. You’ll need a total of $145,950 to $569,000 for the total investment, however, which means you may need to take out a franchise loan to finance the rest of your investment. Domino’s itself doesn’t provide financing help, so it’ll be up to you to find the cash.

You have several options for where to get the money. And just like with any loan, the higher your credit score and down payment, the better your odds are of getting approved for a business loan with the best terms.

One option is to seek out a Small Business Administration (SBA) loan. These loans are given out by banks and backed by the SBA, so often people who may not qualify for a traditional bank loan can get an SBA loan. Domino’s is a registered franchise with the SBA, so you are eligible to apply for a loan to open one of these stores. The downside is that these loans can take a bit longer to finance, and there may be a lot of hoops to jump through.

You could also apply for a normal business loan from a bank or credit union. Again, the requirements for these loans may be high and can take a long time to process.

You can also ask well-meaning and well-off friends and family members to invest in your business. This is a risky move, though, and some people rightfully don’t like to mix money with family obligations. However, it can work for some, especially if you draft a loan contract and honor it.

There are also online lenders who could lend you money. However, it’s important to assess these companies carefully. Many are reputable, but it’s also much more common to find lenders with extremely high fees and impractical repayment terms that could jeopardize your business, if not your profits.

The bottom line

Opening any business is risky. There’s no guarantee your business will thrive or even survive if you choose to open a Domino’s. But the company has stellar numbers backing it up, which boosts your odds of success. The company boasts that, on a global level, the average time to recoup your investment costs is just three years.

The opportunities are ripe for the picking with Domino’s. The company is aggressively trying to expand its markets, setting a goal to open almost 10,000 more Domino’s locations by 2025. Are you interested in a slice of the pie?

The information in this article is accurate as of the date of publishing. 

 

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