Domino’s Pizza (UK): Asset-Light, Growing Leader With High FCF Yield

José Antonio Larraz of Equam Capital presented his investment thesis on Domino’s Pizza Group plc (UK: DOM) at European Investing Summit 2025.

Thesis summary:

Domino’s Pizza Group is the exclusive master franchisee for the UK and Ireland. The company operates a highly asset-light, 100% franchised business model. DPG manages the central supply chain, including dough manufacturing and logistics, as well as national marketing. Franchisees, who are required to source all materials from DPG, run the individual stores. This structure results in low CapEx requirements, with maintenance CapEx below 1% of revenues, and a negative working capital cycle.

DPG holds a dominant position in the UK pizza delivery market with a 54% market share, making it more than 3.5 times the size of its nearest competitor. José highlighted that DPG is strengthening this leadership, having added over 90 stores in the past two years while its two largest branded competitors have seen a net reduction in their store counts. This scale provides DPG with durable competitive advantages in brand awareness, sourcing efficiencies, and the ability to optimize delivery times, which is a key service metric.

The company’s growth strategy is multi-faceted. The first leg focuses on maximizing revenues from the existing network by improving service, continuous product innovation, and the national rollout of a loyalty program designed to increase average order frequency from 4.3 to over 5.0 times per year. The second leg is expanding the store network in the UK, which remains underpenetrated (53k people/store) compared to markets like the US (28k). This expansion is targeting smaller towns and splitting existing territories. A third leg involves accelerating growth in Ireland, an even less penetrated market (85k people/store) with an opportunity for over 100 new locations.

DPG is also exploring further growth avenues, including leveraging its supply chain, franchisee network, and 13.5 million active customers to launch a second, non-pizza fast-food brand in the UK. The company is exploring international expansion, signaled by its 12.1% stake in Domino’s Pizza Poland. José noted the company’s strong FCF generation and commitment to shareholder returns, having distributed 460 million GBP via dividends and buybacks in the last four years, equivalent to 52% of its recent market capitalization.

According to José, the investment opportunity exists because a >50% share price decline, driven by a weak UK consumer environment that has temporarily stalled LFL sales growth, has disconnected the company’s valuation from its fundamentals. He views this slowdown as cyclical. The company’s shares recently traded at historical low multiples of less than 10x P/E and at a FCF yield of approximately 10%. This valuation represents a discount to comparable companies, despite DPG’s market leadership. The balance sheet remains solid with leverage at approximately 2.0x net debt/EBITDA.

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About the instructor:

José Antonio Larraz is a founding partner of Equam Capital. Jose has 15 years of experience as a partner in Capital Alianza Private Equity, investing in Spanish private companies in the middle market. He has investment experience in chemical, food, retail, outsourcing and telecommunications sectors, having participated in the board of directors of six different companies. Jose has 4 years of experience in financial advisory, corporate finance and M&A at Lehman Brothers in London and New York and He is a Professor at Instituto de Empresa since 2008. Jose holds a degree in Law and Business Administration from ICADE University and MBA from Insead.