Corporate Finance of Domino’s Pizza Enterprises

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Table of Contents

Introduction
Risk
Capital Structure
Dividend Structure
Conclusion
Reference List

Introduction

Domino’s Pizza Enterprises is a chain of the pizza delivery stores which works on the basis of the franchising business. Functioning in the consumer industry sector, it is possible to state that the company is successful for now.

Risk

Franchising is considered to be a form of business running where risks are limited to minimum. Still, considering this specific business model, it is possible to identify some particular risks which may be related to the business model and specifics of the business. Thus, it is really important to follow the rules established by the franchiser which may be difficult for those who want to do personal marketing. The absence of the uniqueness may be the main means of profit reduction.

Those who buy franchise should understand that it is a long term contract where a buyer takes some responsibilities (Barkoff, Selden & American Bar Association 2008). Domino’s Pizza Enterprises business is successful, but there is chance that one specific store may fail. It is impossible to predict the outcome. Still, to reduce the risks, Domino’s Pizza Enterprises follow the risk management policy (Quality is our heart & soul 2010)

Capital Structure

The capital structure is the combination of the share capital and loan capital which is considered to denote the long term financial information of the company. Considering the current report which has been composed in 2011, the recent information may be described. The company has a debt of $1.45 billion.

It is about 5.9% of the blended cash interest rate. According to the Investor Presentation 2011 the capital structure of the company (its debt) is the interest only, and in the last quarter of 2010 the earnings before interest, taxes, depreciation and amortization were 5.5x. The securitization of the business is “secured with most cash flows of the company” (Investor Presentation 2011, p. 17).

The initial term the company has is five years with the possibility to extend the tern on 1 year twice. The extension is planned to start in April 2011 and end the same month in 2014 (Investor Presentation 2011).

Dividend Structure

The dividend structure of the company may be considered in the following table.

Code	Div Amount	Ex Div Date	Record Date	Date Payable	% Franked	Type
DMP	8c	01/09/2009	07/09/2009	21/09/2009	100%	Final
DMP	6c	23/02/2010	01/03/2010	15/03/2010	100%	Interim
DMP	11.8c	24/08/2010	30/08/2010	15/09/2010	100%	Final
DMP	10.4c	22/02/2011	28/02/2011	14/03/2011	100%	Interim

(Domino’s pizza enterprises limited 2011)

Considering the calendar of events of the company, it is possible to state that the company fairly provides its shareholders regularly receive their shares. Thus, the company had paid its dividends on the 14^th of March, 2011 (10.4c, 100% franked) (Domino’s Pizza Enterprises Limited (DMP) 2011).

Conclusion

Thus, it may be concluded that the company business has a positive dynamics. Having a specific model for business running, the company limits its risks, but at the same time increases the debt during the first year of functioning of the newly bought franchise.

Reference List

Barkoff, RM, Selden, AC & American Bar Association 2008, Fundamentals of franchising, American Bar Association, New York.

‘Domino’s Pizza Enterprises Limited (DMP)’ 2011, Invest Smart. Web.

‘Domino’s pizza enterprises limited’ 2011, ASX. Web.

Investor Presentation 2011, Domino’s Pizza Enterprises. Web.

‘Quality is our heart & soul’ 2010, Domino’s Pizza Enterprises Limited Annual Report. Web.

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