(Reuters) -The UK's Domino's Pizza (NYSE:DPZ) Group (DPG) has reached a new five-year agreement with its franchise partners, it said on Monday, as the fast-food chain looks to expand its store network and increase investment in its digital platform.
The new Profitability and Growth Framework, which the company said had the "unanimous support" of its franchise partners, allows for shared investment in marketing and technology, and provides incentives for new store openings.
The London-listed pizza chain, which operates under the umbrella of U.S.-based Domino's Pizza in the UK and Ireland, is targeting 2 billion pounds ($2.55 billion) of sales by 2028 from more than 1,600 stores, around 200 more than currently.
DPG said it would directly contribute about 3 million pounds to 4 million pounds ($3.8 million-$5.1 million) each year from 2025 under the deal, and invest an additional 4 million to 5 million pounds a year in the cost base, including in its technology platform, cybersecurity and supply chain capacity.
"(The) incremental spend on the new franchisee framework should calm any fears of a larger reset, particularly in the wake of the budget, which will have had a disproportionably large impact on the franchisees," analysts at RBC Capital said.
October's UK budget lifted employer National Insurance contributions and the minimum wage from April, fuelling concerns of increased taxes and business costs for companies.
The new franchise agreement will run from Jan. 3, following the conclusion of the existing deal, said DPG, which in 2021 resolved a row with its franchisees over profit sharing after more than two years of negotiations.
DPG said it expects to make additional investments including for the extension of new store incentives to five years from the current three years.
Total (EPA:TTEF) orders grew 5.3% and like-for-like sales rose 2.7% in the first nine weeks of the fourth quarter.
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