Overseas business keeps pizza chains cooking

Feb. 25, 2009
Despite dismal results for domestic locations, the top pizza chains are continuing to enjoy strong overseas growth.
While Papa John's overall revenues were up 7 percent, to $1.13 billion, compared with the previous year, the company's international revenues were up 24.2 percent, reflecting an increase in both the number and average unit volumes for those restaurants.
The company added a net nine company-owned and a net 131 franchised international locations during 2008, bringing its total to 23 company-owned and 565 franchised international locations.
"We had tremendous momentum on the international area," said Papa John's interim CEO John Schnatter during the company's year-end conference call with investors.
"We just celebrated our 600th international opening. And let's put that in prospective," he said. "It took us 10 years to open 500 and it took us only seven months to open our next 100. We now have over 200 restaurants in Asia, well over 100 restaurants in each Europe and Latin America ,and we're quickly approaching 100 restaurants in the Middle East."
Papa John's plans to open as many as 1,200 new overseas restaurants within the next 10 years.
Domino's continues international comp growth
International same-store sales at Domino's restaurants increased 4.5 percent for the 2008 fourth quarter, marking 15 years of international same-store sales growth.
Domino's international division now comprises more than 40 percent of the company's global retail sales. The company added 257 international stores during 2008, bringing its overseas total to 3,726.
"We are very pleased with the continued growth in our international division with both strong sales and store growth," said Domino's chief financial officer Wendy Beck in the company's year-end conference call with investors. "We have a proven business model that is resilient even during the challenging times."
And sales at the China Division of Pizza Hut parent Yum! Brands grew 15 percent in the fourth quarter alone. The company expects 70 percent of its earnings to come from its overseas operations within 10 years, compared with 60 percent today.
The company opened nearly 1,500 new international restaurants last year.
Currency exchange rates effect revenue
The international benefit was softened by the negative impact of currency exchange rates, though, thanks to a strong dollar. Royalty revenues at Domino's took a $3.6 million hit because of exchange rates, and Yum! officials said they expected foreign currency translation to have a significant negative impact on operating profit for the company's International Division in 2009.
"Given the nature and volatility of the foreign currency markets, the full year forecasted foreign currency impact is difficult to quantify," Yum! officials said in a filing with the Securiites and Exchange Commission. "However, for the first quarter of 2009, we currently expect a $20 million negative impact on (Yum's International Division's) operating profit and a similar impact for the second quarter of 2009."

Topics: Domino's Pizza , Operations Management , Papa John's , Pizza Hut

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