# How Domino's makes money

CXProWealth Business Lens · Domino's (DPZ) · Q3 FY2026

Read from the 10-Q for the period 2026-06-15 to 2026-09-06, filed 2026-10-13 with the SEC (accession 0001286681-26-000040): https://www.sec.gov/Archives/edgar/data/1286681/000128668126000040/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $1.2B (+3.4% on the year)
- Operating income: $241.8M (operating margin 20.4%)
- Net income: $152.2M (net margin 12.8%)
- Gross margin: 40.2%
- Free cash flow: $146.2M (12.3% of revenue)
- Cash conversion (operating cash flow / net income): 1.10x
- Capital expenditure: 1.8% of revenue

## Where the money goes (Q3 FY2026)

- U.S. Stores → Revenue: $355.7M
- Supply Chain → Revenue: $746.2M
- International Franchise → Revenue: $83.7M
- Revenue → Cost of sales: $709.2M
- Revenue → Gross margin: $476.4M
- Gross margin → General and administrative: $105.7M
- Gross margin → U.S. franchise advertising: $128.7M
- Gross margin → Refranchising loss (gain): $206.0K
- Gross margin → Income from operations: $241.8M
- Income from operations → Other (expense) income: $2.5M
- Income from operations → Interest expense: $46.2M
- Income from operations → Income before provision for income taxes: $193.0M
- Interest income → Income before provision for income taxes: $2.1M
- Income before provision for income taxes → Provision for income taxes: $42.9M
- Income before provision for income taxes → Net income: $152.2M

## Where the revenue comes from

### Segments (Segment Information - Financial Information by Operating Segment (Detail))

| Member | Value | Share |
|---|---:|---:|
| Supply Chain | $746.2M | 62.9% |
| U.S. Stores | $355.7M | 30.0% |
| International Franchise | $83.7M | 7.1% |

The members sum to total revenue.

### Subsegments (Segment Information - Financial Information by Operating Segment (Detail))

| Member | Value | Share |
|---|---:|---:|
| Supply Chain | $764.8M | 64.5% |
| U.S. franchise royalties and fees | $165.6M | 14.0% |
| U.S. franchise advertising | $128.7M | 10.9% |
| International franchise royalties and fees | $83.7M | 7.1% |
| U.S. Company-owned stores | $61.4M | 5.2% |
| Supply chain - intersegment revenues | -$18.6M | -1.6% |

The members sum to total revenue.

## Key insights

### A small fee line equals most of the profit

U.S. royalties are 14.0% of revenue yet equal 68.5% of income from operations, since they carry no cost of sales.

U.S. franchise royalties and fees were $165.6M this quarter, 14.0% of revenue of $1.19B, against income from operations of $241.8M. The filing states that franchise revenues "do not have a cost of sales component", so changes in these revenues "have a disproportionate effect" on segment profit. _(from the filing)_
International franchise royalties and fees added $83.7M, equal to 34.6% of income from operations, and rose 6.56% on the year, faster than total revenue at 3.36%. _(from the filing)_
Combined, the U.S. and international royalty lines exceed income from operations. This compares two lines; it is not a margin, since royalties still carry part of general and administrative cost. It shows where the profit sits: in fees on stores the company does not own. _(analysis)_

### Sales grew from new stores, not busier ones

Global retail sales rose 3.2% while existing U.S. stores barely grew, so openings, not higher sales per store, drove the quarter.

Global retail sales excluding currency rose 3.2%. U.S. same store sales rose 0.3%, rolling over 5.2% a year earlier, and international same store sales rose 0.2% against 1.7%. The filing credits "net store growth during the trailing four quarters". _(from the filing)_
The quarter added 175 net stores: 26 in the U.S. and 149 internationally. In the U.S., same store sales rose on "higher customer transaction counts, partially offset by lower average ticket." _(from the filing)_
Royalties follow the store count, so growth now depends on franchisees continuing to open units. That holds while a new store pays back its owner's investment; a lower average ticket and a 2.2% higher food basket price to stores are the pressures on that payback. _(analysis)_

### Flat overhead turned slow sales into faster profit

Gross profit rose with revenue while overhead barely moved, so income from operations grew 8.34% on revenue up 3.36%.

General and administrative expense was $105.7M against $105.1M a year earlier, 8.92% of revenue, down 0.24 points. Gross margin rose 3.58% to $476.4M. Income from operations reached $241.8M, 20.39% of revenue, up 0.94 points. _(from the filing)_
The filing attributes the gross margin gain to higher global royalty revenue and to supply chain, where food costs fell as a share of sales through "procurement productivity" and labor costs fell on "higher sales leverage and labor efficiency", partly offset by higher fuel costs for delivery. _(from the filing)_
Part of the 7.06% rise in supply chain revenue is price: the filing names "an increase in our food basket pricing to stores" of 2.2% alongside higher order volumes, so not all of that growth is volume. _(from the filing)_
Over the three quarters to date, overhead grew faster, which the filing ties to the company's biennial Worldwide Rally and higher computer expenses. A flat overhead quarter is partly timing, not necessarily a new run rate. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of Domino's (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what Domino's's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Domino's 10-Q for the period to 2026-09-06: https://www.sec.gov/Archives/edgar/data/1286681/000128668126000040/ (2026-10-13)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03