This piece marks a return to Domino’s Pizza Group UK, the stock we first highlighted in our Global Fund introduction video. (Watch here)
With the 2026 FIFA World Cup now underway and the potential for improved performance, it feels like an apt moment to revisit a company in the portfolio that stands to benefit from the tournament. So, sit back, ideally with a Domino’s box on the table, as we walk through the thesis in more detail and bring everyone back up to speed on the story.

Still Hot, Priced Otherwise

The market rarely leaves well-known category leaders lying around on depressed multiples for long.

When a company controls more than half of its core market, throws off dependable free cash flow, and has handed back around £500 million – equivalent to 65% its market capitalization – to shareholders since 2021, investors usually do not hesitate to pay up for that certainty. For years, Domino’s Pizza Group fitted that description neatly: a low-drama, cash-generative listed business with an easy-to-understand model and a long runway for store expansion.

That confidence has faded. The stock is trading around 9x forward earnings and near the bottom end of its multi-year range. placing the shares in a valuation range usually reserved for businesses facing structural decline. The market’s message is clear: growth is slowing, store rollouts have lost momentum, and the unit economics that once looked self-evident are no longer being taken on trust.

That judgement looks too harsh.

For investors focused on long-term fundamentals, as we are, this has created an opportunity.

The issues weighing on Domino’s appear temporary rather than terminal. The market seems to be treating a cyclical soft patch in UK consumer demand and franchisee economics as though it has broken the long-term earnings engine altogether. That is the gap worth examining.

From Dependable Compounder to Question Mark

Domino’s Pizza Group has spent years building one of the most attractive business models in UK listed quick service restaurant (QSR) stocks.

At first glance, it looks like a pizza retailer. In practice, it is much closer to a branded platform with a captive supply chain. The group is the exclusive master franchisee for Domino’s in the UK and Ireland, and it earns its economics not simply from pizzas sold to end customers, but from supplying the system itself. The company works with roughly ~130 franchise partners across its 1,400 stores, with more than 97% of outlets owned and operated by franchisees rather than run in-house.

Franchisees operating under the brand are required to buy dough, ingredients, packaging and equipment from the group, which turns the supply chain into the main profit engine of the business. In addition, the group receives a royalty stream linked to system sales, creating a layered earnings model tied directly to network activity.

This structure has important consequences. The company does not need to deploy large amounts of capital into each incremental store, because franchisees carry most of that burden. Instead, Domino’s benefits as the network grows: every new outlet adds volume through the supply chain, adds royalty income, and does so without requiring a matching rise in central overhead. In FY2025, new stores delivered an average cash payback of roughly 3.5-4 years, implying an incremental return of around ~25% and highlighting just how cash-efficient the model remains even through a tougher trading patch.

That combination of predictability, scale, and capital-light growth once earned Domino’s a premium rating. It no longer does.

The Recent Bumps in the Road

The recent disappointment has come from cyclical macroeconomic pressure rather than a break in the model.

The most obvious evidence of this has been the slowdown in store openings. Domino’s opened only 31 new stores in FY2025, down from 54 in FY2024 and below the pace needed to keep the long-term rollout story feeling effortless. This matters because the network expansion story is central to the bull case. More stores mean more system sales, more supply chain throughput, and greater central cost absorption.

Why has that cadence slowed? The answer sits mostly with franchisees. Rising labour costs, especially UK wage inflation and higher National Living Wage rates, have put pressure on store-level returns, making operators more cautious about committing capital to new openings. That does not mean the network has stopped working. It means franchisees are requiring clearer economics before pushing ahead with expansion.

Secondly, the like-for-like system sales in FY2025 rose just 0.2%, while total orders declined 0.9%. That is not what investors expect from a business that once looked like a reliable traffic compounder. A pressured UK consumer has become more selective, and some households have traded down, reduced frequency, or shifted toward collection over delivery to save money.

Taken together, these issues reflect temporary macroeconomic headwinds that will eventually abate. Nonetheless, they have been sufficient to sour the market’s perception of the stock.

The Economic Moat is Unchanged

The important point is that the franchise’s underlying advantages remain intact.

Domino’s holds a 52.6% share of the UK takeaway pizza market, making it more than three-and-a-half times the size of its nearest branded competitor. That kind of scale matters in a category where brand familiarity, delivery density, and logistical reliability all reinforce one another. It is not simply a recognisable name; it is an operating system built over decades.

The supply chain is a particularly underappreciated strength. Because the group is the mandatory supplier to the network, it captures economics that customers do not see and competitors struggle to match. Volume purchasing drives input-cost advantages, central manufacturing improves consistency, and each incremental order pushes more throughput across an already-built platform. A challenger would need to replicate the brand, the store network, the driver density, the digital ordering platform, and the supply chain all at once. That is a much higher hurdle than opening a few rival pizza shops.

Also, Domino’s Pizza Group UK competes in a structurally favourable market relative to its Australian and US cousins. With relatively few scaled independents offering meaningfully better pizza, there is less need to chase volume through aggressive vouchering. This has supported a structurally higher operating margin of 15–20%, versus the ASX‑listed Domino’s, where margins have oscillated in a lower 4–12% band. The UK‑listed stock is even competing with the US‑listed Domino’s, the global master franchisor that earns a royalty on every Domino’s pizza sold worldwide, whose own margins have sat in a 13–20% range over the last decade.

In short, the moat is still there. The market is simply choosing not to pay for it right now.

The Growth Flywheel Still Turns

The long-term case for Domino’s is still built around a simple formula: more stores, more orders, more supply chain volume, and more profit flowing through a largely fixed central infrastructure.

Encouragingly, management’s latest Q1 2026 trading update showed clear progress, with system sales up around 5.8% and like-for-like system sales rising 4.5%, while total orders increased 2.3% and like-for-like orders edged 0.9% higher. App engagement also remained strong, and early performance from Chick ‘N’ Dip was ahead of internal expectations, suggesting top line is being driven by both volume recovery and pricing mix.

Management continues to target at least 1,550 stores by 2028 and 2,000 by 2033, compared with 1,400 stores at the end of FY2025. That remains a meaningful runway. If achieved, it would imply years of network-led growth before even considering pricing, mix, or additional order occasions.

At the same time, the competitive backdrop is steadily tilting in Domino’s favour. Papa John’s and Pizza Hut continue to rationalise their UK estates, both closing ~70 underperforming sits and retreating from weaker catchments. As these legacy stores disappear, Domino’s inherits both delivery “white space” and incremental consumer demand without needing to outlay additional capital.  

There are also product-led drivers that could support sales growth. As mentioned above, Chick ‘N’ Dip gives the group exposure to the UK chicken delivery market without requiring a separate store estate, effectively widening the menu and increasing the number of meal occasions Domino’s can capture. This matters because the easiest growth in consumer businesses often comes not from finding new customers, but from giving existing customers more reasons to order.

A smaller, but still relevant, near-term tailwind may come from the 2026 FIFA World Cup. Domino’s has benefited from major football tournaments before, as big televised events tend to create exactly the sort of group ordering occasions that play to its strengths. With the 2026 tournament hosted in North America, many matches should fall into attractive UK evening time slots, which could create a modest uplift in order frequency and basket size during the competition. This is not central to the thesis, but it is one of several reasons why the next twelve months may look better than the market currently assumes.

UK Soft Patch, Not Structural Failure

The bearish interpretation is that Domino’s has entered a slower-growth era in which labour inflation, aggregator competition, and weaker consumer demand permanently reduce returns on new stores and cap the upside from the model.

That conclusion looks premature.

Franchisee economics, while pressured, are still far from broken. The core proposition remains: Domino’s continues to offer some of the fastest delivery times in the market, a sharp price point that keeps it firmly in the “good value” bucket for most households, and consistently strong customer feedback on reliability and convenience. 

That distinction matters. If sales softness were being caused by a broken proposition, market share would likely be slipping. Instead, the evidence suggests Domino’s is winning within its category, while the category itself is experiencing a consumer-led wobble. Those conditions can, and are starting to, reverse.

Valuation — When Short-Term Noise Creates Long-Term Value

This is ultimately where the case becomes most compelling.

Domino’s now trades on roughly 9x forward earnings, versus a history of being valued between 15x-20x earnings when the market was happy to underwrite its growth and margins. At the same time, the business still sits on dominant share in a resilient category, throws off healthy free cash flow and pays a 5.8% dividend, a cash return profile more reminiscent of a structurally challenged asset than a franchise with a long runway.

Our base case does not require heroic assumptions. A gradual recovery in store opening cadence, like‑for‑like sales stabilising in low single digits, and a moderate uplift in operating margins back toward 16–18%, still below the 20%+ levels Domino’s has earned historically, should, in our view, justify a meaningful re‑rating in the multiple investors are prepared to pay on those earnings. Layer on the growing likelihood of a renewed buyback, with the CEO and Board signalling a preference for returning surplus capital over pursuing large distracting M&A, and the total shareholder return potential becomes difficult to ignore.

To be specific, valuing the business at 15x FY28 earnings, the bottom of its historical range, and layering the impact of dividends and prospective buybacks implies roughly 75% upside from today’s £1.92 share price.

Only a short time ago, Domino’s Pizza Group was priced as a steady compounding franchise. Today it is priced as though the economics have permanently rolled over. We think the reality sits somewhere very different: the moat remains, whilst competitors are falling away, and investors are being paid handsomely to wait while sentiment normalises.

Domino’s Pizza Group PLC remains a core holding within the Collins St Global Fund.