Operator: Thank you. One moment for our next question. And our next question comes from the line of Sara Senatore from Bank of America. Your question, please.
Sara Senatore: Thank you. I have a clarification and then a question. Just a clarification is Sandeep, you said company margins would have been up slightly excluding insurance and loyalty liability. I guess given transaction growth and lower commodity costs and the shift to carryout, which I think is typically higher margin rate, I would have thought up more than slightly. So I guess as we think about that business, we should be focused now, I guess, increasingly on profit dollar growth as opposed to margin rate expansion sort of similar to how you think about supply chain or maybe my interpretation of up slightly is not quite right. And then the question is about the industry and the pizza segment. And so you often have better insights into the competitive dynamic than I do.
Was any of this category improvement? Finally, I think that may be normalization in terms of sales mix, but anything you can say about what — to what extent are share gains by Domino’s versus finally seeing perhaps green shoots in the category? Thank you.
Sandeep Reddy: Thanks, Sarah. So I’ll take the first one and Russell will take the shared question. So kook, in terms of company margins, we specifically called out the impacts of those two and the margins expanding slightly outside of that. And I think it’s been consistent. If you look at the first three quarters, our margins expanded. And I think in the fourth quarter, excluding the impact of those two items that we call out insurance and the loyalty liability, margins are expanded. So the great thing about the loyalty liability adjustment is it’s because we expect to have incremental transactions or redemptions on the loyalty program. So you’re right, look for profit dollar growth on the supply chain — sorry, on the company stores. But I think we also do believe that there is an opportunity to expand margins in addition to driving profit dollar growth as we leverage the fixed cost structure of the company stores. So look for both on company stores is my answer.
Russell Weiner: And on the state of the industry, I think and this is really even looking forward to 2024. A lot of what we expect is QSR there to be real pressure on orders and transactions. We don’t expect that to be the case with Domino’s, and I think will be unique in that area in 2024.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Brian Harbour from Morgan Stanley. Your question, please.
Brian Harbour: Yeah. Thanks. Good morning. I wanted to ask about just your international sales outlook as well. How much of this do you think is kind of market specific execution issues? And I’m referring to just some of the countries that have been a little bit slower versus kind of macro pressures. And as you have that outlook for kind of improvement through the year, does that depend on some of those macro pressures easing, like, for example, if you think about India or can you maybe comment on some of the other markets that you didn’t address before.
Russell Weiner: Yeah. Well, actually, maybe I’ll start out talking about India because I was speaking over the weekend to Hari Bhartia, who’s the Chairman of Jubilant. I mean that’s a great example of both dynamics you talk about. And so obviously, they’re pushing the business there. It’s some headwinds. But what Hari talked about is what’s going on in the rest of the industry and why he’s bullish and while he’s looking for the future. And while they’re talking about 200 stores to grow in 2024 is because he’s growing share. And so what I love about our franchisees is that they’re future focused. And I think you see a lot of folks doing what they’re doing in India. That’s why we think the second half is going to return to that 3% that we talked about. Anything to add?
Sandeep Reddy: No. I think Russell is exactly right. We think it’s all tied back to the Hungry for MORE strategy is being applied across the entire system with the international markets. Learnings from markets like Australia being applied across DPE and essentially all of the other markets as well have embraced Hungry for MORE, and that’s really what we’re looking to drive.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question, please.
Danilo Gargiulo: Thank you. I have a quick clarification and then a question. So the clarification is, Russell, you mentioned that you’re expecting some real pressures in the industry, but not for Domino’s. Can you clarify whether the increase in transactions that you’ve seen in the fourth quarter is across all the income cohorts? And then the question is, can you talk about the speed of delivery in the overage channel versus your own channel, understanding that you’re using your own drivers anyway? And maybe how does the delivery timing compared versus your peers today?
Russell Weiner: On the transactions piece, we believe that our transactions being positive is something that, like I said, is that is unique in the industry. We’ll get more share information as that comes out, and we’ll certainly share that with you. On speed of delivery, the biggest comparison — the biggest comparison we have is versus ourselves. And every day, we expect to get better than the day before. So we’re happy that we’re back to 2019 levels. We’re now moving more volume into that delivery network. And we’re doing everything we can, not only to make sure that the delivery times or where they need to be. But more importantly, we haven’t talked a lot about this is that the quality is there. And so when you think about our Hungry For MORE pillars, the first M is about most delicious food and so just delivering a pizza on time is one thing.
It’s got to be great. And one of the things that I talk about, hopefully, there are no Boston Red Socks fans on the call today of a Yankee fan. And there’s a famous player, Joe DiMaggio who there’s a quote Somebody asked him one, why you play so hard every game. And what he said was there’s going to be someone who sees me for the first time in that game and so I’m playing for them. And that is how we need to approach making our pizza. Every pizza you’re making is for your mom, right? And that’s what some of these sprints are all about with more delicious operations. We’re making promises in our advertising we need to deliver it, and it’s more than just time. It’s quality, it’s consistency in all of those. And we like to say, down, we don’t sell 1 million pizzas a day.
Our goal is to sell one pizza a day 1 million times. And that’s kind of the new thinking behind Delicious operations.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Jeff Bernstein from Barclays. Your question, please.
Jeffrey Bernstein: Great. Thank you very much. Just following up from the Investor Day, you guys talked about your, I guess, Pulse 2.0 technology. And I think you mentioned there will be a complete overhaul throughout 2024 in conjunction with your Microsoft partnership talking about AI tools and whatnot, which are clearly very topical. So I’m wondering if you could talk a little bit about the greatest changes or the most likely incremental benefits to the front or the back of the house and maybe the time frame to see those benefits. Obviously, it’s been, like you said, a long time coming with this major overhaul. So just trying to get a sense of what we’re going to see as we look through ’24. Thank you.
Russell Weiner: Yeah. Thanks for the question. It’s a good time for me to clarify that. I think the future of the benefits of Pulse is actually now, right? We talked about [indiscernible] and accelerating the areas within the circle of operations that make the biggest difference in our business. And so yes, next-generation pulses in stores now, some stores in the U.S. will be rolling out to a bigger degree later on in 2024. But the most important element, the ones that are going to drive the operational efficiencies, the more delicious food, the improved atmosphere — working atmosphere for our team members. Those are out in the [indiscernible] with current pulse and the next-generation pulse. Hopefully, that clarifies it. The Microsoft – the answer to your Microsoft question is we’re working really in two areas with Microsoft and generative AI.
One is on the consumer ordering side. We are not waiting for the new website to come in to see something on that. So you’ll see something that in 2024. And then also on the store side and what can we do with Generative AI to make the experience better on our team members in store. And so we’ll have more to talk about both of those in 2024.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Andrew Strelzik from BMO Capital Markets. Your question, please.
Unidentified Participant: Hi. This is Joe Zinski (ph) on for Andrew Strelzik. Thanks for taking the question. So I’m curious how you would characterize the current competitive environment and what you’re seeing from a promotional standpoint. And I was wondering if you could provide any incremental details regarding product innovation and the two new products that you are planning to launch this year? Thank you.
Russell Weiner: Yeah. Sure. I don’t really like to talk a lot about competitors. I mean, a competitor we have is ourselves, and we try to get better than ourselves every day, and I think you see that in our Q4 results. I talked in general about it probably being a year that’s less about order count. And we’ll see how folks adjust to that and when they do, be happy to comment on that through the year. I didn’t quite hear your second question. Can you repeat the second — even though we’re only supposed to ask one I’m joking. Yeah, products. Thank you very much. Yeah, on the product side, couple of things. One is we’re really happy that we’ve got our pan pizza out there now. But that’s not a new product, and you should know that is not counted among the kind of two plus new products we’re going to have this year.
But what you do see with that is, we haven’t talked about pan pizza since 2014. So while I’m not counting it on my list of new products, it’s something that’s new to a lot of people and something that is really shot. If you look at the way we shot that commercial in the new way of kind of romancing the deliciousness of our pizza. So we’re out with product news. News on a product for the first time in a long time, but that’s not part of our two new product scheme for this year.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Chris Carril from RBC Capital Markets. Your question, please.
Chris Carril: Hi. Thanks. Good morning. So Russell, you mentioned the U.S. system added more than 60 new franchisees. I think that was the most in 15 years, you said. On the back of this, how are you thinking about the evolution of the domestic franchisee base and just the balance of openings coming from new franchisees versus longer tenured franchisees going forward? Thanks.
Russell Weiner: Yeah. Thanks a lot for the question. When we have calls like this and what I — what I tell people is you’re ever wondering how the Domino’s Pizza brand is going to do in the future, you look at what your franchisees are doing. And franchisees right now from a profit standpoint, obviously really positive versus where they were the year before. We opened up more stores really heavy towards the end of the year when things became clear there, yet we’re still very positive that we’re going to beat that number in 2024 and hit our 175 plus algorithm. The 60 to me means that we’ve got young of encumbers within our system that for the first time in 15 years, it’s bigger than — or bigger than we have had in 15 years, which means they see a really positive future.
And the cool thing is as you look into ’24, what I can tell you is two things. One is we already have 170 new potential franchisees that are either in or have graduated our franchise management school, which is the last step you do before you either build a store or buy a store. And we have 50 already waiting on opens or transfers within the system. We’re in February. And so I think some of the momentum you saw is going to continue. And that just shows what they are feeling about the brand where they want to invest.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Meredith Jensen from HSBC. Your question, please.
Meredith Jensen: Yes. Hi. I know we’ve spoken about it a number of times in terms of the loyalty program. But given the mention of the liability, the loyalty liability from the relaunch, is there a way or how would you suggest we sort of track that and look at the breakage levels and sort of see where that may be going in the future and how we should sort of map that out. Obviously, as you mentioned, it’s a positive thing, so. Thank you.
Sandeep Reddy: Yeah, Meredith. Thank you for the question. And look, I mean, I think the way to look at this is it’s the appropriate accounting treatment if we’re going to expect to see more redemptions, and that’s the adjustment to the breakage accrual. But I think the whole point with this is our Domino’s Rewards program is working as we intended. More transactions expected to come in, more redemptions are expected to come in. And I think Sarah asked the question earlier, look for profit dollar growth in addition to margin expansion as we move forward, especially on the company stores in 2024. And we’ll continue to provide disclosure as we move forward, but that’s how I would actually measure performance on this.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Brian Mullan from Piper Sandler. Your question, please.
Brian Mullan: Hey. Thank you. Just a follow-up on the topic of Domino’s advertising on Uber. Understanding it’s just getting started, it will ramp throughout the year. Can you just discuss any learnings you’ve had here? Is it going how you would have thought? Has anything with the effectiveness surprised you either positively or negatively. And I ask in the context of just — it’s a new activity for Domino’s, but I know you’ve been preparing to get ready for it. So just any thoughts on that strategy?
Russell Weiner: Yeah. Thanks, Brian. There’s two advertising now for Domino’s on Uber. One is Domino’s and the other is Uber. And I think what we’re seeing on that platform is very promotionally driven. And the nice place. The nice thing is when you think of marketplaces and excelling on marketplaces, that’s what we do, whether it’s a Google marketplace or in this case, Uber. And so responding how you would think it’s very much promotionally driven, but we know how to excel in those areas, which is why we are confident that a percent of sales remover is going to increase to that 3% exit rate we talk about.
Operator: Thank you. One moment for our next question. And our final question for today comes from the line of Jon Tower from Citi. Your question, please.
Jon Tower: Great. Thanks. I appreciate it. Quick clarification on a question. Clarification, the loyalty liability. I’m assuming that was just a onetime true-up, if you can clarify, that would be great. And then the question is on frequency shifts you’re seeing in the loyalty program. Any way you can give us some sort of benchmarks as to where some of the more loyal customers were spending either frequency last year and what it’s looking like so far since you made the shifts in late ’23.
Sandeep Reddy: So I’ll take the first part of the question, John. And it is a onetime thing because I think the significance of the change of the new program was what was the trigger. But that doesn’t mean it’s never going to happen also because I think you always have to continue to monitor your breakage and if you do need to make a true-up, you will make a true up. But given the new program launching, I think this was much more of a onetime event because of the new program launching. And I think on the frequency ships, Russell will take the question.
Russell Weiner: Yeah. What I can tell you, macro, we’re still just a couple of months into this thing is what we thought we would see with regards to car customers and lighter user engagement, we are seeing. What we will do, John, is make sure throughout the year when we got more information under our belt, and we’re able to give perspective because remember, loyalty programs are not just about the first use or the second it’s about lifetime value and use over time. And so as we get more color on that, we’ll share.
Greg Lemenchick: Thanks, John. That was our last question of the call. I want to thank you all for joining our call today, and we look forward to speaking with you all soon. You may now disconnect. Have a great day.
Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
