TIP839: Domino's Pizza (DPZ): Is the Royalty Engine Still Running? w/ Kyle Grieve & Shawn O’Malley

**SPEAKER_1** (0:00)
You're listening to TIP.

**Shawn O'Malley** (0:03)
All right, folks, welcome to The Investor's Podcast today on episode 839 We are digging into a business nearly everybody listening has probably ordered from at least at some point in their life or maybe their college days in particular. It's Domino's Pizza. It's the largest pizza company on earth with more than 22,000 stores in over 90 markets. It runs one of the most capital light business models you'll find. 99% of its stores are owned by independent franchisees, with Domino's collecting a pretty healthy royalty on top of that.
That structure has helped the company compound its intrinsic value consistently for multiple decades now.

**Kyle Grieve** (0:40)
All this sounds pretty great until you look at some of the recent events. Revenue growth has slowed to a bit of a crawl over the last four years. Same-store sales are hovering near zero, and the stock has actually fallen 40% from its all-time highs.
One of its biggest shareholders in Berkshire Hathaway, which once held roughly a 10% stake in the business, ended up selling out of the entire position at the beginning of 2026 On top of that, Domino's is carrying close to $5 billion in debt on a business that's now facing some pretty real questions about changing consumer health habits.

**Shawn O'Malley** (1:09)
Even with all that, the returns on capital have been fantastic, and franchisees are still very much lining up to open new locations, both in the US and internationally.
The real question is whether this is a temporary rut for a great compounder or the new normal for a maturing pizza chain. Let's get into it.

**SPEAKER_1** (1:31)
Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you.
This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Shawn O'Malley and Kyle Grieve.

**Kyle Grieve** (2:17)
Now, before we start today's episode, I want to discuss something that I personally am really, really excited about. So in September, we're going to be hosting our Intrinsic Value Conference in Manhattan, and we have just a lineup of really excellent presenters, all from our community.

**Shawn O'Malley** (2:30)
People are saying it's going to be the value investing event of the year.
So no, it is going to be a lot of fun, and it's going to be a great place to meet up with other value investors, all looking to find great investing opportunities and also hoping to build genuine relationships. So if you want to go ahead and secure your ticket before they sell out, head on over to intrinsicvalueconference.com and going back to Domino's now. We haven't really covered a business on this show that makes money from selling food. You could say that we have a little bit of exposure through Amazon. They have Whole Foods and then Uber Eats, but they're more a delivery logistics business. Really, the only other restaurant connection we have in our intrinsic value portfolio is via Berkshire Hathaway, where we have exposure to one of Warren Buffett's favorite restaurants, that is, of course, Dairy Queen and then some sweets in Berkshire's ownership of Seas Candies. But other than that, we've tended to stay away from food-related businesses or restaurants because, well, the competition there can just be absolutely brutal. But today, we're going to buck that trend and look at one of the holy grails of restaurant franchises, Domino's Pizza, and see whether it's worth investing in.

**Kyle Grieve** (3:48)
Yeah, I'm really excited to pitch this one to you, Shawn, because the whole business model of franchising is something that I personally find really, really fascinating. Let me tell you why. So you could think of a franchise as pretty much being a royalty-type business, and royalty businesses are really interesting because they don't have to spend too much just to maintain the business and can earn some really, really high margin revenue for the right just to use its name or its system. So royalty businesses, they're really all around us. I used to own one in Natural Resource Partners, a business that owned a ton of real estate, and we ended up leasing it to these larger coal mining companies. So their customers would mine the coal, they would sell it, and then just simply return a percentage of the proceeds to Natural Resource Partners. Now, the best part was that Natural Resource Partners didn't actually have to take any part in the construction or the maintenance of the mine, they just sat back and let the cash come rolling in. And it's also clear that obviously Warren Buffett understands the strength of a franchise business very very well, which is why he purchased Dairy Queen in 1997 for about $585 million.