dodo pizza 2016 - corporate presentation
TRANSCRIPT
Dodo PizzaCorporate PresentationAugust 2016
• Dodo Pizza is an international QSR pizza chain founded in 2011 by Fedor Ovchinnikov in Syktyvkar, Russia
• We serve American-style pizza and snacks for delivery and for dine-in in our branded stores
• Focus on franchising business-model with limited number of company-owned stores and limited presence in food processing and distribution
• We provide our franchisees with all standard services, training and
support but consider our cloud-based IT platform as our key differentiating factor – a «digital franchise» concept
• As of 1 August 2016 out network consisted of 113 stores in 9
countries including 8 company-owned stores
• Binding franchising agreements for additional 344 stores
• Generated RUB 2.7bn run-rate system-wide sales in June 2016 ���(+57% vs December 2015)
• To-date we have raised RUB 172m of equity and convertible debt from 186 private individuals
# of stores RUB m
(1) Year-‐over-‐year sales of Russian franchised stores older than 30 months
Dodo Pizza Today
1 1 2 8 8 12 18 28 45 74
106
0
750
1 500
2 250
3 000
0,
37,5
75,
112,5
150,
Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16
Dodo Pizza Evolution
Number of stores (LHS) Run-rate system-wide sales (RHS)
8%4% 5% 6%
(5%)
14%
22% 22%18%
29% 27%31%
Jul-15 Sept-15 Nov-15 Jan-16 Mar-16 May-16
Like-for-Like Sales Dynamics (1)
Dodo Pizza 2016
▪ #1 QSR pizza chain in Russia by the number of stores
▪ Chained pizza delivery is an outperforming segment of QSR
industry both in Russia and globally
▪ Like-for-like sales of mature stores above 25% in 2016YTD with material upside due to growing brand recognition
▪ New stores openings: we expect to have >170 stores globally
by 2016 year-end and over 400 by 2017 year-end
▪ Asset-light business model with outstanding ROIC
▪ Unique ability to focus on franchising early-on due to public
profile of Mr Ovchinnikov and innovative marketing
▪ Franchisee stickiness ensured by IT-system, not by capital-
intensive distribution or real estate backbone
▪ Existing 11 international stores in CIS, Romania, US and China; first contract soon to be signed for a
UK store
▪ Russian emigrants as a first wave of franchisees –
already multiple incoming requests
▪ Strong unit-based economics – average payback time for a Dodo Pizza store is 2.5 years and is set to improve with increasing
brand recognition and franchisee expertise
▪ Existing franchisees account for over half of new openings
▪ Streamlined store management system
▪ Bringing online marketing tools to offline business
▪ Franchisee quality control and stickiness to the franchise
▪ Potential for big data tools and predictive analytics
Dodo Pizza 2016
National Champion in The Highly Attractive Pizza Segment
Key Investment HighlightsExceptional Growth Prospects
Unique In-House IT-System
Tangible International Expansion Prospects Proven Concept
Franchising-Focused Business Model
“Business reality show”
We publish online key operational and financial stats including monthly P&L of the Group and weekly sales of each pizzeria
We stream online our weekly all-office meetings
Each of our stores has web-cams which stream live video from the kitchen where you can watch your order being prepared
What does it give us?
Massive online following – low-cost marketing of the franchise and loyal customer base
Accountability and discipline for the management team
Spreading company values and strategic vision to all employees and customers
Access to capital for us and our franchisees
Total Transparency Policy
Our franchise is affordable…
Concession payment of 350,000 RUB (c.$5,500), significantly lower than market average
We do not have minimal net worth requirements
We do not require prior retail business expertise
… but we choose franchisees carefully
We require knowledge and understanding of our model and our values
We seek enthusiasts – new franchisees must personally go through a month-long training in our headquarters in Syktyvkar
We achieve very high franchisees engagement making them true ambassadors of the brand
Our Franchisees We have been focusing on our “digital franchise” concept from the very beginning
In-house developed cloud-based IT-system interwoven into every aspect of our business: website and call centre, in-store cashier and marketing dashboards, order tracking, delivery management, HR and inventory management
Share of online orders in sales for delivery is in line with best in-class global peers and 2x times above e-commerce penetration in Russia. Moreover, our phone sales go through a centralised call centre where orders are entered into IT-system and flow to the relevant store which allows real-time digital tracking of each and every order across the network
Our Digital Focus
Public online dashboard with ���live financial information ���
from our IT-systemScreenshot from live webcam from kitchen in our store in Oxford, USA
Fedor Ovchinnikov on the cover of the leading global pizza industry magazine
Dodo was featured in major global news sources following pizza delivery by
drone in 2014
Dodo featured on Microsoft global website among select examples of Microsoft Azure usage
case studies
Dodo Pizza 2016
What Makes Us Unique?
▪ As per our investment plan we require USD 7-8m of external financing to fund our growth by 2019
▪ Most of the investments are discretionary and can be tightly managed
▪ However, we choose to invest as we believe it will enable us to strengthen our
platform and make it scalable across formats and geographies
▪ Key uses of capital in the mid-term are:
▪ Dodo IS (IT-system) – we plan to expand our engineering and development team from current 30 members to over 100 by 2019. The
system should be restructured to withstand the growing scale of our
business and we constantly seek the best engineering talent to
strengthen our team
▪ Company-owned network – we seek to expand our proven retail
business both in Russia and USA and we are establishing a supply and distribution operations in the key regions of Moscow and Saint-
Petersburg
▪ Corporate needs – we are expanding our management team with the
focus on marketing & analytics and finance & legal and plan to invest in
legal restructuring and introduction of control and reporting practices
according to international standards
▪ Please address all your questions to Andrey Petelin [email protected]
Sources USD thousand
Cash balance as of 1 Jan 2016 770
Royalties and concession payments – Russia, CIS and Romania
22,277
Royalties and concession payments – other international 419
Operating cash flow – company-owned stores Russia 2,550
Operating cash flow – company-owned stores USA 410
Minimum required capital injection 7,047
Total Sources 33,473
2016-2018 Indicative Sources and Uses of Capital
Uses USD thousand
Capex – company-owned stores Russia 3,112
Capex – company-owned stores USA 1,800
IT system – capex and opex 8,217
HQ opex and G&A (incl. taxes) 13,377
Corporate capex including international development 6,967
Total Uses 33,473
Investment Plan
Dodo Pizza 2016
Year Invested amount Valuation of 100% Acquired stake Type
2012 ≈170 000 USD ≈3,4 mln USD 5% loan
2012-2013 ≈322 000 USD ≈6,45 mln USD 5% equity
2014 338 100 USD ≈16,9 mln USD 2% equity
2013-2014 ≈570 000 USD ≈16,9 mln USD 3,66% convertible loan
2014-2015 ≈2 624 000 USD ≈28,7 mln USD 8,83% convertible loan
Legal Structure and Shareholders Overview
Raised capitalTotal investment amount ≈ 4 024 100 USD
Shareholders of DP Global Group Limited
Fedor Ovchinnikov, founder of Dodo Pizza
Private investors
EmployeesDP Global Group LimitedHolding company registered in
BVI. Global franchisor and trademarks owner
100% 100%
100%Dodo Franchising LLCFranchising company. Russian think tank and
franchisor in Russia and CIS countries (except Baltic
countries)
Pizza Venchur LLC
Corporate-owned retail companyRussia, 7 stores
Dodo Pizza USA Retail Inc
Corporate-owned retail companyUSA, 1 store
Dodo Pizza 2016
62,9%
21,3%
15,8%
Units Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Last 12 MonthsCompany-owned stores (excluding USA)
# of stores # 6 6 6 7 7 7 7 7 7 7 7 7 7
Sales - stores '000 RUB 15,539 15,889 14,710 16,480 16,134 18,159 20,011 18,254 19,252 17,381 20,137 19,359 211,304 Cash costs - stores '000 RUB (14,032) (13,833) (13,083) (15,215) (15,080) (19,227) (17,490) (15,708) (16,601) (15,013) (16,479) (16,635) (188,396)EBITDA - stores '000 RUB 1,507 2,057 1,627 1,265 1,054 (1,068) 2,521 2,546 2,650 2,367 3,658 2,724 22,908 Stores EBITDA margin % 9.7% 12.9% 11.1% 7.7% 6.5% -5.9% 12.6% 13.9% 13.8% 13.6% 18.2% 14.1% 10.8%
EBITDA - distribution center (Moscow) '000 RUB 0 0 0 0 0 0 0 (104) (280) (328) (244) (130) (1,085)
Capex - stores '000 RUB (507) (494) (3,036) (1,640) (1,061) (645) (443) (570) (2,172) (2,834) (1,573) (3,358) (18,334)Capex - distribution center in Moscow '000 RUB 0 0 0 (20) (956) (402) (1,070) (572) (353) (67) (1,536) (443) (5,419)
Franchising and headquarters
# of stores # 41 45 51 59 63 67 71 78 83 90 93 98 98
Concession payments '000 RUB 3,957 4,170 12,119 4,685 10,502 7,348 7,545 6,500 10,332 10,864 9,941 24,258 112,221 Royalties '000 RUB 2,606 2,909 3,328 3,980 4,277 5,095 5,839 6,073 6,982 7,652 8,986 9,190 66,918 Other revenue '000 RUB 12 7 37 180 110 133 162 138 182 159 181 197 1,498 Total revenue '000 RUB 6,575 7,086 15,484 8,845 14,889 12,576 13,546 12,711 17,496 18,675 19,108 33,645 180,637
Franchising support and development '000 RUB (2,868) (2,866) (3,412) (4,320) (3,749) (4,717) (4,111) (3,984) (4,907) (5,219) (4,778) (5,466) (50,397)G&A '000 RUB (860) (926) (1,051) (2,246) (1,409) (1,608) (2,145) (2,330) (1,467) (1,640) (1,617) (2,174) (19,473)VAT '000 RUB (896) (1,073) (2,349) (1,305) (2,227) (1,817) (1,984) (1,855) (2,566) (2,587) (2,802) (4,808) (26,269)EBITDA '000 RUB 1,951 2,221 8,672 974 7,504 4,434 5,306 4,542 8,556 9,229 9,911 21,197 84,498
Capex - DoDo IS (IT-System) '000 RUB (3,078) (3,121) (3,011) (4,305) (5,003) (4,023) (4,331) (4,470) (4,184) (4,295) (4,452) (5,595) (49,867)General capex '000 RUB (3,831) (3,844) (2,664) (735) (396) (674) (156) (737) (1,014) (446) (273) (523) (15,293)
Total (excluding USA)
EBITDA '000 RUB 3,458 4,278 10,299 2,239 8,558 3,366 7,827 6,985 10,927 11,269 13,325 23,791 106,322 Capex '000 RUB (7,416) (7,459) (8,711) (6,700) (7,416) (5,744) (6,000) (6,349) (7,723) (7,642) (7,834) (9,919) (88,913)Cash end of period '000 RUB 20,628 27,312 30,364 49,510 50,749 48,959 50,562 50,140 48,613 43,066 48,847 62,947 62,947
Key Financials
Source: unaudited management accounts. Dodo Pizza 2016
Dodo Pizza 2016
Business Overview
Source: Euromonitor, companies’ disclosures.
Number of locations in Russia
(0,6%)
0,7%1,3%
4,7%
Consumer Foodservice
Fast food/ QSR Pizza QSR Chained Pizza QSR
Russia Market CAGR 2015-2020Share of takeaway and delivery in total QSR market
18,1%
8,0%
USA Russia
155
95 88 8671
44 36
0
40
80
120
160
200
Dodo Pizza year-end
Dodo Pizza 1H 2016
Sbarro Tashir Pizza
Papa Johns Dominos Pizza Hut
National Pizza Champion with Ample Room for Growth
Dodo Pizza 2016
Dodo Will Be #1 QSR Pizza Chain in Russia By Far By the End of the Year
Dodo Operates in the Fastest-Growing Segment of the Market
Pizza Is the Most Unconsolidated Large QSR Segment
118
45 44 27
11 10
0
30
60
90
120
150
Burger Coffee/Bakery Pizza Chicken Middle Eastern
Ice Cream
Independent Chained
Russia QSR market size by segment in 2015, RUB bn
And Will Also Benefit From the Wider ���Adoption of Food Delivery
2011, April – first store opened in Syktyvkar
2012, June – first franchised store
2013, February – official start of franchising programme
2014, October – store opened in Romania becoming the
first Dodo Pizza international location
2016, March – first US store opens in Oxford, MS
2016, June – launch of the first Chinese Dodo Pizza in Yantai, Shandong province.
As of August 1st, 2016, 113 pizzerias are operating in 9
countries: Russia, Kazakhstan, Uzbekistan, Kyrgyzstan,
Romania, Lithuania, Estonia, China and the USA.
Dodo Pizza’s presence as of August 1st, 2016
2011 2012 2013 2014 2015 2016
18
12
28
74
113
65
178
Store count growth
Store count
under development
operating
178 pizzerias will be operating by the end of 2016
History of Network Growth
Dodo Pizza 2016
Operating Stores Under development
(franchise agreements signed)TOTAL Dine-in &
DeliveryDelivery & Take-away Food court Pizza & coffee
Syktyvkar, Komi Republic, Russia 6 3 2 1
Moscow & Saint-Petersburg regions, Russia 1 1 18
Oxford, Mississippi, USA 1 1
Total company-owned 8 4 1 2 1 18
Franchised stores
Moscow 1 1 44
Moscow region 17 15 2 24
Saint Petersburg and Leningradskiy region 5 4 1 3
Samara and Samara region 7 7 3
Rostov-On-Don and Rostov region 5 5 7
Smolensk and Smolensk region 3 2 1
Other Russia 57 49 7 1 229
Total franchised, Russia 95 83 9 3 308
Total franchised, Kazakhstan 2 3 17
Total franchised, Romania 2 1 1
Total franchised, Estonia 1 1
Total franchised, Lithuania 1 1
Total franchised, Uzbekistan 1 1
Total franchised, Kyrgyzstan 1 1
Total franchised, China 1 1 1
Total network 113 96 10 6 1 344
Current Network Overview
Source: company data.
Average Check Dynamics of Russian Franchised Stores
73%53% 80%
Average Sales Profile of a Russian Franchised Store
RUB / month
Delivery Sales Channels in 1H 2016
0
23
45
68
90
113
0
1 000 000
2 000 000
3 000 000
4 000 000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43
Number of observations Average monthly sales
Month of operation
# of stores RUB / transaction
1
0
0
1
0% 25% 50% 75% 100%
Sales
Orders
Delivery Eat-in
0,560,44
OnlineTelephone
200
350
500
650
800
Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 Mar-19 Jul-19 Nov-19 Mar-20
Total Delivery Eat-in
Sales Profile Review
Dodo Pizza 2016
Dine-In vs Delivery in 1H 2016
44%56%
Store FormatsDelivery Pizza RestaurantOur mass market format is Delivery Pizza Restaurant with the menu centered around pizza. The business model is delivery-oriented with a delivery time guarantee within the designated zone. Our concept is similar to that of international chains such as Domino’s, Telepizza, Papa John’s.
The success of the delivery model is evidenced by worldwide proliferation of companies that specialise in pizza delivery. Around the delivery model, without undermining its efficiency, Dodo Pizza has developed a dine-in format that strengthens the entire business through diversification and extra revenues and helps to promote the brand. A Dodo Pizza store with a dine-in area doesn’t have waiters and orders are served in disposable packaging. Great emphasis is placed on ambiance, interior design and customer service. Items like coffee, house-made milkshakes and uniquely marketed pizza slices are only available on the dine-in menu. Customers are offered fresh-out-of-the-oven pizza slices while our information system Dodo IS displays exactly how long each slice has been sitting on the counter. Dine-in sales can account for 30-70% of sales depending on location and various other factors.
Development of dine-in
Several sub-formats have been built around the single production model so as to meet the demands of different markets, locations with different traffic and renting costs. This approach allows a degree of flexibility while maintaining consistency and uniformity. The main format is based on delivery but sites with high traffic and costly rent are developed so as to generate high dine-in sales. Low-traffic locations either have no dine-in area at all or have kids rooms and larger tables for children's parties in order to attract family audiences.
Flexibility and uniformity
Dodo Pizza is developing 5 restaurant sub-formats around the single production model
Dine-in & Delivery Delivery & Take Away
Food Court Street Food
Small town
• Delivery and dine-in area with sit-down tables
• Total area 80-250 sq m
• Only delivery and takeout. No dine-in area.
• Total area 60-120 sq m
• The food court format for malls
• No delivery• Total area 50-70 sq m
• Format for locations with high pedestrian traffic
• Pizza by slice, pizza to go, no delivery
• Total area 50-70 sq m
• Dine-in & Delivery for small towns, simplified menu
• Total area 120-250 sq m
Dodo Pizza 2016
Product Management• The Dodo Pizza menu caters to the mass consumer and focuses on
delivery. Its foundation is a selection of pizzas. Besides pizzas, the menu includes snacks, ready-to-eat desserts, cold and hot beverages. Several menu items were introduced specifically for dine-in customers: milkshakes, coffee, pizza by slice. Depending on the pizzeria’s format, pizza generates 60-70% of sales.
• The menu is continuously evolving. New products are introduced as we explore new formats and new markets. The company operates an R&D lab for developing new products, testing equipment and new technologies. Since launching in the US, Dodo Pizza has started collaborating with leading American pizza technologists and dough experts John Arena and Tom Lehman.
• By combining new technologies with our information system we launched an innovative model of selling pizza slices. The information system forecasts sales volumes and automatically initiates pizza production. Fresh-out-of-the-oven pizza is offered by slice for up to 60 minutes. During the first 45 minutes slices are sold at regular price. Then they are offered for 15 minutes at a substantial discount. If not sold after 60 minutes, slices are written off. The information system informs customers of exactly when each slice was taken out of the oven. This ensures transparency and higher appeal for the customer. This way, pizza slices offered at Dodo Pizza are always fresh and write-offs are minimised through accurate forecasting.
Pizza accounts for 60-70% of sales
Pizza by slice
Dodo Pizza 2016
Product Management
Dodo Pizza 2016
• Seasonal offers are a crucial element of Dodo Pizza product marketing strategy. As part of this initiative we release a seasonal pizza once every three months. Each seasonal release is accompanied by a separate marketing campaign. Seasonal products help maintain brand awareness and let customers try new flavours and combinations. Seasonal products are created by the Product department. They are mandatory for every pizzeria throughout the relevant region.
• The Product department initiates certain programs to meet specific marketing objectives. An example of this is the launch of the “combo”, a product category aimed specifically at value-conscious customers and allowing them to choose among sets with 2 or more pizzas and a beverage at a special price. Key suppliers also participate in many of our marketing programs.
• System-wide supply volumes in Russia allow us to negotiate the best prices and terms for our franchisees. Manufacturers produce and package products specifically for us. For example, Mozzarella cheese is manufactured and packaged in Russia specifically per our requirements. Most ingredients used in Dodo Pizza kitchens are strictly controlled to ensure consistency of taste and quality.
• Promo photos of Dodo Pizza menu items are created at our photo studio using real products. We don’t use digitally enhanced photographs.
Marketing
At the moment, national promotion of the brand is conducted primarily through social media. More sophisticated national marketing campaigns will commence in 2017.
National marketing
Local marketing is handled by franchisees with support of the head office. Dodo Pizza educates franchisees about effective local marketing techniques, customer acquisition and retention.
• Franchisees have essential knowledge of local markets, local culture and support of local communities. Combined with global expertise of Dodo Pizza, they form a fail-proof marketing strategy for individual stores.
• Local marketing targets and objectives are set by the franchisee. The head office provides ready solutions as per specific requirements of individual local marketing projects.
• Real-life marketing experience accumulated by both the franchisee and the corporate marketing department can be used subsequently for development in similar markets.
Local marketing
Dodo Pizza’s marketing efforts can be broken down into local marketing and national marketing. National marketing is focused on promoting the brand and product and its direction is governed by the corporate head office. Local marketing is a set of activities aimed at attracting customers in individual local pizzerias.
Dodo Pizza runs a system-wide customer loyalty program. Customers are awarded 5% value of every purchase in bonus points. They can then use the bonuses to pay for orders partially or in full.
The system only requires association with a client’s phone number - no need to carry extra plastic around in the wallet. Alternatively, customers pay with bonuses through QR code that is automatically generated in their account on the Dodo Pizza website.
The loyalty program allows to very closely and scrupulously study customer behaviour. Based on relevant data, we intend to develop statistical models and a CRM system that will become an integral part of Dodo IS.
Customer loyalty program
Marketing mock-up from the Dodo Pizza online Knowledge Base
Customers
Delivery Dine-in
Young peopleFamiliesAll population
Average income
Main marketing channels:• social media• direct marketing / direct mail
Dodo Pizza 2016
• The headquarters are in Syktyvkar (Komi Republic, Russia). We have a separate Dodo IS development office in Moscow and two more development teams in Nizhniy Novgorod and Kolomna (Moscow region).
• Dodo Pizza grows at a rapid pace requiring flexible, continuously evolving
organizational structure. • Each functional unit at Dodo Pizza is treated as a separate “enterprise”
inside the company with its own “product”, business metrics and targets. Each unit sets goals that can be quantified and measured. The chief metric
reflects the current strategy. For example, in 2016 the main company metric is the increase in year-over-year same-store orders in mature stores.
• The entire head office takes part in the development of Dodo IS, the company’s information system. The Dodo IS project teams are comprised of managers from various departments and software developers. Dodo IS helps corporate managers reach their business objectives.
• The company’s rapid growth attracts talented managers and professionals from all over Russia and abroad. In 2016 the company launched “The Managers’ School”, an extensive internal training program / internship to
prepare highly skilled corporate office managers.
Headquarters
Headquarters in Syktyvkar (Russia):
agile style office, R&D lab, training center
900 sq. meters
89 Head office employees 30 Dodo IS staff
Organizational structure
Head office
The entire complex of entities participating in the transnational Dodo Pizza network can be viewed as a structure with three functional levels — corporate head office, master franchises and local franchise chains. The corporate head office is responsible for business system development and the Dodo Pizza brand in general. A master franchise is a company that has the rights for distribution of the franchise (also known as sub-franchise) within a certain territory. Dodo Pizza master franchises are corporate owned. Local franchise chains are companies that own and operate one or several pizzerias. They are directly involved in restaurant operations, meaning they run the kitchens, order supplies and sell pizza to end customers. They can be independent or owned by other companies, including master franchises and the head office.
development of business system and Dodo Pizza brand
development of regional franchise system in a specific territory
Master franchise
development of pizzerias in a specific area
Local chains
The head office develops the brand, business system, Dodo IS and domestic franchise chains. Currently the head office also acts as the Russian master franchise, which in the future, will be transformed into a separate functional division.
Current structure
Future structure
US chain
The company owns and operates two local chains: 7 pizzerias in Russia and 1 in the USA. They have separate operations management and finance. Corporate owned units help accumulate essential first-hand business operations experience. For the company, they represents a strategically significant direction. Nevertheless, the primary focus is franchising. In the future, the corporate owned chains will be merged into one division.
Head office
Corporate owned local chains
Russian chain
Russian master franchise
Franchises
International master franchise
companies
Head office
Franchises
International master franchises
Head office
International corporate owned chain
Franchises
Dodo Pizza 2016
Standards and information
division
Financial dep.,Accounting
CEOCompany structureJune 2016
New units division
Supply chain division
Analytics division
Control division
Training center
Product Department
Product division
Dodo University Franchising Department
HRdepartment
Russian contact center
Legal department
Dodo IS development department
Corporate owned local chains
Russian chain US chain
International development
division
Marketing,Communications
Common for all companies in the
group
• Menu, pizzeria concepts and formats, kitchen production model – R&D
• Product marketing, seasonal products
• New unit development — kitchen floor plans, interior design
• Unit development system – project office
• Development of thesupply chain - ingredients, implements, and equipment
• Development. of operations management system.
• Development of effective tools to drive sales and profits.
Monitoring of operations and quality control, product and standards ratings.
• Knowledge base management, communication with franchisees, best practices and standards.
Training of franchisees and pizzeria staff
• Franchise distribution, network development, resolving disagreements, M&A.
Three key departments of the company answer the three key questions: what? how? and who?
The Product Department answers the “what” questions. What do we offer the market and restaurant and delivery customers? What is the Dodo Pizza experience, product, service, pizzeria, menu, and brand?
Dodo University answers the “how” questions. How to build a sustainable pizza business? How to manage a pizzeria? How to produce high-quality product every day?
The Franchising Department answers the “who” questions. Who will be our franchisees? The Franchising Department reviews and selects future partners, ensuring dynamic growth of the store network.
Dodo Pizza 2016
Development and maintenance of the information system Dodo IS
Fedor Ovchinnikov, 35 years old; entrepreneur; founder and СЕО of Dodo Pizza. In 2006-2010 he launched and headed the largest regional book store chain,. In 2011 he started Dodo Pizza.
Andrey Petelin, 34 years old; director of franchising; at the company since 2011; supervises finance and legal department. Prior to his career at Dodo Pizza, Mr Petelin worked in banking, retail and manufacturing.
Dmitriy Vyazov, 39 years old; financial director; with the company since 2013. Before Dodo Pizza, Mr Vyazov worked at Sberbank and VTB Bank.
Valentina Kadulina, 52 years old; chief accountant, at the company since 2013. Prior to joining Dodo Pizza, Ms. Kadulina had been employed at several companies as chief accountant for 15 years.
Semyon Belousov, 33 years old; chief counsel; at the company since 2012; worked as head of legal departments since 2009.
Marsel Ziganshin, 28 years old; head of Analytical, training and quality control center (Dodo University); with the company since 2014. Prior to joining Dodo Pizza, Mr Ziganshin worked as a business analyst and restaurant business consultant. He also worked at McDonald's for 7 years.
Ilya Zomba, 33 years old; head of Product, New unit development and Supply chain; joined the company in 2016. Prior to his employment at Dodo Pizza, Mr Zomba occupied executive positions in a number of international companies operating in Russia.
Andrey Morevsky, 34 years old; head of software development and Dodo IS architect, joined the company in 2013. Before Dodo Pizza, he was a leading developer at the Federal Tax Service and system architect for Rapid Soft where he was involved in projects for Svyaznoy Bank, Svyaznoy-club and VTB.
Ilya Farafonov, 26 years old; head of the Russian corporate owned chain; at the company since 2013. Ilya Farafonov is a former Dodo Pizza franchisee. Before he joined Dodo Pizza, Mr Farafonov had managed a catering business for 2 years.
Alyona Tikhova. 26 years old; СЕО of Dodo Pizza USA; joined the company in 2014. She is a former Dodo Pizza franchisee in Khimki. Prior to her joining the company, Ms Tikhova worked in marketing and sales; was in charge of working with key customers at “Baltika”, and worked as a sales manager at Hilti Russia.
Key management Yuliya Belyavskaya, 29 years old; head of HR; at the company since 2011: head of contact center and quality control, store manager. Before joining the company Ms Belyavskaya headed a local branch of the newspaper “Telesem”.
Dodo Pizza 2016
Store Economics
Dodo Pizza 2016
Average EBITDA Margin(1) of Russian Franchised Stores(2)
(1) EBITDA after royalty(2) Russian franchised stores older than 2 years
Breakeven Point in Russia
Payback period
▪ First store in a city/town. Building a solid customer base, conducting aggressive marketing campaigns. Sales grow gradually. Payback period is usually 2-3 years.
▪ Subsequent pizzerias. Sales grow rapidly. A store usually starts generating
operating profit in 2-3 months. Payback periods for such units rarely extend
beyond 1,5-2 years.
Lower income regions(low rent, low incomes) 1-1,5 million RUB monthly sales
Higher income regions (high rent, highh incomes) 1,5-2,5 million RUB monthly sales
EBITDA Margin(1) of the Velsk-1 Store
Velsk is a small town in the Arkhangelsk region, Russia with a population of 23,000.
The pizzeria opened on 16 April 2016.
Dodo Pizza can be as successful in small towns as in large and medium size cities.
Unit-Level Economics
A pizzeria’s key success factors
Expenses % of sales
Cost of Sales (Food, Paper, Freight and Cartage) 30-40%
Labor Cost 20-25%
Utilities 2-3%
Advertising 2-3%
Occupancy Costs 5-10%
Royalty 4,1-5,9%
Misc. Expenses 2-5%
EBITDA 10-25%
* Cost of sales at a specific pizzeria depends on distribution of sales between delivery and dine-in. The higher the delivery sales, the lower the Cost of sales. Because delivery orders contain mostly pizzas, which have higher margins. Yet, pizzerias with dining rooms are more profitable overall due to additional sales.
*
Consistent quality of product and service
Local marketing
Cost management
Customer retentionCustomer base expansion
New customers
Increasing productivityMinimising losses
Management
Management is a crucial factor of success. Pizzeria location is not as important because delivery generates 50-60% of sales.
Dodo Pizza 2016
• The process of opening a new store is systematised, which allows to work simultaneously on multiple projects. Currently, we are able to handle over 100 ongoing development projects at once. The Startup department is responsible for new unit development. Kitchen floor plans are produced
internally while restaurant interior design is provided by a long-term contractor design studio.
• Each franchisee attends a 21-day training program and internship at the Dodo Pizza Training Center in Syktyvkar.
• Over 50% of new pizzerias are opened by existing Dodo Pizza franchisees. Their previous experience allows for higher efficiency in planning and executing subsequent pizzeria launches. Best timing for opening a full-scale
restaurant has so far been 60 days, for a food court location - 32 days. Both projects were managed by experienced franchisees.
• A list of verified reliable contractors allows to open quickly and smoothly. Suppliers of essential kitchen equipment (ovens, coffee machines,
refrigerators) maintain stock specifically for our needs to further accelerate development. We deal directly with manufacturers of equipment and our franchisees are given bulk discounts.
• Every launch is preceded by a thorough examination of the entire pizzeria, including its kitchen production, furniture and signage placement etc. This examination, conducted by the Control department, ensures brand consistency and compliance with quality standards.
Systematic approach to opening new stores
The main stages of development
Average budget for a full-fledged restaurant with dine-in area - ���10 200 000 rubles (c.$150k)
Cost of launching a standard pizzeria
Dodo Pizza 2016
Two-stack oven XLT 3240. ���Retail price in Russia - 35 306 USD, for our franchisees- 26 833 USD
XLT is one of leading global manufacturers of conveyor pizza ovens. The oven is the “heart” of a pizzeria. That’s why we opted for the best and most reliable solution.
Coffeemaker Thermoplan B&W one. ���Retail price in Russia - 9 930 EUR, for our franchisees- 7 547 EUR. ���Interest-free payment plan available for existing franchisees..
Thermoplan is the “Mercedes-Benz” of coffeemakers. Their patented cold foam technology ensures superior quality of product. These machines are also used by Starbucks and Costa Coffee.
Estimated cost of equipment for standard full-scale pizzeria – 4 484 000 RUB
Distribution of equipment by origin in a standard estimate
Equipment expenses structure
Dodo Pizza 2016
Cost structure for average 3-4 years old pizzeria. Percentage of sales.
Costs ≈85%
Controllable ≈32%
Non-controllable≈20%
• Costs are broken down into COGS, controllable and non-controllable expenses.
• The main controllable expenses include staff wages, advertising, utilities and repairs.
• Controllable expenses for a 3-4 year old pizzeria are around 32% of sales. These are expenses that can be controlled through various management initiatives.
• Non-controllable expenses are rent payments, call-center payments,
banking services and royalty payments. They normally amount to roughly 20% of sales.
• Sore management is always challenged to optimise controllable expenses.
The two key areas for optimisation are the minimisation of shrinkage and optimisation of staff payments
• Dodo IS allows store managers to identify stages of production where most losses occur and take action to eliminate them. It also helps to
manage inventory in the most efficient way minimising working capital requirements
• Dodo IS has an interface for detailed shift scheduling. Before scheduling a
shift the store manager checks the integrated orders forecast. Based on this, the manager can optimise employees’ schedules so that the pizzeria isn’t understaffed or overstaffed at any time.
Cost of goods sold ≈33%
Opex Structure and Efficiency
Dodo Pizza 2016
Schedule in Dodo IS
• With the help of Dodo IS the store manager optimises budgets and improves profitability.
• Staff payments. Optimised schedule - expenses reduced by 5-7%.
• An average shift at a store consists of 6 staff members: a shift manager, a counter, 2
pizzamakers and 2 delivery drivers. All employees come in at times indicated in the
schedule agreed in advance.
• We offer employees a flexible schedule. Each employee fills out an availability calendar in
the personal account interface indicating days and shifts when she or he can come in to
work.
• By analysing previous orders data Dodo IS forecasts how many pizzas and other items will
need to be prepared at any given hour during a shift.
• The system factors in variability of demand and employees’ availability and recommends an optimised schedule. The “no orders - no staff” principle helps to avoid overstaffing.
• If necessary, the store manager makes final adjustments of the schedule manually.
• Losses. By minimising losses, a pizzeria’s expenses are reduced by 3-5%.
• A store maintains a constant supply of various stock items. So in order to efficiently
monitor and control stock levels, Dodo IS features an integrated inventory management
interface.
• Shift managers register incoming stock, write-offs and stock movements inside the pizzeria
in the system and optimise inventory based on the analysis of historical data
Relocation of ingredients in Dodo IS
Opex Structure and Efficiency
EBITDA 12% → 24%
Dodo Pizza 2016
Dodo IS IT-System Overview
Dodo Pizza 2016
Dodo Information SystemDodo Pizza is in a sense an IT company that makes pizza. We develop our own web-based software that manages operations of a single pizzeria as well as the entire chain. This software, the information system Dodo IS, is the core of our franchise. With the use of the Internet and IT, Dodo Pizza creates a highly efficient pizzeria model. Dodo IS enables online control over operations and quality throughout the restaurant chain in real time. What differentiates Dodo IS from systems used by other chains? There are two main factors:
1. Combination of competencies. Dodo Pizza is simultaneously a pizzeria chain and an IT company that since its inception in 2011 has been developing its own software. This approach enables integration of software with business operations to an extent unprecedented in the industry. Not only are traditional processes optimised but also entirely new, more efficient production and administration systems are developed. Software development is an interactive continuous process that is fully integrated with other company projects.
2. The Internet. Dodo IS is a website. Even POS terminals at our pizzerias operate through a browser. The Internet allows to unite all pizzerias, tablets in the kitchens, delivery drivers’ phones, apps on customers’ smartphones, employees’ accounts, the website for placing orders and call-center into one system.
The Internet provides opportunities for innovation. The information system allows to break new ground in automatisation. Production in a kitchen equipped with tablets or other mobile devices becomes fully transparent. Meanwhile, the set-up is simple because we only need a browser and Internet connection. The Internet also provides flexibility and rapid system-wide implementation - improvements and updates are affected instantaneously throughout the chain comprising thousands of pizzerias.
Franchise as a web-service
Pizzerias
Customers
FranchisesManagers
Qualitycontrol
The Internet
Web sitesCall centers
Head office
Dodo Pizza creates something similar to the “smart house” concept. Only it’s “smart pizzeria”. Franchisees access the system from anywhere through any Internet browser. It’s a simple and functional solution. Yet all this is just the beginning. The system aggregates large amounts of data. Its analysis has enormous business potential.
Smart Pizzeria
Dodo Pizza 2016
Production management
since 2011
Dodo IS is developed ���in-house
30 software developers
in June 2016
future: 120 software
developersby 2019
Dodo IS – franchise as a web service
Store management • Website for customers���Mobile apps
• Customer loyalty program• CRM system
Dodo IS combines stores into an integrated network,
allows instant access to operational data from each unit
separately or from all regional, national or international
units, enables analysis and comparison of real-time business
stats, which results in more efficient data-driven decision-
making.
Pizzeria network management
• Regional network���National network
• International network• International head office
Quality control
Pizzeria production management system
• Tracking - order fulfillment• Shift motivation system• POS module• Board-menu control • Delivery management• Dough management
Shift management systemPizzeria management system
• Shift management - work time control, consumption of supplies, inventory management, orders processing, delivery, operational documents
• Staff management - hiring, scheduling, payments, staff turnover management
• Ingredients consumption - cost control, stock management
• Local marketing - promotions management, customer database analysis
Employee’s personal accountPersonal work schedule management, calculation of payments, motivation of employees
System that manages the international network of pizzerias and provides essential analytics for the global corporate head office.
Knowledge base
Digital learning and instructions at pizzerias
System-wide quality control relies on ojective operational data from Dodo IS as well as reports of mystery shoppers and corporate staff, customer reviews on the website and in social media.
The main components of the system
Dodo Pizza 2016
How Dodo IS works. Case-study: Order preparation speed
Dodo Pizza not simply automates conventional business processes. Dodo Pizza software developers actually undergo regular kitchen practice, manage pizzerias and based on real operations experience invent new ways for pizzerias to be more efficient.
The Tracking kitchen tablet
Game-like kitchen motivation screen
Store manager’s interface – comparing pizzerias’ speed
How do you make your kitchen team prepare pizza as quickly as they change wheels at Formula 1 pit stops?
• All Dodo Pizza kitchens are equipped with tablets that communicate the necessary information about orders, products and tasks. Each work station has its own interface. Not only do kitchen line operators receive information through the system but they also interact with it by registering every stage of order fulfillment.
• Preparation times are registered in the system. But how to motivate staff to work faster? Our experience indicates that long term motivation is ineffective for this particular problem. Instead, Dodo Pizza kitchens use positive and negative reinforcement in combination with “game” motivation. If a product is prepared within the required time the system plays a “cheering” sound, if not - a “booing” sound. There are special motivation screens in the kitchens. If preparation took too long a red octopus appears on the screen, if it was on time - a green one. All this motivates the team to work faster.
• Store managers, regional division managers and corporate office managers can view and compare average preparation speed at any pizzeria online. Comparing their results against those of other units motivates store managers to reach new targets.
Dodo Pizza 2016
How Dodo IS works. Case-study: Hiring and staffing
Dodo IS lowers staff turnover and increases productivity by optimising employees’ schedules. Performance metrics at all pizzerias are monitored online by the corporate head office.
The hiring manager receives applications, reviews them, invites prospects to be interviewed and monitors performance - all in a single interface in Dodo IS. Dodo IS allows to conduct recruitment entirely in the system. Average application response time is reported as well as how many employees quit during the first 2 weeks. The head office can easily spot pizzerias that have turnover problems.
ApplicationsAn employee enters her availability schedule into the system. Based on this information, the store manager will assign hours in shifts. Employees can plan their work hours well in advance. This feature proved to be a significant factor in attracting new employees and retaining the existing ones.
Dodo IS performs statistical analysis and forecasts work loads and hourly order quantities. It advises the manager on the optimal schedule for maximum efficiency, when to schedule more people and when - less. Employees can check their confirmed work schedules and positions. If for some reason they can’t work on a given day, the system will help to find a replacement.
Availability Scheduling shifts
Dodo Pizza 2016
▪ Dodo IS manages all pizzeria’s business processes out of box.▪ Dodo IS is web applications and services hosted in the Microsoft Azure
Cloud and distributed via SaaS-model –
no local deployment and administration required.
▪ Dodo IS provides strong SLA to our franchisees
due its use of cloud power – Load Balancing,
On Demand Scaling, High Availability, sharding for terabytes of data.▪ Dodo IS serves over 100 pizzerias world-wide 24x7 and processes about
1000 orders per hour.
▪ Dodo IS development proceeds in collaboration and partnership with Microsoft.
Dodo IS Technical Overview
Neil Leslie General Manager Developer Evangelism Microsoft and Fedor Ovchinnikov founder of Dodo Pizza
Dod
o Pi
zza
2016
Dodo IS is continuously evolving - currently we are building the new Service Oriented Architecture
▪ It’s more reliable and secure▪ It’s less coupled and less complex
▪ It’s more predictable for high loads▪ It correlates with business
department structure
▪ It allows to serve over 4000 pizzerias worldwide 24x7 in 2025
▪ ASP.NET MVC, React, jQuery at frontend▪ .NET and RabbitMQ at backend▪ MySQL Percona Cluster to persist
operational data
▪ MongoDB to shard data (such as client profiles, etc)
▪ Redis for caching▪ ElasticSearch for logging
▪ TeamCity for Continuous Integration▪ dotTrace for profiling▪ ...and many others for other purposes
Technology Stack
Dodo IS High Level Architecture
Dodo Pizza 2016
Investing in Dodo IS
Store Management
12 people
Dodo IS Team Expansion Plan
Client Services8 people
Product teams
Network Management
5 people
Technical Team
5 people
2016 2018
Product teams
Client Services
14 people
Network Management
16 people
CRMSystem
9 people
KitchenProduction11 people
Technical Team
11 people
Quality Control
10 people
���Store
management34 people
• Reporting• Staff & Drivers
• Local marketing
Knowledge Base
5 people
2016 — 30 employees2018 — 120 employees
Architect – 1 person CTO, architect, head of QA, design and UI – 5 people
increase by a factor of 4
Investment plans:
• Recruiting of highly skilled developers, analysts, and CTO
• Moscow-based Dodo IS office
• System refactoring; improving the architecture and fault tolerance
• Development of a high-quality mobile app for customers and employees.
Development of Dodo IS commenced upon opening the first Dodo Pizza in 2011. At first, the IT team
consisted of only 3-5 people. Today, we have a team
of 30 engineers but at the current network growth
rate we need to expand it rapidly. The system
requires refactoring and a new architecture. The
system’s capacity must be accommodating of thousands of pizzerias all over the world. At the first
stage, we need to increase the number of product
teams, developers and recruit highly-skilled IT staff.
How does Dodo IS set the business up for success?
• Full transparency and control over restaurant operations for maximum efficiency
• Integration, transparency and management efficiency for regional divisions
• Efficient management of global operations, menu and the brand
• Higher competitive appeal of the Dodo Pizza franchise model
• Advanced monitoring of franchise performance helps control quality
Dodo Pizza 2016
Company-Owned Network
Dodo Pizza 2016
Sales, RUB m
2011: Corporate-chain network established when Fedor Ovchinnikov opened his first store in Syktyvkar
2013: first production and distribution center in Syktyvkar
2014: first food court store opened in Syktyvkar
2015: acquired the Khimki store, first company-owned store outside of Syktyvkar
2015: opened experimental Dodo Pizza & Coffee store in Syktyvkar
2016: first Dodo Pizza store completely redesigned and converted into a new format targeted at city centers with high-traffic
2016: ongoing construction of the production and distribution centre in Moscow to supply growing chain in Moscow and Moscow region
2016: flagship Dodo Pizza store to be opened in the Moscow city centre by the end of the year
Corporate Chain Overview20 810 031
14 129 120
• Network expansion with the focus on Moscow
and Saint-Petersburg
• Development of production and distribution
centres in Moscow and Saint-Petersburg
• Development and optimisation of new formats
and products
• Development of best-in-class management
practices that can be spread across the system
Experimental format: ���Dodo Pizza & Coffee
First Dodo Pizza store, Syktyvkar
Corporate Chain Strategy
SalesIn April of 2015, the Khimki-based franchisee decided to leave the restaurant business. The corporate-owned chain acquired the store. At the time the store had been operating for 6 months with monthly sales of 1.6 million RUB and negative profits. All the major global industry players were already operating in Khimki: Pizza Hut Express, Domino’s, Papa John’s. In 6 months after the acquisition the store started generating profit. By May 2016, monthly sales reached 3.4 million RUB with 17% EBITDA margin.
EBITDA margin(1)
RUB per month
acquisition
(1) after acquisition by the corporate-owned retail division
Case-study: Khimki, Moscow region
• By improving management we achieved consistency and high-quality product and service.
The team• Experienced store manager from Syktyvkar• New staff motivation system• Implemented a new recruitment systemCost optimisation• Waste and shrinkage reduced• Increased productivity of labor through optimised schedulingMarketing• Direct Mail - systematic customer acquisition • Effective campaigns in social media
The Khimki case demonstrates the corporate-owned chain’s main competence - systematic improvement of business efficiency and profitability in competitive markets. The division’s strategy accounts for eventualities where franchisees decide to exit the business. In such cases, acquisition by the corporate-owned chain will be considered.
How was this accomplished?
Dodo Pizza 2016
Franchising Overview
Dodo Pizza 2016
● Initial fee (one unit) – 350 000 RUB + VAT
● Royalty - 3.5% of sales + VAT in year 1, 5% of sales + VAT starting in year 2
● Once the store count in Russia reaches 400, an additional marketing fee of 1% of sales will be introduced (with an option of subsequent revision).
Store operations support:● complete list of equipment and supplies;● pizzeria layout and interior design;● Instructional materials, manuals, technical information,
kitchen processes etc;● three-week training program at Dodo Pizza headquarters.
● quality control systemThe information system Dodo IS:
● automatisation of processes;● website and mobile app for online orders;
Effective marketing:● menu, seasonal products;
● marketing materials and mock-ups;● customer loyalty program.
Dodo Pizza Franchise
The franchise package includes:
Franchising terms in Russia and Kazakhstan:
• Franchise fee (for every unit) – 7 000$;• Royalty (on net sales) – 5-7%;• Marketing fee (on net sales) – 3-5%.
Some unique features:
• All franchisees must complete the training program in Syktyvkar.
• Current franchisees participate in “tenders” to obtain “exclusivity” in large cities.
• Owners of pizzerias with quality problems are prevented from developing new units. Quality must be fixed first and foremost.
• Agreements with franchisees that systematically fail to meet quality requirements are terminated.
• Contracts for exclusivity in a territory necessarily contain a development schedule, failure to comply with which will result in contract termination.
International franchising - projected terms:
Dodo Pizza franchisees after successfully completing studies at the Training Center
Dodo Pizza 2016
Select Dodo Pizza franchisees
Dodo Pizza 2016
Dmitry Troyanfranchisee since 2012
Denis Grinev franchisee since 2013 Sergei Gritsenko
franchisee since 2013
Cities: Samara, Novokuibyshevsk, Orenburg, Tolyatti, Nizhny Novgorod, Bor, Kstovo, Dzerzhinsk, Penza, Saint Petersburg
“In four years, our team has managed to open 5 pizzerias in my hometown Samara and 3 more in other cities. Our monthly sales are approaching 30 million RUB. There are things we still need to work on. But what we have already accomplished is inspiring. In my opinion, success is a consequence of perseverance and teamwork. Besides, we operate in large cities where the delivery and dine-in model appeals strongly to the needs of the market.”
Cities: Taganrog, Rostov-on-Don, Voronezh
“Dodo Pizza is a unique company with a great future ahead. With my own eyes I’ve seen this company’s drive for success and what it’s based on: talented passionate people and leadership, vision, strong company culture, focus on innovation and aspiration to be the best in the business. This is all that’s needed for long-term success. And this is why I am part of the Dodo team.”
Cities: Oktyabrskiy (Bashkortostan), Saint Petersburg
“When I decided to get into the restaurant business I saw that the Russian market was still largely undeveloped. I was interested in working with a scalable model. And this is what Dodo Pizza is especially good at. It is a fast-growing chain with many competitive advantages that I can be a part of. It’s a great team that completes the most ambitious projects and works in full harmony with their franchisees. This is a winning approach that is not as deeply felt with some other franchises out there.”
Former Head of Sales in Henkel Ukraine and Moldova
● The story of the Samara chain started in 2012, when two brothers Dmitry and Yury Troyan opened their first Dodo Pizza. Today their franchise network consists of 8 units of
different formats operating in 4 cities.
● All pizzerias exhibit stable growth of sales overtime with each new-unit’s initial growth
rate exceeding analogous figures of previously opened units. The first store had been
operating for 10 months before its monthly sales reached 1.13 million rubles. The second
one took three months to match the same monthly figure. The third one brought 1.6 million in sales in the first month of operation.
● The pizzeria Samara-5 set a record of 2 969 003 rubles sales just 2 months after launching.
● The increasingly impressive growth rates of newer units can be explained not just by
increased brand awareness but also by increased experience and expertise of
management. The Samara team has set up a local training center to improve efficiency of
kitchen staff and management. New managers are recruited in part through a social media-based blog, which currently has around 4000 subscribers. The blog focuses on business-
related subjects, pizzeria operations, best practices and team members’ personal stories.
Pizzeria AgeSales, first month.
rub..Sales in June 2016. rub.
Average EBITDA margin in 2016, %
Samara-1 2 y. 6 m. 336 985 4 567 591 26,11%
Samara-2 2 y. 786 150 5 258 452 25,82%
Samara-3 1 y. 8 m. 1 637 734 5 040 134 21,92%
Samara-4 11 y. 4 m.4. 2 875 466 5 624 613 32,34%
Tolyati-1 5 m. 1 014 859 3 770 173 28,53%
Samara-5 2 m. 1 638 873 2 875 659 16,78%
Novokuibyshevsk-1 2 m. 1 405 783 2 382 253 19,77%
The Samara Dodo Pizza franchised chain
Restaurants: 8Sales: > 30 MM rub. a monthShare in system-wide sales: 15%
Dodo Pizza 2016
Samara-1Samara-2
Samara-3Samara-4Tolyati-1Samara-5
Nizhny Novgorod
Novokuibyshevsk-1
Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016
Total revenue, RUB
AgeSales, first month.
rub..
Sales, June 2016. rub.
Average EBITDA margins in 2016, %
2 y. 5 m. 795 847 5 543 659 25,86%
● The first pizzeria outside of Syktyvkar where the company is headquartered opened in Ukhta in 2012. The Ukhta franchisee Evgenia Petelina recently opened her second location in a food court.
● With a population of 100 thousand, Ukhta is a fairly small city by Russian standards. In spite of this, sales in Ukhta are growing at an impressive rates.
● Likewise, the restaurant consistently scores high in monthly system-wide quality control reports. The 2016 Ukhta-1 average weekly quality score is currently at 89%.
Pizzeria Age Sales, first month. rub.Sales, June 2016.
rub.Average EBITDA
margins in 2016, %
Ukhta-1 4 y. 1 323 380 6 860 0621 15,54%
Ukhta-2 3 m.. 1 129 381 1 498 909 14,00%
Dolgoprudny and Ukhta
● Stanislav Semionov opened a pizzeria in Dolgoprudny, a suburban town near Moscow, in February 2014. Currently, he owns the first Dodo Pizza restaurant in Moscow and 4 more Moscow units are under development and construction.
● Despite substantial competition in the market, the restaurant’s sales grow at a steady rate.
Dodo Pizza 2016
Dolgoprudny Ukhta
Revenue Ukhta, RUBRevenue Dolgoprudny, RUB
Quality rating
Product qulity rating ● At Dodo Pizza it’s not just about pizza but rather the overall customer
experience. Details are of paramount importance: ambience at the restaurant, immaculate sanitation, music, exceptional service and of course hot, delicious pizza. We call this elaborate complex of goods, services, practices, designs and arrangements our “product” - the experience. And we care passionately about the experience being valuable to our customers. But an outstanding customer experience cannot be entirely centrally manufactured. The “product” that keeps customers coming back is brought to life by kitchen and management teams at each pizzeria. Our responsibility is to put in place an effective mechanism for ensuring consistently high quality throughout the system. So we created our own unique quality control system.
● By systematically working with mystery shoppers we compile weekly system-wide pizzeria product ratings. The ratings are published every Monday. They directly impact development of new sites - before being approved for developing additional units a franchisee must meet certain criteria of the quality control department, including maintaining a satisfactory quality rating for at least 12 consecutive weeks.
Standards Rating● Twice a month each pizzeria is fully inspected to assess compliance with Dodo
Pizza standards regarding sanitation, storage, processes, hygiene etc. This rating also affects approval of new site development.
Inspectors and mystery shoppers● Mystery shoppers and inspectors are reimbursed with bonus points that can be
used to pay for orders at Dodo Pizza.
Product rating
Standards rating Regulation of franchisees
> 85 >3,5 Allowed to open new pizzerias
75-85 2,4-3,5 Not allowed to open new pizzerias
<85 <2,4 Contract termination if cannot be fixed
Quality control Current chain results:Quality Rating: 88/100Rating of Standards: 4/5
Dodo Pizza 2016
Strategy and Development Plan Overview
Dodo Pizza 2016
Dodo Pizza‘s long term goal is building a global pizzeria chain and mass consumer brand. At the moment, two broadly-defined directions of development can be identified — the already well-positioned rapidly-growing domestic network of stores (in Russia and some neighbouring markets), and “venture” projects in the USA, China, and the UK. In 2016—2018 we will expand our network in Russia, Kazakhstan, Romania and the Baltic region. Simultaneously we will be getting ready for penetration into other foreign markets starting from 2018. We will develop localised scalable models for the US, China, and Great Britain, improve the company’s management, and the information system Dodo IS.
Dodo Pizza Key Development Markets in 2016-2018
Russia and CIS
ChinaUSA
UK
Investments in 2016-2018
• Scaling and rapid growth
• Development of sustainable model; preparing for scaling
Russia and adjacent markets
• Scaling of the proven model: rapid expansion in Russia, Kazakhstan,
Romania, and the Baltic region.
Russia• Extensive growth in Moscow, Saint-Petersburg and other major cities.• Improvement of logistics, dough production
centers and training centers for sustainable growth.
• Promoting the brand on the national level.• New formats and markets — improving food
court and street food formats, developing in small towns (population from 20,000).
• Assist franchisees in raising capital for new unit development through the company-run investment program.
The USA, China, and the UK21
Medium Term Strategy and Investment Plan
• Getting ready for scaling — building and testing viable and competitive business models; local team building and growth; infrastructure reinforcement.
• Moderate growth
Three Focuses of the Medium Term Strategy
Corporate team, Dodo IS, franchise3
• Recruitment of talented specialists and top-managers; testing and improving the learning program for corporate managers; preparing to expand in foreign markets in 2018.
• Parallel work on Dodo IS: creating new interfaces , updating and improving the system.
• Recruiting highly skilled corporate staff.
• Enhancement of Dodo IS.• Infrastructure reinforcement:
dough production centers; logistics and training centers.
• American, Chinese and British offices.
• Dodo Pizza brand development.• Global promotion of the Dodo
Pizza franchise.• Improvement of management
system.• Transition to optimised legal
structure and IFRS.
Dodo Pizza 2016
Country 2016 2017 2018
Russia 160 356 564
Kazakhstan 9 27 50
Belarus 0 3 9
Uzbekistan 1 2 3
Kyrgyzstan 1 2 4
Romania 2 3 7
Estonia 1 2 3
Lithuania 1 3 6
United Kingdom 0 1 3
China 2 7 33
USA 1 3 7
Other countries 0 0 0
Total 178 409 689
• At the moment, franchising agreements for development of 344 new pizzerias have been signed with new and current franchisees. A clause in the agreement specifies the development schedules for each project. Failure to meet store opening deadlines would result in suspension of the franchisee’s exclusive right to develop in the reserved city. In such instances, franchise fee payments will not be refunded.
• Negotiations are in progress to sign agreements for 184 more stores in Russia and 16 in Kazakhstan by the end of 2016.
• In 2016, we signed agreements with franchisees in the United Kingdom and Belarus. The first pizzerias will commence operations in 2017.
• The Russian market will be developed through 4 pizzeria formats: medium and large city pizzeria (population 50 thousand and up), small city pizzeria (population under 20-50 thousand), street food mini pizzeria and food court pizzeria.
Development plan up to 2019
Dodo Pizza on the food court
Coresi Shopping Mall, Brasov, Romania
www.coresibrasov.ro
Dodo Pizza – Dine-in & Delivery
Ukhta, Russia
Dodo Pizza 2016
Cities with population over 1 million
PopulationTarget store
count
Moscow 12 184 015 105
Saint Petersburg 5 197 114 43
Novosibirsk 1 547 910 12
Ekaterinburg 1 412 346 11
Nizhny Novgorod 1 263 873 10
Kazan 1 190 850 9
Samara 1 172 348 9
Chelyabinsk 1 169 432 9
Omsk 1 166 092 9
Rostov-on-Don 1 109 835 8
Ufa 1 096 702 8
Krasnoyarsk 1 035 528 8
Perm 1 026 477 8
Volgograd 1 017 985 8
Voronezh 1 014 610 8
20112015
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Dine-in & Delivery 62 155 334 516 618 681 736 766 788 808 823
Small-town 2 8 30 55 84 109 131 153 175 197 219
Food court 3 4 11 23 40 61 88 119 163 215 273
Street food 2 2 8 20 37 57 84 115 159 209 266
Total 69 169 383 614 779 908 1039 1153 1285 1429 1581
Russia and Kazakhstan detailed development plan• Similarly, Saint Petersburg was divided into 11 sectors,
with estimated minimum capacity of 43 pizzerias, of which 26 have been reserved.
• Besides dine-in & delivery, food court and street food pizzerias will be opened in cities with population over 150 000. By 2026 we project to open 1 of each (street food and food court) per every 150 000 inhabitants, which is half of the estimated capacity.
• The Dodo Pizza network will also extend into towns of 20-50 thousand inhabitants. We intend to operate dine-in & delivery stores in every second small town in Russia and Kazakhstan by the end of 2025.
• By the end of 2025, we plan to have 1581 dine-in & delivery, food court, street food and small town pizzerias working under the Dodo Pizza brand in Russia and Kazakhstan.
• As of August 1, 2016, all cities in Russia and Kazakhstan with population over 1 million, except for Moscow and Saint Petersburg, have been reserved. As per signed agreements, 1 pizzeria will be opened for each 125 thousand inhabitants. Thus, in the near future, 265 pizzerias will be opened in major urban centers.
• Moscow was divided into 35 sectors with an estimated capacity of 105 stores. Among them, 55 have already been reserved.
Dodo Pizza 2016
International development strategy
• In 2018, we will actively venture into new foreign markets. We will primarily consider entering well-developed and flourishing pizza delivery markets with presence of leading industry players: Domino’s Pizza, Papa John’s, Pizza Hut, Telepizza.
• The main competitive advantage of the Dodo Pizza franchise is the information system Dodo IS. It optimises pizzeria operations, enhances efficiency and makes the business streamlined and transparent.
The Dodo Pizza international strategy relies on direct franchising. We don’t intend to work with external master franchises. For smaller territories (countries) we will offer exclusive rights to develop a country-wide network. In larger territories (countries), we will distribute the franchise to multiple franchisees through our subsidiaries in the respective territories.
Direct franchising Why direct franchising?
• Direct franchising will allow direct communication between the head office and franchisees. It will also help preserve the company culture, brand consistency and enable effective quality control.
• Franchising directly will eliminate unnecessary elements and inefficiencies in the system. Franchisees will pay less in royalties and the head office will earn more than if there were an intermediary present. This makes Dodo Pizza an even more attractive offering on the franchising market.
What makes it possible?
Direct franchising that transcends national borders is made possible by effective remote management and control over performance, operations and quality enabled by Dodo IS. Kitchen processes, customer satisfaction, popularity of menu items, even “moods” of kitchen staff all over the world can be monitored online.
The deciding factor in securing the right prospects is confidence of the public in the Dodo PIzza business model, promoted through success stories of franchisees. As per the company’s policy of total openness and transparency, monthly sales of every pizzeria that is part of the network are accessible to general public online. We are going to build a franchising website where anyone will be able to monitor sales of every pizzeria in real time. Entrepreneurs from all over the world will have all the tools to determine whether Dodo Pizza is right for them. In exchange for publicity, we will offer incentives for franchisees in new markets - a royalty-free start-up period of several years. Their success will become the basis of further proliferation of the franchise.
Promoting the franchise internationally
Dodo Pizza’s international development timeline
2011 2012 2013 2014 2015 2016 2017 2018
Russia Romania
KazakhstanLithuaniaUzbekistanEstonia
USAChinaKyrgyzstan
United Kingdom
Dodo Pizza 2016
§ First Dodo Pizza store (delivery + carryout) in the USA was launched in March, 2016 in a college town Oxford, MS (population – 28,000 people)
§ The store has a unique business model for the US market: super narrow
menu (7 pizzas with classic recipes, one-sized + sodas), limited customization’s
options, online ordering only (no phone orders), focus on quality of the
ingredients and their freshness
§ USP: pizza of the restaurant quality delivered home fast and fresh
§ Essence of the business model: cutting off all the elements having no direct
impact on quality in order to deliver better tasting product and increase kitchen
efficiency with help of Dodo IS
§ The main marketing channel in the US is social networks. The average
Facebook customer reviews’ score of Dodo Pizza in Oxford is 4.9 (out of 5,
based on 175+ reviews with 3,500+ page likes). The customers highlight the exceptional quality of Dodo Pizza, friendly customer service and fast
deliveries
$18 508
$38 228,00 $37 639,00
$30 528,00
марта.16 апр..16 мая.16 июня.16
Dodo Pizza Oxford sales
1 3 7 14 32 72128
200286
387
0
100
200
300
400
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Dodo Pizza USA development plan
Number of stores (LHS)
# of stores
Summer school break
§ Dodo Pizza Oxford total investments: $375,000. EBITDA margin (based on 4 months): 6%
§ Dodo Pizza will develop both corporate and franchising chains in the US
§ Projected monthly sales of one delivery + carryout store is $52,000
(EBITDA margin – 16%), projected monthly sales of one dine-in store is
$83,000 (EBITDA margin – 14%)
§ First franchisees are joining the company royalty-free
§ Regular franchising royalty is starting at 2% (1st year) and going up to 5%
(3rd year) as well as 3-8% applied towards national marketing efforts
§ Projected EBITDA margin of the corporate chain is 14-16%, franchising is
80-85%, commissary is 3-5%
* Opening date – March, 18th • Sales in June are equal to Domino’s store in Oxford operating 15 years
Dodo Pizza USA
Read more about Dodo Pizza USA:www.dodopizzastory.comwww.facebook.com/dodopizzaoxford
corporate store
First Dodo Pizza in China• The first Chinese Dodo Pizza opened its
doors in Yantai, Shandong province on June 6, 2016. First-month sales were ���65 942 CNY.
• The second Chinese unit is scheduled to open by the end of 2016 in the city of Hangzhou, Zhejang province. The pizzeria is currently under construction.
• Both pizzerias are franchises owned by Russian entrepreneurs residing permanently in China and co-financed by Chinese partners.
• The head office together with our chinese partners undertook a number of projects to prepare for the launch in China: thorough examination of the local pizza market, brand adaptation, Chinese menu development, packaging, marketing and translating Dodo IS into Mandarin. The first Chinese pizzerias will offer delivery and dine-in service.
• At the moment, major international chains Domino’s, Pizza Hut and Papa John’s are successfully expanding in China. There are also a number of Korean and domestic pizza delivery brands running successful operations across China. Similarly, we view China as a market with enormous potential for Dodo Pizza.
The first Chinese Dodo Pizza opened in June 2016
Dodo Pizza 2016
Dodo Pizza China franchised store
www.dodopizza.cn