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Domino's Pizza, Inc. (NYSE:DPZ)

2013 Consumer & Retail Conference

March 13, 2013 10:30 am ET

Executives

J. Patrick Doyle - Chief Executive Officer, President and Director

Analysts

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Stephen Anderson - Miller Tabak + Co., LLC, Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

[Audio Gap] continue with the restaurant portion of our consumer conference with Domino's Pizza. Domino's Pizza is run by CEO, Patrick Doyle. And I find myself sitting in my living room very often watching television saying, "I know that guy." I envision being CEO has become a primary spokesman for their advertising campaign. With that, I'd like to turn it over to Patrick. Thank you for joining us.

J. Patrick Doyle

Thanks, Joe. Or I can give the facts presentation. Good morning, everybody. Thank you for joining us. I'm going to start with giving you kind of the broad overview of the Domino story. And, I mean, we'll sit with Joe and we'll take you through some Q&A. Standard forward-looking statements.

So investment thesis on Domino's. Fundamentally kind of 4 areas that I'm going to talk about today. First is the domestic part of the business, a kind of dramatically improved brand over the course of the last couple of years since we relaunched at the beginning of 2010. We are over 90% franchised in the U.S. So very little CapEx going back into the business as a result of that. And a supply chain that we sell all the food product out to our stores. Great value-added opportunity. We continue to drive value for our franchisees there. I'm going to talk about each of these in more detail. The international business, 100% franchised, now a little bit bigger than our domestic business. It is a master franchise model. So in general, 1 entity, 1 person, 1 company will have the rights to 1 market. There are some small exceptions to that, but overall, 100% franchised. So a pure cash flow business.

We have had 76 straight quarters in a row of positive same-store sales in our international business. That's 19 years without a negative comp, something that we are very proud of. And to hit my quota with my communications team, I have to say that at least 5 times while I'm up here today, but very, very strong same-store and store growth.

Third part of the story has really been around technology, and that's been relatively a new part of the story over the last 3 to 5 years. It's now over 35% of our business, both domestically and internationally. Very important part of the story, and I'll talk about that a bit more. And then finally, our balance sheet. Because we are generally working off of the top line because we're drawing royalties, very consistent cash flow in the business, not a lot of operating leverage. So we believe the right answer is to operate with meaningful financial leverage, and have for very long time. And then cash used in the way that we think is going to generate the best return for our shareholders. And there's been some news on that front with an initiation of a dividend here just recently.

So first overall, we are now a little bit bigger outside of the U.S. than we are inside the U.S. As I said, we own just under 400 stores domestically. So over 90% franchised. We also own 19 supply chain centers where we are making the dough balls and basically cross-stocking the pepperoni and the cheese and all the rest of it and delivering that out to the stores. On the international side, 100% franchised. We don't own any company stores. We do own the supply chain centers in Canada. Everywhere else outside of the U.S. and Canada, the supply chain centers are owned and operated by our master franchisees.

On the domestic side of the business, they say a franchise model generates very good returns. Very focused model on delivering carryout footprints are relatively small, so the investment in the stores is relatively low, which generates a strong return for our franchisees.

Our cash flow from those stores has been kind of in the 50 to 80 range. We're now near the high end of that and had a very nice improvement in store-level profits over the course of the last 3 or 4 years.

On a unit, that costs, kind of, $200,000 to $300,000 to build new, a very nice return on investment for our franchisees and something that we're very focused on continuing to improve.

And domestically, really kind of 2 ways to look at this. The answer is still relatively low market share, and market share gains domestically is where we think a lot of our growth has come and is going to continue to come from. So about 11% of the total pizza category in the U.S., kind of 22%, 23% on the delivery side of the business, which is kind of the core of our business, has been for a long period of time, but we think a real opportunity to continue to take share. And an important part of all this plays over in technology. You've seen some share gains not only for us but also for our other national competitors over the course of the last couple of years, and we think technology is a big part of what's driving those share gains against the smaller players who don't have kind of the same technology platforms that we do.

Supply chain side of the business. So we deliver and sell the food to our stores, provides consistency for the stores. And a couple of things about the economic model as you're looking at our P&Ls are important. First, we have kind of a unique arrangement with our franchisees. They sign a long-term agreement with us, says we want to buy 100% of the product from you, and they agree that they will give us a year's notification if they are ever going to do that on their own. They have the right to do that. I think there about 4 stores in the U.S. today that do not do that. In return for that and kind of giving us visibility on that business, we split the profits by center 50-50 with our franchisees. And so the P&L you see is after that profit sharing payment is made to them on a period basis. It aligns our interests with our franchisees. If we can drive costs out of the supply chain, they know they're going to get a bigger profit sharing check from that.

The other thing that's important is kind of the pricing model we use. Basically, while we will try to control some of the volatility through some hedges or whatnot on the commodities, the longer-term agreements on some of the commodities, we essentially price at a cost-plus basis. So the commodity movements are essentially being passed through to the store level, and our volume and our kind of gross profit margin is going to be based on the amount of pounds that we're shipping to food plus kind of a fixed penny profit margin on that. So what you'll see over time as you look at the supply chain P&Ls is it's been a very consistent kind of growth on that business over time.

Magnitude of commodity costs. Cheese is the largest, meat kind of second largest, then down through boxes, wheat and sauce. As I said, the pricing pass-through. Last year was a very attractive market from a commodity standpoint. We wound up about flat in 2012 versus 2011 on commodities. Our best guess right now is that we're going to see that up kind of 3% to 4% in 2013 versus 2012, which is still a pretty benign kind of commodity inflation environment for us. So good news on that front for as long as we kind of forecast correct.

Quick recap on the fourth quarter. Very strong quarter for us. Our same-store sales were up 4.7% for the quarter. That got us to 3.1% for the year. We ended with a net unit growth in the U.S. of 21 units. First time we've been up in a while. We think it's a modest move in the right direction towards getting some store growth again in the U.S. We rolled out a Spanish language app. But really, the big news for the quarter and what drove the quarter was we launched a Handmade Pan Pizza at the beginning of the fourth quarter, and that's really what drove our results and clearly had very good results with that for the quarter.

On the international side of the business, it is overwhelmingly just a royalty business. So 91% of our operating income is from royalties from the markets around the world. Very limited CapEx as we don't own any corporate stores. We have the supply chains in Canada. That's basically the only place where we put capital. There had been years where our only capital expenditures in international were literally a couple of laptops and maybe a little bit of office furniture. But it is a pure cash flow business for us.

Our compound annual growth rate at the retail sales level in international over the course of the past 5 years is 12%, and we are one of the 5 largest international restaurant chains of the publicly traded companies.

Store growth has been terrific over the course of the past 5 years. You can see 1,800-plus stores. On a percentage basis, our international business has actually grown faster than any of the major restaurant chains. And you see the consistency of the same-store sales track record over the past few years. That actually goes back, as I said, 19 years straight of quarterly same-store sales increases in the international business. So it's been a phenomenal part of the story at Domino's. From an opportunity standpoint, it's going to be a long time before we're going to hit any kind of a cap on our ability to grow in international. Even in our 10 most developed markets, we think there's still an opportunity, easily, for kind of 2,700 more stores. And if you look at the third one on the list, as the economy continues to grow in India, it's altogether possible that, that number is going to continue to go up. We are #1 in delivery in most of those markets. But even in these markets, which are our most penetrated markets, there is very significant growth. You add into those where we are less penetrated, and there's clearly even far more growth left there and there are still some markets that we are not in today.

Fourth quarter recap on international, and the answer is that it was really more of the same. Same-store sales up 5.2% for the quarter, which allowed the year to finish also at 5.2%. The 76th straight quarter of the positive same-store sales. I think that's 3 times I've said it. So I met my quota. But it really has been a phenomenally consistent track record for us.

We're up 183 net units in the fourth quarter, 492 for the year. That is the fastest growth that we have ever had in our international business. And also opened 3 more countries towards the end of the year, Thailand, Macedonia and El Salvador. Technology, as I mentioned, has become a very big part of the story. So we are now doing over $1 billion a year in e-commerce domestically. We are also doing over $1 billion a year in e-commerce outside of the U.S. It makes us one of the largest e-commerce companies in the world from a transaction count standpoint. All of our apps are kind of in the top 10 in ratings. They are also all rated higher than our competitors'. We've had over 5.6 million downloads domestically. Only very, very important part of the business. The profile on those orders and the customer reaction is really better top to bottom. Higher customer satisfaction ticket is a little bit higher. They're a more profitable order than our phone orders. So it's a win for customers, it's a win for us. It's something that we're going to continue to invest in aggressively to continue to move our customers towards what we think is a better way for them to do business with us.

Finally, the balance sheet. We have a history of operating with leverage. We think it's the right answer for us. With the free cash flow characteristics of the business, low CapEx requirements, relatively low operating leverage, then the answer is this is a business that should be run with financial leverage, and has been. We're very comfortable with that. We actually completed the first big financing in 1999 when we were still a private company, worked our way down, levered back up again while we were still private in 2003. 2004 is when we went public. Levered up again in 2007 probably to a bit higher level than I would do in the future. Down through 2011 back down to 4.9x trailing. Interestingly, we completed a refinancing, increased our leverage in the first quarter of 2012. And with EBITDA growth and a little bit of amortization, we wound up ending 2012 1/10 of a turn lower on our leverage even after having increased the overall level with the refinancing that we did at the beginning of 2012. But this is a pattern that you're going to see from us. We think it's the right answer for Domino's. It's the right way to kind of optimize returns for our shareholders. And if you look at the growth in earnings per share even over the course of the last couple of years and it goes back a couple of years before that, it's been a pretty great run for us.

If you look at the consistency of those results, really with the exception of 3 lousy years from 2006 to 2008, we've been very consistent domestically as well. And we relaunched the brand '09, and so really '10 was the big announcement around the relaunch of our pizza. Obviously a very big year in 2010. But you look back for what is what, an 18-, 20-year track record, and domestically we've been driving kind of 2.5% average on the international side. You see that track record they talked about of consistently up. It's been an average of 5.6%, last year at 5.2%. So kind of in line with what's been typical for us in that business.

We don't give short-term guidance, but we do give long-range outlooks. And our view is that we ought to be able to grow our global net unit counts in the 4% to 6% range off of a base that we rolled the 10,000th mark back in September. Currently, that would mean kind of 400 to 600. Last year, we were right around 500, and we think that will continue to ratchet up. On an actual basis, on a percentage basis, we think we'll stay in that range.

Domestic comps, we think 1% to 3% is where you should be betting that we're going to be, at least in this kind of a low inflationary environment.

International, certainly more robust. Category is growing more quickly outside of the U.S. than inside, so kind of 3% to 6%, which we think will generate global retail sales growth of 6% to 10%.

Finally, returning capital to shareholders. We are pretty agnostic on our approach. We want to generate the best returns we can for our shareholders. And over time, we have used our free cash flow to return to shareholders in basically every way that we could. We have deleveraged in the past. We have moderate -- modest amortization on our current debt structure. It actually ends when we get to a 4.5x or less EBITDA leverage. We have no required amortization after that. We're at 4.8 right now. So hopefully, that will happen in the not-too-distant future.

We have repurchased shares fairly aggressively. In 2012, we repurchased about 2.5 million shares at an average price of between $35 and $36. And we've been very active on that front. And as we deplete authorizations from our board, we get new ones.

We paid a special dividend in March 2012 when we did our refinancing, paid out $3 a share to our shareholders. And then we just, at our last board meeting, authorized an ongoing dividend program that actually is going to be paid later this month starting at $0.20 on a quarterly basis.

So bottom line, powerful global brand in over 75 markets now. Really terrific demand and results from consumers over the past few years. Strong unit economics as the pizza restaurant is relatively inexpensive to build in the carryout and delivery model. And then very consistent cash flow out of that business based on a franchise model 100% outside of the U.S. and over 90% domestically. So that's the basics of the Domino's story. And with that, I'm going to join Joe.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Thank you, Patrick. Our Q&A format, I'm sure you're all familiar with at this point. I'll ask a few questions and ask questions from the audience. Please wait for the microphone to reach you before you ask your questions.

Question-and-Answer Session

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Patrick, there's many interesting aspects to the Domino's story. But one that is most dramatically different in recent years in my view is that the national chain led by Domino's are gaining share based on technology. Now how important is that change? Is it a secular game changer, do you think, in terms of the national chain. Now that, specifically, it's competing against regional vendors?

J. Patrick Doyle

Yes, it has really been a game changer. And while I can point to the consumer reviews on our apps, on Google Play and all of that as being better than our national competitors', the gap there is relatively small. I think we do a better job on this than anybody. But what really matters is the difference between the national players, the 3 of us, and the regionals and local players, some of whom don't have any offering on digital, some of whom have an offering, but, frankly, it's tough for them to roll out a platform. When you're spreading across a couple of 100 stores versus 10,000 stores, that's going to be as engaging and functional as our platform is. So I really think it is the primary reason why you've seen us and Pizza Hut and Papa John's gaining some share over the course of the past couple of years. I do think it's sustainable. I think there is a point at which maybe technology is going to get even more accessible for some of these smaller players, but we've got an awfully big lead. As we get customers who are registered with us that have already set up the accounts, there's a barrier for them to decide do they want to go and do that somewhere else. And we've got a big lead on that front. So it's an area where we're going to continue to invest aggressively, and we want to keep moving kind of that percentage of the business up.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

At your recent analyst meeting, you've had a technology part of the presentation that was one of -- really the most fascinating. I think of your presentation of many presentations that I see over the course of the year. And one of the things that has always stood out about pizza delivery is you actually know who your customer is. So how important is that? And how can you leverage that? Can you leverage it even more given all the technology advancements?

J. Patrick Doyle

It's interesting. I mean, 15 years ago, I came out of the packaged goods industry when I moved to Domino's. And it was one of the first things I realized when I moved, that we've got this access to data that most marketers would kill for. We know who our customers is, we know when they ordered, we probably know what offer they were responding to, we know whether or not they received a coupon and it's incredibly powerful. And so we continue to move and shift dollars from mass marketing, which we continue to get a great return out of television, but the return on investment that we get as we're doing things in the digital world is terrific. We continue to find opportunities there. We continue to ship dollars there. The return on investment calculation is exact. We know who we have hit, and we know how -- to the extent at which we've generated an incremental return. So it's pretty powerful. And that access to the data, I talked about on our Pan launch in the fourth quarter. I mean, we know while we continue to get new customers from that, it was kind of in line with our norm. Really, where we picked up incremental business in the fourth quarter were people who were already doing business with Domino's but would go elsewhere when they wanted a pan pizza. And we can see, as we're going through the quarter, is that you know what? These are incremental orders that are coming from our own customers that weren't giving us -- they were going somewhere else when they wanted a pan pizza. And so yes, it's a very powerful thing for us.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Okay. It's so dramatically different from, of course, every other a consumer products company who really doesn't know the customer that precisely.

J. Patrick Doyle

Yes, they've got consumer products, I mean, they've got scanner data, and they may have access to some of the customer loyalty data from the chains, but they don't have that themselves.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Question here in the front?

Unknown Analyst

Patrick, what happens to the leverage ratio when interest rates go back to being normal?

J. Patrick Doyle

Yes. Well, the leverage ratio won't change. But certainly, the interest expense could go up 6 or 7 years out. And our expectation is 6, 7 years out, that it will be up and higher than it is today. I think the offset to that is -- and I think I even said kind of that 1% to 3% range on domestic comp store sales growth -- that's assuming a pretty benign inflation environment. My expectation, but there are wiser economists out there than me, but my expectation is you can't continue to print money around the world at the pace that money is being printed without generating inflation and, at some point, higher interest rates. I think that'll happen at some point. The good news is that having leverage on your balance sheet, if you expect a higher inflationary environment in the future, is actually a very, very good thing for shareholders since you're going to kind of devalue the kind of that debt over time, if that's what happens. So the answer is we've got a long run with debt that's locked in over another 6 years now. We're going to have lots of visibility on what that environment is going to be before we get there, and then we'll make adjustments and decisions on that. But I feel very good about where our capital structure is today and we'll adjust. But my expectation is you can't get interest rates a whole lot lower than they are today. So the corollary is I think it'll be higher 6 years from now than they are today, yes.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

We have one here.

Unknown Analyst

Can you talk about the competitive response to the Pan Pizza launch?

J. Patrick Doyle

I don't know if there's been a lot directly as a result of that. I think the answer is the pizza category has done a pretty good job of delivering value over the course of the last couple of years in general. And I think it's why you're seeing the pizza category getting some growth over the course of the past couple of years. So while I can't say I've seen necessarily a direct response from competition on our Pan Pizza launch, what I would tell you is that if you look at the growth that we're getting in the category, you look at improving unit economics, that's a pretty good story. I mean, the -- if our franchisees are making more money per restaurant, we're getting some category growth, that's all pretty healthy. So I feel pretty good about where the value equation is not only for us but overall for the category right now.

Stephen Anderson - Miller Tabak + Co., LLC, Research Division

And speaking of unit growth. Can you just talk about the new store prototype and how that's helping with the -- with your development targets?

J. Patrick Doyle

Yes, very early, I mean, we've got about 100 of our units that have been reimaged, sort of been newly built in a new image. And it's going to be a little bit of time before we're going to kind of give any answer as to whether or not we think we've got this nailed, and that's just been happening over the course of the last few months. So I like it. Consumer reaction is good, but I want to watch it a little bit before I'm saying, yes, we're convinced we've got something here.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

We've got one in the back.

Unknown Analyst

Could you please talk about the impact of food price inflation as well as gasoline inflation on your business and how you manage those?

J. Patrick Doyle

Yes. So a couple of different answers on that. The -- first of all, the overall economic environment right now is about where we've expected it to be. And I have a lot of questions about kind of the tax changes at the beginning of the year and all of that, and I guess what I'd say is our expectation is the only way that over the long term you balance your budget is you either have higher taxes or you reduce your spending. And all of those are going to be somewhat headwinds over the course of the next few years, which means you've got to provide good value to consumers because you're going to have an environment out of D.C. that's going to have to be somewhat less accommodative going forward than it has been over the course of the last few years. So all of that's kind of in line with where we've been expecting. From a commodity standpoint, last year we didn't have any commodity inflation. This year, we're expecting some. If we can continue to grow the category, as we have been, volume gains ought to offset really anything that we're going to see from the commodity front. And I'm going to be very cautious about any kind of price increases in this economic environment. The last thing you mentioned was gasoline prices. And there are really 3 ways that gas prices can affect us: the first is changing consumer behavior; the second is direct impact on our P&L because we're reimbursing drivers for the mileage, and particularly, our franchisees are reimbursing them; and the final way is as it plays through kind of commodities because it's going to flow through. And the real answer is 2007, we -- there was a big spike in energy costs, and we couldn't pull out specific consumer behavior change from our data then, at least not material. We don't think that's a big effect for us on consumer behavior. It's got to be at the margin but not big enough that we really felt it that much. The P&L, direct P&L, impact at the store level of changes in gas prices are relatively not that big. So it's something you've got to take into account, but it's not that big of a line item on the P&L. The one that I frankly worry about the most is energy playing through in the commodity costs. And that's got to be a pretty big move before you see it, but we clearly saw it in 2007. I think we all got an education in how much energy will play in this commodity cost. We're not at a level today where we're seeing a lot of that, but you have $5 gas prices out there, I think you're going to start seeing commodity inflation as a result of that. And that's ultimately a far bigger P&L impact than either of those first 2. So that's -- it's got to be a big order of magnitude move, I think, before we're going to really see it, but it's the one that could be big enough that I think it could be a material effect.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Patrick, can we [indiscernible] for 1 moment? You were one of the few companies on your fourth quarter calls that didn't remind investors about the weather and the gasoline prices and social security taxes and the late tax refunds and this umbrella of factors. But then they're real. I'm not saying it in a cynical way, but it's not cynical at all. They're real. Is pizza and where Domino's is in that kind of the scheme of things with the pan pizza still relatively new, in good shape versus those factors versus the industry at large, do you think?

J. Patrick Doyle

Well, the first thing is weather. We've got a really good model around our whole business. We really -- we've got a great statistical model. We've got a really good sense of what's driving the business and what's not. And first quarter of 2012 was the single biggest weather anomaly we've ever seen in terms of what would affect our business. And it was a slight negative for us because we actually want bad weather. Unlike everybody else, we want people to stay home and order in, and it was not big enough that it really moved the quarter materially one way or the other. So first answer is if you ever hear me using weather as an excuse, call me on it because it's -- for my business, for a lot of restaurants, it's a much bigger deal. For my business, it just isn't a big deal. So you shouldn't hear me talking about weather much. Then you get into kind of the overall economic environment. I guess my answer is as I said before, our expectation is you're going to have to see ultimately out of D.C. a less accommodative environment as they work towards a more balanced budget. And so our expectation is one way or the other, that's going to be coming towards us and it's our job to be ready for that. And we've expected it to be coming in, and so its coming and we're going to work around that. So that's kind of the answer.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Okay, we have one here.

Unknown Analyst

Can you talk a little bit or help us understand the AUVs in the international market and just maybe the opportunity to increase that productivity over time?

J. Patrick Doyle

Yes. So on average, our average unit volume today is a little higher outside the U.S. than it is in the U.S. On average, our return on investment at the unit level is better outside of the U.S. than it is inside the U.S., which is part of why you see faster growth. So there's more opportunity to grow in international, but the return on investment on average at the unit level outside of the U.S. is stronger than in the U.S. And we see a very direct correlation between kind of years to pay back on a unit and pace of growth. And so the reason you see explosive growth for us in India today or in Turkey or Malaysia is because the return on investment is exceptional. And on average, it's better outside of the U.S. still than it is inside the U.S.

Unknown Analyst

[Indiscernible] follow-up. [Indiscernible] some more [indiscernible]?

J. Patrick Doyle

Yes. Yes. The question was, can you make it even better? And the answer is absolutely, you can, and it's something that we're very focused on. And you listen to our quarterly calls, and we talk about unit profitability every single quarter because we think it's critical. While it's not really on our P&L that directly because we don't own that many stores, ultimately that's going to drive the success of the system, and the growth of the system is going to be that return on investment. And so it's something that we track very carefully, both domestically and internationally. And we think it's one of the things that we can bring to the table best to help drive the growth of the system, is for us to continue to help them, the franchisees, drive better unit economics because we know that's what ultimately is going to drive growth from the system. So it's something we track very, very carefully. And yes, we think there's absolutely still more upside.

Unknown Analyst

Yes, can you talk a little bit about -- it seems like a lot of companies now are shifting more towards more national media, and you guys -- can you talk about your decision to up your national media percentage and what impact that's having?

J. Patrick Doyle

Yes. So again, I go back to kind of our model. And we've got our old database model out. We run a media mix model against that database. So we're generating a return on investment calculation for each area of media spend, whether it's national television, local television, radio, coupons, online, digital advertising. And there was enough of a material difference between the ROI that we could generate at a national level and what was being generated with coupon basically, which is mostly the local where most of the local spend is still going, that we thought it was worth making a shift. So this should not be an increase in net spending for a system. It's just moving dollars from something that we thought was less efficient to something that was more efficient. On an ongoing basis, that's relatively rare that we'd be going out and saying okay, we need to move dollars from something that's being spent locally to our National Ad Fund. But what I will tell you is within the National Ad Fund, that's something that we're tweaking on an ongoing basis based on that return on investment. And if a vehicle starts generating a better return on investment, we're going to quickly shift dollars towards it to get that incremental return until you've spent up to a level where you start bringing that ROI back down to being about equal with the other ROIs. And that's how we spend on media. It's pretty numbers driven.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

We have another one over here.

Unknown Analyst

Just on India, we've seen 3 or 4 quarters of your same-store sales growth falling off from like mid-40s to now sub-20%. What's your take on that? And...

J. Patrick Doyle

I will never complain about double-digit growth. So we're doing a lot of splits. We're doing a lot of areas that are already covered where we're putting a new store in. And I guess what I would say is I look at growth in India, and I'm less concerned there just because the same-store sales growth has been so strong. But frankly, to me, I look more at the overall retail sales growth. Because the return on investment on a unit in India is incredibly high, so to me it's about can you continue the pace of overall growth of the business. They had a record year for opening stores on their most recently released 12-month basis. And so I'm very encouraged by what's happening in India overall. There are -- I've been to stores in -- I can think of 1 in Noida outside of Delhi that I think what was once 1 delivery area now has 8 stores in it. And the original store is still doing the same volume that today -- that it was before they split it into 8 territories. When you're doing a lot of store splits -- we were still entering new areas as well, but that many store splits, you're going to have some deceleration in same-store sales growth, but it's still double digit. I'm very happy with double digit.

Unknown Analyst

And just lastly, is there a -- does this franchisee fee revision come through for them anytime soon?

J. Patrick Doyle

I'm sorry, is what?

Unknown Analyst

The -- is the franchise agreement or the franchise fee up for renewal anytime soon?

J. Patrick Doyle

Oh, yes. No, no, those are very long-term agreements for our master franchisees. So no, you won't see a change there.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Patrick, thank you very much.

J. Patrick Doyle

Well, thank you.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

We appreciate it.

J. Patrick Doyle

Thank you.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Thank you. [Indiscernible].

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