Why Warren Buffett's Berkshire Hathaway Invests in Domino's Pizza
Warren Buffett's portfolio often reads like a master class in long-term investing. Berkshire Hathaway's holdings include blue chip names like Apple, Coca-Cola, and American Express -- businesses with durable demand, trusted brands, and wide moats. But tucked within its broader portfolio is a name many investors might not expect: Domino's Pizza (DPZ 0.33%).
This outlier begs the question: What do the Oracle of Omaha -- or his investment lieutenants -- see in Domino's? The answer lies in three traits that line up neatly with Buffett's playbook: An asset-light franchise model, a brand with recession-resistant demand, and a logistics moat that rivals any in the food industry.
1. Domino's Operates an Asset-Light Franchise Model
Domino's operates more than 21,000 stores across more than 90 markets, but the key detail is that about 99% of those stores are franchise-owned. That structure means Domino's collects royalties, fees, and supply chain revenue while leaving the heavy lifting -- store operations, staffing, rent, and maintenance -- to franchisees.
For investors, the result is powerful: High-margin, recurring revenue with minimal capital intensity. In 2024, Domino's generated $4.7 billion in revenue, but the systemwide retail sales from its global stores were $19.1 billion -- showing how much of the sales value accrues to the franchisor. Operating margin was 18.7%, made up of high-margin franchise revenue offset by low-margin supply chain revenue.
The franchise part of Domino's business is the gem, and that aligns nicely with the types of business models that Buffett has favored for decades. From See's Candies to Dairy Queen, he has often highlighted the appeal of businesses that require little incremental investment to grow, but deliver robust returns on capital. Domino's recurring franchise revenue fits this mold perfectly.
2. Brand Power and Everyday Demand
Another Buffett hallmark is the power of a trusted brand that customers return to again and again. Domino's is precisely that.
Pizza is one of the most universally consumed comfort foods, and Domino's has steadily built itself into the largest pizza company in the world. It has maintained relevance across decades by focusing on three customer needs: Value, consistency, and convenience. The consistent quality across franchises strengthens brand loyalty.
By delivering what customers need, year in and year out, Domino's has reached a remarkable track record of same-store sales growth (SSSG) for 31 consecutive years (in its international business). This track record demonstrates the resilience of the business model, which performs in good and bad times. Consider this alongside evolving consumer preferences, where convenience and speed are paramount.
That durability is critical. Buffett often says he looks for businesses that would still thrive if markets closed for 10 years. Domino's steady demand profile -- affordable, repeatable, and recession-resistant -- fits that definition well.
3. A Logistics and Technology Edge
Buffett is also famous for his focus on moats -- structural advantages that protect profits from competition. Domino's moat is less evident than Coca-Cola's brand recognition or Apple's ecosystem, but it is still critical to its long-term success. Domino's constantly innovating delivery methods, including drone delivery in some markets, showcases a commitment to staying ahead of the curve.
At its core, Domino's is not just a pizza chain. It's one of the largest food delivery networks in the world, with a vertically integrated system spanning dough production, distribution centers, point-of-sale software, and proprietary delivery infrastructure. Supply chain efficiency plays a major role in maintaining margins and competitive pricing.
Unlike most rivals that rely heavily on third-party apps, like Uber Eats or DoorDash, Domino's has invested in building its own delivery platform and fleet. Customers can order directly through Domino's app, website, or even voice assistants, cutting out costly intermediaries and keeping margins healthier. Of course, Domino's has also worked with the latter to broaden its customer reach, but still deliver its own pizza. This strategic balance allows for maximum reach while retaining control over the customer experience and profitability.
Besides, technology has played a central role in reinforcing this moat. Domino's pioneered its Pizza Tracker system years before competitors leaned into digital ordering, and it continues to experiment with innovations like AI-enabled voice ordering and autonomous delivery pilots. Integrating data analytics to optimize delivery routes and predict demand patterns is also crucial.
While the ongoing investment in technology doesn't come cheap, Domino's has more than 21,000 stores to spread its fixed cost, giving it a massive operating leverage. Thus, with its scale, Domino's can create huge improvements in customer delight over time, and yet pay very little on a per-store basis. Efficient marketing strategies, tailored to local markets, further enhance customer acquisition and retention.
No wonder Buffett likes the company!
What does it mean for investors?
Domino's may not seem like the kind of stock that would catch Buffett's eye. After all, it's a fast-food company in a competitive category. But a closer look reveals why it deserves a spot in Berkshire's portfolio:
* It operates an asset-light franchise model that generates predictable, high-margin cash flows.
* It benefits from reliable brand power and everyday demand that proves resilient across cycles.
* It has built a logistics and technology moat that protects its business from both pizza rivals and delivery apps.
That's why Domino's makes sense in his portfolio -- and why long-term investors should keep it on their radar.
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