UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 30, 2018January 2, 2022

or

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number001-32242

Domino’s Pizza, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (734) (734) 930-3030

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☒[X] No ☐[ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes ☐    [ ] No ☒[X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒[X] No ☐[ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒[X] No ☐[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K:  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large accelerated filer [X] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [ ]

Emerging growth company [ ]

If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐[ ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act): Yes ☐[ ] No ☒[X]

The aggregate market value of the voting andnon-voting common stock held bynon-affiliates of Domino’s Pizza, Inc. as of June 17, 201820, 2021 computed by reference to the closing price of Domino’s Pizza, Inc.’s common stock on the New York Stock Exchange on such date was $11,546,079,722.$16,864,015,144.

As of February 14, 2019,22, 2022, Domino’s Pizza, Inc. had 41,040,70436,036,184 shares of common stock, par value $0.01 per share, outstanding.

Documents incorporated by reference:

TABLE OF CONTENTS

Throughout this document, Domino’s Pizza, Inc. (NYSE: DPZ) is referred to as the “Company,” “Domino’s”,“Domino’s,” “Domino’s Pizza” or in the first-person notations of “we,” “us” and “our.”

In this document, we rely on and refer to information regarding the U.S. quick service restaurant, or QSR, sector and the U.S. QSR pizza category from the CREST^® reportCREST® ongoing foodservice market research (years ending November) prepared by The NPD Group, as well as market research reports, analyst reports and other publicly-available information. Although we believe this information to be reliable, we have not independently verified it. DomesticU.S. sales information relating to the U.S. QSR sector and the U.S. QSR pizza category represent reported consumer spending obtained by The NPD Group’s CREST^® reportCREST® ongoing foodservice market research from consumer surveys. This information relates to both our Company-owned and franchised stores.

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Part I

Item 1. Business.

Overview

Overview

Domino’s is the largest pizza company in the world based on global retail sales, with more than 15,90018,800 locations in over 8590 markets around the world.world as of January 2, 2022, and operates two distinct service models within its stores with a significant business in both delivery and carryout. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our retail sales also come from carryout customers. Although weWe are a highly-recognizedhighly recognized global brand, and we focus on value while serving the local neighborhoods in which we live and do businesslocally through our large globalworldwide network of franchise owners and 390 U.S. Company-owned stores. On average, weWe are primarily a franchisor, with approximately 98% of Domino’s stores currently owned and operated by our franchisees sell more than 3 million pizzas each day throughout ourindependent franchisees. Franchising enables an individual to be his or her own employer and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global system.brand and operating system with limited capital investment by us.

The Domino’s business model is straightforward: weDomino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technologytechnological innovations. Our hand-tossed dough is generally made fresh and distributed to stores around the world by us and our franchisees.

Domino’s generates revenues and earnings by charging royalties and fees to our franchisees. Royalties are ongoingpercent-of-sales fees for use of the Domino’s® brand marks. The CompanyWe also generatesgenerate revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations, primarily in the U.S. and Canada, and by operating a number of our own stores.Company-owned stores in the United States. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit bysub-franchising and selling food and equipment to thosesub-franchisees, as well as by running pizza stores. EveryoneWe believe that everyone in the system can benefit, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically.

The Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flowflows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases since becomingrepurchases. We believe we have a publicly-traded company.proven business model for success, which includes leading with technology, service and product innovation and leveraging our global scale, which has historically driven strong returns for our shareholders.

Our History

We pioneered the pizza delivery business and built Domino’s Pizza into one of the most widely-recognized consumer brands in the world. We have been delivering quality, affordable food to our customers since 1960, when brothers Thomas and James Monaghan borrowed $900 to purchase a small pizza store in Ypsilanti, Michigan. Thomas purchased his brother’s share of the business shortly thereafter. Concentrating first on building stores near college campuses and military bases in the 1960s and 1970s, the brand grew quickly in the 1980s in urban markets and near residential communities.1960. We became “Domino’s Pizza” in 1965 and opened our first franchised store in 1967. The first international stores opened in 1983, in Canada and Australia.

Monaghan sold 93%Over the last 60 years, we have built Domino’s into one of his economic stakethe most widely-recognized consumer brands in the Companyworld. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.

During 2021, the uncertain environment created by the novel coronavirus (“COVID-19”) pandemic persisted. However, we continued to increase global retail sales, while our supply chain operations experienced higher volumes as a result of the increase in 1998retail sales. In the U.S. we launched our newest side item, Domino’s Oven-Baked Dips in three unique flavors including Cheesy Marinara, Five Cheese and Baked Apple to Bain Capital, LLC, then soldpair with our Domino’s Bread Twists. Additionally, emphasis on technological innovation helped us achieve more than half of all global retail sales in 2021 from digital channels. In the U.S., we have developed several innovative ordering platforms, including those for Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter and transferred his remaining stakemore. In 2019, we announced a partnership with Nuro to further our exploration and testing of autonomous pizza delivery. In 2021 we began a test of pizza delivery with Nuro vehicles in the CompanyHouston, Texas. In 2020, we also launched a new way to order contactless carryout nationwide – via Domino’s Carside Delivery®, which customers can choose when placing a prepaid online order, with a two-minute guarantee launched in 2004, when we completed2021. This new service method emphasizes our initial public offering.commitment to serving hot and delicious pizza in a convenient, contactless manner.

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Since 1998, the Company has been structured with a leveraged balance sheet and has completed a number of recapitalization events.transactions. The Company’s most recent recapitalization transaction completed in 2018April 2021, (the “2018“2021 Recapitalization”), primarily consisted of the issuance of $825.0 million$1.85 billion of fixed rate notes and the repurchase and retirement of $490.0a new $200.0 million of previously outstanding fixed rate notes.variable funding note facility. As of December 30, 2018,January 2, 2022, the Company had $3.53$5.07 billion in total debt, which included debt from its 20182021 Recapitalization and its previous recapitalization transactions in 2019, 2018, 2017 and 2015 (the “2019 Recapitalization,” “2018 Recapitalization,” “2017 Recapitalization” and the “2015 Recapitalization,” respectively, and together with the 20182021 Recapitalization, the “2018,“2021, 2019, 2018, 2017 and 2015 Recapitalizations”). Excess proceeds from our 2018, 2017 and 2015 Recapitalizations were used primarily to repurchase shares of our common stock.

Were-launched our brand in the U.S. in late 2009 by introducing a new recipe for our core pizza product. Since 2008, the majority of our menu has changed, either through the improvement of existing products or the introduction of new products, such as our Handmade Pan Pizza and Specialty Chicken. During this time frame, we also began expanding our focus on technology through our development of innovative ordering platforms and other technological advancements, such as the launch of our Piece of the Pie Rewards^® loyalty program in 2015 and the launch of Domino’s Delivery HotSpots^® in 2018. Globally, we opened our 10,000^th store in 2012 and our 15,000^th store in 2018. In 2013, we announced a plan requiring all stores to adopt our newcarry-out friendly “Pizza Theater” store design, which is more inviting to customers and allows them to see their orders being made fresh in front of them. The majority of our U.S. and international stores have completed these remodels as of the end of 2018.

Our Industry

The U.S. QSR pizza category is large and fragmented. From 20082016 through 2018,2021, the U.S. QSR pizza category has grown from $32.8$35.9 billion to $36.5$40.6 billion. It is the second-largest category within the $299.6$304.8 billion U.S. QSR sector. The U.S. QSR pizza category is primarily comprised of delivery,dine-in and carryout.carryout, with carryout and delivery comprising the two largest segments.

In the U.S., we compete primarily in the delivery and carryout segments of the pizza industry. Weindustry, and we are the dollar market share leader for delivery and a growing leader in the delivery segment and we are amongst the top three chains in share in the carryout segment.carryout. Delivery segment salesdollars of $9.8$19.8 billion in 2018 (down2021 (up from $10.3$13.1 billion in 2008)2016) account for approximately 27%49% of total U.S. QSR pizza. The delivery segment declined slightly during the period from 2008 to 2012, and has increased slightly since 2012, from $9.7 billion in 2012 to $9.8 billion in 2018. The threefour industry leaders, including Domino’s, account for over 56%59% of U.S. pizza delivery, based on reported consumer spending, with the remaining salesdollars going to regional chains and independent establishments. From 20082016 to 2018,2021, the carryout segment grew from $14.1$16.3 billion to $17.1$17.5 billion. The four industry leaders, including Domino’s, account for approximately 48% of the U.S. carryout segment. (Source: The NPD Group/CREST®, year ending November 2021).

In contrast to the U.S., international pizza delivery is relatively underdeveloped, with only Domino’s and two other competitors having a significant global presence. We believe that demand for pizza delivery and pizza deliverycarryout is large and growing throughout the world, driven by international consumers’ increasing emphasis on convenience, and theour proven success of ourmore than 35 years of conducting business abroad.

Our Competition

The global pizza delivery and carryout segments, as well as the broader QSR sector, are highly competitive. In the U.S., we compete against regional and local companies as well as national chains Pizza Hut®, Papa John’s® and Little Caesars Pizza®. Internationally, we compete primarily with Pizza Hut®, Papa John’s® and country-specific national and local pizzerias. We generally compete on the basis of product quality, location, image, service, technology, convenience and price. Our business and those of our competitors can be affected by changes in consumer tastes, economic and health conditions, demographic trends, marketing, advertising, pricing and consumers’ disposable income. We also compete on a broader scale with other food, and food delivery companies.and order and delivery aggregation companies, which have continued to grow in size and scale in recent years. We compete not only for customers, but also for management and hourly employees, including store team members, drivers and qualified franchisees, as well as suitable real estate sites and qualified franchisees.sites.

Our Customers

The Company’s

Our business is not dependent upon a single retail customer or small group of customers, including franchisees. No customer accounted for more than 10% of total consolidated revenues in 2018, 20172021, 2020 or 2016. Our2019. As of January 2, 2022, our largest franchisee based on store count, Domino’s Pizza Enterprises (DMP: ASX), operates 2,383operated 3,229 stores in seventen international markets, and accountsaccounted for 15%17% of our total store count. Revenues from this master franchisee accounted for 1.4%1.7% of our consolidated revenues in 2018.2021. Our international business unitfranchise segment only requires a modest amount of general and administrative expenses to support its markets and does not have costsa cost of sales.sales component. Therefore, the vast majority of these royalty revenues result in profits to us.

Our Menu

We offer a menu designed to present an attractive, quality offering to customers, while keeping it simple enough to minimize order errors and expedite order-taking and food preparation. Our basic menu features pizza products with varying sizes and crust types. Our typical store also offers oven-baked sandwiches, pasta, boneless chicken and chicken wings, bread and dips side items, desserts and soft drink products. International markets vary toppings by country and culture, such as squid topping in Japan or spicy cheesethe Cheese and Corn pizza in India, or the Octopus Bomb Shrimp in Korea, featuring shrimp, octopus, vegetables, feta cream and often feature regional specialty items, such as a banana and cinnamon dessert pizza in Brazil.horseradish sauce.

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Store Image and Operations

We have been focused primarily on pizza delivery for nearlyover 60 years, as well asand we also emphasize carryout as a significant component of our business. In 2012, we introduced our carryout-friendly Pizza Theater store design; theThe majority of our U.S. and international stores have converted to this design asare constructed in the carryout-friendly Pizza Theater design. Many of the end of 2018. Manythese stores offer casual seating and enable customers to watch the preparation of their orders, but do not offer a full-servicedine-in experience. As a result, our stores generally do not require expensive restaurant facilities and staffing.

Our Business Segments

We operate, and report, three business segments: U.S. stores, international franchise and supply chain.

U.S. Stores

During 2021, our U.S. stores segment accounted for $1.50 billion, or 34%, of our consolidated revenues. Our U.S. stores segment consists primarily of our franchise operations, which consistconsisted of 5,4866,185 franchised stores located in the United States.States as of January 2, 2022. We also operateoperated a network of 390375 U.S. Company-owned stores.stores as of January 2, 2022.

During 2018,

Directly operating Domino’s stores contributes significantly to our U.S. stores segment accounted for $1.26 billion, or 37% of our consolidated revenues.ability to act as a credible franchisor. We also use our Company-owned stores as test sites for new productstechnological innovation and promotions as well as operational improvements. We also use them for training new store managers and operations team members, as well as developing prospective franchisees. While we are primarily a franchised business, we continuously evaluate our mix of U.S. Company-owned and franchise stores. As of January 2, 2022, franchised stores represented approximately 94% of our total store count within our U.S. stores segment.

We maintain a productive relationship with our independent franchise owners through regional franchise teams, distributing materials that help franchise stores comply with our standards and using franchise advisory groups that facilitate communications between us and our franchisees.

U.S. Franchise Profile

As of December 30, 2018,January 2, 2022, our network of 5,4866,185 U.S. franchise stores werewas owned and operated by 793735 independent U.S. franchisees. Our franchise formula enables franchisees to benefit from our brand namerecognition with a relatively low initial capital investment. As of December 30, 2018,January 2, 2022, the average U.S. franchisee owned and operated sevenapproximately eight stores and had been in our franchise system for over 18 years. At the same time, 17Additionally, 22 of our U.S. franchisees operated more than 50 stores (including our largest U.S. franchisee who operated 179177 stores) and 262216 of our U.S. franchisees each operated one store.store, each as of that date.

We apply rigorous standards to prospective U.S. franchisees. We generally require them to manage a store for at least one year and graduate from our franchise management school program before being granted athe right to franchise. This enables us to observe the operational and financial performance of a potential franchisee prior to entering into a long-term contract.agreement. Substantially all of our 793 independent U.S. franchise owners started their careers with us as delivery drivers or in otherin-store positions, which we believe offers advantages in terms of familiarity with our business and store operations. In addition, we generally restrict the ability of U.S. franchisees to be involved in other businesses, which we believe helps focus our franchisees’ attention on operating their stores. We believe these characteristics and standards are largely unique within the franchise industry and have resulted in qualified and focused franchisees operating Domino’s stores. We maintain a productive relationship with our independent franchise owners through regional franchise teams, distributing materials that help franchise stores comply with our standards and using franchise advisory groups that facilitate communications between us and our franchisees. We consider our relationship with our U.S. franchisees to be good.

U.S. Franchise Agreements

We enter into franchise agreements with U.S. franchisees under which the franchisee is generally granted the right to operate a store in a particular location for a term of ten years, with an ability to renew for an additional term of ten years. We havehad a franchise contractagreement renewal rate of approximately 99%. in 2021. Under the current standard franchise agreement, we assign an exclusive area of primary responsibility to each franchised store. Each franchisee is generally required to pay a 5.5% royalty fee on sales.sales, as well as certain technology fees. In certain instances, we will collect lower rates based on new storecertain incentives.

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Our U.S. stores in the United States currently contribute 6% of their sales to fund national marketing and advertising campaigns (subject, in certain instances, to lower rates based on certain incentives and waivers). These funds are administered by Domino’s National Advertising Fund Inc. (“DNAF”), our consolidatednot-for-profit advertising subsidiary. The funds are primarily used to purchase media for advertising, butand also to support market research, field communications, public relations, commercial production, talent payments and other activities to promote the Domino’s brand. In addition to the national and market-level advertising contributions, U.S. stores generally spend additional funds on local store marketing activities.

We have the contractual right, subject to state law, to terminate a franchise agreement for a variety of reasons, including, but not limited to, a franchisee’s failure to adhere to the Company’s franchise agreement, failure to make required payments, or failure to adhere to specified Company policies and standards.

International Franchise

Our

During 2021, our international franchise segment accounted for $298.0 million, or 7%, of our consolidated revenues. This segment is comprised of a network of franchised stores in more than 8590 international markets. At December 30, 2018,As of January 2, 2022, we had 10,03812,288 international franchise stores. During 2018, this segment accounted for $224.7 million, or 6% of our consolidated revenues. The principal sources of revenues from those operations are royalty payments generated by retail sales from franchised stores.stores, as well as certain technology fees.

Our international franchisees employ our basic standard operating model and adapt it to satisfy the local eating habits and consumer preferences of various regions outside the U.S. Currently, the vast majority of our international stores operate under master franchise agreements.

We believe Domino’s appeals to potential international franchisees because of our recognized brand name and technological leadership, the moderate capital expenditures required to open and operate ourthe stores and ourthe system’s favorable store economics.desirable store-level profitability. Stores in eightseven of our top ten largest international markets in terms of store count are operated by master franchise companies that are publicly traded on stock exchanges as noted in India (JUBLFOOD: NS), the United Kingdom (DOM: L), Mexico (ALSEA: MX), Australia (DMP: ASX) (which operates the stores in our Australia, Japan, France and Germany markets) and Turkey (DPEU: L).below table. The following table shows our store count as of December 30, 2018January 2, 2022 in our top ten largest international markets, which accounted for approximately 64%62% of our international stores as of December 30, 2018.that date.

International Franchisee Profile

The vast majority of our markets outside of the U.S. are operated by master franchisees with franchise and distribution rights for entire regions or countries. In a few select markets, we franchise directly to individual store operators. Prospective master franchisees are required to possess local market knowledge to establish and develop Domino’s Pizza stores, with the ability to identify and access targeted real estate sites, as well as expertise in local laws, customs, culture and consumer behavior. We also seek candidates that have access to sufficient capital to meet growth and development plans. We consider our relationship with our international franchisees to be good.

International Master Franchise and Other Agreements

Our international master franchise agreements generally grant the franchisee exclusive rights to develop andsub-franchise stores, and the right to operate supply chain centers in particular geographic areas. Agreements are generally for a term of ten years, with options to renew for additional terms. The agreements typically contain growth clauses requiring franchisees to open a minimum number of stores within a specified period. The master franchisee is generally required to pay an initial,one-time franchise fee as well as an additional franchise fee upon the opening of each new store. The master franchisee is also required to pay a continuing royalty fee as a percentage of sales, which varies among international markets and may also differ based on certain incentives and concessions, and averaged approximately 3.0% in 2018.2021. We also have agreements with certain of our international master franchisees with respect to certain technology fees.

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Supply Chain

Our

During 2021, our supply chain segment operates 19accounted for $2.56 billion, or 59%, of our consolidated revenues. We operate 21 regional dough manufacturing and food supply chain centers in the U.S., onetwo thin crust manufacturing center,facilities, one vegetable processing center and one center providing equipment and supplies to our U.S. and certain international stores. We also operate five dough manufacturing and supply chain centers in Canada. We plan to continue investing in additional supply chain centers and capacity initiatives in the future. We also operate fivefuture, including one additional regional dough manufacturing and food supply chain centerscenter that is expected to open in Canada.fiscal 2022. Our supply chain segment leases a fleet of more than 800900 tractors and trailers. During 2018, our supply chain segment accounted for $1.94 billion, or nearly 57% of our consolidated revenues.

Our centers produce fresh dough and purchase, receive, store and deliver quality food and other complementary items to substantially all of our U.S. stores and most of our Canadian franchised stores. We regularly supply over 6,3007,100 stores with various food and supplies. Our supply chain segment made approximately 766,000 full-service deliveries in 2018 or approximately 2.5 deliveries per store per week, and we produced over 573 million pounds of fresh dough during 2018.

We believe our franchisees voluntarily choose to obtain food, supplies and equipment from us because we offer the most efficient, convenient and cost-effective alternative, while also offering both quality and consistency. Our supply chain segment offers profit-sharing arrangements to U.S. and Canadian franchisees who purchase all of their food for their stores from our centers. These profit-sharing arrangements generally offer participating franchisees and Company-owned stores with 50% (or a higher percentage in the case of Company-owned stores and certain franchisees who operate a larger number of stores) of their regionalthe pre-tax profit from our supply chain center’spre-tax profits.center operations. We believe these arrangements strengthen our ties to and provide aligned benefits with franchisees.

Third-Party Suppliers

Over half

A significant amount of our annual food spend is with suppliers with whom we have maintained a partnership of at least 20 years.maintain long-standing partnerships. Our supply partners are required to meet strict quality standards to ensure food safety. We review and evaluate these partners’ quality assurance programs through (among other actions)on-site visits, third-party audits and product evaluations designed to ensure compliance with our standards. We believe the length and quality of our relationships with third-party suppliers provides us with priority service and quality products at competitive prices.

Cheese is our largest food cost. The price we charge to our U.S. franchisees for cheese is based onformula-based, with the Chicago Mercantile Exchange cheddar block price as the primary component, plus a supply chain markup. As cheese prices fluctuate, our revenues and margin percentages in our supply chain segment also fluctuate; however, actual supply chain dollar margins remain unchanged. We currently purchase our U.S. pizza cheese from a single supplier. Under our September 2017 agreement, our U.S. supplier agreed to provide the Company with an uninterrupted supply of cheese and the Company agreed to a seven-year pricing schedule to purchase all of its U.S. pizza cheese from this supplier. While we expect to meet the terms of this agreement, if we do not, we will be required to repay the certain negotiated cost savings as outlinedprovided in the agreement. The majority of our meat toppings in the U.S. come from a single supplier under a contract that expires in June 2022. We have the right to terminate these arrangements for quality failures and for certain uncured breaches.

We are party tohave entered into a multi-year agreement with Coca-Cola® for the contiguous U.S. This contract, renegotiated in December 2013,June 2019, provides for Coca-Cola to continue to be our exclusive beverage supplier and expires in March 2019.on December 31, 2023 or at such time as a minimum number of cases of Coca-Cola products are purchased by Domino’s, whichever occurs later.

We believe alternative third-party suppliers are available for all of these referenced products. While we may incur additional costs if we are required to replace any of our supply partners, we do not believe such additional costs would have a material adverse effect on our business. We continually evaluate each supply category to determine the optimal sourcing strategy.

We have not experienced any significant shortages of supplies or delays in receiving our inventories or products. Prices charged to us by our supply partners are subject to fluctuation, and we have historically been able to pass increased costs and savings on to stores. We periodically enter into supplier contracts to manage the risk from changes in commodity prices. We do not engage in speculative transactions, nor do we hold or issue financial instruments for trading purposes.

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Our Strengths

Strong Brand Equity

We are the largest pizza company in the world based on global retail sales. Weand we believe our Domino’s Pizza brand is one of the most widely-recognized consumer brands in the world. We are the recognized world leader in pizza delivery and have a significant business in carryout. We believe consumers associate our brand with the timely delivery of quality, affordable food.food and technological innovation.

Over the past five years, our U.S. franchise and Company-owned stores have invested an estimated $1.9$2.4 billion in national,co-operative and local advertising. Our international franchisees also invest significant amounts in advertising efforts in their markets. We continue to reinforce our brand with extensive advertising through various media channels. We have also enhanced the strength of our brand through marketing affiliations with brands such as Coca-Cola.

We are the number one pizza delivery company in the U.S. with a 31.1%approximately 31% share of pizza delivery based on reported consumer spending.spending data for the year ending November 2021. For the same period, we are also a growing leader in carryout with approximately 16% share of carryout pizza consumer spending (Source: The NPD Group/CREST®, year ending November 2021). With 5,8766,560 stores located in the U.S., our store delivery areas cover a majority of U.S. households. Our share position and scale allow us to leverage our purchasing power, supply chain strength and marketing investments. We believe our scale and market coverage allow us to effectively serve our customers’ demands for convenience and timely delivery. Outside the U.S., we have significant market share positions in many of the markets in which we compete.

Strong and Proven Business Model

Our business model generates U.S. and international franchise royalties and fees, supply chain revenue and retail sales at Company-owned stores. We have developed this model over our many years of operation, and it is anchored by strong store-level economics, which provide an entrepreneurial incentive for our franchisees and historically has generated demand for new stores. Over the past ten years, average U.S. store profitability in the Domino’s system has increased meaningfully, resulting in higher profitability for our franchise owners. Our franchise system, in turn, has produced strong and consistent earnings for us through royalty payments and through supply chain revenues, with moderate capital expenditures by us.revenues.

We developed a cost-efficient store model, characterized by a delivery- and carryout-oriented store design, with moderate capital requirements and a menu of quality, value-oriented and affordable items. At the store level, we believe the simplicity and efficiency of our operations give us significant advantages over our competitors, who, in many cases, also focus ondine-in or have broader menu offerings. At the supply chain level, we believe we provide quality, good value and consistency for our franchise customers while also driving profits for us, which we share with our franchisees.franchisees under the profit-sharing arrangements described above.

Our menu simplifies and streamlines production and delivery processes and maximizes economies of scale on purchases of our principal food items. In addition, our stores, including those in our Pizza Theater image, are generally smaller and less expensive to build, furnish and maintain as compared to many other restaurant concepts. New stores built in our Pizza Theater design are often slightly larger than stores we have built in the past toconcepts, and they create a betterpositive experience for our carryout anddine-in customers; however, they are still generally smaller and less expensive than many other restaurant concepts.customers. The combination of this efficient store model and strong sales volume has resulted in favorablestrong store-level financial returnseconomics and, we believe, makes Domino’s Pizza an attractive business opportunity for existing and prospective franchisees around the world. We and our franchisees are continuing to focus on growing our global store count around the world to increasecount. In recent years, we have focused specifically on increasing our presence in all of our existing markets to provide better serveservice to our customers, including shrinking our delivery areas to provide better delivery service and adding locations that are closer to our carryout customers. We call this approach our fortressing strategy.

We believe our store economicsfinancial returns have led to a strong, well-diversified franchise system. This established franchise system has produced strong cash flows and earnings for us, enabling us to invest in the Domino’s Pizza brand, stores, technology and supply chain centers, pay significant dividends, repurchase and retire shares of our common stock and service our debt obligations.

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Technological Innovation

Technological innovation is vital to our brand and our long-term success. Digitalsuccess, and digital ordering is critical to competing in the global pizza industry. In 2018,and broader QSR industries. Emphasis on technological innovation helped us achieve more than half of all global retail sales were derivedin 2021 from digital channels, primarily through our online ordering website and mobile applications. We believechannels. In the U.S., we are among the largeste-commerce retailers in terms of annual transactions. After launching digital ordering in the U.S. in 2008, we made the strategic decision in 2010 to develop our own online ordering platform and to manage this important and growing area of our business internally. Over the next five years, we launched mobile applications that cover 95% of the smartphones and tablets on the U.S. market. In 2013, we launched an enhanced online ordering profiles platform, allowing customers the ability to reorder their favorite order in as few as five clicks, or 30 seconds. In 2014, we introduced “Dom,” a voice ordering application, which we believe is the first in the restaurant industry, and we also made the Domino’s Tracker^® available on our ordering platforms. In 2015, we introducedhave developed several innovative ordering platforms, including Samsung Smart TV^®, Twitter, and text message using a pizza emoji. We continued this trend of innovation in 2016 with the introduction ofzero-click ordering as well as addingthose for Google Home, Facebook Messenger, Apple Watch, and Amazon Echo, Twitter and more. In 2019, we announced a partnership with Nuro to further our exploration and testing of autonomous pizza delivery. In 2020, we added GPS to our ordering platforms.Domino’s Tracker, which allows customers to monitor the progress of their food, from the preparation stages to the time it is in the oven to the time it arrives at their doors. In 2017, as part of an industry-first collaboration with Ford Motor Company, we began a meaningful test of delivery using self-driving vehicles. In April 2018,mid-2020, we launched a new way to order contactless carryout nationwide – via Domino’s Carside Delivery, HotSpots, featuring over200,000 non-traditional delivery locations including parks, beaches, local landmarks and other unique gathering spots.which customers can choose when placing a prepaid online order.

The Company’s

Our Piece of the Pie Rewards® loyalty program launched in 2015, is meant to reward customers with a program that is simple to understand and easy to use. Upon signing up for the program, customers become rewards members and can earn points for onlinetheir orders. When rewards members reach a certain amount of points, they can redeem their points for free pizza. Rewards members may also receive exclusive members-only discounts and bonus offers. We may also occasionally provide additional opportunities for participating customers to benefit under the Piece of the Pie Rewards program.

All of this

This improved functionality has been developed to work seamlessly with our Domino’s PULSE™point-of-sale system. Our Domino’s PULSE system is designed to drive operating efficiencies for our franchisees and our corporate management and assist franchisees in independently managing their business. We have installedAs of January 2, 2022, Domino’s PULSE is being used in every Company-owned and franchised store in the U.S., in more than 99% of our U.S. franchised stores and in approximately 72%77% of our international stores.

We believe utilizing Domino’s PULSE with our integrated technology solutions throughout our system provides us with competitive advantages over other concepts.Weconcepts.We intend to continue to enhance and grow our online ordering, digital marketing and technological capabilities.

Product Innovation

In late 2009, we reintroduced

We believe our core hand-tossed pizza in the U.S. with a new recipe which we believe has contributed to continuedlong-term growth in customer reorder rate,rates, consumer traffic and increased sales. This recipe is now in use in other markets around the world. Our nearlymore than 60 years of innovation have resulted in numerous new product developments,developments. During 2021, we launched our newest side item, Domino’s Oven-Baked Dips, in three unique flavors including Cheesy Marinara, Five Cheese and Baked Apple to pair with our more recent innovations of Handmade Pan Pizza, Specialty Chicken, ParmesanDomino’s Bread Bites, Stuffed Cheesy Bread, Marbled Cookie Brownie and Bread Twists, among others.Twists. Product innovation is also present in our global markets, where our master franchisees have the ability to recommend products to suit their local market tastes. Products includecan range from simple to indulgent, including the Mayo JagaCheese Fondue Fire Meat in Japan (bacon, potatoes(cheese, tomato and sweet mayonnaise)truffle cream sauce, barbeque pork, bacon and vegetables) and the Saumoneta in France (light cream, potatoes, onions, smoked salmon and dill).

Internal Dough Manufacturing and Supply Chain System

In addition to generating significant revenues and earnings in the U.S. and Canada, we believe our vertically integrated dough manufacturing and supply chain system enhances the quality and consistency of our products, enhances our relationships with franchisees and leverages economies of scale to offer lower costs to our stores. It also allows store managers to better focus on store operations and customer service by relieving them of the responsibility of mixing dough in the stores and sourcing other ingredients. Many of our international master franchisees also profit from running supply chain businesses.businesses in their respective markets.

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Human Capital

As of January 2, 2022, we had approximately 13,500 employees, including 9,000 employees supporting our U.S. Company-owned stores and U.S. franchise operations (our U.S. stores segment), approximately 3,000 employees supporting our U.S. and Canadian supply chain operations (our supply chain segment), approximately 100 employees supporting our international franchise operations (our international franchise segment) and approximately 1,400 corporate employees. Approximately 6,100 of our employees are part-time and approximately 7,400 are full-time equivalent. Our Idealsfranchisees are independent business owners, so their employees are not our employees and therefore are not included in our employee count. None of our employees are covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Purpose and Values

We believe in: opportunity, hard work, inspired solutions, winning together, embracing communityare a purpose-inspired and performance-driven company with exceptional people committed to feeding the power of possible, one pizza at a time. At the heart of our brand is a commitment to a set of values that define our core beliefs on how we run our business, treat our people, support our franchisees and serve our customers.

Do the Right Thing: We act with integrity and make disciplined decisions, even when it’s difficult or unpopular. High ethical standards and uncommon honesty.honesty are at the heart of how we work together. We are committed to safely and responsibly serving our customers, and to giving back to the communities where we live and work.

Opportunity abounds

Put People First: We create an inclusive culture, knowing our people are core to our success. We treat each other with dignity and respect, and we value the differences each team member brings. We strive to be a company where all team members can bring their full selves to work and know that they can belong, contribute and reach their potential.

Create Inspired Solutions: We are a company built on entrepreneurship and innovation. We get better every day by having the humility and the courage to embrace and lead change. Together, we unlock our collective potential to be bold and think big. We have a bias for action to solve customer needs in new and relevant ways.

Champion our Customers: We deliver on our promises, treating each order and interaction as an opportunity to deepen relationships by delivering great products, services and experiences. We hold ourselves accountable, and if we don’t deliver on a promise, we are committed to making it right.

Grow and Win Together: We are not playing a finite game. We are committed to building an enduring brand that outlives any of our individual contributions. We will grow together, deliver exceptional results together, celebrate wins together, have fun together, and leave the Domino’s brand in a better place for those that come after.

Compensation and Benefits

Exceptional people are the core of our business. We are committed to providing competitive pay and benefits to attract and retain great talent, whether in our U.S. Company-owned stores, in our supply chain centers or in our corporate offices. We enable this by benchmarking and analyzing pay and benefits both externally and internally. In recent years, we have made continued investments in frontline team member wage rates in our U.S. Company-owned stores and supply chain centers. We are committed to providing pay equity for all employees.

Domino’s offers a comprehensive benefits package to eligible team members. We also make available to our team members several benefits designed to promote an inclusive workplace like paid parental leaves, adoption support, discounted childcare tuition, and health plans that are available to dependents, spouses and domestic partners and include fertility and gender transition support. We also offer eligible team members a 401(k) plan, education assistance, access to financial education, a back-up childcare network and access to legal assistance.

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Beyond basic insurance programs, Domino’s offers other wellness services to help team members manage and optimize their health. These no-cost programs include smoking cessation, diabetes and hypertension management, at-home physical therapy, and emotional support through Domino’s team member assistance program for all part-time and full-time team members and their dependents. Additionally, we provide up to 40 hours per year of sick time for all part-time and full-time team members, with no waiting period for our part-time team members who begin accruing sick pay on their first day of hire, and access to an outside wellness platform featuring 4,000+ videos on topics like mindfulness, exercise, nutrition, sleep, and financial well-being.

Talent Development and Recruiting

Having best-in-class talent across the globe is crucial to all aspects of Domino’s business, brand and long-term success. We are focused on attracting, developing and retaining high-performing, diverse teams and building an inclusive culture that inspires leadership, encourages innovative thinking and supports the development and advancement of all team members. Domino’s team members are empowered to drive their own success through different resources, training, and several development programs, including our G.O.L.D. (Global Operations Leadership Development) Program, our Supply Chain Services Driver Development Program and our Tech Rotation Program.

Our success will continue to depend on our ability to attract and retain qualified personnel to operate our stores, dough manufacturing and supply chain centers and international operations. To continue to strengthen our ability to attract and retain talent, in 2021 we launched a new Applicant Tracking System and have made continued investments in frontline team member wage rates in our U.S. Company-owned stores. On an annual basis, we also review scores for our team member engagement and culture surveys to identify strengths and opportunities for our brand.

The opportunity and potential at Domino’s. You can startDomino’s is best represented in an entry-level position and become a store owner – in fact,key statistic: substantially all of our independent U.S. franchise ownersfranchisees started their careers with us as delivery drivers or in otherin-store positions. ThousandsWith the vast majority of Domino’s U.S. franchisees developed from within our own system, the opportunity to become a small business owner is a profound and unique aspect of Domino’s culture and strength as a brand. Experienced store managers and other operators can apply for Franchise Management School (“FMS”). At FMS, these operators receive training for a successful transition from store management to store ownership.

Inclusion and Diversity Efforts

“Do the Right Thing” and “Put People First” are our top two core values at Domino’s. From those two values our Inclusion and Diversity mission was launched, and we have been relentless in our commitment to building and strengthening our culture every day. Our mission is to foster a more diverse, highly engaged workforce that sees our Company as the employer of choice and is representative of the communities we serve. We want our team members to feel comfortable bringing their unique experiences and diverse backgrounds to discussions where they can share, learn and listen together enabled by conscious inclusion practices and our leadership competencies.

Domino’s is focused on building an inclusive culture that welcomes and supports everyone and seeks to understand and listen to team members and our neighborhood community members. Our Inclusion and Diversity efforts are built with a strategic framework that encompasses three pillars:

Workforce– supervisors, trainers, quality auditors, international business consultants, marketersfocused on the diversity of our workforce at all levels of the organization.

Workplace – focused on ensuring that our Company-owned stores, offices and executivessupply chains are inclusive.

Marketplace – also began their careersfocused on ensuring our brand reaches and is relevant to all consumers.

As part our workplace initiatives, we provide leadership and funding to support team members in participating in Employee Resource Groups (“ERGs”). We currently have ERGs representing the Black, Hispanic and LGBTQ communities, as well as women in the stores. Internal growthworkforce and providing opportunitiesindividuals with disabilities, with more to come based on team member interest. We also make available to our team members several benefits designed to promote an inclusive workplace like paid parental leaves, adoption support, discounted childcare tuition, and health plans that are available to dependents, spouses and domestic partners and include fertility and gender transition support.

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Corporate Stewardship

Our vision for anyone willingstewardship is for Domino’s to work hard aredeliver the foundationpower of our core beliefs.

The ideals of inspired solutions, uncommon honesty and winning together were driving forces behind the relaunch of our brand. We were inspired by our harshest critics when it came to the perceived taste of our pizza. Our solution was not simply more advertising; the solution was to create a new recipe and a broader menu of great-tasting products. Our marketing campaign was shockingly honest in its approach: telling consumers (and showing them via television ads) that we heard their negative feedback and were listening. And, without thebuy-in from our franchise owners, we couldn’t have done it. We believe that we can’t focus solely on the Company’s success; we must focus on making our stores and our franchisees successful. That’s winning together.

Community Involvement

We believe in supportingpossible every day for the communities we serve, through donating our time, moneypeople and pizza. You can find more information aboutthe planet. We drafted this inaugural brand vision, with notable goals and objectives to drive change in the years and decades to come, and with pillars that ladder up to our community giving atbiz.dominos.com. Here arenewly established long-term goals. We have initiated a new drive to better understand our environmental and social impacts. We engaged outside experts to measure and quantify our environmental footprint, and identify opportunities to improve. With the help of these experts, we conducted a materiality assessment, connected with key stakeholders inside and outside of the company and developed a baseline report for our carbon, water and land use footprint in the U.S. We have set two organizations worthynew significant commitments on greenhouse gas emissions, including a commitment to set and reach Science Based Targets by 2035 and achieve net zero carbon emissions by 2050.

Domino’s also has a long history of note:

caring for the communities we serve. Our national philanthropic partner is St. Jude Children’s Research Hospital^®. St. Jude, which is internationally-recognizedinternationally recognized for its pioneering work in finding cures and saving children with cancer and other catastrophic diseases. Through a variety of internal and consumer-based activities, including a national fundraising campaign called St. Jude Thanks and Giving®, the Domino’s system has contributed $57.5$95.7 million to St. Jude since our partnership began in 2004, including raising $10.5$13.6 million in 2018.2021. In addition2020, we committed to raisinga 10-year, $100 million campaign to raise funds we have supportedto build Domino’s Village at St. Jude, throughin-kind donations, including hosting hospital-wide pizza parties for patients and their families. Our system also helps St. Jude build awareness througha planned housing complex that will accommodate up to 140 patient families during long-term stays at the inclusion of the St. Jude logo on millions of our pizza boxes and through a link on our consumer website, as well as a St. Jude-themed Pizza Tracker duringThanks and Giving^®.hospital.

We also support the Domino’s Pizza Partners Foundation (“the Partners(the “Partners Foundation”). Founded in 1986, the mission of the Partners Foundation is “Team Members Helping Team Members.” Primarily funded by team member and franchise contributions, the foundationPartners Foundation is a separate,not-for-profit organization that has disbursed more than $6.7over $9.4 million over the past five years. The Partners Foundation is committed to meeting the needs of Domino’s team members facing crisis situations, such as fire, illness, natural disasters or other personal tragedies.

Additional DisclosuresDomino’s recently announced a pledge of $3.0 million to support the Black community in the U.S., including $1.0 million to create the Company’s first Black Franchisee Opportunity Fund.

Employees

As of December 30, 2018, we had approximately 14,500 employees inYou can find more information about our Company-owned stores, supply chain centers, World Resource Centerinitiatives and regional offices. None ofread our employees is covered by a collective bargaining agreement. As franchisees are independent business owners, they2021 Corporate Stewardship Report, which includes both Sustainability Accounting Standards Board (SASB) and their employees are notGlobal Reporting Initiative (GRI) indexed tables, at stewardship.dominos.com. The information included in our employee count. We consider our relationship with our employeesthis report is not incorporated by reference herein and franchisees toshould not be good. We estimate the total numberconsidered a part of people who work in the Domino’s system, including our employees, franchisees and the employees of franchisees, was more than 320,000 as of December 30, 2018.this document.

Additional Disclosures

Working Capital

Information about the Company’s working capital is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7., pages 35 through 39.

Government Regulation

We, along with our franchisees, are subject to various federal, state and local laws affecting the operation of our business. Each store is subject to licensing and regulation by a number of governmental authorities, which include zoning, health, safety, sanitation, building and fire agencies in the jurisdiction in which the store is located. In connection with maintaining our stores, we may be required to expend funds to meet certain federal, state and local regulations, including regulations requiring that remodeled or altered stores be accessible to persons with disabilities. Difficulties in obtaining, or the failure to obtain, required licenses or approvals could delay or prevent the opening of a new store in a particular area or cause an existing store to cease operations. Our supply chain facilities are also licensed and subject to similar regulations by federal, state and local health and fire codes.

We are also subject to the Fair Labor Standards Act and various other federal and state laws governing such matters as minimum wage requirements, overtime and other working conditions and citizenship requirements. A significant number of both our and our franchisees’ food service personnel are paid at rates related to the applicable minimum wage, and past increases in the minimum wage have increased labor costs, as would future increases.

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We are subject to the rules and regulations of the Federal Trade Commission (“FTC”) and various state laws regulating the offer and sale of franchises. The Federal Trade CommissionFTC and various state laws require that we furnish a franchise disclosure document containing certain information to prospective franchisees, and a number of states require registration of the franchise disclosure document with state authorities. We are operating under exemptions from registration in several states based on the net worth of our subsidiary, Domino’s Pizza Franchising LLC, and experience. We believe our franchise disclosure document, together with any applicable state versions or supplements, and franchising procedures comply in all material respects with both the Federal Trade CommissionFTC guidelines and all applicable state laws regulating franchising in those states in which we have offered franchises.

Internationally, our franchise stores are subject to national and local laws and regulations that are often similar to those affecting our U.S. stores, including laws and regulations concerning franchises, labor, health, sanitation and safety. Our international stores are also often subject to tariffs and regulations on imported commodities and equipment, and laws regulating foreign investment. We believe our international disclosure statements, franchise offering documents and franchising procedures comply in all material respects with the laws of the foreign countries in which we have offered franchises.

Privacy and Data Protection

We are subject to a number of privacy and data protection laws and regulations both in the U.S. and globally. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increase in attention given to privacy and data protection issues with the potential to directly affect our business. This includes recently-enacted laws and regulations in the U.S. and internationally requiring notification to individuals and government authorities of security breaches involving certain categories of personal information. Any changes in privacy or data protection laws or regulations could also impact our marketing techniques and could change our marketing strategies. We have a privacy policy posted on our website at www.dominos.com. The security of our financial data, customer information and other personal information is a priority for us.

Trademarks

Trademarks

We have many registered trademarks and believe that the Domino’s mark and Domino’s Pizza names and logos, in particular, have significant value and are important to our business. Our policy is to pursue registration of our trademarks and to vigorously oppose the infringement of any of our trademarks. We license the use of our registered marks to franchisees through franchise agreements.

Environmental Matters

We are not aware of any federal, state or local environmental laws or regulations that we would expect to materially affect our earnings or competitive position or result in material capital expenditures. However, we cannot predict the effect of possible future environmental legislation or regulations. During 2018,2021, there were no material environmental compliance-related capital expenditures, and no such material expenditures are anticipated in 2019.2022.

Seasonal Operations

The Company’s business is not typically seasonal.

Backlog Orders

The Company has no backlog orders as of December 30, 2018.

Government Contracts

No material portion of the Company’s business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the U.S. government.

Available Information

The Company makes available, free of charge, through its internet website biz.dominos.comir.dominos.com, its annual reportAnnual Report on Form 10-K, quarterly reportsQuarterly Reports on Form10-Q, current reports Current Reports on Form8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a), 15(d), or 16 of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after electronically filing such material with the Securities and Exchange Commission. Materials filed with the Securities and Exchange Commission are available atwww.sec.gov. Retail orders from Domino’s stores can be made through its internet websitedominos.comwww.dominos.com. The reference to these website addresses anywhere in this Annual Report on Form 10-K (the “Form 10-K”) does not constitute incorporation by reference of the information contained on the websites and information appearing on those websites, includingbiz.dominos.comir.dominos.com,stewardship.dominos.com anddominos.comwww.dominos.com, should not be considered a part of this document.

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Item 1A. Risk Factors.

For a business as large and globally diverse as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in this report and our other filings with the SEC, we believe the most significant risk factors affecting our business include the following:

Business, Operational and Industry Risks

The quick service restaurant ("QSR") pizza category isand the food service and food delivery markets in general are highly competitive and such competition could adversely affect our operating results.

In the U.S., we compete primarily against regional and local companies as well as national chains Pizza Hut®, Papa John’s® and Little Caesars Pizza®. Internationally, we compete primarily with Pizza Hut®, Papa John’s® and country-specific national and local companies. We couldmay experience increased competition from existing or new companies in the delivery and carryout pizza categories, in addition to competition from order and delivery aggregators both in the pizza category which couldand more broadly, that may create increasing pressures to grow our business in order to maintain our market share. Competition for both customers and drivers from these order and delivery aggregators and other food delivery services has substantially increased as order and delivery aggregators have continued to grow in size and scale. Additionally, we face growing competition from the supermarket industry and meal kit and food delivery providers, with the improvement of prepared food and meal kit offerings, expansion in meal delivery platforms and services and the trend towards convergence in grocery, deli, retail and restaurant services. If we are unable to maintain our competitive position, we could experience downward pressure on prices, lower demand for our products, reduced margins, the inability to take advantage of new business opportunities and the loss of market share, all of which would have an adverse effect on our operating results and could cause our stock price to decline.

We also compete on a broader scale with quick service and other international, national, regional and local restaurants. Competition from delivery aggregators and other food delivery services has also increased in recent years. The overall food service market, food delivery market and the quick service restaurant sectorQSR market are intensely competitive with respect to food quality, price, service, image, convenience and concept, and are often affected by changes in:

We compete within the food service market and the quick service restaurant sectorQSR market not only for customers, but also for management and hourly employees, including store team members, drivers and qualified franchisees, as well as suitable real estate sitessites. We and qualified franchisees. our franchisees have recently faced an increasingly competitive labor market due to sustained labor shortages and increased turnover resulting in part from the COVID-19 pandemic which has caused us and our franchisees to in certain cases reduce store hours and delay store openings, and has prevented us from running promotions, which has impacted our sales, service levels and customer experience and could ultimately impact our growth and competitive position. Our success is also dependent in large part upon our ability to maintain and enhance the goodwill and reputation of our brand, our customers’ connection to our brand, and a positive relationship with our franchisees and the communities in which we and our franchisees operate.

Our supply chain segment is also subject to competition from outside suppliers. While substantially all U.S. franchisees purchased food, equipment and supplies from us in 2018,2021, U.S. franchisees are not required to purchase food, equipment or supplies from us and they may choose to purchase from outside suppliers. If other suppliers who meet our qualification standards were to offer lower prices or better service to our franchisees for their ingredients and supplies and, as a result, our franchisees chose not to purchase from our U.S. supply chain centers, our financial condition, business and results of operations would be adversely affected.

If we are unable to maintain our competitive position, we could experience downward pressure on prices, lower demand for our products, reduced margins, loss of management or hourly employees, reduced service levels, disruption in our supply chain, the inability to take advantage of new business opportunities and the loss of market share, all of which would have an adverse effect on our operating results and could cause our stock price to decline.

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If we fail to successfully implement our growth strategy, which includes opening new U.S. and international stores, our ability to increase our revenues and operating profits could be adversely affected.

A significant component of our growth strategy includes the opening of new U.S. (both Company-owned as well as franchised stores) and international franchised stores. We and our franchisees face many challenges in opening new stores, including, among others:

We may also pursue strategic acquisitions as part of our business. If we are able to identify acquisition candidates, such acquisitions may be financed, to the extent permitted under our debt agreements, with substantial debt or with potentially dilutive issuances of equity securities.securities and may not be successful.

Labor shortages and increases in food, labor and other costs could adversely affect our profitability and operating results.

We have recently experienced increased labor shortages at many of our stores and supply chain centers and our franchisees have experienced similar labor shortages at their stores. While there historically has been some level of ordinary course turnover of employees, the COVID-19 pandemic and resulting actions and impacts have exacerbated labor shortages and increased turnover. Labor shortages and increased turnover rates within our team members and the employees of our franchisees have led to and could in the future lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain team members and could negatively affect our and our franchisees’ ability to efficiently operate our respective businesses and result in a negative impact on service and customer experience. Given the inflation rates in fiscal 2021, there has been and may continue to be increases in food costs and labor costs which have and could further impact our profitability and that of our franchisees and which could impact the opening of new U.S. and international franchised stores and adversely affect our operating results. Factors such as inflation, increased food costs, increased labor and employee health and benefit costs, increased rent costs and increased energy costs may adversely affect our operating costs and profitability and those of our franchisees and could result in menu price increases. Most of the factors affecting costs are beyond our control and, in many cases, we may not be able to pass along these increased costs to our customers or franchisees and to the extent we were to raise menu prices to offset these costs, could result in decreased consumer demand, sales and profitability. Most ingredients used in our pizza, particularly cheese, are subject to significant price fluctuations as a result of seasonality, weather, demand and other factors. For example, we have experienced increased volatility in prices for some ingredients during the COVID-19 pandemic, which may continue even if the pandemic recedes. Cheese is a significant cost to us, representing approximately 25% of the market basket purchased by our Company-owned stores.

Additionally, while we strive to engage in a competitive bidding process for our ingredients, because certain of these ingredients, including meat products, may only be available from a limited number of vendors, we may not always be able to do so effectively. Furthermore, if we need to seek new suppliers, we may be subject to pricing or other terms less favorable to us than those reflected in our current supply arrangements. Labor costs are largely a function of the minimum wage for a majority of our store personnel and certain supply chain center personnel and, generally, are also a function of the availability of labor. In addition to the increases in labor costs described above, several jurisdictions in which we operate have recently approved minimum wage increases. Federal, state and local proposals that increase minimum wage requirements or mandate other employee matters could, to the extent implemented, materially increase our labor and other costs. As more jurisdictions implement minimum wage increases, we expect our labor costs will continue to increase. The advent of legislation aimed at predictive scheduling could impact labor for our stores and our franchisees’ stores. Additionally, while we do not currently have any unionized employees, certain employees of other companies in our industry have recently become unionized. If a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other union requirements that increase our costs, disrupt our business, reduce our flexibility and impact our employee culture. Further, our responses to any union organizing efforts could negatively impact how our brand is perceived. Labor costs and food costs, including cheese, generally represent approximately 50% to 60% of the sales at a typical Company-owned store.

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The food service market is affected by consumer preferences and perceptions. Changes in these preferences and perceptions may reduce the demand for our products, which would reduce sales and harm our business.

Food service businesses are affected by changes in consumer tastes, international, national, regional and local economic conditions, marketing, advertising, pricing, including both price increases and discounting, and demographic trends. For instance, if prevailing health or dietary preferences cause consumers to avoid pizza and other products we offer in favor of foods that are perceived as healthier, our business and operating results would be harmed. Moreover, because we are primarily dependent on a single product, if consumer demand for pizza should decrease, our business would suffer more than if we had a more diversified menu, as many other food service businesses do. The preferences of customers also may change as a result of advances in technology or alternative delivery methods or channels. If we are not able to respond to these changes, or our competitors respond to these changes more effectively, our business and operating results could be adversely affected.

Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could adversely impact our business.

In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites, and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other persons. The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination. The dissemination of information via social media could harm our business, brand, reputation, marketing partners, financial condition, and results of operations, regardless of the information’s accuracy. This could include negative publicity related to our food products or stores or negative publicity related to actions by our executives, team members or franchisees.

In addition, we frequently use social media to communicate with consumers and the public in general. Failure to use social media effectively could lead to a decline in brand value and revenue. Other risks associated with the use of social media include improper disclosure of proprietary information, negative comments about our brand, exposure of personally identifiable information, fraud, hoaxes or malicious dissemination of false information.

Reports of product contamination, food-borne illness or food tampering couldmay reduce sales and harm our business.

Reports, whether true or not, of product contamination, food-borne illnesses (such as E. coli, avian flu, bovine spongiform encephalopathy, hepatitis A, trichinosis or salmonella) and injuries caused by food tampering have in the past severely injured the reputations of participants in the QSR sectormarket and could in the future as well. These events could occur both at the store and supply chain center levels. If such an event was to occur, we may not be able to respond to it quickly and effectively. The potential for acts of terrorism affecting our global food supply also exists and, if such an event occurs, it could have a negative impact on us and could severely hurt sales and profits. In addition, our reputation is an important asset; as a result, anything that damages our reputation could immediately and severely affect our sales and profits. Media reports of product contamination, illnesses and injuries, whether accurate or not, could force some stores to close or otherwise reduce sales at such stores. Moreover, as further described above,below, social media has dramatically increased the rate at which negative publicity, including as it relates to food-borne illness, can be disseminated before there is any meaningful opportunity to respond to or address an issue. Even reports of food-borne illnesses or food tampering occurring solely at the restaurants of competitors could, by resulting in negative publicity about the restaurant industry in general, adversely affect us on a local, regional, national or international basis. Our international operations expose us to further risk as our master franchisees are responsible for obtaining their own supply of food and equipment, subject to their compliance with our quality standards. A decrease in sales due to these health concerns or negative publicity or as a result of the closure of any Domino’s stores could adversely affect our results of operations.

We do not have long-term contracts with certain of our suppliers, and as a result they could seek to significantly increase prices or fail to deliver.

We do not have long-term contracts or arrangements with certain of our suppliers. Although in the past we have not experienced significant problems with our suppliers, our suppliers may implement significant price increases or may not meet our requirements, including those that may result from increases in volume, in a timely fashion or at all. The occurrence of any of the foregoing could have a material adverse effect on the ability of our supply chain centers to deliver necessary products to our stores and those of our franchisees and on our results of operations.

Shortages or interruptions in the supply or delivery of fresh food products could adversely affect our operating results.

We and our franchisees are dependent on frequent deliveries of food products that meet our specifications. In addition, we have single suppliers or a limited number of suppliers for certain of our ingredients, including pizza cheese and meat toppings. While we believe there are adequate reserve quantities and potential alternative suppliers, shortages or interruptions in the supply of food products caused by increased demand, capacity constraints, problems in production or distribution, financial or other difficulties of suppliers, inclement weather or other conditions could adversely affect the availability, quality and cost of ingredients, could adversely affect our operating results.17

Increases in food, labor and other costs could adversely affect our profitability and operating results.

An increase in our operating costs could adversely affect our profitability. Factors such as inflation, increased food costs, increased labor and employee health and benefit costs, increased rent costs and increased energy costs may adversely affect our operating costs. Most of the factors affecting costs are beyond our control and, in many cases, we may not be able to pass along these increased costs to our customers or franchisees. Most ingredients used in our pizza, particularly cheese, are subject to significant price fluctuations as a result of seasonality, weather, demand and other factors. Cheese is a significant cost to us, representing approximately20-25% of the market basket purchased by our Company-owned stores. Additionally, while we strive to engage in a competitive bidding process for our ingredients, because certain of these ingredients, including meat products, may only be available from a limited number of vendors, we may not always be able to do so effectively. Furthermore, if we need to seek new suppliers, we may be subject to pricing or other terms less favorable to us than those reflected in our current supply arrangements. Labor costs are largely a function of the minimum wage for a majority of our store personnel and certain supply chain center personnel and, generally, are also a function of the availability of labor. Several states in which we operate have recently approved minimum wage increases. As minimum wage increases are implemented in these states or if such increases are approved and implemented in other states in which we operate, we expect our labor costs will continue to increase. The advent of legislation aimed at predictive scheduling could impact labor for our stores and our franchisees’ stores. Additionally, while we do not currently have any unionized employees, if a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other union requirements that increase our costs, disrupt our business, reduce our flexibility and impact our employee culture. Labor costs and food costs, including cheese, generally represent approximately 50% to 60% of the sales at a typical Company-owned store.

Any prolonged disruption in the operations of any of our dough manufacturing and supply chain centers could harm our business.

We operate 1921 regional dough manufacturing and supply chain centers onein the U.S., two thin crust manufacturing center andfacilities, one vegetable processing center in theand one center providing equipment and supplies to our U.S. and certain international stores. We also operate five dough manufacturing and supply chain centers in Canada. We plan to continue investing in additional supply chain capacity in the future.

future given the capacity limitations we are currently facing resulting from the growth of our business. Our U.S. dough manufacturing and supply chain centers service all of our Company-owned and substantially all of our U.S. franchise stores. As a result, any prolonged disruption in the operations of any of these facilities, whether due to technical, systems, operational or labor difficulties, destruction or damage to the facility, real estate issues, limited capacity or other reasons, could adversely affect our business and operating results.

Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could adversely impact our business.

The use of social media platforms, including blogs, social media websites, chat platforms, and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other persons, including to our customers and the general public, and other consumer-oriented technologies has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors. Negative publicity related to our food products or stores or negative publicity related to actions by our executives, team members or franchisees and their team members or others perceived to be associated with us or our franchisees could harm our business, brand, reputation, marketing partners, financial condition, and results of operations, regardless of the accuracy of such negative publicity. Failure to use or respond to social media campaigns effectively could lead to a decline in brand value and revenue. In addition, a failure of us, our employees, our franchisees or third parties acting at our direction to abide by applicable laws and regulations in the use of social media may adversely impact our brand, reputation, marketing partners, financial condition, and results of operations or subject us or our franchisees to fines or other penalties.

Our success depends in part upon effective advertising, and lower advertising funds may reduce our ability to adequately market the Domino’s Pizza brand.

We have been routinely named a Leading National Advertiser byAdvertising Age.and our success depends in part on continued effective advertising. Each Domino’s store located in the contiguous U.S. is obligated to pay a percentagecontribute 6% of its sales in advertising fees. In fiscal 2018, each store in the contiguous U.S. generally was required to contribute 6% of their sales to DNAF (subject, in certain instances, to lower rates based on certain incentives and waivers), to DNAF, which uses such fees for national advertising in addition to contributions for local market-level advertising. We currently anticipate that this 6% contribution rate will remain in place for the foreseeable future. While additional funds for advertising in the past have been provided by us, our franchisees and other third parties, none of these additional funds are legally required. The lack of continued financial support for advertising activities could significantly curtail our marketing efforts, which may in turn materially and adversely affect our business and our operating results.

We face risks of litigation, investigations, enforcement actions and negative publicity from customers, franchisees, suppliers, employees, regulators and others in the ordinary course of business, which can or could divert our financial and management resources. Litigation, investigations, enforcement actions or publicity may adversely impact our financial condition and results of operations.

Claims of illness or injury relating to food quality or food handling are common in the food service industry, and vehicular accidents and injuries occur in the food delivery business. Claims within our industry of improper supplier actions also occasionally arise that, if made against one of our suppliers, could potentially damage our brand image. In addition, class action lawsuits have been filed, and may continue to be filed, against various quick service restaurants alleging, among other things, that quick service restaurants have failed to disclose the health risks associated withhigh-fat foods and that quick service restaurant marketing practices have encouraged obesity. State attorney general offices or other regulators may initiate investigations or enforcement actions against us. In addition to decreasing our sales and profitability and diverting our management resources, adverse publicity or a substantial settlement, fine, penalty or judgment against us could negatively impact our financial condition, results of operations and brand reputation, thereby hindering our ability to attract and retain franchisees and grow our business.

Further, we may be subject to employee, franchisee and other claims in the future based on, among other things, discrimination, harassment, wrongful termination and wage, rest break and meal break issues, and those claims relating to overtime compensation. We have been and continue to be subject to these types of claims. If one or more of these claims were to be successful or if there is a significant increase in the number of these claims or if we receive significant negative publicity, our business, financial condition and operating results could be harmed.

Loss of key employees or our inability to attract and retain new qualified employees could hurt our business and inhibit our ability to operate and grow successfully.

Our success in the highly competitive pizza delivery andcarry-out carryout business will continue to depend to a significant extent on our leadership team and other key management personnel. Although we have entered into employment agreements with Richard E. Allison Jr., and Russell J. Weiner, each of these executives may terminate his agreement on ninety days’ notice. Our other executive officers may terminate their employment pursuant to their employment agreements at any time. As a result, we may not be able to retain our executive officers and key personnel or attract additional qualified management.

While we do not have long-term employment agreements with our executive officers, for all of our executive officers we havenon-compete andnon-solicitation agreements that extend for 24 months following the termination of such executive officer’s employment. Our success will also continue to depend on our ability to attract and retain qualified personnel to operate our stores, dough manufacturing and supply chain centers and international operations. The loss of these employees or our inability to recruit and retain qualified personnel, including store-level team members, or our inability to adequately respond to changes in the labor market, could have a material adverse effect on our operating results.

Adverse global economic conditions subject us Changes we make to additional risk.

Our financial conditionour current and results of operations are impacted by global markets and economic conditions over which neither we nor our franchisees have control. An economic downturn, including deterioration infuture work environments may not meet the economic conditions in the U.S.needs or international markets where we compete, may result in a reduction in the demand for our products, longer payment cycles, slower adoption of new technologies and increased price competition.

Poor economic conditions may adversely affect the abilityexpectations of our franchiseesemployees and may be perceived as less favorable compared to pay royalties or amounts owed andother companies' policies, which could have a material adversenegatively impact on our ability to pursue our growth strategy, which would reduce cash collectionshire and in turn, may materially and adversely affect our ability to service our debt obligations.retain qualified personnel.

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Our international operations subject us to additional risk. Such risks and costs may differ in each country in which we and our franchisees do business and may cause our profitability to decline due to increased costs.

We conduct a significant and growing portion of our business outside the U.S. Our financial condition and results of operations may be adversely affected if global markets in which our franchise stores compete are affected by changes in political, economic or other factors. These factors, many over which neither we nor our master franchisees have control, may include:include both internal and external factors including:

Fluctuations in the value of the U.S. dollar in relation to other currencies may lead to lower revenues and earnings.

Exchange rate fluctuations could have an adverse effect on our results of operations. Approximately 6.5% of our total revenues in 2018, 7.4% of our total revenues in 2017 and 7.2% of our total revenues in 2016 were derived from our international franchise segment, a majority of which were denominated in foreign currencies. We also operate dough manufacturing and distribution facilities in Canada, which generate revenues denominated in Canadian dollars. Sales made by franchise stores outside the U.S. are denominated in the currency of the country in which the store is located, and this currency could become less valuable in U.S. dollars as a result of exchange rate fluctuations. Unfavorable currency fluctuations could lead to increased prices to customers outside the U.S. or lower profitability to our franchisees outside the U.S., or could result in lower revenues for us, on a U.S. dollar basis, from such customers and franchisees. A hypothetical 10% adverse change in the foreign currency rates in our international markets would have resulted in a negative impact on international royalty revenues of approximately $20.0 million in 2018.

Our earnings and business growth strategy dependsdepend on the success of our franchisees, and we may be harmed by actions taken by our franchisees, or employees of our franchisees, that are outside of our control.

A significant portion of our earnings comes from royalties and fees generated by our franchise stores. Franchisees are independent operators, and their employees are not our employees. We provide tools forthat franchisees to usecan consider using in training their employees, but the quality of franchise store operations and our brand and branded products may be diminished by any number ofnumerous factors beyond our control. FranchiseesConsequently, franchisees may not operate stores in a manner consistent with our standards and requirements or they or their employees may take other actions that adversely affect the value of our brand. In such event, our business and reputation may suffer, and as a result our revenues and stock price could decline. Our success also depends in part on continuing positive relationships with our franchisees (and positive relationships between our international master franchisees and their corresponding sub-franchisees) and if those relationships were to deteriorate, our revenues and stock price could decline. While we try to ensure that franchisees maintain the quality of the Domino’s brand and branded products and comply with their franchise agreements, franchisees may take actions that adversely affect the value of our intellectual property or reputation or that are inconsistent with their contractual obligations. Although our franchise arrangements permit the applicable franchisor to terminate a franchise agreement under certain circumstances, including the failure by franchisees to uphold quality standards, there can be no assurance that such remedy will be available or sufficient to prevent harm to our brand and protect our intellectual property.

As of December 30, 2018,January 2, 2022, we had 793735 U.S. franchisees operating 5,4866,185 U.S. stores. SeventeenAs of that same date, 22 of these franchisees each ownowned and operateoperated more than 50 U.S. stores, including our largest U.S. franchisee who ownsowned and operates 179operated 177 stores and the average U.S. franchisee ownsowned and operates sevenoperated approximately eight stores.

Our international master franchisees are generally responsible for the development of significantly more stores than our U.S. franchisees. As a result, our international operations are more closely tied to the success of a smaller number of franchisees than our U.S. operations. OurAs of January 2, 2022, our largest international master franchisee operates 2,383operated 3,229 stores in seven10 markets, which accountsaccounted for approximately 24%26% of our total international store count. Our U.S. and international franchisees may not operate their franchises successfully. If one or more of our key franchisees were to become insolvent or otherwise were unable or unwilling to pay us our royalties or other amounts owed, our business and results of operations would be adversely affected.

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We may not be able to adequately protect our intellectual property, which could harm the value of our brand and branded products and adversely affect our business.

We depend in large part on our brand and branded products and believe that they are very important to our business. We rely on a combination of trademarks, copyrights, trade secrets and similar intellectual property rights to protect our brand and branded products. The success of our business depends on our continued ability to use our existing trademarks in order to capitalize on our name recognition, increase brand awareness and further develop our branded products in both U.S. and international markets. We have registered certain trademarks and have other trademark applications pending in the U.S. and foreign jurisdictions. Not all of the trademarks that we currently use have been registered in all of the countries in which we do business, and they may never be registered in all of these countries. WeSome countries’ laws do not protect unregistered trademarks at all, or make them more difficult to enforce, and third parties may have filed for “Domino’s” or similar marks in countries where Domino’s has not registered its brand. Accordingly, we may not be able to adequately protect our trademarks everywhere in the world and our use of these trademarks may result in liability for trademark infringement, trademark dilution or unfair competition. All of the steps we have taken to protect our intellectual property in the U.S. and in foreign countriesglobally may not be adequate. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S. Further, through acquisitions of third parties, we may acquire brands and related trademarks that are subject to the same risks as the brands and trademarks we currently own.

We may, from time to time, be required to institute or defend litigation to enforce our trademarks or other intellectual property rights, or to protect our trade secrets. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability and prospects regardless of whether we are able to successfully enforce our rights.

The occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of confidential information, or damage to our employee and business relationships, any of which could subject us to loss and harm our brand.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data or steal confidential information about customers, franchisees, suppliers or employees. A number ofMany retailers and other companies have recently experienced serious cyber incidents and breaches of their information technology systems. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. outsourced and we may further be negatively impacted to the extent outdated or legacy systems cease to function appropriately. We have in the past been and in the future may also be subject to negative impacts to our business caused by cyber incidents relating to our third-party service providers or the service providers of those third parties or our franchisees.

The three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationships with customers, franchisees and employees and private data exposure.exposure, including payment card or other financial data. In addition to maintaining insurance coverage to address cyber incidents, we have also implemented processes, procedures and controls to help mitigate these risks. However, our cyber insurance coverage may not fully cover all of the costs ofassociated with a cyber incident and these measures, as well as our increased awareness of the risk of a cyber incident, do not guarantee that our reputation and financial results will not be materially and adversely affected by such an incident.

Our and our franchisees’ operations depend upon our ability and the ability of franchisees, third-party service providers and the service providers of those third parties (as well as franchisees’ third-party service providers and the service providers of those third parties), to protect computer equipment and systems against damage from theft, fire, power loss, telecommunications failure and other catastrophic or unanticipated events, as well as internal and external security incidents, viruses, denial-of-service attacks, phishing attacks, ransomware attacks and other intentional or unintentional disruptions. A significant portion of our retail sales depends on the continuing operation of our information technology and communications systems, including Domino’s PULSE™, our online and mobile ordering platforms and our credit card processing systems. The failure of these systems to operate effectively, stemming from maintenance problems, upgrading or transitioning to new platforms, a compromise in our security or other unanticipated problems has at times in the past and in the future could result in interruptions to or delays in our and our franchisees’ operations. Some of our systems are not fully redundant, and our system’s disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, intentional sabotage or other unanticipated problems could result in lengthy interruptions in service.

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In addition, the implementation of technology changes and upgrades to maintain and upgrade our systems, errors or vulnerabilities in our systems, or damage to or failure of our systems, including because of systems becoming obsolete, could result in interruptions in our services and non-compliance with certain laws or regulations, which could reduce our sales, revenues and profits and damage our business and brand. Furthermore, as a result of the COVID-19 pandemic, certain of our employees have been required to work from home for an extended period of time. The significant increase in remote working, particularly for an extended period of time, could exacerbate certain risks to our business, including an increased risk of cyber incidents and improper dissemination of personal or confidential information. Because we and our franchisees accept electronic forms of payment from customers including credit cards, our business requires the collection and retention of customer data, including sensitive financial data and other personally identifiable information in various information systems that we and our franchisees maintain and in those maintained by third parties with whom we and our franchisees contract to provide payment processing. A weakness in such third party’s systems or software products (or in the systems or software products in the service providers of those third parties) may provide a mechanism for a cyber threat. In recent years, a significant number of companies have experienced security data breaches in which customer information was stolen through vendor access channels. While we select our third-party suppliers carefully, cyber attackscyber-attacks and security data breaches at a payment processing contractor could compromise confidential information or adversely affect our ability to deliver products and services to our customers. These problems could negatively affect our results of operations, and remediation could result in significant, unplanned capital investments.

We also maintain important internal Company data, such as personally identifiable information about our employees and franchisees and information relating to our operations. In addition, more than half of all global retail sales in 20182021 were derived from digital channels, primarily through our online ordering website and mobile applications, where customers enter personally identifiable information that we retain. Our use and retention of personally identifiable information is regulated by foreign, federal and state laws and regulations, as well as by certain third-party agreements. For example, the European Union adopted a new regulation that became effective in May 2018,Court of Justice of the European Union Generalinvalidated the U.S. – E.U. Privacy Shield framework, which was a commonly relied upon mechanism for exchanging personal data from the European Union to the U.S., in the July 16, 2020 “Schrems II” decision (Case C-311/18 Data Protection Regulation,Commissioner v. Facebook Ireland and Maximillian Schrems) and the State of California has adopted the California Privacy Rights Act of 2020, an amendment to the California Consumer Privacy Act, both of which requiresmay require companies to meet new requirements regarding thechange their handling of personal data. In addition, the State of New York promulgated the New York SHIELD Act which imposed obligations on businesses to implement physical, administrative and technical security measures to protect personal data by the March 21, 2020 effective date. As privacy and information security laws and regulations change, we may incur additional costs to ensure that we remain in compliance with those laws and regulations.regulations, and our current and future planned uses of personal and other data may be adversely affected by future adopted privacy and information security laws, regulations and rulings. If our security and information systems are compromised or if we, our employees or franchisees fail to comply with these laws, regulations or contract terms, or to successfully implement appropriate processes related to applicable requirements, laws and regulations governing cyber incidents could require us to notify customers, employees or other groups, and could result in adverse publicity, loss of sales and profits,cash flows, increased fees payable to third parties and fines, penalties or remediation and other costs that could adversely affect our reputation, business and results of operations. Any other material disruption or other adverse event affecting one or more of our digital ordering platforms, including, for instance, power loss, technological or systems failures, user error or cyber attacks,cyber-attacks, could similarly result in adverse publicity, loss of sales and profitscash flows and other costs, which could in turn materially and adversely affect our reputation, business and results of operations.

We may also become subject to private lawsuitscannot predict the impact that new or other proceedings for purportedly fraudulent transactions arising outimproved technologies in general, alternative methods of the actualdelivery, including autonomous vehicle delivery, or alleged theft of our consumers’ credit or debit card information or ifchanges in consumer or employee information is obtainedbehavior facilitated by unauthorized personsthese technologies and alternative methods of delivery will have on our business.

Advances in technologies in general or used inappropriately. Any such claimalternative methods of delivery, including advances in digital ordering technology and autonomous vehicle delivery, or proceeding,certain changes in consumer behavior driven by these or any adverse publicity resulting from such an event, mayother technologies and methods of delivery could have a material adversenegative effect on our business and market position. Moreover, technology and consumer offerings continue to develop, and we expect that new or enhanced technologies and consumer offerings will be available in the future. We may pursue certain of those technologies and consumer offerings if we believe they offer a sustainable customer proposition and can be successfully integrated into our business model. However, we cannot predict consumer acceptance of these delivery channels or their impact on our business. In addition, our competitors, some of whom have greater resources (financial or otherwise) than we do, may be able to benefit from changes in technologies or consumer acceptance of alternative methods of delivery, which could harm our competitive position.

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There can be no assurance that we will be able to successfully respond to changing consumer preferences, including with respect to new technologies and alternative methods of delivery, or to effectively adjust our product mix, service offerings, and marketing and merchandising initiatives for products and services that address, and anticipate advances in, technology and market trends. Alternative methods of delivery may also impact the potential labor pool from which we recruit our delivery experts and could reduce the available supply of incurring significant remediation costs.

Welabor. If we are subjectnot able to extensive government regulation and requirements issued by other groups and our failuresuccessfully respond to comply with existing or increased regulations could adversely affectthese challenges, our business, market share, financial condition, and operating results.results could be materially and adversely affected.

We are subject to numerous federal, state, local and foreign laws and regulations, as well as requirements issued by other groups, including those relating to:

We are subject to a Federal Trade Commission rulevariety of additional risks associated with our franchisees.

Our franchise system subjects us to a number of additional risks, any one of which may impact our ability to collect royalty payments and fees from our franchisees, may harm the goodwill associated with our brand, and/or may materially and adversely impact our business and results of operations. Such risks may also apply to variousus as owners of stores. These risks include, but are not limited to:

The Patient Protection and Affordable Care Act (as amended, the “Affordable Care Act”) requires employers such as us to provide health insurance for all qualifying employees or pay penalties for not providing coverage. The majority of the increases in these costs began in 2015, and while the incremental costs of this program have not been material to us to date, we cannot predict what effect these costs will have on our results of operations and financial position, or the effects of the Affordable Care Act on some of our larger franchisees. Modifications to, or repeal of, all or certain provisions of the Affordable Care Act are possible, consistent with statements made by certain elected officials.

The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was signed into law on December 22, 2017, significantly reforming the Internal Revenue Code of 1986, as amended. The 2017 Tax Act, among other things, includes changes to U.S. Federal tax rates, imposes significant additional limitations on the deductibility of interest, allows for the expensing of capital expenditures, puts into effect the migration from a “worldwide” system of taxation to a territorial system and modifies or repeals many business deductions and credits. We continue to examine the impact the 2017 Tax Act may have on our business. The estimated impact of the 2017 Tax Act is based on our management’s current knowledge and assumptions and recognized impacts could be materially different from current estimates based on our actual results and our further analysis of the new law. We revalued our net deferred tax assets and liabilities at the newly enacted corporate tax rate in fiscal 2017 and recorded a significantly lower effective tax rate in 2018. Although some uncertainty remains about the effects of this new legislation on our business, we currently expect lower effective tax rates for the Company in 2018 will continue in future periods.

We may also become subject to legislation or regulation seeking to tax and/or regulatehigh-fat foods, foods with high sugar and salt content, or foods otherwise deemed to be “unhealthy,” and our capital expenditures could increase due to remediation and compliance measures related to these laws or regulations.

If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial fines, sanctions and other enforcement measures.

Our current insurance coverage may not be adequate, insurance premiums for such coverage may increase and we may not be able to obtain insurance at acceptable rates, or at all.

We have retention programs

For certain periods prior to December 1998 and for periods after December 2001, we maintain insurance coverage for workers’ compensation, general liability and owned andnon-owned automobile liabilities. We are generally responsible for up to $1.0$2.0 million per occurrence under these retention programs for workers’ compensation and general liability.liability, depending on policy year and line of coverage. We are generally responsible for up to between $500,000 and $3.0$5.5 million per occurrence under these retention programs for owned andnon-owned automobile liabilities. liabilities, depending on policy year and line of coverage.

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Total insurance limits under these retention programs vary depending upon the period covered and range up to $110.0 million per occurrence for general liability and owned andnon-owned automobile liabilities and up to the applicable statutory limits for workers’ compensation. These insurance policies may not be adequate to protect us from liabilities that we incur in our business. In addition, in the future our insurance premiums may increase, and we may not be able to obtain similar levels of insurance on reasonable terms, or at all. Any such inadequacy of, or inability to obtain insurance coverage could have a material adverse effect on our business, financial condition and results of operations.

Our annual

Environmental, social and quarterlygovernance matters may impact our business and reputation.

Increasingly, in addition to the importance of their financial performance, companies are being judged by their performance on a variety of environmental, social and governance (“ESG”) matters, which are considered to contribute to the long-term sustainability of companies’ performance. A variety of organizations measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized. In addition, major institutional investors have publicly emphasized the importance of such ESG matters to their investment decisions. Further, in December 2021, we announced our goal to set and reach Science Based Targets by 2035 and achieve net zero carbon emissions by 2050. Execution of these strategies and achievement of these goals are subject to significant fluctuations depending on various factors,risks and uncertainties, many of which are beyondoutside of our control and ifmay prove to be more costly than we failanticipate. These risks and uncertainties include, but are not limited to, meetour ability to execute our strategies and achieve our goals within the expectationscurrently projected costs and the expected timeframes; unforeseen design, operational and technological difficulties; the outcome of securities analysts or investors, our share price may decline significantly.

Our salesresearch efforts and operating results can vary significantly fromquarter-to-quarter andyear-to-year depending on various factors, many of which are beyond our control. These factors include, among other things:

As a result, our operational performance may decline quickly and significantly in responseRisks Related to changes in order patterns or rapid decreases in demand for our products. We anticipate that fluctuations in operating results will continue in the future.Our Indebtedness

Our common stock price could be subject to significant fluctuations and/or may decline.

The market price of our common stock could be subject to significant fluctuations. Among the factors that could affect our stock price are:

The stock markets in general have experienced volatility that has sometimes been unrelated to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our common stock to decline.

Our substantial indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business.

We have a substantial amount of indebtedness. As of December 30, 2018,January 2, 2022, our consolidated total indebtedness was approximately $3.53$5.07 billion. We may also incur additional debt, which would not be prohibited under the terms of our current securitized debt agreements. Our substantial indebtedness could have important consequences for our business and our shareholders. For example, it could:

Further, a portion of our indebtedness bearsvariable funding notes bear interest at fluctuating interest rates that in certain circumstances is based on the London interbank offered rate (“LIBOR”), and there is currently uncertainty around whether LIBOR will continue to exist going forward. Following completion of a consultation regarding cessation of LIBOR settings in January 2021 and receipt, from a majority of the panel banks, of notices of future departure with respect to each LIBOR setting, ICE Benchmark Administration Limited, the administrator for LIBOR, confirmed its intention to cease the publication of the one-week and two-month U.S. dollar LIBOR settings immediately after 2021. IfDecember 31, 2021, and the remaining U.S. dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023.

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The Financial Conduct Authority (the “FCA”) also stated that, while most available tenors for U.S. dollar LIBOR will be available for legacy contracts after December 31, 2021, such tenors may not be used in new contracts. The FCA will consult regarding the use of new powers to be granted by the EU and UK governments which would permit the FCA to require panel banks to continue to publish certain LIBOR settings on a “synthetic” basis until the end of 2022, including the use of such powers for one-month, three-month and six-month U.S. dollar LIBOR settings. However, the FCA also stated that any continued publication of “synthetic” LIBOR would not be representative and would only be for use in legacy contracts. In addition, the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation had previously released a statement that (i) encouraged banks to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, (ii) indicated that new contracts entered into before December 31, 2021 should either utilize a reference rate other than U.S. dollar LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after the discontinuation of U.S. dollar LIBOR and (iii) explained that extending the publication of certain U.S. dollar LIBOR tenors until June 30, 2023 would allow most legacy U.S. dollar LIBOR contracts to mature before LIBOR begins experiencing disruptions. In the United States, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities called the Secured Overnight Financing Rate (“SOFR”).

Our 2021 Variable Funding Notes loan documents contemplate a transition from LIBOR to SOFR in the event that LIBOR ceases to exist, we may needexist. Because the composition and characteristics of SOFR are not the same as those of LIBOR, in such event, there can be no assurance that SOFR will perform the same way LIBOR would have at any given time or for any applicable period and how markets will respond to renegotiate certain loan documents and we cannot predict whatSOFR or other alternative index would be negotiated with our lenders.reference rates as the transition away from the LIBOR occurs as anticipated. As a result, our interest expense could increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.

In addition, the financial and other covenants we agreed to with our lenders may limit our ability to incur additional indebtedness, make investments, pay dividends and engage in other transactions, and the leverage may cause potential lenders to be less willing to loan funds to us in the future. Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of repayment of all of our indebtedness.

Downgrades in our credit ratings could impact our ability to access capital and materially and adversely affect our business, financial condition and results of operations.

Our debt is rated by credit rating agencies. These agencies may downgrade their credit ratings for us based on the performance of our business, our capital strategies or their overall view of our industry. There can be no assurance that any rating assigned to our currently outstanding indebtedness will remain in effect for any given period of time or that any such ratings will not be lowered, suspended or withdrawn entirely by a rating agency if, in that agency’s judgment, circumstances so warrant. A downgrade of our credit ratings could, among other things, increase our cost of borrowing, limit our ability to access capital, result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur, including restrictions on our ability to pay dividends or repurchase shares, or require us to provide collateral for future borrowings, and thereby adversely impact our business financial condition and results of operations.

We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which would adversely affect our financial condition and results of operations.

Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings are not available to us under our variable funding notes in amounts sufficient to fund our other liquidity needs, our financial condition and results of operations may be adversely affected. If we cannot generate sufficient cash flow from operations to make scheduled principal amortization and interest payments on our debt obligations in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity. If we are unable to refinance any of our indebtedness on commercially reasonable terms or at all or to effectaffect any other action relating to our indebtedness on satisfactory terms or at all, our business may be harmed.

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The terms of our securitized debt financing of certain of our wholly-owned subsidiaries have restrictive terms and our failure to comply with any of these terms could put us in default, which would have an adverse effect on our business and prospects.

Unless and until we repay all outstanding borrowings under our securitized debt, we will remain subject to the restrictive terms of these borrowings. The securitized debt, under which certain of our wholly-owned subsidiaries issued and guaranteed fixed rate notes and variable funding senior revolving notes, contain a number of covenants, with the most significant financial covenant being a debt service coverage calculation. These covenants limit the ability of certain of our subsidiaries to, among other things:

The securitized debt also requires us to maintain specified financial ratios at the end of each fiscal quarter. These restrictions could affect our ability to pay dividends or repurchase shares of our common stock. Our ability to meet these financial ratios can be affected by events beyond our control, and we may not satisfy such a test. A breach of this covenant could result in a rapid amortization event or default under the securitized debt. If amounts owed under the securitized debt are accelerated because of a default under the securitized debt and we are unable to pay such amounts, the investors may have the right to assume control of substantially all of the securitized assets.

During the term following issuance, the outstanding senior notes will accrue interest in accordance with the terms of the debt agreements. Additionally, our senior notes have original scheduled principal payments of $35.3$51.5 million in each of 2019 through 2021, $888.0 million in 2022, $26.3 million in each of 2023 and 2024, $1.14$1.17 billion in 2025, $14.0$39.3 million in 2026, and $1.27$1.31 billion in 2027.2027, $811.5 million in 2028, $625.9 million in 2029, $10.0 million in 2030 and $905.0 million in 2031. In accordance with our debt agreements, the payment of principal on the outstanding senior notes shallmay be suspended if the leverage ratiosratio for the Company areis less than or equal to 5.0x total debt, as defined, to adjusted EBITDA, as defined in the indenture governing our securitized debt, and nocatch-up provisions are applicable. As of December 30, 2018, we also had $65.0 million outstanding under our variable funding notes with a legal maturity date in July 2022, subject to two additionalone-year extensions at the option of the Company, subject to certain conditions.

If we are unable to refinance or repay amounts under the securitized debt prior to the expiration of the term, our cash flow would be directed to the repayment of the securitized debt and, other than a weekly management fee sufficient to cover minimal selling, general and administrative expenses, would not be available for operating our business.

No assurance can be given that any refinancing or additional financing will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and capital markets and other factors beyond our control. There can be no assurance that market conditions will be favorable at the times that we require new or additional financing.

The indenture governing the securitized debt will restrict the cash flow from the entities subject to the securitization to any of our other entities and upon the occurrence of certain events, cash flow would be further restricted.

In the event that a rapid amortization event occurs under the indenture (including, without limitation, upon an event of default under the indenture or the failure to repay the securitized debt at the end of its term), the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate or grow our business.

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Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

As of February 14, 2019,22, 2022, Domino’s Pizza, Inc. had 170,000,000 authorized shares of common stock, par value $0.01 per share, of which 41,040,70436,036,184 were issued and outstanding. As of February 22, 2022, there were 1,563 registered holders of record of Domino’s Pizza, Inc.’s common stock. Domino’s Pizza, Inc.’s common stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “DPZ.”

Our Board of Directors declared a quarterly dividend of $0.65$1.10 per common share on February 20, 201924, 2022 payable on March 29, 201930, 2022 to shareholders of record at the close of business on March 15, 2019.2022.

We currently anticipate continuing the payment of quarterly cash dividends. The actual amount of such dividends, if any, will depend upon future earnings, results of operations, capital requirements, our financial condition and certain other factors. There can be no assurance as to the amount of free cash flow that we will generate in future years and, accordingly, dividends will be considered after reviewing returns to shareholders, profitability expectations and financing needs and will be declared at the discretion of our Board of Directors.

As of February 14, 2019, there were 1,565 registered holders of record of Domino’s Pizza, Inc.’s common stock.

As of December 30, 2018,January 2, 2022, we had a Board of Directors-approved share repurchase program for up to $750.0 million$1.0 billion of our common stock, of which $158.8$704.1 million remained available for future purchases of our common stock. Any future purchases of our common stock would be funded by current cash amounts, available borrowings or future excess cash flow. The following table summarizes our repurchase activity during the fourth quarter ended December 30, 2018:January 2, 2022:

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The following comparative stock performance line graph compares the cumulative shareholder return on the common stock of Domino’s Pizza, Inc. (NYSE: DPZ) for the five-year period between December 31, 20132016 and December 31, 2018,2021, with cumulative total return on (i) the Total Return Index for the New York Stock Exchange (the “NYSE Composite Index”), (ii) the Standard & Poor’s 500 Index (the “S&P 500”) and (iii)(ii) the peer group, the Standard & Poor’s 400 Restaurant Index (the “S&P 400 Restaurant Index”). Management believes that the companies included in the S&P 400 Restaurant Index appropriately reflect the scope of the Company’s operations and match the competitive market in which the Company operates. The cumulative total return computations set forth in the performance graph assume the investment of $100 in the Company’s common stock, the NYSE Composite Index, the S&P 500 Index and the S&P 400 Restaurant Index on December 31, 2013.2016.

Item 6. Selected Financial Data.[Reserved].

The following selected financial data set forth should be read in conjunction with, and is qualified by reference to, Management’s

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes included in this Form10-K. The selected financial data, with the exception of store counts and same store sales growth, has been derived from the audited consolidated financial statements of Domino’s Pizza, Inc. and subsidiaries. This historical data is not necessarily indicative of results to be expected for any future period.Operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Our fiscal year typically includes 52 weeks, comprised of three twelve-week quarters and one sixteen-week quarter. Every five or six years our fiscal year includes an extra (or 53rd) week in the fourth quarter. Fiscal 2018, 20172021 and 20162019 each consisted of 52 weeks and fiscal 2020 consisted of 53 weeks.

In this section, we discuss the results of our operations for the year ended January 2, 2022 compared to the year ended January 3, 2021. For a discussion of the year ended January 3, 2021 compared to the year ended December 29, 2019, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 3, 2021.

Description of the Business

Domino’s is the largest pizza company in the world, based on global retail sales, with more than 15,90018,800 locations in over 8590 markets around the world.world as of January 2, 2022, and operates two distinct service models within its stores with a significant business in both delivery and carryout. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. Although we are a highly-recognized global brand, we focus on value while serving the local neighborhoods in which we live and do businesslocally through our large network of franchise owners and Company-owned stores. On average, we and our franchisees sell more than 3 million pizzas each day throughout our global system.

Our business model is straightforward: weDomino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technologytechnological innovations. Our hand-tossed dough is generally made fresh and distributed to stores around the world by us and our franchisees.

Domino’s generates revenues and earnings by charging royalties and fees to our independent franchisees. Royalties are ongoingpercent-of-sales fees for use of the Domino’s brand marks. The CompanyWe also generatesgenerate revenues and earnings by selling food, equipment and supplies to franchisees, primarily in the U.S. and Canada, and by operating a number of our own stores.Company-owned stores in the U.S. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza brand to master franchisees. These master franchisees are charged with developing their geographical area, and they maycan profit bysub-franchising and selling food and equipment to thosesub-franchisees, as well as by running pizza stores. Everyonestores directly. We believe that everyone in the system can benefit, including the end consumer, who can purchase Domino’s menu items for themselves andfeed their family conveniently and economically.

Our financial results are driven largely by retail sales at our franchise and Company-owned stores. Changes in retail sales are driven by changes in same store sales and store counts. We monitor both of these metrics very closely, as they directly impact our revenues and profits, and we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees, as well as Company-owned store and supply chain revenues. Retail sales are primarily impacted by the strength of the Domino’s Pizza brand, the results of our extensive advertising through various media channels, the impact of technological innovation and digital ordering, our ability to execute our strong and proven business model and the overall global economic environment.

Our business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flow to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases since becoming a publicly-traded company.company in 2004.We believe we have a proven business model for success, which includes leading with technology, service and product innovation and leveraging our global scale, which has historically provided strong returns for our shareholders

Fiscal 2018 Highlights

The adoption of Accounting Standards Codification 606,Revenue from Contracts with Customers (“ASC 606”) in 2018 resulted in the recognition of $358.5 million in revenue in 2018 related to U.S. franchise contributions to Domino’s National Advertising Fund Inc. (“DNAF”), our consolidatednot-for-profit advertising fund. In 2017, under accounting standards in effect at that time, we had presented these contributions net with the related disbursements in our consolidated statement of income. Refer to Note 1 to the consolidated financial statements for additional information related to the adoption of this new accounting standard.

During 2018, we continued our rapid global expansion with the opening of 1,058 net new stores. Our international franchise segment led the way with 800 net new store openings, including the opening of our 10,000^th international store. We also continued our strong U.S. and international same store sales performance with 31 straight quarters of positive U.S. same store sales and 100 straight quarters of positive international same store sales. Our Domino’s Piece of the Pie Rewards loyalty program continues to contribute to our U.S. same store sales performance. Additionally, we remained focused on growing online ordering and improving the digital customer experience through our technology platforms, including the recent launch of Domino’s Delivery HotSpots. Our emphasis on technology innovation helped the Domino’s system generate more than half of global retail sales from digital channels in 2018. Overall, we believe our focus in 2018 on global growth and technology will continue to strengthen our brand in the future.

Fiscal 2017 Highlights

During 2017, we continued our rapid global expansion with the opening of 1,045 net new stores. Our international franchise segment led the way with 829 net new store openings. We continued our focus on growing online ordering and the digital customer experience as well as other technological advancements. In 2017, as part of an industry-first collaboration with Ford Motor Company, Domino’s began a meaningful test of delivery using self-driving vehicles. Our emphasis on technology innovation helped the Domino’s system generate more than half of global retail sales from digital channels in 2017.

Critical accounting policies and estimates

The following discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, our management evaluates its estimates, including those related to revenue recognition, long-lived and intangible assets, casualty insurance and legal matters, share-based paymentsreserves and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. Changesestimates, and changes in our accounting policies and estimates could materially impactaffect our results of operations and financial condition for any particular period.

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We believe that our most critical accounting policies and estimates are:

Revenue recognition. We earn revenues through our network of U.S. Company-owned and franchised stores, dough manufacturing and supply chain centers and international operations. Retail sales from franchise stores are reported to the Company by its franchisees and are not included in Company revenues. Retail sales from Company-owned stores and royalty revenues resulting from the retail sales from franchised stores are recognized as revenues when the items are delivered to or carried out by customers. Retail sales are generally reported and related royalties paid to the Company based on a percentage of retail sales, as specified in the related standard franchise agreement (generally 5.5% of U.S. franchise retail sales and, on average, 3.0% of international franchise retail sales). The Company also generates revenues from U.S. franchise advertising contributions to DNAF, its consolidatednot-for-profit advertising fund (generally 6.0% of U.S. franchise retail sales). Although these revenues are restricted to be used only for advertising and promotional activities to benefit franchised stores, the Company has determined there are not performance obligations associated with the franchise advertising contributions received by DNAF that are separate from its U.S. royalty payment stream and as a result, these franchise contributions and the related expenses are presented gross in the Company’s consolidated statement of income.

Revenues from Company-owned stores and revenues from franchised stores (including U.S. franchise royalties and fees and U.S. franchise advertising revenues) can fluctuate fromtime-to-time as a result of store count and sales level changes. This can occur when a Company-owned store is sold to a franchisee. If a Company-owned store that generated $1,000,000 in revenue in fiscal 2017 was sold to a franchisee in fiscal 2018, revenues from Company-owned stores would have declined by $1,000,000 in fiscal 2018, while U.S. franchise royalty revenues would have increased by $55,000 and U.S. franchise advertising revenues would have increased by $60,000 in fiscal 2018, as we generally collect 5.5% of a U.S. franchisee’s retail sales as royalty revenue and 6.0% of a U.S. franchisee’s retail sales for advertising contributions. Sales of food from our supply chain centers are recognized as revenues upon delivery of the food to franchisees, while sales of equipment and supplies are generally recognized as revenues upon shipment of the related products to franchisees.

Long-lived and intangible assets.We record long-lived assets, including property, plant and equipment and capitalized software, at cost. For acquisitions of franchise operations, we estimate the fair values of the assets and liabilities acquired based on physical inspection of assets, historical experience and other information available to us regarding the acquisition. We depreciate and amortize long-lived assets using useful lives determined by us based on historical experience and other information available to us. Our estimates of the useful lives of our long-lived assets have not changed during the periods presented. We evaluate the potential impairment of long-lived assets at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Our periodic evaluation is based on various analyses, including, on an annual basis, the projection of undiscounted cash flows. If we determine that the carrying amount of an asset (or asset group) may not be recoverable, we compare the net carrying value of the asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset group. For Company-owned stores, we perform related impairment tests on an operating market basis, which the Company haswe have determined to be the lowest level for which identifiable cash flows are largely independent of other cash flows. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows of that asset, the Company estimateswe estimate the fair value of the asset. If the carrying amount of the asset exceeds the estimated fair value of the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value.

We have not made any significant changes in the methodology used to project the future market cash flows of Company-owned stores during the years presented. Same store sales fluctuations and the rates at which operating costs will fluctuate in the future are key factors in evaluatingdetermining projected cash flows used to evaluate recoverability of the related assets. If our same store sales significantly decline or if operating costs increase and we are unable to recover these costs, the carrying value of our Company-owned stores, by market, may be unrecoverable and we may be required to recognize an impairment charge.

A significant portion of our goodwill relates to acquisitions of U.S. franchise stores There were no triggering events in 2021, 2020 or 2019, and is included in our U.S. stores segment, specifically, in our Company-owned stores division. We evaluate goodwill annually for impairment by comparing the fair value of the reporting unit (which is primarily determined using the present value of future cash flows) to its carrying value. If the carrying value of the reporting unit exceeds the fair value, goodwill would be impaired. We have not made any significant changes in the methodology used to evaluate goodwill impairment during the years presented. At December 30, 2018, the fair value of our business operations with associated goodwill exceeded their recorded carrying value, including the related goodwill. If cash flows generated by our Company-owned stores were to decline significantly in the future or there were negative revisions to the market multiple assumption,accordingly, we may be required to recognize a goodwill impairment charge. However, based on the latest impairment analysis, we do not believe it is reasonably likely that there could be changes in assumptions that would trigger impairment. The Company did not record any impairment charges during fiscal 2018, fiscal 2017 or fiscal 2016.losses on long-lived assets in 2021, 2020 and 2019.

We adopted ASU2017-04,Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU2017-04”) during 2018. ASU2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. As the fair value of our business operations exceeded their recorded carrying value in “Step 1” of the impairment test, the adoption of this standard did not have an impact on our evaluation of goodwill impairment.

Insurance and legal matters. We are a party to lawsuits and legal proceedings arising in the ordinary course of business. Management closely monitors these legal matters and estimates the probable costs for the resolution of such matters. These estimates are primarily determined by consulting with both internal and external parties handling the matters and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Legal judgments can be volatile and difficult to predict. Accordingly, if our estimates relating to legal matters proved inaccurate for any reason, we may be required to increase or decrease the related expense in future periods. We had accruals for legal matters of approximately $1.9 million at December 30, 2018 and $1.7 million at December 31, 2017.Casualty insurance reserves

For certain periods prior to December 1998 and for periods after December 2001, we maintain insurance coverage for workers’ compensation, general liability and owned andnon-owned auto liabilities. We are generally responsible for up to $2.0 million per occurrence under these retention programs for workers’ compensation and general liability, under insurance policies requiring paymentdepending on policy year and line of a deductiblecoverage. We are generally responsible for each occurrence up to between $500,000 and $3.0$5.5 million per occurrence under these retention programs for owned and non-owned automobile liabilities, depending on the policy year and line of coverage. The related insurance reserves are based on undiscounted independent actuarial estimates, which are based on historical information along with assumptions about future events. Specifically, various methods, including analysesThere is inherent uncertainty in the ultimate cost for known claims under our insurance coverages, and for incidents that have occurred that will be subject to a claim, but have yet to be reported to us. Analyses of historical trends and actuarial valuation methods are utilized to estimate the cost to settle reported claims and claims incurred but not yet reported. The actuarial valuation methods develop estimates of the future ultimate claim costs based on thefor claims incurred as of the balance sheet date.date and for claims incurred but not yet reported. When estimating these liabilities, several factors are considered, including the severity, duration and frequency of claims, legal cost associated with claims, healthcare trends and projected inflation.

Our methodology for determining our exposure has remained consistent throughout the years presented. Management believes that the various assumptions developed, and actuarial methods used to determine our self-insurancecasualty insurance reserves are reasonable and provide meaningful data that management uses to make its best estimate of our exposure to these risks. Changes in assumptions for such factors as medical costs and legal actions, as well as changes in actual experience, could cause our estimates to change in the near term which could result in an increase or decrease in the related expense in future periods. A 10% change in our self-insurancecasualty insurance liability at December 30, 2018January 2, 2022 would have affected our income before provision for income taxes by approximately $5.3$5.6 million for fiscal 2018.in 2021. We had accruals for casualty insurance mattersreserves of approximately $53.3$56.5 million and $54.6 million at December 30, 2018January 2, 2022 and $51.4 million at December 31, 2017.January 3, 2021, respectively.

Share-based payments. We recognize compensation expense related to our share-based compensation arrangements over the requisite service period

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Income taxes

The U.S. Federal statutory income tax rate was 21% in each of 2021, 2020 and 2019. Our Federal income tax provision calculated based on the grant date fair value of the awards. The grant date fair value of each restricted stockFederal statutory rate was $131.4 million, $116.6 million and performance-based restricted stock award is equal to the market price of our stock on the date of grant. The grant date fair value of each stock option award is estimated using the Black-Scholes option pricing model. The pricing model requires assumptions, including the expected life of the stock option, the risk-free interest rate, the expected dividend yield$101.4 million in 2021, 2020 and expected volatility of our stock over the expected life, which significantly impact the assumed fair value. We account for forfeitures as they occur. Additionally, our stock option, restricted stock and performance-based restricted stock arrangements provide for accelerated vesting and the ability to exercise during the remainder of theten-year stock option life upon the retirement of individuals holding the awards who have achieved specified service and age requirements.2019, respectively.

Management believes that the methods and various assumptions used to determine compensation expense related to these arrangements are reasonable, but if the assumptions change significantly for future grants, share-based compensation expense will fluctuate in future years.

Income taxes.We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We measure deferred tax assets and liabilitiestaxes using current enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid. Judgment is required in determining the provision for income taxes, related reserves and deferred tax assets and liabilities.taxes. These include establishing a valuation allowance related to the ability to realize certain deferred tax assets, if necessary. On an ongoing basis, management will assess whether it remains more likely than not that the net deferred tax assets will be realized. The Company did not have any valuation allowances recorded for deferred tax assets as of December 30, 2018 or December 31, 2017. Our accounting for deferred tax assetstaxes represents our best estimate of future events. Our netExcept with respect to certain foreign tax credits and interest deductibility in separately filed states, our deferred tax assets assume that we will generate sufficient taxable income in specific tax jurisdictions, based on our estimates and assumptions. As of January 2, 2022 and January 3, 2021, we had total foreign tax credits of $10.2 million and $6.6 million, respectively, each of which were fully offset with a corresponding valuation allowance. We also had valuation allowances related to interest deductibility in separately filed states of $1.2 million and $1.0 million as of January 2, 2022 and January 3, 2021, respectively. We believe our remaining deferred tax assets will be realized. Changes in our current estimates due to unanticipated events could have a material impact on our financial condition and results of operations.

Fiscal 2021 Highlights

During 2021, we experienced global retail sales growth and U.S. and international same store sales growth. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand. We launched our newest side item in the U.S., Domino’s Oven-Baked Dips in three unique flavors including Cheesy Marinara, Five Cheese and Baked Apple to pair with our Domino’s Bread Twists.

Same store sales in the U.S. continue to be positively affected by changes in consumer ordering behavior observed since the onset of the COVID-19 pandemic, but have been pressured in part in recent quarters due to labor shortages affecting store hours and staffing levels in many of our markets, as well as a waning in the level of economic stimulus activity in fiscal 2021 in the U.S. as compared to the prior year. Our strong international same store sales performance continued with 112 straight quarters of positive international same store sales. We also continued to experience sustained increases in retail sales during fiscal 2021 resulting from evolving consumer trends, as well as the reopening and resumption of normal store hours and operating procedures at certain of our international franchised stores that had been temporarily closed or affected by changes in operating procedures and store hours for portions of fiscal 2020 as a result of the COVID-19 pandemic. Our U.S. and international same store sales results continue to be impacted by our fortressing strategy, which includes increasing store concentration in certain markets where we compete, as well as from aggressive competitive activity.

During 2021, we continued our global expansion with the opening of 1,204 net stores. We had 205 net stores open in the U.S. comprised of 214 store openings and 9 closures. We had 999 net stores open internationally comprised of 1,094 store openings and 95 closures.

We remained focused on improving the balance sheet relatingcustomer experience through our technology initiatives, including through our GPS delivery tracking technology, which allows customers to uncertain tax positions considermonitor the ultimate resolutionprogress of revenue agent reviewstheir food, from the preparation stages to the time it is in the oven to the time it arrives at their doors. Additionally, we offer contactless carryout nationwide – via Domino’s Carside Delivery®, which customers can choose when placing a prepaid online order. Our emphasis on technological innovation helped the Domino’s system generate more than half of global retail sales from digital channels in 2021. Overall, we believe our global store growth, strong sales, emphasis on technology, operations and marketing initiatives have combined to strengthen our brand.

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Statistical Measures

The tables below outline certain statistical measures we utilize to analyze our performance. This historical data is not necessarily indicative of results to be expected for any future period.

Global Retail Sales Growth (excluding foreign currency impact)

Global retail sales growth (excluding foreign currency impact) is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales growth refers to total worldwide retail sales at Company-owned and franchise stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on estimatesa percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and assumptions. We believe we have appropriately accounted for our uncertain tax positions; however, tax audits,to track the growth of the Domino’s Pizza brand. In addition, supply chain revenues are directly impacted by changes in tax lawsfranchise retail sales in the U.S. and other unforeseen matters may resultCanada. Retail sales for franchise stores are reported to us by our franchisees and are not included in us owing additional taxes. We adjust our reserves for uncertain tax positions when factsrevenues. Global retail sales growth, excluding foreign currency impact, is calculated as the change of international local currency global retail sales against the comparable period of the prior year. Global retail sales growth in 2021 and circumstances change or due to2020 reflect the passageimpact of time. The completion of a tax audit or the expiration of a statute of limitations associated with uncertain tax positions are examples of situations when we may adjust our reserves. Management believes that our tax positions comply with applicable tax law and that we have adequately provided for these matters. However, to the extent the final tax outcome of these matters is different than our recorded amounts, we may be required to adjust our tax reserves resulting53rd week in additional income tax expense or benefit in future periods.2020.

Same Store Sales Growth