DPC Dash lights up Domino’s global leader board with push into small-town China

The operator of Domino’s Pizza restaurants in China reported its revenue rose 27% in the first half of the year, as it opened 190 net new stores

Key Takeaways:

• DPC Dash posted strong revenue and profit growth in the first half of the year, as it continued its aggressive opening of new Domino’s Pizza stores in China
• The restaurant operator opened 190 net new stores during the six-month period, bringing its total to 1,198 and putting it on track to reach its goal of 300 net new stores this year

By Doug Young

DPC Dash Ltd. (1405.HK), the operator of the Domino’s Pizza (DPZ.US) chain in Mainland China, Hong Kong and Macau, is finding out that too much success can sometimes be a double-edged sword.

The company has emerged as the global star for Domino’s, dominating the U.S. company’s leader board for best-performing stores in their first 30 days by taking 48 of the top 50 slots worldwide. That dominance owes partly to DPC’s strategy of going into China’s non-tier one cities, where pizza is often seen as somewhat exotic and new store openings often draw large crowds eager to try the latest dining trend.

But that kind of novelty factor inevitably fades over time and more stores in town, and new stores typically see their sales normalize at lower, more sustainable levels by a year or more after their opening. That leads to inevitable short-term same-store sales declines for such star performers.

DPC got a taste of that “opening hangover” effect in the first half of this year, when it posted a modest 1% decline of same-store sales in the first half of the year, according to the company’s interim result release issued on Aug. 28. Still, it marked a bittersweet shift for the company, which has expanded rapidly to become China’s second largest pizza chain.

At the same time, DPC’s latest report showed it continued to deliver strong revenue and profit growth this year, as it aggressively opened new stores, with a focus on smaller cities that it calls “non-tier one new growth markets” in its report. As a result, it is now well on the way to reaching its goal of opening 300 net new stores this year, which will boost its total by roughly 30% from the 1,008 stores it had at the end of last year.

DPC is also discovering that in the current climate of economic uncertainty, its older stores in the nation’s wealthiest and more cosmopolitan cities are performing well as people look for more affordable dining options.

“We will continue our store opening strategy of ‘Go deeper’ in existing markets and ‘Go broader’ into new markets prudently to build up our national footprint and enhance Domino’s Pizza brand name,” DPC said in its interim results announcement.

DPC began collaborating with the Domino’s Pizza brand as early as 2010, and became the U.S. chain’s exclusive master franchisee for Mainland China, Hong Kong and Macao in 2017. It has embarked on an aggressive expansion since then, and passed a major milestone with the opening of its 1,000^th store last year. Now it has become the nation’s second-largest chain, and still has significant room for growth compared to industry leader Pizza Hut, which is about three times the size with 3,864 stores at the end of June.

DPC notched another major milestone with its Hong Kong IPO in 2023, and its shares have nearly doubled since then. Most recently, Domino’s began selling down its stake in the company, reflecting its belief that DPC was ready to stand on its own. Although liquidity has improved, a significant portion of the equity remains in the hands of committed long-term investors. Its current stable of major investors includes the likes of The Capital Group Cos., which holds around 7.9%, as well as other long-term shareholders.

Growing footprint

DPC’s revenue rose 27% year-on-year to 2.59 billion yuan ($361 million) in the first half of the year from 2.04 billion yuan a year earlier, as the company opened 190 net new stores across China during the six-month period to bring its total 1,198. It has opened another 43 stores since July and has another 62 either under construction or signed, which would nearly achieve its annual goal of opening 300 net new stores this year.

Its national footprint continued to grow as it entered nine new cities during the first half of the year, giving it stores in 48 cities nationwide. Among its newest stores, the company’s first in the Northeastern city of Shenyang smashed a Domino’s world record for annual sales during its first 198 days with 31 million yuan alone. It took that record from another DPC store, this one in the Southern city of Xiamen, which recorded over 30 million yuan in sales during its first year.

Such strong openings have helped DPC post impressively short payback periods for its new stores. The 64 stores the company opened in 15 new markets it entered between last December and June this year had actual or expected average payback periods of just 11 months – well below the more typical period of around three years in more mature markets. Twenty-four of the 64 new stores already achieved full cash payback by Aug. 15. While such quick paybacks are impressive, they also lead to the kind of “double-edged sword” effect we already mentioned as sales for such stores inevitably normalize at more sustainable levels.

DPC’s older stores have performed better in terms of same-store sales, and the company noted that same-store sales growth remained positive in the first half of the year for stores opened before December 2022. It also pointed out that the figure remained positive in the tier-one cities of Beijing, Shanghai, Shenzhen and Guangzhou, reflecting the “resilient performance and strong brand recognition in these highly competitive markets.” The company had 515 stores in those tier-one cities at the end of June, compared with 683 in smaller cities.

DPC is also actively building up a loyalty program, which reached 30.1 million members by the end of June, up from 19.4 million a year earlier. Such customers now account for about 66% of the company’s sales, up from 63.6% a year earlier. Its growing customer base, combined with concurrently growing economies of scale, helped DPC to boost its store-level operating margin to 14.6% in the first half of this year, up slightly from 14.5% a year earlier.

Those improvements, combined with the rapid store expansion, lifted DPC’s adjusted net profit by 79.6% to 91.4 million yuan in the first half of 2025 from 50.9 million yuan a year earlier. Analysts are quite bullish on the company’s growth story and its stock, with two of the 11 polled by Yahoo Finance rating it a “strong buy” and the other nine rating it a “buy.”

DPC is feasting on a Chinese pizza market expected to grow 15.5% annually between 2022 and 2027, to reach 77.1 billion yuan in annual sales by the end of that period, according to Frost & Sullivan. Like many foreign brands entering China, DPC’s menu includes plenty of offerings tailored to local tastes, with popular toppings like durian fruit, as well as a cocoa and cheese stuffed crust pizza.

DPC Dash’s aggressive expansion into lower-tier cities and growing brand recognition could position it for steady growth over the long term despite the types of short-term same-store sales fluctuations we’ve previously mentioned. That could position the company to capitalize on China’s expanding pizza market, as it focuses on balancing rapid store openings with sustained profitability to consolidate its position as an industry leader.

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