High-flying Domino's Pizza Enterprises insists it can easily swallow looming pay rises for staff who missed out on penalty rates thanks to an old deal with the shop assistants' union, as it sets out to hire 2500 workers over the next two weeks.
Fresh from reporting record annual sales and a 15.5 per cent rise in same-store sales for the start to the new financial year, Domino's says the hiring spree will mean an extra four staff, on average, for its 650-odd stores in Australia.
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Domino's to launch pizza delivery robot in Australia
Domino's Robotic Unit (DRU) which travels up to 18 km/h is the latest idea in the company's push for autonomous food delivery systems.
In addition, Domino's intends to hire 1000 people to staff the new stores it will open before Christmas.
Domino's does not break out its labour costs – some of its stores are company-owned but most are franchised – but has about 16,600 employees in Australia. Labour is its highest cost.
The sharemarket darling attracted scrutiny in July when investment bank Deutsche Bank suggested Domino's workers were missing out on penalty rates worth at least $32 million. Under this deal with the Shop, Distributive and Allied Employees Association (SDA) that was struck in 2009 and expired in 2013, staff are paid overall rates now well below the legal minimum.
"We believe penalty rates will need to be paid at some point, which could have a significant impact on [Domino's] profitability," retail analyst Michael Simotas said, tipping pay rises would slash the Domino's profit by nearly 25 per cent. "It pays a lower base than competitors and doesn't pay the weekend penalty rates stipulated in the award."
But Domino's CEO Don Meij said the labour concerns were "old news" and overstated how much it would cost Domino's to lift pay.
"I'm not going to speculate, because we don't even have the numbers," he said.
"We plan for the worst and if the worst happens, we're in a good place."
He said Domino's had increased pay in July because it was the "right thing to do", but also did not want "to be the pioneer out there, doing things that completely outprice you from the market".
An adult driver is now paid $21.18 an hour, plus $2.27 per delivery (with average deliveries of between three and five an hour), and an adult instore is paid $24.53 an hour, the company said. This was an increase of $2.19 an hour for drivers.
Mr Meij said the company would wait on the Fair Work Commission's review of penalty rates later this year before making further pay increases. If the commission was to delay, Domino's would "voluntarily most likely take another pay increase in the first quarter of 2017. But we would just do that because the business is doing so well and is just seems fair."
We plan for the worst and if the worst happens, we're in a good place.
Domino's CEO Don Meij
And responding to news that private equity group Allegro Funds was holding exclusive talks with Eagle Boys franchisees, fresh from swallowing up Pizza Hut Australia, Mr Meij said: "We're struggling to keep up with the amount of growth, so there is room for other players."
But he said that mooted group would have less than 10 per cent of the market, compared with the 32 per cent market share held by Domino's.
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