Sidecar Investor

$DPZ Someone asked me an interesting question recently. What could $DPZ realistically look like and be worth 20 years from now? It sat in the back of my mind, so I decided to really think through the long term economics, the franchise model, the moat, and what this business could potentially become over the next couple decades. Before even getting into the future, I think it is important to understand the quality of the business itself. $DPZ is very quietly one of the greatest performing public companies of the modern era and in fact has actually outperformed $GOOG over roughly the last 20 years. That sounds almost ridiculous at first because one company sells pizza while the other built the modern internet, but that is exactly why I find it so fascinating. I think investors often underestimate simple outstanding operational systems that compound for decades. The market gets excited about futuristic narratives because they feel intellectually stimulating, while some of the greatest compounders in history were actually very simple businesses that became more efficient every year. Businesses like $COST, $FAST, $AZO, $SHW, $MCD, and now arguably $DPZ all looked “boring” to many investors at various points while creating enormous shareholder value. Most people look at $DPZ and see a pizza company. I increasingly think that is the wrong way to analyze the business entirely. Over time, $DPZ is more like a global logistics, software, and franchise infrastructure platform than a traditional restaurant chain. The pizza almost becomes secondary at a certain point. What really matters is the system underneath it. Millions of loyal app users, massive advertising scale, franchise relationships, and a business model where franchisees fund the expansion while $DPZ collects high margin royalties. Quite similar to $WING. What makes $DPZ and by extension $WING so powerful is that the economics actually improve as the network gets larger. More stores improve efficiency, more customer data, stronger advertising efficiency, and better purchasing power. Scale itself becomes the moat because every additional order makes the overall system slightly smarter and more efficient. I also think people underestimate how much runway still exists internationally. $DPZ already has more than 21k stores globally and continues opening hundreds every year, yet many countries are still dramatically underpenetrated relative to the US. Stretch this out over 20 years and I would not be surprised if the company eventually reaches 50k+ stores globally albeit obviously with a much larger international mix. The really important part though is the franchise model itself. If the franchise system remains intact, the long term economics could become extraordinary because $DPZ requires very little capital to grow. Franchisees fund most of the restaurant expansion while $DPZ collects recurring royalty streams that become larger every single year as sales compound globally. That is why the free cash flow of the business has historically been so strong. Even during weak consumer periods $DPZ still generates significant cash, continues buying back shares, pays dividends, and expands internationally. Most restaurant businesses simply cannot do that consistently through multiple economic cycles. The buyback is also very important. Over very long periods, a business that steadily compounds earnings while aggressively shrinking the share count can create enormous per share value even if growth eventually slows. The combination of global unit growth, pricing power, franchise economics, and buybacks becomes extremely powerful mathematically over decades. 1/👇

California high-speed rail cost now up to $231 billion. That means the average worker in the state will pay out over $12,000 to fund a single project that almost no one will ride. CA rail will be studied for generations, a truly once-in-a-lifetime level of government failure.