Domino's Pizza is not growing as much as it claims, investor says in new lawsuit

• An investor has filed a class action lawsuit against Domino's Pizza.
• The complaint says Domino's "overstated" its business and financial prospects to investors.

An investor has filed a class action lawsuit against Domino's Pizza, claiming the restaurant chain "overstated" its business and financial prospects.

Law firm Bernstein Lierbhard LLP said in a press release that the lawsuit was filed for investors who acquired or purchased Domino's securities between December 2023 and July 2024. The complaint, filed on September 20 in Michigan, also listed Domino's CEO Russel J. Weiner and CFO Sandeep Reddy as defendants. It's centered on Domino's Pizza Enterprises, the largest franchisee for the brand globally.

"The lawsuit seeks to recover Domino's shareholders' investment losses," the law firm's statement said.

The complaint says Domino's made "materially false and misleading statements regarding the Company's business, operations, and prospects."

Specifically, the company's annual global net store growth.

The complaint says Domino's hosted its 2023 Investor Day that December, during which it discussed the long-term guidance for the annual global net store growth between 2024 and 2028.

Domino's and its leadership did not disclose that the franchisee was navigating "significant challenges with respect to both new store openings and closures of existing stores," according to the complaint.

The complaint says that those challenges made it unlikely that Domino's could achieve the goals it touted to investors.

Domino's denied the claims in the lawsuit in a statement sent to Business Insider.

"We believe this suit is totally without merit and plan to vigorously defend it," a Domino's spokesperson wrote in a statement sent to BI.

Although Domino's Q1 financial report in April suggested the company was on track to fulfill its global net store growth metric, it indicated this was no longer the case during its Q2 financial report in July.

"The Company expects it will fall 175 to 275 stores below its 2024 goal of 925+ net stores in international primarily as a result of challenges in both openings and closures being faced by Domino's Pizza Enterprises ("DPE"), one of its master franchisees," the Q2 report said.

The report added that Domino's is "temporarily suspending its guidance metric of 1,100+ global net stores until the full effect of DPE's store opens and closures on international net store growth are known."

The complaint says the company "overstated" its business and financial prospects, so its "public statements were materially false and misleading at all relevant times."

As a result, investors experienced losses and damage, according to the complaint.

Despite investor concerns over its global net store growth, revenues at Domino's has grown. The July financial report said Domino's revenues increased $73.1 million — about 7.1% — in the second quarter of 2024 compared to the same quarter in 2023.

The revenues increased "primarily due to higher supply chain, U.S. franchise advertising and U.S. franchise royalties and fees revenues."

"The increase in supply chain revenues was primarily attributable to higher order volumes, as well as an increase in the Company's food basket pricing to stores, but was partially offset by a shift in the relative mix of the products sold by the Company," the report said.