The present local and global economic developments that are characterized by slowed economic recovery from the economic crunch have harmful effects on the profits of Domino’s Pizza. The economic meltdown has negatively affected the domestic and international markets thereby cutting the Domino’s profitability.
Additionally, the persistent price increases caused by global economic crunch has increased the cost of production of food. The raised energy costs have increased the variable operations costs at Domino’s Pizza franchisees and other Domino’s owned stores. In spite of the increased costs, the Domino’s could not transfer the increased production costs to the customers due to the high level of competition. The seasonality of the inputs used in the production of pizza has caused their prices to keep on fluctuating through out a financial year. in reference to the Domino’s Pizza 2009 annual report, cheese, which is a major input used in pizza production, “The cheese block price per pound averaged $1.29 in 2009, and the estimated increase in Company owned store food costs from a hypothetical $0.25 adverse change in the average cheese block price per pound would have been approximately $2.1 million” (Board of Directors).