Domino’s Pizza Inc (DPZ) Q3 2020 Earnings Call Transcript


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Domino’s Pizza Inc (NYSE: DPZ)
Q3 2020 Earnings Call
Oct 8, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 Domino’s Pizza, Incorporated Earnings Conference Call. [Operator Instructions]

And now I will hand the conference over to your speaker today, Chris Brandon, Director of Investor Relations. Please go ahead.

Chris BrandonDirector of Investor Relations

Appreciate that Carmen and good morning, everyone. Thank you for joining us for our conversation today regarding the results of our third quarter 2020. I’m also joined today by our Vice President of Finance, Michelle Hook, who recently took on an expanded role within our finance organization that includes oversight of our Investor Relations function in addition to her other responsibilities.

Today’s call will feature commentary from Chief Executive Officer, Ritch Allison; and Chief Financial Officer, Stu Levy. As this call is primarily for our investor audience, I ask all members of the media and others to be in a listen-only mode. I want to remind everyone that the forward-looking statements in this morning’s earnings earnings release and 10-Q also apply to our comments on the call today. Both of those documents are available on our website. Actual results or trends could differ materially from our forecasts. For more information, please refer to the risk factors discussed in our filings with the SEC.

In addition, please refer to the 8-K earnings released to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today’s call. Our request to our coverage analysts, we, as always want to do our best to accommodate all of you today, so we encourage you to ask only one one-part question on this call if you would, please. Today’s conference call is being webcast and is also being recorded for replay via our website.

With that I’d like to turn the call over to our Chief Executive Officer, Ritch Allison.

Ritch AllisonChief Executive Officer

Thank you, Chris and good morning, everyone. First, this morning, I’d like to welcome Stu Levy to the call. This will be Stu’s first earnings call as our new CFO. As all of you know, Jeff Lawrence announced his retirement from Domino’s on our Q2 call. And while we will miss Jeff and we wish him well, we are excited to welcome Stu as our new CFO. Stu brings a very successful operational track record and a strong connection to the Domino’s culture, having led our supply chain division since January of 2019. Under Stu’s leadership, we have significantly improved the operational and financial performance of our supply chain business. Stu also has deep experience in strategy and planning from his work at Republic Services and at Bain & Company.

Stu is supported here at Domino’s by a very talented and experienced group of finance professionals. I know all of you will enjoy working was Stu and his team in the months and years ahead. Now before I turn the call over to Stu, I do want to take a moment this morning to express a very well deserved thank you. And that’s first to our customers for continuing to give us and our franchisees the privilege to serve you around the world. To our franchisees and operators, I want to thank you for your continued energy, hustle and for the passion you have for this brand, for your teams and for your customers. And finally to our corporate teams for your incredible efforts in support of the brand, our customers, our franchisees and our many operators around the world. Even in the face of this unprecedented pandemic, you have all continued to lead with our values first. And I am extremely proud to serve you as your CEO.

So with that, I’m going to turn the call over to Stu for his remarks on the third quarter, and then I’ll come back to share my thoughts on the quarter and more broadly on the Domino’s business around the world. Stu, over to you.

Stu LevyExecutive Vice President and Chief Financial Officer

Thank you, Ritch and good morning, everyone. I’m really excited to step into this role, and I’m looking forward to working with all of you in the coming months and years. In the third quarter, we continue to lead the broader restaurant industry with 38 straight quarters of positive US comparable sales and 107 consecutive quarters of positive International comps, a truly outstanding accomplishment and a testament to the overall strength of the Domino’s brand and the incredible hard work of our franchisees and team members around the world.

We also continue to increase our global store count, opening 209 gross new stores and 83 net new stores in Q3. Our diluted EPS in Q3 was $2.49, an increase of 21.5% over Q3 2019, primarily resulting from strong operational results and partially offset by COVID related expenses.

Let me provide a bit more detail regarding our financial results for Q3. Global retail sales grew 14.4% as compared to Q3 2019 pressured by a stronger dollar. When excluding the negative impact of foreign currency, global retail sales grew by 14.8%. Same-store sales in the US grew 17.5% in the quarter lapping a prior-year increase of 2.4%, and same-store sales for our International business grew 6.2% rolling over a prior-year increase of 1.7%. Breaking down the US comp, our franchise business increased 17.5% while our Company-owned stores were up 16.6%. The US comp this quarter was driven by a healthy mix of both ticket and order growth.

During the quarter we continue to see a benefit from remaining relentlessly focused on providing good value for our customers and doing so in a safe and convenient way both through our delivery and carryout channels. This has resulted not only in overall order growth, but also in an increase in items per order, which drove our overall ticket growth in the quarter. In our International business, we were pleased to see a sequential improvement over Q2 and retail sales reflecting fewer temporary store closures and in some markets, fewer service method and other operating hour restrictions relative to those seen earlier during the pandemic.

The 6.2% International comp was driven by ticket growth, which was largely a result of a shift to more delivery orders, which tend to include more items and the delivery fee thus yielding a higher ticket. Shifting to unit count. We added 44 net stores in the US during the third quarter, consisting of 47 store openings and three closures. Our International business added 39 net new stores during Q3 comprised of 162 store openings and 123 closures with those closures primarily occurring in India.

We believe the pandemic has had a net negative impact on store openings globally in part due to government restrictions as well as general permitting and construction delays. Overall, our unit economics remain strong, particularly in the US and we continue to work with our franchisees to sustainably grow their businesses.

Turning to revenues and operating margins. Total revenues for the third quarter were up 17.9% from the prior-year quarter, driven primarily by higher retail sales in the US, which in turn drove higher revenue in our supply chain and US store businesses. Our consolidated operating margin as a percent of revenues decreased to 37.4% from 38.5% in Q3 2019 due primarily to investments made related to the COVID-19 pandemic, partially offset by higher revenues from our US franchise business.

Company-owned store margin as a percent of revenue was down year-over-year and was negatively impacted by higher COVID-related labor and supplies costs. Sequentially, operating margin saw additional pressures from higher food costs, as we’ve continued to see significant fluctuations in commodity prices throughout the pandemic. Supply chain operating margin as a percent of revenue was also down year-over-year and was negatively impacted by higher food costs as well as similar COVID-related expenses.

G&A expenses increased approximately $8 million as compared to Q3 2019, primarily due to higher variable performance-based compensation expense. Net interest expense increased approximately $6 million in the third quarter, driven primarily by a higher weighted average debt balance, resulting from our 2019 recapitalization transaction and to a lesser extent, borrowings under our variable funding notes during the quarter. Our reported effective tax rate was 19.9% for the quarter, down 1.8 percentage points from the prior-year quarter. The reported effective tax rate included a 2.8 percentage point positive impact from tax benefits on equity-based compensation. We expect to see continued volatility in our effective tax rate related to these equity-based compensation tax benefits.

When we combine all of those positive elements, our third quarter net income was up $12.8 million or 14.8% over Q3 2019. Our diluted EPS in Q3 was $2.49 versus $2.05 in the prior year, an increase of 21.5%. Let me break down the $0.44 increase a bit. Most notably, our improved operating results benefited us by $0.35. Our lower effective tax rate, resulting primarily from higher tax benefits on equity-based compensation, as I mentioned previously positively impacted us by $0.06. A lower diluted share count driven by share repurchases prior to the pandemic benefited us by $0.13. And finally, higher net interest expense resulting primarily from higher average debt balances negatively impacted us by $0.10.

Shifting to cash. Our financial standing remains strong. We continue to generate positive cash from operations during the third quarter, and as of the end of the quarter, we had more than $330 million in available cash and an additional $160 million of available borrowing capacity under our variable funding notes. During the third quarter, we generated net cash provided by operating activities of approximately $158 million. After deducting for capex, we generated free cash flow of approximately $141 million. During Q3, we also returned $31 million to our shareholders in the form of $0.78 per share quarterly dividend. Finally, while we have not repurchased any shares under our Board authorized share repurchase program since the first week of January, we have $327 million remaining under the program for future repurchases.

Before wrapping up the financial update, I’d like to walk you through the impact of the COVID-19 pandemic on our Q3 results. As we’ve mentioned previously, we are steadfast in our commitment to do the right thing for our team members, our franchisees, our customers and our communities. During Q3, the total impact from safety and cleaning equipment, enhanced sick pay and other compensation for our team members and support for our franchisees and our communities was $11 million. Separately, the estimated Q3 impact on International royalty revenues from partial store closures was $2 million.

And while we withdrew our original annual guidance measures earlier this year due to the uncertainty surrounding the business in light of the COVID-19 pandemic, given the growth in our overall business and the corresponding increase in G&A expense from Q2 to Q3, I wanted to provide some visibility on the anticipated full year G&A number. We currently expect our full year G&A expense to be in the range of $405 million to $410 million for the 53-week fiscal year. Keep in mind that G&A expense can vary in either direction depending on among other things, our performance versus our plan as that impacts our variable performance-based compensation expense.

In addition to the G&A guidance, we currently estimate that FX for the 2020 full fiscal year could have a $5 million negative impact on royalty revenues, which is lower than previous estimates, driven by the strengthening of foreign currencies relative to the US dollar. In closing, our business continued its strong performance in the third quarter and we remain in very good shape financially. Obviously, we will continue to closely monitor all aspects of our business operations given these uncertain times.

And finally, I’d be remiss, if I didn’t take a minute to thank our incredible team members and franchisees around the world. It’s their dedication and commitment to our customers and our communities that allows us to generate these results.

Thank you again for joining the call today. And now, I’ll turn it over to Ritch.

Ritch AllisonChief Executive Officer

Thank you, Stu. And once again congratulations on the new role. I’m certain our analysts and investors are going to enjoy getting to know you better in the days ahead. Now, moving on to our results. I’ll briefly discuss our US and International businesses before we take some questions. So let’s get started with the discussion about the US business.

During the third quarter, the pandemic continued to drive a favorable tailwind for food delivery coupled with the challenging operating environment. Our focus as a brand across our corporate and franchise stores remained squarely on serving our customers and our communities with a convenient, affordable and safe food and service experience. We continue to put our people first, making investments in our teams across our corporate stores, our supply chain centers and our support resources. Around the country, we were also pleased to see our franchisees stepping up to support their teams.

The third quarter marked our 38th consecutive quarter of positive same-store sales growth, and 17.5% is the strongest same-store sales number we’ve posted in our US business over the course of that almost decade-long run. We achieved this remarkable level of growth without running any aggressive promotions during the quarter. During Q3 of last year we ran two 50% off boost week promotions. Now, while we expect these boost weeks will continue to be an important part of our customer acquisition strategy in the future, the underlying demand and our strong everyday value messages allowed us to focus on store level profitability and on service during the quarter.

Now, we still have work to do on service levels, but I am very pleased with our execution in absorbing the unprecedented volume in both our stores and our supply chain centers. During the quarter, we launched some terrific new products. Our new chicken wings with improved sauces launched on July 7, and we launched two new specialty pizzas, our cheeseburger pizza and our chicken taco pizza on August 24. Customer feedback thus far has been very positive on these new products. And I have to tell you, as one of our most frequent customers, my new personal favorite pizza is our chicken taco pizza with jalapenos added to it.

We continue to roll out technology to enable contactless service methods and to improve the operations of our stores. Our Domino’s carside delivery has been overwhelmingly embraced by our franchisees and is available today in over 95% of our US stores providing a convenient, contactless carryout experience across the US. We are working to continue to drive customer awareness of contactless delivery. Our GPS technology is now in place in approximately 90% of our US stores giving customers a better experience and allowing our operators to better optimize the routing and dispatching of our deliveries. Our enhanced makeline tools are rolling out across the country and are now present in nearly 80% of our US stores, allowing us to get pizzas in the oven faster and improving our service levels. These are just a few of the many innovations, our team is driving to improve the customer and the team member experience.

Now, we’ve talked a lot about the opportunity to create frequency and loyalty with customers that have discovered or reengaged with the Domino’s brand during this time. We believe value, convenience, quality and our new product news are bringing customers to us and hope it will continue to bring them back. Digital and loyalty adoption give us a good proven opportunity to drive additional customer frequency, and we continue to see strong growth and performance in both areas during the third quarter. And we have to continue to focus on service as our category remains fragmented and customers often switch brands. Executing the blocking and tackling of service is as critical for us as anything else.

Unit growth remains a challenge, given the many obstacles that the pandemic has placed on construction and permitting across the country. But given those circumstances, I’m very pleased with the efforts of our franchisees and our corporate teams. Collectively, we still manage to open 44 net new stores in the US, consisting of 47 openings and only three closures during the quarter. This is a terrific result when you consider what is happening across the category and more broadly across the US restaurant industry.

Our development team and our franchisees continue to work closely on data-driven assessments around fortressing which continues to prove out strong results and tied to carryout to delivery service, delivery costs, runs per hour for drivers and most importantly a great economic return for our franchisees, who are making an investment in the brand. Now, while obstacles presented by the pandemic will create uncertainty in the short term for unit growth for the foreseeable future, I remain highly optimistic around our US unit growth potential for the medium and the long term.

So to close out our discussion on the US business, while we don’t have all the answers on the future, we’re going to continue to execute on our fundamental strengths, and as a work in progress, brand, we will work diligently on the areas where we can and need to improve. All in all, I’m proud of our third quarter US performance and very optimistic about our ability to continue driving profitable retail sales growth for our franchisees and for Domino’s over the long term.

Now let’s move on to International, where I was pleased to see the momentum build across the business during the quarter. Thanks to the great work of our International master franchisees. We have now achieved 107 — 107 consecutive quarters of positive same-store sales. And at 6.2%, the highest International same-store sales result since the third quarter of 2016. As the pandemic continues to evolve around the world, we continue to see wide variations in performance across the International business, and forward visibility continues to be quite challenged compared to normal.

We had a number of markets that continued to generate strong retail and same-store sales growth, including China, Japan and Germany among others. In these markets, our ability to remain open and operating throughout the pandemic has allowed us to benefit from the delivery tailwind in these markets. In several other markets, we are still fighting our way back from significant temporary unit closures and service restrictions to regain our sales momentum. India and Spain are two large markets where our master franchisees and operators have worked diligently to reopen stores and continue to build order counts during the quarter. In markets where we have been disproportionately impacted, we’ve stepped in to support our master franchisees in true alliance for the long-term success of the brand.

Now turning our attention to stores. Coming off a peak of approximately 2,400 temporary closures in late March, we have reopened the vast majority of those stores, and now have fewer than 300 that are still temporarily closed. We’ve regained some momentum in new store openings during the quarter with 162 gross store openings. However, those were offset with a higher than unusual — higher than usual number of closures, resulting in 39 net new stores. Those closures were concentrated in India where our master franchisee took the necessary steps to close of underperforming units that were also negatively impacted by the pandemic.

In the near term, our retail sales growth will continue to be pressured by the slower pace of store growth that we’ve seen thus far and anticipate for the foreseeable future. Visibility will continue to be difficult, and the unit growth environment could remain choppy. While I am highly optimistic regarding the growth potential for our brand, given these delays and the choppiness in international store openings that we’ve seen as the pandemic has continued to persist, over the past months, we are currently reassessing, whether we will be able to achieve the timing of our previously articulated goal of having at least 25,000 stores opened by 2025.

Now, I want to be very clear. I see this is a timing as opposed to a capacity matter, and I have a great deal of confidence in our International business and in our master franchisees. They are eager to ramp the pace of store growth back up to our pre-pandemic pace as we continue to pursue our long-term goals. All things considered, I’m very pleased with the resiliency and performance of our International business, and I applaud our best-in-class master franchisees. It is their incredible commitment to invest in the brand, that has allowed us to serve our customers and our communities across the globe at a high level even in the face of so many challenges.

The global fundamentals around delivery adoption and market share upside coupled with our strong value positioning, service delivery and unit economics all position us well for long-term growth and success in our International business. And to sum it up, the third quarter was a true testament to the unquestioned strength of our International business model, and I remain very optimistic about the future of this business.

Stepping back to look across the global Domino’s enterprise, the global backdrop around food delivery, digital ordering in the pizza category specifically continues to be favorable. Now, we don’t know how long the pandemic will continue and we don’t know how long we’ll continue to feel the related demand tailwinds and operational challenges. However, make no mistake, we will continue to build on our strengths and we will continue to invest to position ourselves to win in the long game. We’ll be leading with our values, delivering high quality menu offerings to our customers, delivering a strong consistent and reliable value proposition driving sustainable order and transaction growth, investing in technology to support the consumer and our store operators, relentless focus on unit economics and franchisee health and continuing to fortress our market positions in the US and around the world. These are the areas, regardless of the external economic and competitive landscape, where I believe we will continue to differentiate ourselves from the competition and drive shareholder value over the long term.

In closing, our global — our global franchisees and operators continue to rise to the challenge every day, and it continues to motivate me and my team. I am proud to serve them each and every day. And with that, we’ll be happy to open up the line and take your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question comes from Brian Bittner with Oppenheimer. Please go ahead.

Brian BittnerOppenheimer — Analyst

Good morning, Ritch and good morning, Stu. Congratulations on your new role as CFO. Your domestic comps, they continue to be very impressive, but I want to focus my question on the profit flow-through constraints this quarter that caused the EBITDA growth to trim below revenue growth. We haven’t seen that in many, many quarters as the financial model. Can you talk a little bit more about the nature of these COVID expenses? How much is potential structural changes to cost versus transitory? And separately on the G&A outlook Steve gave — Stu gave for fourth quarter, it looks to be stepping up in a material way about $20 million year-over-year on the G&A line, can you also just flush out the inflection in that expense in the fourth quarter? Thanks.

Ritch AllisonChief Executive Officer

Hey, Brian. Good morning. I’ll start with the — with your question around the US store side and the flow-through. As Stu outlined in his discussion earlier, we did see some significant cost in the quarter related to operating in the pandemic and that relates to frontline, hourly compensation, team member, enhanced sick pay benefits, protective equipment, cleaning supplies, etc. that are just a reality of operating in a pandemic environment. The position that we’ve taken there is that, we are going to focus on serving our customers, taking care of this demand that’s been presented to us in the face of COVID and also very much on supporting our team members and taking care of our team members in the store. If we do — if we do those two things, then we believe that we position ourselves for the long term to continue to accelerate growth in the business on the back of this unprecedented short term boost in demand.

As long as we’re operating in a pandemic environment, I do expect to see an elevated level of operating costs in the stores, but we don’t see structural changes in the business over the long term, it’s simply the reality of operating in a pandemic environment. And the second part of your question around G&A, I’ll let Stu comment on that.

Stu LevyExecutive Vice President and Chief Financial Officer

Yeah. And actually, before I do that, let me add just a little bit more color on the margin, and this is detailed a little bit more in the queue. But relative to Q2, the food basket for us was up significantly in Q3 and that’s been an effect that we’ve seen, just volatility in the commodity markets during the pandemic. So in Q2, we — the basket had decreased year-over-year, 1.2%, Q3, it was up 3.8%. And if you — if you break that down a little bit, cheese, which is obviously a huge input for us was at an all-time low in Q2, and it’s been at all time highs in Q3, and we’ve seen similar volatility across a lot of other commodities. So that obviously puts a headwind on the business both in terms of store operations and our supply chain business.

On the G&A side, the largest driver there is higher variable performance-based compensation. But the other — the other driving force here is a 53rd week, which obviously drives increased G&A year-over-year. So that, you know it’s something we get once every handful of years but we happen to have it this year in the middle of a pandemic, so it has a little bit of additional complexity there.

Brian BittnerOppenheimer — Analyst

Thank you, guys.

Operator

Thank you. Our next question comes from Eric Gonzalez with KeyBanc. Please go ahead.

Eric GonzalezKeyBanc Capital Markets — Analyst

Hey, just a quick question on the international store closures. I think given the number of closures in this segment to date, should we expect to see an elevated number of closures in the next few quarters. If you think those master franchisees in those volatile markets like India have already made the necessary adjustments.

Ritch AllisonChief Executive Officer

Yeah, great question. And yes, we’ve been — we’ve been very pleased to see the resiliency in that International business. And as you know, we had about 2,400 temporary closures back about six months ago. And as the teams have worked very hard to get those stores reopen they’ve also taken a look and assessed, are there stores in the portfolio that are structurally challenged in the near term and the long term. And I applaud the team in India for taken the necessary steps to go ahead and take some of those closures and we were supportive of that. As I look broadly across the business, we still have a great deal of optimism around the medium and long-term growth potential in International, but as we look out across the near term, I do expect to see some continued choppiness as it relates to getting stores open due to construction and permitting delays. And then also, we expect to see a few more closures as the markets reassess — reassess their portfolios and make sure that we’re focused in resources going forward on the stores that are going to — that are going to drive growth.

Eric GonzalezKeyBanc Capital Markets — Analyst

Thank you.

Operator

Thank you. Our next question is from Gregory Francfort with Bank of America. Please go ahead.

Gregory FrancfortBank of America — Analyst

Hey, thanks for the question. I had a question for Stu. I see — I think most companies in the space have kind of paused the share buyback. And I guess you guys, I don’t think bought back any stock in the quarter. What are you looking for, I guess, to consider restarting that program and is it just conservatism for maybe why you haven’t started back up so far? Thanks for the thoughts.

Stu LevyExecutive Vice President and Chief Financial Officer

Sure, no problem. I appreciate the question. Yeah, for us, we’re always going to look at what the right way to deploy our cash as whether and how to return that to our shareholders where it’s appropriate. I think earlier in COVID with the uncertainty as a lot of companies did, we wanted to preserve cash and figure out until we kind of had a better understanding of how things looked like they were going to play out. And obviously, now we’ve got better visibility and we’ll continue to evaluate the best ways to deploy that cash to the business or how to return that to our shareholders.

Gregory FrancfortBank of America — Analyst

Thanks. Thanks for the thoughts.

Operator

Thank you. Our next question is from Sara Senatore with Bernstein. Please go ahead.

Sara SenatoreBernstein — Analyst

Thank you. I was just trying to understand a little bit more on the margin question, obviously, investments in people are absolutely the right thing to do. Given they’re on the frontlines, and I think you said, you didn’t see this as a structural change, but just from like a practical standpoint on modeling, how do we think about the ability to reverse any of these, like when being pandemic proceeds, just having some kind of maybe color on whether these are increases in wage rates, which I assume would be really hard to turn back or just kind of the order of magnitude of the different factors that are contributing to that, just as they, really just from a practical or mathematical perspective from next year. Thanks.

Ritch AllisonChief Executive Officer

Sure. Hi. Sara, thanks for the question. As Stu outlined in his remarks, we had, during the quarter about $11 million in costs that were associated with — with this COVID-related operating environment. And as you think about how to look at that going forward, as long as we’re operating in a pandemic environment, we’re going to continue to see some elevated costs around safety and cleaning equipment, enhanced sick pay. And then also during the pandemic, we’ve continue to make sure that we are taking care of our frontline team members with some enhanced compensation as well. And so as long as we’re operating in a pandemic environment, we expect to see that also.

Now, over the long term certainly, we will continue to take a look at the overall value proposition for our frontline team members, and that’s certainly evolved over time, some of that driven by minimum wage increases across the country and changes, such as that, but also, with us taking a look at the value proposition that we offer our team members and making sure that we are employer of choice going forward. So, you will see, you’ll certainly see postponed some of these cost pare back, and then what we’ll do is, as a management team is we’ll focus then from there on continuing to make sure that this is a great place to work for our team members. And that our team members are appropriately rewarded for their efforts.

Sara SenatoreBernstein — Analyst

Thank you.

Operator

Thank you. Our next question is from Chris O’Cull with Stifel. Please go ahead.

Chris O’CullStifel — Analyst

Yeah, thanks, good morning, guys, and congratulations, Stu. Ritch, would you talk about the performance of markets in the US that have largely lifted restrictions and in particular, how order size and transaction performance has been impacted once restrictions are lifted?

Ritch AllisonChief Executive Officer

Yeah, sure. Chris, it’s interesting, and if I look across — if I look across the US business and where we’ve had kind of differential levels of performance, it’s interesting. As you know, our brand tends to be less urban focused than a lot of other brands. We’ve got higher concentrations of our stores in rural and second city type of markets. And certainly those markets have performed better than the urban and suburban markets have over time. So we saw, throughout the third quarter, we saw that in the second quarter as well, that dynamic continued to persist. And then some of the other dynamics that we’ve talked about in the past also continue, we continue to see a higher ticket in both our delivery and our carryout businesses.

And I’m really pleased that that higher ticket was not coming from price increases. Price increases around food and delivery charges have been really moderate and in line with inflation over the course of the third quarter. But really what we’ve seen is that continued increase in — we continue to see that increase in basket size. And then the other dynamic around the ticket overall is just a higher mix of delivery orders relative to carryout orders in the business. And delivery just by its very nature it comes with a higher ticket, and with that delivery albeit modest, that delivery charge still added to the ticket. So that’s a little bit about the dynamics and what we’ve seen across the course of the quarter.

Chris O’CullStifel — Analyst

Thank you.

Operator

Thank you. Our next question is from Lauren Silberman with Credit Suisse. Please go ahead.

Lauren SilbermanCredit Suisse — Analyst

Thanks for the question. And Stu, congrats on the new role. How do you expect the recent return of the NFL and college football will impact trend given ongoing restrictions at bars and restaurants across the country? And then are you willing to provide the cadence of content throughout the quarter? And to the extent you’re willing, any color on quarter-to-date trends, given football really started post quarter end?

Ritch AllisonChief Executive Officer

Yeah. So, hi Lauren, we won’t comment on any quarter-to-date trends this morning, but most certainly, we are glad to see televised sports back. It certainly creates occasions for people to gather and when people have occasions together they love ordering the Domino’s Pizza. And so I’m certainly happy to see that coming back. And as you know, for us, it’s less about fans being able to set in the seats, than it is about the sports being on TV and folks being able to gather and watch it. So without the ability, really at this point to parse out any results based on that, I can tell you that we certainly view it as favorable relative to not having — not having those sports on television for us.

Lauren SilbermanCredit Suisse — Analyst

Great. And are you willing to provide the cadence of comp trends throughout the quarter?

Ritch AllisonChief Executive Officer

I’m sorry, Lauren, I could not hear your question.

Lauren SilbermanCredit Suisse — Analyst

The cadence of comp trends throughout the quarter.

Ritch AllisonChief Executive Officer

No, what I can tell you is, we had strong growth throughout the quarter. But I won’t comment on period by period specifics.

Lauren SilbermanCredit Suisse — Analyst

Okay, thank you very much.

Operator

Thank you. Our next question is from Peter Saleh with BTIG. Please go ahead.

Peter SalehBTIG — Analyst

Thanks. Stu, congrats on your first conference call. I wanted to ask about the loyalty and loyalty memberships. I know, earlier in the year, you were discussing that you guys had about 85 million unique users, your database, but about 23 million or so loyalty members. Can you talk about the cadence maybe of signing up more or attaining more loyalty members throughout the year? Has that accelerated through the pandemic, and what exactly are you guys seeing from the loyalty guests in terms of their behavior, in terms of spending recently?

Ritch AllisonChief Executive Officer

Hey, Pete, thanks for the question. We certainly saw, as the pandemic hit, we saw a pickup in loyalty enrollments at the beginning of the pandemic. And that leveled off some during the third quarter. But interestingly, also we saw fewer folks who were — who were exiting or becoming inactive in loyalty program over time. So the overall number of customers in our Piece of the Pie Rewards program continue to increase. And then as we took a look at what was happening with our heavy and medium and light users, we’re also pleased to see over the course of the quarter that customers in each of those buckets were ordering from us more often. And the ticket was higher also in each of those buckets. And that occurred in the third quarter, despite the fact that we didn’t run any boost weeks in the third quarter of 2020 and that compares to running two of them of our 50% off promotions back in the third quarter of 2019.

Peter SalehBTIG — Analyst

All right. Thank you very much.

Operator

Thank you. Our next question is from John Glass with Morgan Stanley. Please go ahead.

John GlassMorgan Stanley — Analyst

Hi. Good morning and thanks for the question and congratulations, Stu. Ritch, you talked a couple of times about service and service opportunities, obviously challenges in the business. I wasn’t sure if that was a comment about, you saw some service slipping for some reason or this is just a work in progress company, but can you just talk about, has there been unique challenges that have created service delays for example in the business. And can you maybe make [Phonetic] that into, how you think the performance of some of the new products are doing? Does that create greater complexity or maybe how do you — how do you grade yourself or how do you think the new wins and new pizza launch have contributed to sales to date?

Ritch AllisonChief Executive Officer

Sure. John, first on the service piece, most, definitely at the beginning of the pandemic when volumes in our business jumped up significantly, we definitely slipped a little bit on our estimated average delivery times. We have since, thanks to the great work of our franchisees and operators over the second and third quarter. We have — we’ve improved our service and gotten back to where we are as good or better than we were pre-pandemic, which is pretty significant when you think about the overall increase in the business that we’ve seen, and the fact that we deliver our own food. So we are making sure that we’ve got trained and uniform delivery experts bringing that product to the customer.

I suspect that, as long as I’m the CEO of this company, you will always hear me talk about wanting to improve service at Domino’s, because until we’re getting to a place where we’re delivering pizzas, and not 30 minutes, not 25 minutes, but 20 minutes or less, I’ll never be satisfied with where we are on service. So we’re always going to be a work in progress there.

Second part of your question around new products. I’m very pleased with the new products we’ve launched. Our wings and our two new specialty pizzas have been very well received by our customers. You haven’t seen us promote wings, because we’re selling all the wings that we can get our hands on today. So very, very positive performance on the wings business and then we launched the specialty pizzas obviously just within the last couple of weeks of the third quarter. But those specialty pizzas are already at the top end in terms of mix of our specialty pizza range. So very pleased with where we are to-date.

And also really pleased, and I think you asked — you asked a great question, these do not add operational complexity within our — within our stores. In fact, the wings actually reduced operational complexity in the store, given how we package it. And each of the two specialty pizzas required only one incremental ingredient that we didn’t have on the make line already.

John GlassMorgan Stanley — Analyst

Thank you.

Operator

Thank you. Our next question is from David Tarantino with Baird. Please go ahead.

David TarantinoRobert W. Baird — Analyst

Hi. Good morning. Ritch, I was hoping you could elaborate a bit on your comments about the 25,000 unit target you laid out a few years ago. And in particular, I understand the issues with delays in terms of International market openings. But you also mentioned potential for some closing. So I wonder if you could talk about how much of your, I guess a pull back on the target might be related to the closings, you expect to see and whether you’re willing to frame-up the magnitude of those closings?

Ritch AllisonChief Executive Officer

Sure, David, it really does relate to the pace of openings much, much more so than concern about closures going forward. Hitting the closures first, we’ve certainly seen a higher number of closures in 2020 relative to normal in our International business. But I expect that we will — we will work through those over the short term. So the real issue around the pace to getting to 25,000 is just the pace of the gross openings which had slowed during 2020, given some of the similar construction in permitting challenges that we’ve seen in markets all over the world, but also for those countries that had temporary closures, the effort has really been directed in the short term on getting those stores reopened and ramping them back up to, excuse me, to their full run rate.

So I’m optimistic over the medium to long term that we will, that we’ll get back to the very strong pace of unit growth that we had in the International business, it’s just at the step back that we’ve had to take in 2020, does cause us to take a look at reassess the timing of that 25,000 milestone. Not the milestone, but just the timing of reaching it.

David TarantinoRobert W. Baird — Analyst

Makes sense. And I guess one follow up I guess a lot of companies have talked about potentially accelerating the pace of the opening, given the opportunities they see on the other side of the pandemic. So I guess your comments might imply that that might not be possible or might not be desirable in the international markets in a sense to catch up for the lost ground in 2020.

Ritch AllisonChief Executive Officer

No, I wouldn’t take it that way, David. And if I break it down a little bit, first of all, starting on the US side of the business. I see a heck of a lot of opportunity to accelerate our unit growth on the US side of the business where while we’ve been in a difficult operating environment. If you look at our trailing four quarter net unit openings in the US, it’s still very strong and consistent with where we were a year ago. The International business, when you take a look at that, you really have to break it down. Because if you talk about it, just in total, you lose some of the nuances of it, and we have multiple markets in International that in fact have maintained pace and are accelerating on unit growth.

It’s just when you take into account, some of those countries that had to take a step back with respect to temporary closures. I just expect it to take a bit more time to ramp back up in those markets. But all around the world, our teams are taking a look at the real estate opportunities that are — that are presented to us by the fact that there are quite a few other restaurant and retail businesses that are closing out there, certainly at a much higher rate than we see inside our own business.

David TarantinoRobert W. Baird — Analyst

Great, thank you very much.

Operator

Thank you. Our next question is from Dennis Geiger with UBS. Please go ahead.

Dennis GeigerUBS — Analyst

Great. Thank you. Ritch, you gave some really good color on the loyalty program, but just wondering if you could talk a bit more about new customer acquisition in recent months, kind of how that’s trended since 2Q and how you’re thinking about the stickiness of those new customers, as we look ahead? Thanks.

Ritch AllisonChief Executive Officer

Sure, Dennis. We’ve had, if you look — if you break our business down and I talk about it a lot in terms of the two businesses that we run inside each of our boxes, which is, one is the delivery business and the other is a carryout business. If we take a look at our delivery business, what we’ve seen is a nice tailwind in customer acquisition, but also just as important and in a lot of cases more so, our retention of customers and order frequency has also increased as well in the delivery business.

And then if we look at the carryout business, the story is a little bit different, we’ve not seen the tailwind on customer acquisition in carryout. And that’s not surprising as customers stayed in their homes, much more often during the pandemic. But what we’ve seen is increase in retention and in the frequency of orders of — on the carryout side for our customers. Now, one of the reasons that we have rolled out our Domino’s carside delivery, frankly a lot earlier than we had originally planned to was so that, we could get out there, and you’ve seen us on TV talking to customers about a very safe and convenient way to come and get carryout at Domino’s. The early results that we’ve seen in carside delivery in the third quarter have been very positive in terms of the customer receptivity to that service method.

Dennis GeigerUBS — Analyst

Thanks, Ritch.

Operator

Thank you. Our next question is from Chris Carril with RBC Capital Markets. Please go ahead.

Chris CarrilRBC Capital Markets — Analyst

Hi. Thanks. Good morning and thanks for the question. So, could you provide any further detail around how the value platforms performed over the course of the quarter. And did you see any change in utilization of the $5.99 and $7.99 platforms.

Ritch AllisonChief Executive Officer

Hey, thanks. Thanks, Chris. The $5.99 platform continued in the quarter to be an incredibly important statement of value and driver of the business. And in fact it was more important in Q3 than probably any time because we didn’t run any boost week promotions during the third quarter. So very important in terms of customer acquisition. And we’re also — we’re always kind of taking a look at and thinking about how can we enhance that value platform. And as you’ve seen with the launch of our two new specialty pizzas, we took a look at how those could integrate into that value platform. And the customer research that we did gave us a high level of confidence that we could offer those pizzas at a $3 upsell to the $5.99 which gives great value to the customer, and also really a nice margin opportunity for our stores as well.

Those pieces and you will also see him on our, if you go on our homepage at $11.99 for a large, which, again, our research tells us is a great value for the high quality those high-quality specialty pizzas and also gives our operators, a terrific opportunity for very profitable, offering. And then if I shift gears on the carryout value proposition, the $7.99, you saw us bring our wings to that platform at $7.99 for carryout as well, which you can now get wings along with all of our crust types, three topping pizza across all of our crust types in that $5.99 platform. When I think about what’s happening with the consumer right now, and looking forward with this recession that we are sitting in today and the fact that there has been no incremental stimulus brought to the consumer, I look forward and believe that our value platforms in sticking to those platforms will only be more important as we look out into the months and quarters ahead.

Chris CarrilRBC Capital Markets — Analyst

Thank you.

Operator

Thank you. Our next question comes from Brett Levy with MKM Partners. Please go ahead.

Brett LevyMKM Partners — Analyst

Good morning, thanks for taking the call, and Stu, best of luck in the new role. You started to discuss a breakdown of where you are in some of your customer facing investment. Would you care to give any quantification in terms of how they’re — how they’re doing in terms of either efficiency, savings or driving sales. And also, how should we think about the, what’s next in terms of new initiatives that you’re investing in? Thanks.

Ritch AllisonChief Executive Officer

Sure, Brett. Well, we are — we are very pleased with the rollout and adoption of these technology platforms. Actually, it’s an interesting kind of pivot for us and how we’re thinking about innovation at Domino’s. So much of the innovation, if you think back to 2010 and forward, when we were driving rapid increases in digital adoption in our business, much of the innovation was around the ordering platforms and what we put in the hands of customers. We’re still doing that, but we’ve also significantly ramped up our efforts around technology innovation to support the operations of our stores. And that’s where you get to — you get to GPS, you get to our enhanced to makeline tools, you get to our carside delivery. Certainly, they have customer benefits, but they’ve got frankly, benefits to our operators that I’m even more excited about than the customer facing aspects there.

And as we think about that innovation pipeline going forward, a good bit of what we’re going to be focused on is, innovation that does make our stores at the incredible volumes that we’re managing today that makes our stores easier to run for our operators and our store managers resulting in a better quality of life for them, but also ultimately a better service experience for our customers.

Operator

All right. Our next question is from John Ivankoe with JPMorgan. Please go ahead.

John IvankoeJPMorgan — Analyst

Hi, thank you. Just a follow-up and a question, the follow-up is quick. You mentioned that delivery fees I think basically increased in line with inflation, that surprises me a little bit considering some of the delivery and service fees, you’re specifically being taken by a third party. Do you think that’s an opportunity as we go forward to kind of think about your delivery and service charge being put together may be having a little bit more of a sliding scale going forward versus the fixed cost it is now. So that’s the follow-up. And the question, could you talk about the competitive intensity, if there is a way for you to measure it in terms of the customer acquisition by third-party whether in the US or any particularly important international markets, where do you think that intensity is getting more intense or perhaps even easier.

Ritch AllisonChief Executive Officer

Great. Hi, John. Yeah, on the delivery fees, we look at this as a competitive advantage for us going forward. When we think about the relatively low and transparent delivery fee that we charge our customers versus what you’re seeing with the aggregators and this really is a key part of our value proposition for our customers. And all of us have ordered third-party delivery, most of the time, it’s really hard to figure out what you’re being charged, because you might be getting a free delivery, but then you go and then you see a line that says taxes and fees. And then if you — if your industry is enough to click on the little question mark, you figure out that it’s not just taxes to the government, but you’re also being charged the service fee.

And for those of us that had been in the delivery business forever, we don’t know what the service fee is, if it’s not paying for having the delivery brought to you. So, I think it’s an area that we’ve got to continue to be out there in educating our customers around the fact that, this is, we’re a transparent brand, and if we tell you the delivery is $3.49, we’re not going to be lumpy on any additional fees there. Certainly, our delivery fees do vary market by market based on labor rates. We operate in places where we’ve got $7.25 an hour labor, and places where we have $15 plus. So that we do adjust those fees, our franchisees adjust those fees up and down, but transparency is going to continue to be a big part of how we present ourselves to our customers.

Second part of your question around the competitive intensity, I would say, John it’s every bit as intense as it was in the second quarter, and is it was in the first quarter. The — in particular with the third-party aggregators, continue to be very aggressive in the offers that they have out in the marketplace and in their advertising. And when we take a look at our competitive set in pizza delivery, it’s a different game, than the game that we were playing five years ago. The number 1 competitor we look at is not any of the pure play pizza players, but it really is competing against delivery from the third-party aggregators.

John IvankoeJPMorgan — Analyst

Thank you.

Operator

Thank you. Our next question is from Jeffrey Bernstein with Barclays. Your line is open.

Jeffrey BernsteinBarclays — Analyst

Great, thank you very much and congrats, Stu on your new role. Just a question on the outlook and then we hear a lot that peers of yours that may be operate their own restaurants or talking about doing more with less on the heels of I guess efficiency learnings through the pandemic and maybe achieving pre-COVID EBITDA dollar, is that at the sales levels well below the prior 100%? So, as I think about your business, you’re running a franchise model obviously, but is there an opportunity there, I mean, and your sales being well above prior sales levels, I’m just wondering what are the greatest drivers to further enhance your profitability obviously after the unique COVID costs ease? Kind of any efficiency opportunities that you see to be more efficient in terms of learnings through COVID? Or if maybe that’s just not a realistic when you’re running the franchise business versus the flow-through of a company operating model. Thank you.

Ritch AllisonChief Executive Officer

Hey, Jeff. Thanks for the question. Most certainly, we are — we’re very focused on driving dollar profitability at the store level. We talk about that all the time and we’ve been fairly transparent about it over time as well. So in our corporate store business and then also as we work with our franchisees, we’re absolutely looking at ways that we can more efficiently operate our businesses coming out of — coming out of COVID. Some of that store technology tools that I talked about earlier, a part of that, are a part of that. I’ll take GPS for example, by utilizing the GPS technology inside our stores, our store managers know exactly where the drivers are at any given time. And that allows us to get more efficient in how we do our routing, how we pre-bag and get the orders ready to go once the delivery driver returns.

And then also in cases of our best run stores today, our drivers aren’t coming at the rush back into the stores. Our operators, because they know the drivers are coming back are running those pizzas out to the cars, handing them into the drivers and save in a minute, maybe two minutes on the turn, which ultimately results in better service and better labor that you run in the stores. We’re also working on some advanced forecasting and labor scheduling tools in our corporate stores where the early results of our pilots and test, there have been very positive, to help us to get better on service, while reducing the labor costs associated with that service. All of that gets thrown into a little bit of disarray as we talked about earlier in a pandemic when you’ve got all of these additional costs that are layered on to the business. But as we look forward, coming out of COVID, our expectation is that, we will continue to drive efficiency and therefore higher levels of EBITDA and operating cash flow in the stores.

Stu LevyExecutive Vice President and Chief Financial Officer

And just to add to that, the one thing we won’t do is reduce the quality of what we’re providing as a way to cut costs. You mentioned, thinking about the menu, as we launched new wings, that was to improve the quality of the product that we were providing, not because we thought we could take a little money out of out of the cost of the ingredients.

Jeffrey BernsteinBarclays — Analyst

Thank you.

Operator

Thank you. Our next question is from John Tower with Wells Fargo. Please go ahead.

John TowerWells Fargo — Analyst

Awesome. Great. Thanks for taking the time. Just real quick, a clarification, Ritch, I think earlier in the conversation in your prepared remarks, you had mentioned the idea that the Company stepped in to support master franchisees and international markets. So I was hoping, one, you could expand upon that. And then two, can you discuss in the US side of the business, how perhaps the delivery versus the carryout mix might have impacted store-level labor during the quarter, particularly relative to the second quarter or even last year, and perhaps maybe the curbside business stepping up the cost of labor in the stores during the period. Thank you.

Ritch AllisonChief Executive Officer

Thanks, John. So first on support on our — with our international master franchisees, we’ve had — we have had several of our international markets that were disproportionately hit by COVID and had to have either a whole or a substantially partial shutdown. And in those cases, we have — we have a very long-term view on the partnership that we have with these international master franchisees. And so there have been some instances where we have leaned in with royalty and fee relief for some of our international franchisees, because it’s just the right thing to do in the short term for our partners that are around with us for decades over the long term.

Second part of your question, delivery and carryout mix, certainly, we’ve seen, in terms of order mix delivery in the third quarter was certainly a higher percentage by a couple of percentage points of our order mix versus what we were running pre-pandemic and certainly delivery orders bring with them on a per order basis higher dollar labor costs, but those are also associated with higher ticket as well. And also the the delivery fee that comes along with it.

And then finally, to your question on curbside, the terrific thing about our carside delivery is, we’ve been — we’ve been able to handle that business really without any significant increase in labor cost at the store level, ultimately somebody when a customer walks into the store is going back to the rack and grabbing that pizza and greeting the customer and handing it to them. But with this technology, we know when the customer pulls into the parking lot, a team member can get out and back into the store very quickly and we’re not using incremental labor to do that.

John TowerWells Fargo — Analyst

Great, thanks. And then just one quick one on, can you quantify the amount of royalty or fee release you provided for the franchisees in the international markets during the period?

Ritch AllisonChief Executive Officer

No.

John TowerWells Fargo — Analyst

Okay, thank you.

Operator

Thank you. Our next question is from Todd Brooks with C.L. King & Associates. Please go ahead.

Todd BrooksC.L. King & Associates — Analyst

Hey, thanks for the question. Ritch, I was wondering, now, that we’re about eight months into this pandemic window, what are your thoughts on the US business as you look out to ’21 and beyond about just in general, survivor bias in the pizza industry as far as, over half the units out there being independently owned and operated and thoughts on market share opportunities due to competitive closures, but also real estate opportunities and how that supports maybe an enhanced unit growth rate in the medium term in the US market. Thanks.

Ritch AllisonChief Executive Officer

Sure. We certainly look at 2021 and forward as an opportunity to continue to gain share in the pizza category. And I’ll preface it by saying, none of us want to see independent pizza restaurants close due to the pandemic. We love to compete and fight it out every day, but we also love to go out and eat at independent restaurants as well. I feel for the challenges that a lot of these independent restaurants are going through and their proprietors that have put their livelihoods into those — into those businesses, but the reality is, if you were operating an independent pizza restaurant with a significant amount of your business dine-in and if you were relying on beverage mix and alcohol to bring a good bit of margin to your business, if that business has now been shifted to where you have to do most of it off-prem, and if most of that has to come by paying very high fees to third-party aggregators, it’s just a really difficult operating environment.

And I know all of you see a lot of the same industry analysts and prognosticators who predict the percentage of independent restaurants that may not reopen or may close permanently. We don’t know where that ultimately lands. But I do believe that the shake-out in the turmoil is going to create opportunity for us to further take share and continue to grow. Our teams both, our corporate store team and our franchisees are out there every day looking for real estate opportunities that are opening up as a result of the pandemic, and also in some cases opportunities where we’ve shifted in some cities and towns from a more sort of landlord-friendly rental environment for to more of a renter friendly rental environment, an opportunity for us to get potentially some more favorable terms on leases going forward as well for some of the stores that we continue to operate.

Stu LevyExecutive Vice President and Chief Financial Officer

Yeah. The other thing that I would add is, our development team is working pretty rigorously with our franchisees going through a ton of analysis and pretty detailed modeling in determining where we actually want to be opening those stores. So, and that’s got to be for the long-term value of the business, that has to be the priority, and if where we want to be, there are real estate opportunities, that gets evaluated the same — the same way we would look at, do we build something freestanding? Do we take existing real estate? Do we take advantage of a business that may have been less fortunate, etc., but it starts with where we want to be. And then shifts to what are the real estate opportunities there.

Todd BrooksC.L. King & Associates — Analyst

Great. Thank you, both.

Operator

Thank you. Our next question is from Andrew Charles with Cowen and Company. Please go ahead.

Andrew CharlesCowen and Company — Analyst

Great. Thank you. Congrats, Stu and Ritch, I’d echo the jalapeno hack on that chicken taco pizza is very good. Stu, can you help rectify the 12.6% supply chain growth with domestic system sales growth, about 21%. There is about a $6 million gap there. I was curious if there is efficiencies or inefficiencies or additional cost, we should be thinking about potentially with the two distribution center openings in the back half of 2020, maybe it’s a mix issue, just given, obviously more wings being sold to that as well. And then I know you said no two-part question, so I’m going to phrase this as an extension of my question, on the longer term, what is your broad observation having run supply chain, where you think you could see margin percentage for the supply chain segment settle out longer term?

Stu LevyExecutive Vice President and Chief Financial Officer

Yeah, thanks for the — thanks for the questions. I’d like the extension part that you didn’t hear. That was effective. You know the pressure in supply chain, and first of all, let me just comment, you mentioned the center opening. So we obviously opened a new center in Q2, we have a new center that we intend to open in Texas in Q4. We also added capacity to our thin crust production in Q3. So, and that for us is an investment, we’re more than happy to make, because that means we’re continuing to grow and we need that capacity.

On the margin side, it’s an interesting dynamic, because what we’re — what we’re trying to do is provide the best value for our franchisees, if they can grow profitably, we as a company are going to benefit from that. So we’re not trying to take advantage, generally speaking when we drive operating efficiencies or other improvements in the business, we’re trying to share that with our franchisees, so that they aren’t negatively impacted.

During the course of COVID, we saw a couple of things, one of which was the high increase in commodities and what we were attempting to do with our franchisees again was sharing a little bit of that pain. So we were — we were passing through commodity increase, but not taking additional margin on it. So, as the food basket goes up, the margin percentage comes down. So, we’re generating more margin dollars, but at a lower percentage, so that, that savings can be passed along to the franchisee base. So that was one piece of it.

The second thing that we did was all of the additional supplies that were related to COVID, we were basically passing through to our franchisees at cost. We didn’t feel we should be layering on additional cost for them, again, trying to make sure, we can drive profitability to the stores. And then in turn that helps the system overall, so are there other efficiency opportunities. Yeah, it’s impossible to run the supply chain, the size of ours and not always have other opportunities for efficiency and that’s what our team works at every single day, is how do we get more efficient, remain safe, being more efficient and more effective in delivering for our franchisees.

Andrew CharlesCowen and Company — Analyst

Thanks, Stu.

Stu LevyExecutive Vice President and Chief Financial Officer

Sure.

Operator

Thank you. Our next question is from James Rutherford with Stephens. Please go ahead.

James RutherfordStephens — Analyst

Hey, thanks for taking the questions. I just was curious directionally how you think about the demand picture for Domino’s and how that will evolve as the country reopens? In other words, a question about this earlier, but we now have a few states have completely removed restrictions on dine-in capacity, more likely follow, a vaccine of course is in the works, so just what have you observed about consumer behavior as certain markets have looked at restrictions and what directionally, does that tell you about the normalized steady state AUVs for Domino’s post pandemic. Thank you.

Ritch AllisonChief Executive Officer

Sure, James. It’s still — it’s still really early on in terms of cities and states reopening and given the purchased frequency and cycle in our business. It’s still early for us to draw any observations from cities that may have flipped from 25% capacity to 50% capacity over the course of the last month or two, but so, what I’ll do is, I’ll step back a little bit just kind of give a perspective, a little bit more broadly. And one of, I think some things that have happened here during the pandemic, have really been the acceleration of some trends that were in place already. So when we think about how customers want to order food, there was a trend toward digital ordering pre-pandemic, and that significantly accelerated during the pandemic.

I don’t expect customers to go back to calling on the phone, I expect digital ordering to continue to grow post pandemic. And I feel that we are very well positioned in that space today with 75% of our sales in the US, digital as we sit here today. I also think that the trend around off-premise consumption, which was their pre-pandemic has accelerated during the pandemic, and I don’t think we’re going to see an immediate snapback, certainly people are going to go, some people are going to want to go and sit down in a restaurant again. I’m one of those people, for sure. But I think we’re going to continue to see a movement in the QSR space toward off-prem consumption. And I think our business with the strength and delivery and in carryout, I believe also positions us very well for that trend to continue going forward.

So what we’re trying to stay focused on here is taking the opportunity that we’ve been given through customer acquisition during COVID and to convert those customers into long term loyal customers of Domino’s Pizza. So far, the early results in that have been very positive as I mentioned earlier. Our retention is up, our frequency is up across medium, heavy and even light users. And really the challenge for me and my team ahead and for our franchisees and operators is we got to continue to do a great job serving those customers and we believe they will continue to come back to us going forward.

And honestly, you know — given the share that we have in the restaurant industry today, even as the number 1 player. We’ve got so much room for upside and share growth within a growing category that, I’m far less concerned about the reopening of sit-down restaurants than I am about us doing a great job on execution every day.

James RutherfordStephens — Analyst

Excellent. Thank you for the thoughts.

Operator

Thank you. And our last question comes from Jared Garber with Goldman Sachs. Please go ahead.

Jared GarberGoldman Sachs — Analyst

Good morning. Thanks. Thanks for all the color on the call today, really great commentary. Most of our questions have been asked and answered, but just wanted to get a little bit more color on China, maybe. Obviously, we heard the news last quarter, the strategic investment there and maybe any color on how the business is trending or how you’re seeing the unit opportunity shape up there, especially versus some of the commentary today on the timing of the 25,000 units by 2025. Thanks.

Ritch AllisonChief Executive Officer

Thanks, Jared. China is really has been a terrific success story in 2020, while we’ve had some slowdown in some of our markets around the world, China is definitely not one of them. Sales growth and unit growth had been very strong in China this year. We’ve got a terrific management team over there in place with our master franchisee, Dash. And we’ve got a lot of optimism around the future growth of our business in China. China also back at the beginning of the year when the pandemic obviously hit China first, China really was — our leaders over there really were the architects of a lot of the contactless service methods that we’re using in the US and around the world. So not only have they delivered great results, but they’ve also stepped up to be thought leaders in our business. And as I look forward on on China, I expect that there will be a point in the future where China will be the second largest Domino’s Pizza business in the world behind the US.

Jared GarberGoldman Sachs — Analyst

Thank you.

Operator

Thank you. And this concludes our Q&A session for today. I would like to turn the call back to Ritch Allison for his closing remarks.

Ritch AllisonChief Executive Officer

Thank you, and thanks everybody for joining us on the call this morning. We look forward to speaking with you again on November 12 when we host our virtual Investor Q&A event. So we hope we’ll get a chance to talk to all of you in just a month’s time. And then of course, in February, we’ll get back together to discuss our fourth quarter and our full year 2020 results. And until then, I hope all of you stay safe and healthy and we’ll talk to you again next month.

Operator

[Operator Closing Remarks]

Duration: 82 minutes

Call participants:

Chris BrandonDirector of Investor Relations

Ritch AllisonChief Executive Officer

Stu LevyExecutive Vice President and Chief Financial Officer

Brian BittnerOppenheimer — Analyst

Eric GonzalezKeyBanc Capital Markets — Analyst

Gregory FrancfortBank of America — Analyst

Sara SenatoreBernstein — Analyst

Chris O’CullStifel — Analyst

Lauren SilbermanCredit Suisse — Analyst

Peter SalehBTIG — Analyst

John GlassMorgan Stanley — Analyst

David TarantinoRobert W. Baird — Analyst

Dennis GeigerUBS — Analyst

Chris CarrilRBC Capital Markets — Analyst

Brett LevyMKM Partners — Analyst

John IvankoeJPMorgan — Analyst

Jeffrey BernsteinBarclays — Analyst

John TowerWells Fargo — Analyst

Todd BrooksC.L. King & Associates — Analyst

Andrew CharlesCowen and Company — Analyst

James RutherfordStephens — Analyst

Jared GarberGoldman Sachs — Analyst

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