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Cutting back: Domino’s European franchise holder is to leave loss-making markets. Photo: Andrew Harrer/Bloomberg

Cutting back: Domino’s European franchise holder is to leave loss-making markets. Photo: Andrew Harrer/Bloomberg

Bloomberg

Cutting back: Domino’s European franchise holder is to leave loss-making markets. Photo: Andrew Harrer/Bloomberg

The UK-based holder of the Domino's Pizza European franchise is pulling out of loss-making markets to focus on Britain and Ireland.

The decision to exit four European markets comes months after the company announced CEO David Wild would retire, in the midst of a row with disgruntled franchisees in the UK and Ireland over commercial terms.

The British company, itself a franchise of US-based Domino's Pizza Inc, owns Domino's operations in Switzerland, Iceland, Norway and Sweden, and owns a minority stake in its German operations.

"We have concluded that, while they represent attractive markets, we are not the best owners of these businesses," Mr Wild said.

Shares in Domino's rose 4.2pc higher, to 276.9 pence.

The company also said third-quarter group system sales rose 3.4pc to £313.5m (€362.5m) on strong demand in the UK and Ireland.

However, international system sales fell 2.7pc. It also warned of a decline in tourist numbers in Iceland.

The firm has 63 franchisees in Britain and seven in Ireland, with two of the largest franchisees accounting for 39pc of stores. Domino's businesses in the four countries it plans to exit will continue as normal during the exit process, the company said in a separate statement.

"We have begun a process to identify new owners for each of the businesses, with the intention of the Domino's brand continuing in all four," the company said.

Analysts said the move would allow Domino's to focus on its core British and Irish businesses, and clear the deck for a new CEO to boost growth in those markets.

"Domino's is now pulling the plug on its international operations after admitting defeat," said Russ Mould, investment director at AJ Bell. "This is the sensible thing to do. Management should be applauded for making the decision to pull out, rather than digging themselves a bigger hole."

Domino's has struggled to control costs in its overseas business, especially in Norway, where it was converting the local pizza operator Dolly Dimple's stores it bought in 2017.

Adding to the company's woes, Europe's economy has slowed this year, as the US-China trade tensions weakened global growth, and consumers and businesses in and around the UK worried about the impact of Brexit on jobs and incomes.

"The decision to exit the loss-making international markets in an orderly manner releases one of the constraints on the share price," Peel Hunt analysts said.

Reuters

Irish Independent