The Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price is down 3.6% in reaction to media reports on legal action.
Domino’s Pizza Enterprises is the largest pizza chain in Australia in terms of both network store numbers and network sales. It is also the largest franchisee for the Domino’s Pizza brand in the world. The company holds the exclusive master franchise rights for the Domino’s brand and network in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany and Luxembourg with more than 2,400 stores.
Domino’s Legal Action?
Domino’s said in an ASX release that it noted media articles referencing potential legal action from current or former Domino’s employees about pay entitlements.
But Domino’s said that it has not been served with any claim or received any prior contact about this matter.
According to Domino’s, one of the articles in the media said that the matter in question “relates to whether the pay and conditions of drivers and in-store workers employed by franchisees should have been determined by reference to a series of industrial agreements rather than the Fast Food Industry Award 2010“.
Domino’s said its view is that those industrial agreements applied to its franchisees at all relevant times.
The pizza chain business went on to say, “Domino’s takes the proper payment of its team members seriously. Any formal proceedings received will be reviewed and actioned in the ordinary course.”
Edit: Subsequent to publishing, Domino’s then announced it has been served with a class action proceeding.
Is Domino’s A Buy?
Domino’s seems to be regularly faced with negative news about employee issues. Whilst it’s unlikely to bring the company down, it could bring a hit to its earnings and it certainly puts a cloud of uncertainty over the fast food business for a while to come.
It’s valued at 22 times financial year 2019’s estimated earnings, according to CommSec. I think it could be a dangerous game trying to buying Domino’s shares with this issue ongoing.
The rapid growth shares in the free report below could be better picks than Domino’s.
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