Introduction and Purpose Our objective is to seek the opportunity to open a new Domino’s Pizza restaurant in the area ofBirmingham– Al Jefferson County.

Introduction and Purpose

Our objective is to seek the opportunity to open a new Domino’s Pizza restaurant in the area ofBirmingham– Al Jefferson County. For this reason we conduct a regression analysis based on demographic and financial data existing online to conclude to formula that will adequately forecast the net income generated from the store in the foreseeable future.

Demographic data

From the Jefferson’s county 2010 census report (U.S Census Bureau Delivers Alabams’ 2010 Census population, 2011)  we have ob (State & County QuickFacts, 2012)tained the following demographic data:

People Facts JeffersonCounty Alabama
Population, 2011 estimate 658,931 4,802,740
Population, 2010 (April 1) estimates base 658,466 4,779,735
Persons under 5 years, percent, 2011 6.8% 6.3%
Persons under 18 years, percent, 2011 23.5% 23.5%
Persons 65 years and over, percent, 2011 13.3% 14.0%
Female persons, percent, 2011 52.7% 51.5%
White persons, percent, 2011 (a) 54.7% 70.1%
Black persons, percent, 2011 (a) 42.3% 26.5%
American Indian and Alaska Native persons, percent, 2011 (a) 0.4% 0.7%
Asian persons, percent, 2011 (a) 1.5% 1.2%
Native Hawaiian and Other Pacific Islander persons, percent, 2011 (a) 0.1% 0.1%
Persons reporting two or more races, percent, 2011 1.0% 1.4%
Persons of Hispanic or Latino Origin, percent, 2011 (b) 4.0% 4.0%
White persons not Hispanic, percent, 2011 51.4% 66.8%
Living in same house 1 year & over, 2006-2010 83.0% 84.3%
High school graduates, percent of persons age 25+, 2006-2010 86.6% 81.4%
Bachelor’s degree or higher, pct of persons age 25+, 2006-2010 28.8% 21.7%
Veterans, 2006-2010 51,882 408,032
Housing units, 2011 299,482 2,182,088
Homeownership rate, 2006-2010 66.8% 71.1%
Housing units in multi-unit structures, percent, 2006-2010 24.0% 15.5%
Households, 2006-2010 260,441 1,821,210
Persons per household, 2006-2010 2.47 2.53
Per capita money income in past 12 months (2010 dollars) 2006-2010 $26,529 $22,984
Median household income 2006-2010 $45,244 $42,081
Persons below poverty level, percent, 2006-2010 15.5% 17.1%

 

Additionally, from Birmingham 2010 census report (State & County QuickFacts, 2012) we extract that over the past decade (2000-2010) the population was fairly stable with a slight decrease of 0,5% from 662,047 to 658,466 residents.  Our target market includes adults 18 to 65 years old (56,4% of the total population) who socialize and have families.

Analysis & Assumptions

From the Domino’sEnterpriseannual reports we can accumulate the net income expressing the quantity demand (Qd) for Domino’s Pizza from years 2006 to 2011 inBirminghamcity. These will be used as the (Qd) dependant variable in our regression analysis. To account for the difficulty in finding accurate numbers of Domino’s pizzas sold in Jefferson county or even inAlabamaState, we make the assumption that the revenues expected from Domino’s pizza in Jefferson county could be the percentage of revenues of total revenues accrued from Domino’sEnterprisein US, equal the county’s population percentage toUSpopulation (0,2%). In other words for each year’s expected net income of Domino’s in Birmingham would be calculated as such:  Expected quantity demand (Qd) = Total Domino’s US revenues * 0.2%. As such (from the quarterly financial statements (Quarterly Earnings – Finacial results, 2012) we have:

Quarters/Years TotalUSnet income (Thousands $)

P

EPS

Qd

1st 2006

26,200.00

16.00

0.39

52.40

2nd 2006

24,500.00

16.00

0.34

49.00

3rd 2006

24,500.00

16.00

0.34

49.00

4rth 2006

31,000.00

16.00

0.49

62.00

3rd 2007

11,000.00

17.00

0.17

22.00

4rth 2007

16,200.00

17.00

0.21

32.40

1st 2008

14,100.00

18.00

0.21

28.20

2nd 2008

18,700.00

18.00

0.22

37.40

3rd 2008

10,100.00

18.00

0.13

20.20

4rth 2008

11,000.00

18.00

0.19

22.00

1st 2009

14,500.00

19.00

0.20

29.00

2nd 2009

23,800.00

19.00

0.21

47.60

3rd 2009

17,800.00

19.00

0.17

35.60

4rth 2009

23,600.00

19.00

0.30

47.20

1st 2010

24,500.00

20.00

0.35

49.00

2nd 2010

22,600.00

20.00

0.33

45.20

3rd 2010

16,600.00

20.00

0.27

33.20

4rth 2010

24,200.00

20.00

0.40

48.40

1st 2011

27,100.00

21.00

0.47

54.20

2nd 2011

25,200.00

21.00

0.40

50.40

3rd 2011

22,100.00

21.00

0.47

44.20

4rth 2011

30,900.00

21.00

0.52

61.80

Our independent variables will be the following:

  • P: Average price of Pizza’s sold per household: ($) (prices were adjusted to account for inflation amortization over the 6 year period)
  • EPS: Earnings per share : ($)

Performing our regression analysis we obtain the following results:

 

From the actual statistical results we obtainR Square: 0.77 which is a good statistical error. The resulting equation for Qd = 26.91 – 0.78 P + 95.85 EPS, which actually means that the higher the price per pizza sold (P) the lower the quantities sold, while and from the other hand the higher the earning per share for US Domino’s Pizza Enterprise the higher the quantities sold. Having this formula we can adequately forecast Domino’s Pizza demand in the city ofBirmingham.

Conclusion

            

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