Image 01 Image 02 Image 03

Bain’s Domino’s Pizza model looks a lot like the Obama model

Bain’s Domino’s Pizza model looks a lot like the Obama model

I have told you that Bain would be our undoing in a general election. But whenever someone questions Bain, they are accused of being anti-capitalist.

Wishing it away will not make it go away, as an article in The Boston Globe about Domino’s Pizza shows, Domino’s Delivered For Bain: Romney’s Bain made big profit from the pizza chain, but left it saddled with debt.

Domino’s Pizza frequently is cited as a Romney and Bain success story.  And for Romney and Bain it was, but it’s not as represented.

Per The Globe, Domino’s was a thriving business when Bain acquired it.  Bain did not start it and it was not in need of a turn around, but now it is saddled with huge debt used to pay Bain:

Domino’s was not in need of rescue, nor was it a classic turnaround case for Bain. But it was still a bonanza for the Boston leveraged buyout firm, which makes money by buying and selling businesses. Bain reaped a 500 percent return on its investment in the nation’s largest pizza delivery chain over 12 years.

Domino’s grew its revenues and earnings under Bain, but its debt also surged to $1.5 billion, leaving the chain with a higher debt ratio than most of its rivals, and interest payments that eat up half its profit each year….

To buy Domino’s, Bain put up a third of the money in cash and borrowed the rest. It took money out in several chunks including: a 2003 refinancing of the company’s debt, a 2004 initial public stock offering, and an $897 million “monster dividend’’ paid to Bain and other investors in 2007. In each instance, the company borrowed money or refinanced old debt to make the payouts.

Is Bain’s Domino’s story of running up debt one we want to run on in November?  If polling is correct, it looks like we will be.


Donations tax deductible
to the full extent allowed by law.



RexGrossmanSpiral | January 29, 2012 at 10:33 am

Dominos also makes terrible, unhealthy pizza too! I know because I just ate some 5 minutes ago.

This does not advance any good agenda, Prof.

Note the dates.

It is like blaming BOOOOOOOOOOOOOOOooooooooooosh for our current economy.

We are better.

    William A. Jacobson in reply to Ragspierre. | January 29, 2012 at 10:39 am

    Romney and his supporters explicitly and loudly have embraced Domino’s as a Romney success story. They own it, for better or worse. I could ignore it, but that will not make it go away.

      But make WHAT go away, Prof.?

      This is a Mushroom Media hit piece. A LOT of what they assert is unsupported (i.e., 500% over 12 years). Depending on how they calculate that, that AIN’T a big pay-out, and may not even be CLOSE to reality.

      And NOBODY at Domino’s said they felt like Bain was screwing them by ANY means.

      See the picture of the very happy man, their founder, getting to realize one of his dreams?

      Looks like voluntary exchange happening to me.

      Now, again, the JOBS claim is VERY SUBJECT to challenge, as that is a devilishly hard thing to figure on a net basis. But NOTE that Domino’s seemed TOP-HEAVY, and Bain helped weed that out.

        “NOBODY at Domino’s said they felt like Bain was screwing them”

        Anybody who did say that would no longer be at Domino’s! The workers who remained “knew which side their bread is buttered on” as the saying goes (or, in this case, knew which side of the pizza had the pepperoni).

      I agree, Prof. This will be used. I agree no gun was aimed at anyone’s head forcing this, but will be used as an example by the Dems as what is wrong with business as usual.

        William A. Jacobson in reply to NewtCerto. | January 29, 2012 at 11:28 am

        The pressure for people to just shut up and go along is going to get intense — we’ve seen it with Huckabee denying he said what two videos say he said.

      1. Romney and his supporters explicitly and loudly have embraced Domino’s as a Romney success story. They own it, for better or worse

      The original post made that point, but not strongly enough to register during my first reading. Per other commenters, my eyebrows rose when this fact-based conservative blog solely cited a Boston Globe hit piece and took it at face value.

      2. Here is the Domino stock chart. The abrupt drop in 2007 presumably reflects the “monster dividend” which the Globe mentioned. Shareholders were almost wiped out during the financial crisis—obviously excessive leverage played a major role, not to mention poor product quality—, but the stock has recovered, presumably without a taxpayer-funded bailout. Moody’s recently upgraded the company’s debt.

      3. The foregoing is not an endorsement of Bain, of this particular Bain operation, or of Romney. Call him a soulless, visionless technocrat and watch me nod. I have accepted your argument that Gingrich is a better bet for the nation.

      4. But let’s not go all Manichean here. I’ve said it before and will probably say it again: none of the Republican contenders is a parfait gentle knight.

Okay, I am playing Devil’s Advocate here, Professor. Did someone from Bain hold a gun the collective heads of the board at Domino’s to sign a contract with them? The article specifically states that Domino’s was not in need of rescue or in need of turnaround. Why, then, was Bain even at the doorway, let alone allowed inside the company?

Am I missing something? I ask that in all honesty, not in sarcastic tones.

    Samuel Keck in reply to herm2416. | January 29, 2012 at 12:19 pm

    Long story short, Domino’s owner wanted to sell, Bain bought … and then leveraged (ie borrowed on Domino’s credit) it to the max; paid themselves millions in management fees from the proceeds of the loans, took Domino’s public and then simply walked away from their debt burdened creation.

    Almost a textbook case in “asset stripping,” and in this case the asset that got stripped was Domino’s good credit. It’s just that simple.

      SeanInLI in reply to Samuel Keck. | January 29, 2012 at 4:24 pm

      Domino’s current credit rating with Moody’s is Baa3, which is considered “investment grade” (albeit at the low end), and they are considering upgrading the rating.

      So please explain how Domino’s credit was “asset stripped” by Bain Capital and the management team they put in place? I’m anxious to hear this doozy of an “explanation”.

        Samuel Keck in reply to SeanInLI. | January 29, 2012 at 11:56 pm

        “So please explain how Domino’s credit was “asset stripped” by Bain Capital and the management team they put in place? I’m anxious to hear this doozy of an “explanation”. ”

        No problemo. Bain sold Domino’s debt in quantities large enough to take it down to the lowest of the ten investment grade ratings — the Moody’s Baa3 of which you speak. They didn’t float more debt because, being Harvard MBAs, they knew that more sales of debt instruments would trigger even lower ratings by the rating services and therefore it would be harder, if not impossible to sell those extra issues — with their attendant lower ratings — to the institutional investor crowd … which naturally don’t like to risk getting the reputation of being junk dealers when the analyst crowd shows up to peek at the books. Like I said before, it’s just that simple … and this stuff ain’t rocket science. Happy now?

    wodiej in reply to herm2416. | January 29, 2012 at 1:55 pm

    So because Domino’s made a bad decision it was ok for Bain to fleece them? Don’t excuse bad behavior w more bad behavior.

On the other hand:

We’re comfortable with debt,’’ said Michael Lawton, Domino’s chief financial officer, at the investment conference. He described the 2007 “monster dividend’’ in which investors, led by Bain, received a $897 million payout from the company. The management team is used to living within the constraints of financial leverage, he said. “We can handle this.’’


Jeffrey Zients will serve as President Obama’s new acting director of the Office of Management and Budget (OMB), but the president’s decision might undercut attacks on Republican Mitt Romney’s career as a venture capitalist, because Zients and Romney are both alumni of Bain & Company.

Read more here:

I don’t see how this is anything like Obamanomics (and to be fair, Bush did just as much overspending…). Did the article say something about trillion dollar deficits? Or did it say the company has managable debt load that was the cost of expansion?

The Boston Globe is a liberal rag…they hate Romney! If Ronald Reagan were running on the GOP ticket, they would do the same thing.

As a Massachusetts resident for 40+ years, I am not defending Romney, but I also very rarely believe a word the “Glob” prints – merely a word of caution!

MaggotAtBroadAndWall | January 29, 2012 at 12:14 pm

I only read your excerpt, so maybe there is more relevant information in the article. But looking at only the excerpted info, we need to know more. Just saying Domino’s has a high debt burden and that Bain earned 500% over 12 years doesn’t tell us a whole lot.

Relevant questions are: How much did Domino’s revenue grow after Bain acquired it? How much did after tax earnings grow? Has whatever growth Domino’s has experienced since Bain’s acquisition been sufficient to enable it to reduce it’s debt load? A key credit statistic is Debt/EBITDA. The smaller the number the less likely the company will experience financial distress. What is Debt/EBITDA now compared to when Bain first did the deal? If Debt/EBITDA is trending down over time, that’s a sign of health. It means the company is either de-leveraging on an absolute basis (paying down debt), or it is growing cash flow fast enough that the level of debt is less likely to become problematic, or some combination of the two.

As the financial crisis was coming to a head, investors worried that Domino’s was potentially going to be a casualty and they sold the stock hard all the way down to $3 in November, 2008. But those fears quickly faded and the stock is now $32.

Somebody who bought at the bottom has made a return of close to 1000% in barely over 3 years. Bain’s 500% return over 12 years makes it look like a piker, comparatively.

BTW, I understand that none of what I’ve said will matter once the Gekko-ization process begins in earnest. Obama and the financially illiterate Obama sycophants pretending to be journalists will demonize Willard and put him back on his heals. They’re going to force him to defend whichever deals they cherry pick to talk about. He’s going to be in a perpetual state of defense.

[…] best for America”? Bain had a history of leveraging the companies they bought. Legal Insurrection has a prime example of Bain’s capitalism: Domino’s was not in need of rescue, nor was it a classic turnaround case ey by buying and […]

I blame Greenspan … Romney was just one of many that took advantage of the easy money era that created market distortions and bubbles. We have those popping now … housing, banking, currency … have we forgotten the crisis that gave us TARP? It is still there, just kicked down the road, past this election.

The management team is used to living within the constraints of financial leverage, he said. “We can handle this.’’

That is the Romney style, and classic of the easy money LBO period. Management may not complain, because it is not their debt. They get to share with Bain in the payouts, while the corporation takes the risk of default.

Bain of course wants success, but wants isolation from the risk. Management wants to share in that, and besides high salaries with nice incentives, often had a golden parachute as well.

Investors were playing the hot stocks, and for the 80’s and 90’s baby boomers were in their prime and finding the stock market. The go go momentum era, along with irrational exuberance that continued to be fostered by Easy Al Greenspan, gave us the bubbles that popped around 2000, and have left us in the critical condition we have now. The economic patient is on a quantitative easing, cash infusion drip.

I don’t blame Romney for being part of the game, but all I see from his camp is interest in continuing the game for personal profit. The problem with too much easy money is over expansion. Market share is gained with leveraged debt clout, which transfers profits from the company to the lenders. Good companies that don’t play the game lose out. Amazon got their market share by losing money on every book they sold … but they had the leverage to endure.

Easy money shifted the whole game, and Wall Street bankers loved it. “Inside Job” is on Netflix and shows some of the problems that resulted. But it’s a tough sell for a 30 second commercial, so go go era Romney will promise to give us more go go, and ignore the systemic damage. Bernanke is promising 0% interest rates through 2014 … another transfer of wealth to the bankers that punishes savers.

Dominoes is a also good example of wealth transfer from middle class and small business to Wall Street leveraged debt junkies. Snort the junk bond cocaine from Wall Street, or you’ll never be a playah. Thanks Easy Al.

    Midwest Rhino in reply to Midwest Rhino. | January 29, 2012 at 12:59 pm

    from Greenspan’s testimony to congress on the housing crisis:

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

    “You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,”…
    Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

    We should perhaps not be shocked that Romney profited much the same way … transferring risk to someone else, while collecting loan shark like fees, dividends, interest. Balloon payments on mortgages, balloon payments on Domino’s loans … are people making any connections at all?

    Romney’s background COULD be helpful, but he is not honest about so many things, how can he be trusted to suddenly be a smaller government guy, and remove the fuel from the fires of debt that are consuming us (and profiting him)?

“Lynn Liddle, a company spokeswoman, acknowledged there’s a risk of interest rates rising. But she said the debt is not holding the company back. Domino’s stock soared 113 percent last year.”


IF ONLY Obama’s model were ANYTHING LIKE that…!!!

We have WAY too much POSITIVE stuff to use to give this kind of thing any oxygen…seems to me.

    Midwest Rhino in reply to Ragspierre. | January 29, 2012 at 1:13 pm

    yeah, if you pick the right time frame, any stock looks good. DPZ is still 10% below it’s high from April 2007.

      Ragspierre in reply to Midwest Rhino. | January 29, 2012 at 1:30 pm

      Let’s get down to the nut-cutting, RINO…

      Would you consider purchasing Domino’s stock?

      Would you consider purchasing Obama corp stock?

      I could fisk the BS you posted, but I really haven’t got that kind of time. There was SOOOOOO much.

        Midwest Rhino in reply to Ragspierre. | January 29, 2012 at 2:53 pm

        but you have so much time for your trash talk, and letting us know how superior your opinions are …

        sorry to embarrass you on your numbers, …. facts are stubborn things, aren’t they. But I appreciate your response … blame the messenger. ha

        A lot of companies soared after 2007, most have pulled back some. MSFT has half the PE of Domino’s without the debt problem. DPZ gapped down from 32 to 19 in 2007, probably largely because of their leveraged debt. They are probably a good example of what can happen if government doesn’t keep printing money.

          Ragspierre in reply to Midwest Rhino. | January 29, 2012 at 3:22 pm

          Well, hell…since you INSIST on double-down stupid…

          Let’s take your asinine assertion that Bain (and all others) leveraged buy-outs were possible ONLY because of “loose money”, shall we…???

          Say Bain had to pay 2-3 more points for money (and you have NO FLUCKING idea what they did pay from the Glob story)…

          Would they have bought Domino’s?

          Hell, YES…!!! IF they could make 2, 3, 4, 10% on their RISK. Which, according to hindsight, they DID.

          Facts ARE stubborn things. So is economic law, and sound business practice.

          Midwest Rhino in reply to Midwest Rhino. | January 29, 2012 at 4:02 pm

          Let’s start with your false premise:
          “Let’s take your asinine assertion that Bain (and all others) leveraged buy-outs were possible ONLY because of “loose money”, shall we…???”

          versus what I said: “I blame Greenspan … Romney was just one of many that took advantage of the easy money era that created market distortions and bubbles.”

          If you know the business cycle, you know Easy Al tried to manage it. Despite claiming in 94 or so that there was irrational exuberance, he did not do like Voelker and raise rates, he chickened out and kept the liquor flowing at the party. We still have the hangover.

          If money is easy for too long, over expansion is a natural outcome. Where the bubbles pop up may be hard to predict. and I wasn’t specific about Bain, was just saying that was the general environment.

          Oh, and I’m “Rhino” becuase that was my nick when I spent 12 hours a day day trading, trying to evaluate companies during a big bubble blow off. Not saying that makes me an expert, but I read a lot of experts, and have ever since. If you want to link me to a guru, it would probably be Fleckenstein …

          I didn’t like the RINO link to Rhino, but now I don’t mind. I’m a Tea party conservative, Republican in name only. 🙂

          Ragspierre in reply to Midwest Rhino. | January 29, 2012 at 4:06 pm

          So…walk back.



          Midwest Rhino in reply to Midwest Rhino. | January 29, 2012 at 4:34 pm

          I only bother with the rant because it is such a pivotal issue. So many think Greenie’s managed government was their friend, and that we are just about to turn things around. Reality is more bleak, and that is largely why Paul is so popular. Newt reached out to the Ron Paul supporters after his win in SC … on problems with the fed.

          Fleckenstein and many others realize how destructive Greenspan and now Bernanke have been. It could be a huge campaign issue, and Romney is on the wrong side … but people still seem to think Easy Al was a god, and all will be well if we just let government manipulate our markets some more.

          But maybe that is too big of a mental hurdle for those that just want their 15% mutual fun returns to come back.

      SeanInLI in reply to Midwest Rhino. | January 29, 2012 at 3:53 pm

      I hate to point it out, but isn’t that EXACTLY what you did, choosing 2007, the stocks bubble-economy high price, vs., say, their IPO in 2004?

      And you ignore the fact that even if you compared Domino’s highpoint in 2007 vs. today, there has been a massive recession, and Domino’s has fared better than most in recovering?

      Domino’s dropped down to about $1 in the market selloff in 2009, but has recovered to $32 today. Sounds like a company most investors want a piece of.

      I’m a Newt supporter, but this is a far-left style lie-filled attack.

        Midwest Rhino in reply to SeanInLI. | January 29, 2012 at 5:08 pm

        of course, but in juxtaposition to the claim of 113% gain, to make my point … and I was impressed by the gap.

        Like you said, it went down to one … maybe that is the real value, not 32. If the plug gets pulled on the money machine, it doesn’t really matter what a broker says it is worth. At that point it was worth one dollar …
        A lot of smart people say we are like Greece, except we have a printing press. Just a matter of time …

Besides the Domino/Bain “success” story, Democrats will use the “it’s not fair that a rich guy has a low tax rate” strategy against Romney. I believe someone here at LI humorously said that Romney’s campaign slogan could be “It’s Perfectly Legal.”

If Romney adopts a different defense, such as “The Dems are right, it isn’t fair so I’ll work to raise rates on rich people like me” then I don’t think that will go over well with conservatives.

01-29-2012 11:15 AM

Axelrod: The Question Is Not Whether Romney Played By The Rules

“On Meet the Press, Obama campaign senior strategist David Axelrod explained talked about Romney’s tax returns and the fact that he paid a 13.9% effective tax rate. Asked if Romney broke any rules, Axelrod pushed back. The question is, are the rules right, Axelrod said. And Romney would continue those rules. It’s not right that Romney can me $22 million and pay an effective tax rate as middle income Americans. Just because Swiss bank accounts and Cayman Island funds are legal, doesn’t make the tax system right.”

    Ragspierre in reply to MadCon. | January 29, 2012 at 12:40 pm

    So, let me understand this line of “thinking”…

    The Deemocrats are going to demagogue the GOP candidate, using any lie they can fashion.

    Therefore, WE should demagogue our candidates preemptively, anticipating the Deemocrat lies.

    I guess that just seems wrong to me.

    On so MANY levels…

      MadCon in reply to Ragspierre. | January 29, 2012 at 4:59 pm

      How is it a lie to bring up valid points that will be used against Romney who many conservatives feel is a seriously flawed “conservative” candidate? And I’m not giving the Democrats any ammunition. What they’re saying is already out there on the liberal blogs. I’m just repeating it so we’re aware of how they’ll be attacking.

      As the Professor notes in his latest entry, why is it okay for Republicans to “demagogue” every Republican candidate except Romney? For days we heard every nasty untruth and half-truth about Gingrich from fellow Republicans, but now we’re told we’re helping Democrats by bringing up our reservations about Romney.

[…] Read it here:… Share this:TwitterFacebookLike this:LikeBe the first to like this post. […]

There is nothing illegal or “wrong” about the Bain model. It is what it is.

My problem with Romney in relationship to his skills/model developed at Bain Capital is what does “fundamently restructuring government the same as you would a very difficult enterprise” mean? It’s a great soundbite, but Romney influenced by his friend Tom Stemburg’s (Staples guy, Gov. Romney’s transition team, pres council of Mass General) idea gave their state RomneyCare, the blueprint for ObamaCare.

I just see “fundamentally restructuring government the same way you would a very difficult enterprise” to be missing key constitutional awareness of individual rights.

So, I connect the dots like this, “fundamentally restructing government the same way you would a very difficult enterprise” = RomneyCare (individual mandate, employer mandate, etc….)

I see Gov. Romney as an “efficiency wonk”, and that’s about it. The genesis and development of Romneycare is enough for me to say, Gov. Romney stay put in private business.

Apparantly Newt’s SuperPac has not been successful in getting people to believe them. The Medicare fraud case against Bain-owned Damon Labs is a powerful piece, especially in Florida in the land of the retiree.

As American Spectator points out, this is an old story that Massachusett’s voters ignored when they elected him governor — but they were mostly liberal Democrats. Conservative Republicans need the Cliff Notes version of this 8-minute epic video NOW!

Nice catch on the article. I hadn’t seen that one. Thanks.

Bottom line: Domino’s was sold to Bain for $1.1 billion, and it’s Enterprise Value is currently listed as $3.3 billion.

That’s called a “success” for all you mathematically-challenged critics.

The debt gets paid down and goes away over time, and the value of the company, with it’s positive cash flow, will continue to grow over time.

    Midwest Rhino in reply to SeanInLI. | January 29, 2012 at 4:56 pm

    Thanks Sean, my point was really to get to the Greenspan thing. I didn’t look at Domino’s in detail, but that one year doesn’t tell the story. The drop from 32 to 19 shows what can happen in a credit crunch, and demonstrates the weakness of a market based on debt in a world of leveraged debt.

    Domino’s might be doing better because it could be counter cyclical … people can’t afford to eat out, so they do pizza in? It’s a well known name … people have run up stocks on less info than that before.

    Debt gets paid down, or maybe NOT if another credit crunch happens and the bottom falls out again. But “they” will postpone that till at least 2013.

    My point is, Bain should be understood in light of Greenspan’s era of debt. Loading up a company with debt they can pay is different than loading up citizens and the nation. Domino’s MIGHT handle it, but trillion dollar annual deficits won’t.

    I might have been clumsy in trying to merge that point in to the Bain/Domino’s story, but I think my points are valid. I appreciate your response.

    Tripling in 14 years works out to an 8% annualized gain. In 1998 long-term interest rates were about 5.5%, which works out to a doubling in 14 years.

    1. Since the stock nearly lost its value during the financial crisis, one may legitimately ask—granted, in hindsight—whether the 2.5% excess annual growth justified the risk.

    2. One may also ask what kind of growth the company would have experienced without leverage, either under the original proprietor or under more conservative management than Bain’s. If available, the financial history under the founding owner would be relevant here.

    3. Also legitimate are legal and ethical questions about whether Bain misused its dominant ownership position to the disadvantage of other shareholders and stakeholders.

It was also during this time that Domino’s underwent a drastic reshaping of their menu, right? I don’t suppose any investment went into that effort?

“But whenever someone questions Bain, they are accused of being anti-capitalist.”

Just want to point out that this is a false narrative. Back when Bain was news, Gingrich very clumsily attacked Romney on this Bain record, and the Professor tried to defend him by splitting hairs the candidate himself was not. And then when such “establishment” figures as Rush Limbaugh came down on the side of the opposition, the Professor through his hands up in disgust and began a false narrative that no one can question Bain.

Gingrich took Bain off the table by being so sloppy in his criticism, which I believe he himself later acknowledged. (Actually I think he blamed it on Obama, but whatever). If it is now radioactive, Gingrich has no one but himself to blame.

It’s truly unfortunate this primary season has gotten so nasty. I hold no great love for Romney, but the Gingrich apologetics are grating.

    Ryan in reply to Ryan. | January 30, 2012 at 1:04 am

    Sorry for the typos, by the way. It should read “his Bain record” and “threw his hands up”, but there’s no way to edit it post hoc. It’s late.