Ritch Allison
Chief Executive Officer at Domino's Pizza
Thanks, Jessica. I'll begin my comments with a look at our U.S. business. Domino's 2021 U.S. retail sales, excluding the impact of the 53rd week of 2020, were up 6.7%, rolling over 15% retail sales growth in 2020, representing a 21.7% 2-year increase. Fourth quarter U.S. retail sales grew 4.6%, excluding the impact of the 53rd week, lapping a 14.3% increase from Q4 2020. Our fourth quarter same-store sales growth of 1% was enhanced by the positive impact of 205 net new stores that we opened throughout the year. There were also headwinds in the quarter driven by ongoing staffing challenges, particularly in our delivery business. These challenges were more pronounced at the end of the quarter due to the Omicron surge. Let's take a few minutes to further break down the U.S. retail sales growth into its two components, store growth and same-store sales. 89 net new U.S. stores in Q4 brought us our franchisees to 205 net new stores for the full year. U.S. store growth in 2021 was softer than we would like to see, particularly given the continuing strong franchisee store-level EBITDA.
While cash-on-cash returns remain very strong, and we continue to see a robust pipeline of future openings, we and our franchisees had a number of store openings delayed in 2021 due to a variety of factors. We experienced slowdowns in permitting inspections and equipment deliveries as well as delays in construction and utility hookups. The aforementioned staffing challenges also impacted some store openings. We remain bullish on the unit growth potential in the U.S. but believe that we may continue to see some of these challenges persist in the quarters ahead. Let's turn now to same-store sales. As we continue to experience COVID overlaps, we believe it remains instructive to look at the cumulative stack of comparable U.S. same-store sales anchored back to 2019 as a pre-COVID baseline and will continue to do so for as long as we believe it is useful in understanding our business performance. Our two-year stack for Q4 was 12.2% and the two-year stack for full year 2021 was 15%. We saw a sequential decline in the Q4 two-year stack when compared to Q3.
As we look back across 2021 and interpret our results, several things evolve throughout the course of the year, which we believe contributed to this sequential decline. First, we believe that government stimulus had a material impact on our sales in Q1 and Q2 2021 that waned in the third and fourth quarters as we moved further away from the onetime payments and other enhanced government benefits tapered off over the course of the year. Second, we saw staffing challenges intensify across the country as the year progressed, resulting in reduced operating hours and other service-related challenges in many stores across the network. We saw that urban markets were generally more impacted than our rural markets. We believe these staffing challenges posed a more significant headwind on orders and sales during Q4 than they did during Q3 and much more so than in the first half of the year.
When we break our U.S. stores down into quintiles based on staffing levels relative to a fully staffed store and then compare their sales performance in the fourth quarter, it gives us a sense for the magnitude of the impact that staffing is having on our U.S. business. Stores in the top 20%, those that are essentially or close to fully staffed, produced an average Q4 same-store sales increase of almost 6%. By contrast, stores in the bottom 20%, those that are facing the most significant labor shortages, saw Q4 same-store sales decrease by an average of almost 7%. When we look across the U.S. business, we continue to believe that consumer demand for Domino's remains very strong across the country. It is our current capacity to serve that strong demand that we believe presents one of our largest near-term challenges. We and our franchisees are taking a number of actions to address the staffing issues and to expand that capacity.
A new applicant tracking system that we rolled out a few months ago has made it easier for candidates to apply for openings and to be onboarded at both corporate and franchise locations across the U.S. system. We are also sharing operational best practices to eliminate unnecessary and time-consuming tasks in the operation of our stores, tasks like pre-folding boxes that could drive both team member and customer satisfaction. We now have over 2/3 of our stores who are not pre-folding boxes, saving an estimated 30 to 40 hours per store per week in labor. The objective of this initiative is to keep drivers in their cars and on the road while working as much as possible. In our corporate stores during 2021, we rolled out increases in team member compensation and benefits totaling more than $6 million over and above required minimum wage increases. In 2022, we are currently anticipating committing an incremental $8 million investment in team member wages over and above required 2022 minimum wage increases in our corporate stores.
Looking back to 2019, we will have invested over $30 million in frontline wage and benefit enhancements in our corporate stores. We are also implementing new approaches to team member onboarding, training and development to improve the employee value proposition. While I'm optimistic about the efforts that we and our franchisees have underway, including a great new hiring ad that features one of our terrific young franchisees, we believe that delivery driver staffing may remain a significant challenge in the near term as the labor market continues to evolve. We are conducting a full assessment of the driver labor market and potential additional actions to relieve the existing constraints on our business. Now I'll turn and share a few thoughts specifically about the carryout and delivery businesses. The carryout business was very strong in Q4, with U.S. carryout same-store sales approaching 10% positive compared to 2020, driven by both ticket and order growth. On a 2-year basis, our carryout same-store sales were up over 16% versus Q4 2019.
We drove greater awareness of Domino's Carside Delivery during the fourth quarter through our Carside Delivery two-minute guarantee. I continue to be pleased with our Carside Delivery performance. Our research shows that it is appealing to both existing and new customers. And we have consistently averaged below two minutes out the door and on our way to our customers' cars. During the fourth quarter, we went on air to launch three great new products to support our signature $7.99 carryout offer. We call them Dips & Twists, and they hit the mark for great taste and consumer appeal with terrific economics for our franchisees. Results indicate that these products contributed meaningfully to our carryout ticket growth in the fourth quarter as many customers added these incremental items to their orders, resulting in the smart ticket growth we've been so focused on driving.
During our recent presentation at ICR, I also highlighted a change for 2022 to our $7.99 carryout offer that recently went into effect. As of January 31, this national offer is now available online only. This supports a balanced approach of bringing value and a great experience to our customers online while supporting our goals of growing the digital carryout business and supporting the profitability of our carryout orders. Online carryout orders generate a higher ticket and require a lower cost to serve than phone carryout orders, in addition to driving digital engagement and the opportunity to add members to our loyalty program. Most recently, we launched a fund campaign to support this transition to online carryout for our customers by offering a $3 tip for each online carryout order. This approach also aims to drive repeat purchases as the tip comes in the form of a coupon that the customer can use on their next order. Turning to the delivery business. Q4 delivery same-store sales declined relative to 2020, driven by order count declines, which were offset in part by higher ticket.
Looking at the business on a two-year stack, Q4 delivery sales remained almost 10% above Q4 2019 levels. We believe that the staffing challenges that I referenced earlier had a disproportionate impact on our delivery business in Q4. During the fourth quarter, we continued our Surprise Frees ad campaign to support our delivery business that played on a key tension that consumers have with third-party delivery apps. The Surprise Frees that are often charged for service or small orders or simply because you live in a certain ZIP code. This campaign supported two of our key brand attributes, value and transparency. Over the course of the campaign, Domino's and our franchisees gave away over $50 million worth of Surprise Frees to our delivery customers. We and our franchisees also gave back to local independent restaurants in our communities across the country. Many of our customers received gift cards with their Domino's orders that could be used to buy directly from local restaurants that have been hurt by rising costs, including fees charged by third-party apps.
As we look forward into 2022 and the inflationary forces across the U.S. economy, we expect to face unprecedented cost pressures on our U.S. business. As Jessica mentioned, we estimate that our food basket will increase 8% to 10% versus 2021, and we anticipate that increase will be even more pronounced in the first half of 2022. As I mentioned earlier, we also expect to make significant incremental labor investments in our corporate stores this year, and we believe many franchisees will be facing similar cost increases in their businesses. These costs put particular pressure on the delivery business due to the more labor-intensive nature of that service method. Managing through this cost inflation requires the same balanced approach that we have successfully executed over the last decade. We must continue to offer great value to our customers while giving our franchisees the tools to profitably grow their businesses over the long term. It's with that balance in mind that on March 14, we will evolve our $5.99 Mix & Match offer for the first time in over 12 years.
We will bring more value to our customers by adding three great products to the Mix & Match menu: 32-piece parmesan bread bites, 6-piece wings and 3-piece chocolate lava cakes. Customers will now have even more variety with more than a dozen items to choose from as they assemble their meals. Historically, when we have added items to the Mix & Match menu, we have seen positive impacts on ticket as customers add more items to their orders. To ensure that Mix & Match can still drive value for our franchisees, we will replace the current single national offer with two separate offers. Our delivery Mix & Match offer will be $6.99 each for any two or more items on the Mix & Match menu. We believe that $6.99 is still a great relative value for our delivery customers, offering variety, great taste and a competitive price while also reflecting the increased costs inherent in a delivery order. This approach can allow our franchisees to achieve balanced growth across ticket and orders, which is key to driving profitable long-term growth for their businesses.
Our carryout Mix & Match offer will remain unchanged at $5.99 each for any two or more items on the Mix & Match menu. This allows us to continue offering the same familiar price point with enhanced variety and great value to our carryout customers as we look to continue growing that important and lower cost-to-serve business channel. Rounding out the fourth quarter, we made continued progress in our U.S. business across several important areas. Our digital sales growth continued, accounting for $6.6 billion in U.S. retail sales in 2021, an increase of over 36% since 2019. We surpassed 29 million active members in our Piece of the Pie loyalty program and now have almost 70 million customers enrolled in our loyalty database. We broke ground on a new supply chain center in Indiana, which we expect to complete by the end of 2022, and we are now running permanent installations of our new PULSE point-of-sale system in five stores right here in Michigan.
We are excited about accelerating this rollout in 2022 and beyond. Now as you know, it is not our practice to provide intra-quarter updates. But before we close our discussion of the U.S. business, I'd like to take a minute to share that the increased staffing headwinds we and our franchisees saw late in the fourth quarter have continued as we begin 2022. COVID, and specifically the Omicron variant, impacted us significantly in January, with the resulting staffing impacts putting more pressure on our U.S. business than we saw on average across the fourth quarter. These labor constraints, in particular, among delivery drivers, have encumbered our and franchisees' ability to take and service all of the orders coming into our stores. When we look at our 1- and 2-year trends, the limitation on order capacity resulting from these labor constraints, combined with the absence of government stimulus in 2022 as compared to Q1 2021, have created a challenging backdrop to date for U.S. sales comps in the first quarter of this year.
We believe that the sales we saw in Q4 2021 and have seen so far in 2022 for the U.S. business are not indicative of the demand our great brand is capable of generating. That demand gives us confidence about our ability to drive long-term growth once we adequately address these labor constraints. Consistent with what we saw in the fourth quarter, well staffed stores continue to outperform those that are not by similarly wide margin. And when we look at the carryout and delivery businesses, carryout has remained much stronger than the more labor constrained delivery business. As I mentioned earlier, we believe that delivery driver staffing may remain a significant challenge in the near term. As the labor market continues to evolve, we are conducting a full assessment of the driver labor market and potential additional actions to relieve the existing constraints on our business. We and our franchisees remain laser focused on relieving the labor capacity constraints and continuing to grow the Domino's brand as we have for many consecutive years.
I'll end the U.S. discussion with a big thank you to our U.S. franchisees, our corporate store operators and our supply chain team for their ongoing efforts to serve their customers, their team members and their communities in a challenging operating environment. I'll now turn my attention to our international business. And before I speak about the quarter and the year, I just want to send out our best wishes and prayers to our team members and their families in Ukraine. It was another strong quarter of performance for our international business. Our 13.2% international retail sales growth, excluding foreign currency impact and the impact of the 53rd week, lapped our 9.9% growth in Q4 2020, combining to deliver a two-year stack of 23.1%. Q4 same-store sales were positive at 1.8%. While this is a sequential deceleration from Q3, we are encouraged that this growth was driven entirely by order count increases as our franchisees continue to provide great value to their customers globally. For the full year, excluding the impact of foreign currency in the 53rd week of 2020, Domino's international retail sales grew by 17.1%, our strongest result since 2016.
As previously shared, we are continuing to watch the two-year stacks across both the U.S. and international, and 2021 represented a 23% international retail sales two-year stack relative to 2019. A clear highlight for the quarter and the year was the outstanding store growth momentum that continued to build across our international business. Our international franchisees demonstrated their strong commitment to growth by opening 379 net new stores in Q4, bringing our full year total to 999 net new stores. When we back out the conversion of Dominion Pizza in Poland, our 999 net new international stores included 950 net new organic stores. That's a new record for our international business. This continued acceleration of international store growth, combined with our U.S. store growth, has driven the global pace of store growth to 6.8% for the full year 2021, aligning nicely with our two to two-year outlook range of 6% to 8%. Our 430 international gross openings and 51 closures during the fourth quarter brought our totals for the year to 1,094 gross openings and 95 closures. This low level of store closures was driven by continued and strengthening store-level economics and related cash-on-cash returns.
Importantly, the few individual markets that closed more than a handful of stores each were among our highest net store growth markets. Many of these closed stores were in atypical locations such as office parks and malls and had significantly lower order counts than average. Closing these stores now, while opening new stores in more ideal locations, creates a stronger foundation for continued growth in 2022 and beyond. At the end of the quarter, we estimate that Domino's had fewer than 50 temporary COVID-related store closures, with the majority of those located in India. I'll now highlight a few international markets of note. In the U.K., our master franchisee, DPG, announced in December a new deal with its sub-franchisees after two years of negotiations. The agreement calls for DPG to invest over GBP20 million and improves alignment between DPG and its sub-franchisees on marketing and promotions, enabling a balanced approach to customer value and franchisee economics. Importantly, the agreement also calls for DPG and its franchisees to increase store openings to 45 annually over the next three years.
As our largest market by retail sales outside the U.S., we are encouraged by this agreement and the future growth that it can unlock. I also want to highlight several of the BRIC markets, which are a significant source of current and future growth. India continued its impressive store growth from Q3 into Q4, leading our international markets, both for the fourth quarter and for the full year in net new store growth. Accompanying the strong store growth was solid same-store sales growth driven by order counts. Our master franchisee, Jubilant, continues to invest in the business and set a higher bar for growth, while also taking care of their people throughout the ongoing COVID challenges. Subsequent to the quarter, Jubilant opened the 1,500th Domino's store in India. By far, our largest international market by store count, this was an incredible milestone for the brand in India. As I highlighted on previous calls, we continue to see strong results coming out of China including more than 100 net new stores opened in 2021. As mentioned at ICR, China is now estimated to have a full market potential of over 5,000 stores.
Fourth quarter results were very strong with a double-digit same-store sales increase and continued store growth momentum. Domino's Brazil was also a highlight in Q4, opening 18 new stores in a difficult macroeconomic environment. That marks 100 net new stores that our master franchisee, Vinci Partners, has opened since acquiring the brand at the end of 2018. We've been impressed with Vinci's ability to drive growth in the market and are very excited about the potential for them to continue expanding the Domino's brand. Brazil is estimated to have a full market potential of over 1,000 Domino's stores. In addition to those markets, we saw a strong continued regional growth in the Middle East from our master franchisee, Alamar, and the 11 markets in which they operate. Alamar recently achieved a great milestone with the opening of their 500th Domino's store. Mexico, Spain, Turkey, Malaysia and Australia were additional large market highlights contributing to our global growth. Our master franchisees have once again reinforced my belief that we have the best partners in the restaurant industry.
With an estimated remaining potential of over 10,000 new stores in our top 15 international markets alone, we look forward to continuing to work with them to drive long-term global growth for Domino's. In closing, I'm very proud of the results we and our franchisees delivered in 2021, particularly when we consider the persistence of the COVID-19 pandemic and the continued challenging operating environment. Our proven model for success, leading with innovation, leveraging our global scale and driving superior returns for our shareholders has continued to guide us. We have adapted to the ever-changing environment. We've grown sales, increased our global store count, invested in our people and driven returns for our franchisees and shareholders, all while staying true to our values as an organization. I am proud of our franchisees and team members who once again proved to me that they are the best in the restaurant business.
As we look ahead to 2022, we will work through the near-term challenges while remaining diligently focused on delivering for our customers, our team members, our franchisees, our communities and our shareholders. We have a long track record of profitable growth, driven by a powerful global brand and a disciplined operating model. This durable foundation gives me a great deal of confidence in our ability to continue to grow the Domino's brand over the long term. I'll end my remarks this morning with a heartfelt thank you to our franchisees and team members across the globe. My team and I are proud to serve you each and every day.
And I thank all of you again for joining us on the call today, and we'll now be happy to take your questions.