The Domino's Pizza Enterprises Ltd (ASX: DMP) share price has pushed higher on Wednesday following the release of a positive announcement.
In afternoon trade the pizza chain operator's shares are up around 2.5% to $44.04.
What was announced?
This morning Domino's announced that it has executed an asset sale agreement to acquire corporate store assets and rights and entitlements in respect to the franchise operations in Denmark previously owned by Domino's Pizza Scandinavia for approximately €2.5 million.
Domino's Pizza Scandinavia ceased operations and entered administration last month.
According to the release, Domino's will enter Denmark pursuant to a master franchise agreement with U.S. based Domino's Pizza, Inc for up to 25 years. This comprises an initial term of 15 years with an option to renew for a further 10 years.
What now?
Domino's expects to restart operations in Denmark with approximately 20 stores within the next year.
It believes things will be different this time around as it will "use its business know-how to carefully reinvigorate operations in Denmark which will be led by senior executives within DPE Europe who will relocate to Denmark."
The re-establishment of operations will of course require additional investment in store equipment, IT systems, and other central support. But the impact on FY 2019 underlying earnings per share is not expected to be material.
Furthermore, due to its small initial size, the Denmark business will take some time to contribute to earnings. But with a market potential of approximately 150 franchised and corporate stores, management has upgraded its future store count target in Europe from 2,700 to 2,850 stores.
Should you invest?
Whilst at this stage it is difficult to know how the company will fare in Denmark, I'm optimistic it will make a success of this and feel it could provide it with further expansion opportunities in the medium term.
Overall, I still see Domino's as a great long term investment along with fellow food shares Collins Foods Ltd (ASX: CKF) and Costa Group Holdings Ltd (ASX: CGC).
