How to survive this crisis

How to survive this crisis

31 March 2020

Fyodor Ovchinnikov

Dodo Pizza CEO

Fyodor Ovchinnikov

As Dodo Pizza CEO, I’ve decided to lower my own salary to the lowest legally allowed figure. Why am I taking such a drastic measure?

This past weekend our chain’s sales in Russia—that’s close to 90% of our business right now—have fallen by more than 30%. The quarantine enactment and the prohibition of restaurant work have taken their toll. Delivery revenue increase couldn’t make up for the dent in our sales made by our closed restaurants. Obviously, our revenue will continue to decline in the near future.

Of course, we’re not even thinking about giving up. We’ve already made a great many efficient decisions in our retail business. We’ve launched hot beverages, milkshakes and even basic necessity goods delivery in some pizza shops around Moscow. This test has already brought good results. We’re now promptly rolling out this solution across the whole chain.

We’ve optimized the retail chain after the quarantine started—41 out of the 508 Russian pizza shops are temporarily closed, and their delivery areas are distributed between working pizza shops. That’s more efficient. We are successfully renegotiating rents with our landlords. Big props to them for understanding! We’ve introduced contactless delivery. We’ve stopped nationwide advertising to save money. And we’ve got many more ideas on how our pizza shops should survive this crisis.

But our chain also has a managing company. That company develops the Dodo Pizza franchise, the core of which is our own digital IT system. The managing company receives income as royalties from franchisees. Royalties are 3.5% to 5% of pizza shop revenue. And the managing company is less flexible than the retail business. Our main expenses are salaries for programmers, marketing consultants, designers, and R&D managers. These aren’t hourly wages, of course, like in pizza shops, but a fixed sum that’s independent of the chain’s sales.

These past one and a half years, we’ve been having a positive cash flow and have built a serious margin of safety. We probably entered this crisis in the best financial state in our history, and we are feeling much better than many other players in our market, but there’s a valley of uncertainty ahead of us. We need to prepare.

We’re an independent company created in a small Russian town, and we don’t have a lot of money or government support. A difficult time awaits us. We will be acting ahead of it to deal with the complications, meet our big goals, bring value to our partners, and simply not disappoint thousands of people who closely watch our company.

The CEO’s salary is a small sum comparing to all of the managing company’s expenses, but it’s an important symbolic gesture. I know that right now, in our pizza shops, to survive and keep the teams together, people are giving up bonuses, and pizza shop investors are giving up dividends. That’s a gesture of solidarity and an example for our partners. You have to start with yourself. Our future is more important than our present. And I’m confident about our future.

I’ve also suggested that all of the managing company’s team members could think about lowering their salaries for the next three months and receive the difference in global Dodo Pizza stocks at a discount (that’s the company that owns everything—the Dodo IS, all the trademarks, the franchise in every country, our company-owned pizza shops, and all new concepts; this company will eventually file for IPO). Compensation with stocks is our faith in the future. It’s the ability to share the risks with the company and invest.

A team of employees who are also shareholders is unstoppable.

Everyone who decides to do this will be able to claim a portion of the company’s revenue in the future. And it’s completely voluntary. People and their situations differ. Some people don’t like or want to take risks, some can’t avoid expenses and have responsibilities, families, or mortgages. I understand, accept, and respect everyone’s decision and choice.

Despite everything, we will see this through together.

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