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Investor files lawsuit alleging Domino's Pizza is not growing as claimed

A class action lawsuit has been filed against Domino's Pizza by an investor who claims that the restaurant chain "overstated" its business and financial prospects. The lawsuit, filed on September 20 in Michigan, is on behalf of investors who acquired or purchased Domino's securities between December 2023 and July 2024. The complaint also names CEO Russel J. Weiner and CFO Sandeep Reddy as defendants. The focus of the lawsuit is on Domino's Pizza Enterprises, the largest franchisee for the brand globally.

According to a press release from law firm Bernstein Lierbhard LLP, the lawsuit seeks to recover Domino's shareholders' investment losses. The complaint alleges that Domino's made "materially false and misleading statements regarding the Company's business, operations, and prospects," particularly in relation to its annual global net store growth.

The complaint claims that Domino's did not disclose significant challenges faced by the franchisee in opening new stores and closing existing ones, which made it unlikely for the company to achieve its goals. Despite these challenges, Domino's has denied the claims made in the lawsuit and plans to vigorously defend itself.

While concerns over global net store growth have been raised, Domino's revenues have continued to grow. The second quarter financial report for 2024 showed a 7.1% increase in revenues compared to the same quarter in 2023, primarily driven by higher supply chain, U.S. franchise advertising, and U.S. franchise royalties and fees revenues.

Overall, the lawsuit against Domino's Pizza Inc. highlights the discrepancy between the company's public statements and its actual business performance. Investors are seeking to recover their losses, while Domino's maintains that the lawsuit is without merit. The case is ongoing, and the outcome remains to be seen.

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