One of the crucial aspects of running a pizza business, as it turns out, is making edible pizza. After it endured a 5 per cent decline in US same-store sales in 2008, as well as years of jokes about its boxes tasting better than their contents, Domino’s Pizza launched a domestic recipe upgrade in late 2009, along with an ad campaign that in effect conceded that the pizza had been bad and would get better. Sales jumped, and the shares have risen 300 per cent since the beginning of 2010.

Now that the pizza is better, it is easy to see the virtues of Domino’s business model. Most of Domino’s 4,900 US stores, and all of its 4,700 international outlets, are franchised, so most of its profits come from fees, royalties and sales of ingredients to franchisees. The result is ample, steady cash flows, which have gone towards stock buy-backs and reducing the heavy debt load taken on in a 2007 recapitalisation.

The Domino’s master franchisee in the British Isles, Domino’s Pizza UK and Ireland, shares these virtues: nearly all of its 726 stores are sub-franchised. It earns a higher operating margin than the US company, despite paying it a royalty. And it has strengths of its own: a pristine balance sheet and more room to grow. It is adding about 60 stores a year in the UK and thinks it can continue doing so for years, and it has the rights to Germany, where it has just six stores at the moment. And it also sends cash back to investors.

Despite this, the shares have not rallied as strongly as the US company’s – perhaps because it didn’t have quality problems to fix. A defensive industry, cash flows, growth, return of capital – an excellent recipe, on both sides of the Atlantic. Too bad all of this is reflected in the valuations. Both companies trade at a notable premium to their industry peers. Investors may have to wait for the market to deliver better prices.

Email the Lex team in confidence at lex@ft.com

Copyright The Financial Times Limited 2018. All rights reserved.