Plan 333: Dodo Brands IPO in 2024

We’re setting a goal for ourselves: go public in early 2024. Going public is part of Dodo Brands strategy for the next three years. We’ve named this strategy “Plan 333”—3 years, 3 brands, $30 million EBITDA.

Fyodor Ovchinnikov
Fyodor Ovchinnikov
Founder, CEO

Before we talk about our future, I want to restate where we are now and how we got here. How many investments have we secured in these 10 years? How did our valuation change? When did we start making profits?

What we have already accomplished

In 2011, I opened our first pizza shop in Syktyvkar, Russia. The initial investment was ₽1.5 million (around $50,000). I didn’t have any ready money back then, only the debt accrued in my previous business. I used ₽300 thousand from a credit card and brought in a partner who lent ₽1.2 million to the company.

From the first operation day of the pizza shop we started developing Dodo IS — our proprietary digital platform, the idea of the business being all about creating our own technological platform. Dodo IS development demanded money. We had to return the loan and invest in the pizza shop. At the time, I co-owned a local TV guide in Syktyvkar. This business brought in a little profit. That was the income my family depended upon then. In the summer of 2011, I sold my share of the paper for ₽1 million ($33,000) and invested everything in Dodo.

By the end of 2011, I realized we had to advance faster and decided to raise more capital. In the beginning of 2012, I secured a ₽5 million ($160,000) loan under my personal guarantee, without any collateral. As a risk compensation I gave our investor 5% of the company. In the fall of that same year, I sold another 5% of the company, but for ₽10 million ($330,000) this time, which gave our company its first value assessment — at about $6.5 million. That was an already serious number for a small business with big ambitions (you have to remember, the dollar cost 30-31 rubles back then.)

Our brand grew rapidly, significantly surpassing the speed at which our digital system evolved. We needed money to expand our team. In 2013, I tried to attract investments from professional investors, but failure was behind the corner. No one believed in us and in our idea. Then I decided to attract private investors online through my blog — and we succeeded. In 2013-2015, we raised $3.5 million from more than 150 private investors.

Doubtlessly, it was a risky investment, and a lot of people considered our valuation to be too high. That’s why I invented a way for our investors to get their money back with interest, should they be dissatisfied with our growth. Private investors gave our company loans under my personal guarantee, and in return they got the opportunity to convert them into our shares in three years at a $30 million valuation. If we didn’t live up to our investors' hopes, I would have to return $3.5 million. But we did. 99% of our investors converted their loans into shares in 2017.

We were growing really fast, but we were losing money. Trying to minimize expenses would’ve led to a halt. We had to continue investing in our digital platform, team, and infrastructure. In 2016, Dodo Pizza became the pizza market leader in Russia. But not a single competitor took us seriously back then.

In 2016, we secured $1 million from a private investor at a $50 million valuation. We needed to open a large office in Moscow, grow our team, and make a breakthrough in our digital system development. In August 2017, we secured $7.5 million from a group of private investors. Those were the last private investments in the history of our company.

In May 2018, we began making a profit. For the past three years our managing company has been generating a positive cash flow.

We’d been losing money for seven years. Some might think that is a very long period of time. That’s not really the case. Our real achievement, probably, is that we have become profitable while investing in development of a big tech platform, and that we continue to grow.

These past three years we use our profit to invest in developing Dodo Pizza in international markets (opening company-owned pizza shops in Great Britain), in new startups (Drinkit and Doner 42), and that’s besides our regular investments in development of Dodo IS.

We took the crisis-filled 2020 well. We grew, while not only maintaining profitability during the pandemic, but also never stopping investing in technologies, new markets, and new concepts.

For the last two years we didn’t have a solid plan for further actions. We postponed making major strategic decisions, like whether we should get investments to boost our growth, or what we need to invest in, or whether we should go public, and if so, when, where, and at what valuation? We needed time to think, get the data, and weigh different options for these important strategic decisions. We were standing at a crossroads and we’ve only recently made our choice.

The future of Dodo Brands: our long-term vision

Before we can formulate a strategy, we have to answer a question: what do we want to arrive at? This warrants a little dreaming. Forgetting the present situation. Forgetting that not everything is perfect right now, because this is the jigsaw we are piecing together.

It was a dream, a big and bold dream, that started our company 10 years ago in Syktyvkar. What kind of company do we want to build today? What do I see in our future?

In the future, Dodo Brands is a global consumer company. Our coffee shops, pizza shops, and doner shops can be encountered all around the globe. We are successful not only in Russia and neighboring countries, but also in extremely competitive developed markets, and not just with pizza. Millions of people become our guests and customers. We develop concepts and brands in the catering and retail industry based on our own digital platform, and we partner with thousands of entrepreneurs from different countries.

What’s our forte? It lies in the borderland between our three major fields of expertise — retail business, technology, and franchising.

  1. We’ve got a deep understanding of mass catering. We know how to create brands, design, how to develop menus and supply chains, how to train people and control quality in thousands of shops.
  2. We’re a tech company. We can create digital solutions for customers and for the business, we employ big data, IoT, and IT in general to create the most competitive concepts.
  3. We know how to work with entrepreneurs. We’re not just selling franchises. We know how to create a culture and build communities that, thanks to our principle of transparency, let every new member of the system benefit every other member.

The future lies with digitized franchises. By means of new technologies it’s easier to transmit, control, and develop a business model. We’re the flagship of this future. We create franchises where the digital and the physical worlds in the form of objects and processes are merged in a unified whole. This is the new franchising. We started on this path 10 years ago in Syktyvkar, when we combined a pizza shop chain and a tech company into one. It’s been a difficult journey, but we had one advantage — we were starting from scratch.

Large companies within our market are about to face significant changes. But we’ve been a digital company from the very beginning. That’s our advantage over the market incumbents. But how are we better than the new guys? Why can’t the internet companies that own the digital traffic, search engines, and aggregators create franchises of their own — in catering, for example?

Because it’s not easy. Unit economics in our business depends on a whole lot of circumstances, and you don’t have that big of a margin, because public catering is one of the most competitive and bloody markets. You need to be competent in food products development, operations management, quality control, franchising, supply chains and much more. Tech giants can’t be experts in everything.

We exist in two worlds, and that’s our main strength.

Our digital franchises generate demand and are successful in the international market. Our digital platform lets us manage a huge global retail chain efficiently. We see our guests’ behavior online worldwide, we see what products they like and what our employees think. We gather enormous amounts of data and are able to make decisions based on these data. We are good at change control. We monitor online how well our units are doing around the world, from Africa to Asia. Our partners can compare their results, share knowledge, and improve their operations. With technology, we create a new experience for our guests.

We’ve built a “Russian Samsung,” a truly successful global company based outside of Europe or the US. Our creative think tank is located in Russia, and at the same time we’re international, our international business development is very robust, we’ve got offices in different countries, we speak English, and our culture is based on universal values — trust, transparency, and partnership. People from all over the world want to work in our company.

Why haven’t we relocated our center of operations to Europe or the US? What are Russia’s advantages?

  1. Russia is our home. Here we understand the culture, people, and their motivation well. And our culture has a lot that can work as an advantage in business and product development — creativity, enthusiasm, openness, and flexibility. Just like Toyota, we have to learn to make a product that is so cool people will buy it across the globe.
  2. Russia has got few global companies, but a lot of talent. In the West we would become just one of thousands of ambitious companies with plans of conquering the world, but in Russia we’re in the limelight. This lets us attract the best, most energetic, talented, and passionate people into our team. In Russia we’re more than just a business. We’re a bold dream, an opportunity to prove that our country can produce a large and competitive global business.
  3. Russia is the country of awesome engineers and programmers. Russia has the technologies, and that’s an integral part of our business.
  4. Russia is a pretty large marketplace that lets us test concepts and innovations and invest in their development, and we also have a history of advantage here. Fate basically decided we were to be the leaders in our home market.

Dodo Brands is an international company that is praised for its efficient management and strong culture built on trust and openness. Our approach to management is studied the same way it is with Netflix’s methodology or Starbucks’ secrets of success.

Dodo Brands is a public company. We’ve fulfilled our obligation to our investors and team members by going public, while not losing control over the company, which means we dictate the long-term strategy and the company culture. A huge number of our team members own Dodo Brands shares. They receive shares as part of a stock option plan, they think long-term and are invested in the company’s future and success.

Dodo Brands has become one of the largest companies in Russia.

That’s the future I see. So, how do we get there?

3 years, 3 brands, $30 million

In the next three years we are developing three brands — Dodo Pizza, Drinkit, and Doner 42 — and we’re going public in early 2024 on Moscow Exchange or on an international stock exchange with an estimated managing companyEBITDA of $30 million and total chain revenue of more than $1 billion.As an interim step before our IPO, by 2022 we’re taking in an investment of ₽1-1.5 billion by issuing bonds in rubles, or with a finance investor, having prepared our new startups for upscaling. This way, we’re getting acquainted with public capital markets and raising money to boost our development before the IPO.

Today our business consists of three major parts:

  1. Dodo Pizza in CIS (Russia, Kazakhstan, Belarus). We’re the market leaders, we’ve got a well-tried business model and a strong brand. That brings a stream of revenue we invest today in development in international markets, in technologies, and in our internal startups on our own digital platform.
  2. An international Dodo Pizza master franchise (Eastern and Central Europe, Africa, Asia.) We give a relatively small or a medium country to our partner in one of the developing markets where there’s little serious competition. This model has proven its effectiveness in Romania, Slovenia, Lithuania, Estonia, and Nigeria. This branch isn’t generating profits for the managing company yet. The objective here is to increase the number of new partners and develop the existing chains. In 2021, we are going to launch master franchises in Poland and Vietnam.
  3. Startups. By startups, we mean new concepts based on our platform, like the Drinkit coffee shop and Doner 42, as well as Dodo Pizza in Great Britain and China, two large competitive markets where our model requires adapting and where we are developing direct franchising, which means not having one single master franchisee for the whole country. Startups are businesses in which we are still looking for a good product/market fit. These are our future sources of growth.

Plan 333 consists of three stages.

Stage one: 2021

In 2021, we are investing our own money in startups, Dodo IS, and our team development. The top priority in 2021 is preparing the sources of future growth, meaning new concepts and new markets (Great Britain and China), for upscaling in 2022.

Dodo Pizza’s objective in Eurasia is to continue increasing our market share while generating a stream of money to invest in the startups.

Dodo Pizza international master franchise’s goal is to increase the speed of growth to become profitable at the next stage.

Meanwhile, in 2021 we assemble a board of directors, improve our management, planning, and accounting systems. We prepare for issuing bonds, we choose brokers, get a credit rating, and develop our investor relations branch. Also, we actively develop our stock option plan for Dodo’s team members.

Stage two: 2022

In the beginning of 2022, we issue ₽1 billion worth of bonds for the purposes of upscaling our startups. Money is distributed in accordance with startup performance — the better it is, the more money we send there. We are morally prepared to shut down or sell some of our startups, if they don’t show enough traction in 2021. The bonds are a way of attracting capital without losing control of the company. However, we don’t discount the possibility of securing an investment with a global investor if our valuation is good.

In 2022-2023, we are going to invest ₽1-2 billion in the growth of our business — we will open our pizza shops in Great Britain and China, as well as commissaries, warehouses, coffee shops, doner shops, and pizza shops in Russia; we also will be developing our international franchising and investing in Dodo IS.

Stage three: 2023

Drinkit and Doner 42 enter the fast upscaling stage and surpass a level of 100 shops each. Dodo Pizza in China and Great Britain begin active franchising, eliciting a lot of interest among potential partners. We’re getting ready for the IPO.

In the beginning of 2024, we’re going public and securing $50-100 million. Hundreds of thousands of people become our shareholders, a lot of them are our compatriots. Dodo’s team members who participate in the stock option plan get a share of this company’s success. The shares become liquid, their price is determined by the market.

We invest the money from the IPO in further development of our business in Russia, China, Great Britain and other countries around the world, and also in technologies and the team, building an innovative open global consumer company from Russia.

Yes, we wish to build a large global business, but I need to say that size isn’t everything. It’s not the main driving force or a goal in itself. Size provides tools and levers to innovate and create new products, to influence the world and make it better. And that’s a challenge. 

So far, nobody has been able to build a global retail company from Russia, never mind such an open one. We’ve got an opportunity. Why not seize it? It’s an incredibly interesting and captivating process.

It’s important to note that “Plan 333” is an internal plan. We understand that a lot will depend on market conditions, but we will do everything in our power for our company and our business to be ready for public markets, so that we may reach our goals.