Lynn Liddle - IR Dave Brandon - Chairman, CEO David Mounts - CFO, VP Finance

Ashley Woodruff - Friedman BillingsRamsey John Glass - CIBC World Markets John Ivankoe – JP Morgan Jeffrey Bernstein - Lehman Brothers Joe Fisher - Bear Stearns Dan Perla - Iridian Zafar Nazim – JP Morgan Joe Buckley - Bear Stearns John Staszak - Argus Research Corp. Glen Patraglia – Citigroup

At this time I would like to welcome everyone to the 2007third quarter earnings conference call. (Operator Instructions) I would now like to turn the call over to Ms.Lynn Liddle, Executive VP of Communications and Investor Relations. Ms. Liddle,you may begin your conference.

Thanks Jason. Thank you everyone for joining us thismorning. With us today, we have our chairman and CEO, David Brandon; ourexecutive VP of distribution and procurement, David Mounts; and as our formerCFO, David will be covering this call as he passes, for the time, onto ouracting CFO, Bill Cap, who is also with us today. We will begin with an overview of the quarter, from DaveBrandon and follow up with David Mount, and then open for Q&A. A couple of points before we begin is, we will ask the mediato be in a listen only mode, and I’ll also refer you to our Safe HarbourStatement that is in our press release and in our queue, in the event that anyforward-looking statements are made. And with that, I would like to turn the call over to DavidBrandon.

Good morning everyone, and thanks for participating in ourreview of the third quarter earnings. Dave and I will likely both take a coupleminutes more than we normally would, to walk you through what we would expectto be a lot of areas of interest, based on the environment that we’re in andthe results that we are announcing today. Our earnings per share this quarter was $0.17, which is$0.17 less than adjusted EPS for the third quarter last year, but let me makesure I quantify this gap. The vast majority of it, $0.13 of it is due to theadded interest expense from the change we made in our capital structure earlierthis year, which we have covered on previous calls. We’ve had very positiveinvestor feedback regarding our more leveraged capital structure. We actually,as we look back, believe our timing for this re-cap was very fortuitous, and weknow that our shareholders appreciate the $13.50 dividend we paid in the secondquarter. So my focus today is going to be on the remaining $0.04 ofearnings per share decline. This is primarily due to challenges that certainlyaren’t unique to our company or inconsistent with the many topics we havediscussed back as recently as our second quarter earnings call. In fact, wehave been discussing these trends and issues with you for quite some time. Weare managing in a very challenging domestic operating environment. This is dueto continued traffic declines in our category, which are clearly a result ofcontinued softness in consumer demand. And since both of you know how ourbusiness model works, you know that decreased traffic causes a reduction in ourdistribution volume, which results in a reduction of efficiency andprofitability in this segment of our business as well. We also continue to battle the cost pressures fromcommodities and labor that I described in a fair amount of detail during ourlast call. In fact, these commodities were higher at the end of the thirdquarter than they were at the end of the second quarter. Our operators continueto absorb very large increases in food packaging and labor costs, which havepressured us during the entire year. As I detailed during our last call, we are doing our verybest to raise prices, to reflect the impact of these historically high costpressures. At the same time, we are trying to stimulate traffic growth in ourcategory, not an easy task when consumers, and particularly highlyprice-sensitive consumers, are getting hit with food price increases at everyturn and are clearly reacting by reducing their spending across many retailcategories. Thankfully, these challenges and shortfalls are somewhatmitigated by the stellar performance that we continue to get from ourinternational group, as evidenced by this quarter’s results. We continue tocelebrate the growth and progress our brand is making in so many regions of theworld. Now, we talked before how many segments, there are manysegments of the QSR industry that continue to experience reduced traffic, andwe see this from our third party research sources as well as our own internaldata. We really believe that consumers are reacting to their tighter financial situations.Now, while our local store marketing efforts, our national marketing topics,and our store level execution were able to able to help us buck the trafficturn last quarter, our franchise needs in the U.S.didn’t gain enough momentum to carry that into the third quarter. We feel badabout that. Our team U.S.A.unit was able to list their prices at a faster rate than our franchisees, whileat the same time doing a better job of minimizing traffic loss. Consequently,they were able to keep their overall same store sales slightly positive for thequarter. However, our franchisees were slower to raise prices and actuallyexperienced a higher reduction in traffic. So we know exactly what needs tohappen. We need to get our franchisees embracing the many initiatives that wehave launched in our corporate-owned stores that will help them close thesame-store sales gap that currently exists. We are working very hard tocommunicate these best practices and proven techniques to our franchiseesacross our domestic systems. Now, in addition to the work that we are doing with ourmarketplace organization, to try to ignite the energy and power of ourfranchise system in the U.S., I want to assure you that we are not sitting idlyby here at our world resource centre in Ann Arbor. We have worked hard to earnour reputation as a very proactive management team and we are all over thesechallenges. I have recently announced changes that I believe will help bringeven more focus and energy, as we address our domestic sales situation. We recently announced management changes, specifically thepromotion of Patrick Doyle, the president of Dominos U.S.A., which puts aproven operator who turned around team U.S.A.stores in the right place, to positively impact our domestic franchisees andtarget our areas of weakness. We also announced the transfer of David Mounts, to lead ourdistribution and procurement business. I believe this will be a greatopportunity for David to make a positive impact on this important aspect of ourbusiness, particularly during this time of unprecedented cost inflation. We have teamed up with a cutting edge creative agency, CrispinPorter & Bogusky. Their experience in targeting our key customer group andtheir spot-on assessment of our brand in the agency review process; and theirknowledge of how to leverage the value of brand equity is expected to result insome dynamic changes in our advertising, which you will begin to see early inthe new year. We also continue to leverage technology through our pulsepoint-of-sale platform, which has now been installed in approximately 60% ofour domestic stores, with new installations coming on-line every day. Duringthe third quarter, for the first time, we rolled out on-line ordering messageson our TV and print ads, resulting in steady increases in on-line orders, whichgenerally are more frequent purchasers and at a higher average ticket. This wasa distinct plus for our corporate team U.S.A.stores, since every one of those stores has pulse and offer on-line ordering inevery store. We have also added mobile phone ordering capability. Thisincreases access to our brand and targets our core customer and how they preferto order from our company. We are also making progress towards rationalizing pricing.As I said, our team U.S.A.stores have worked hard to increase prices where there were opportunities,reducing unneeded discounts while optimizing coupons, purging underperformingproducts and underperforming promotions. We have encouraged our franchisees todo the same thing. As I said earlier, we know that prices most increase, tocope with increasing commodity costs; but we recognize that this must be donestrategically when traffic issues continue to pressure the sector. I broughtthis up the last quarter and likened it to dancing on the head of a pin. Team U.S.A.has taken a very measured stance towards this delicate balance and has seen aminimal fall-off in traffic, as a result of careful and considered pricingincreases. So far, they are doing the best job of dancing, and we need to makesure our franchisees follow their lead. Team U.S.A.stores also continue to be very active with their local store marketing,maintaining high levels, and this has continued to pay off. We have sharedtheir results from these elevated local store marketing efforts withfranchisees, and we have encouraged them to participate in country-wide localstore marketing blitzes. There is no question about, in today’s environment, ifyou want to grow your traffic, you are going to steal share from somebody else;and that’s a war in battle that needs to be waged at the market and storelevel; and that’s what team U.S. A. is doing very effectively, and we need toget our franchisees to do better. Our primary focus in the fourth quarter of this year will beto more effectively get our domestic franchise system to grow their sales inthe existing market conditions. We cannot be successful unless our franchiseeslead our success, and that’s certainly been the history of this system. Out of10 of the last 13 years, franchise sales have exceeded corporate sales by anaverage of a 3% gap. If they were currently beating team U.S.A.by their traditional 3% spread, our quarter results would be much improved.It’s important to note, though, that our franchise performance isn’t the samefor every store or in every market. We are discussing averages here, and I wantto make sure I send a shout out to those franchisees who have continued toout-pace team U.S.A.throughout this period. We have some very successful operators out there who aredoing a great job. We are counting on them to help us lead the way to improvethe performance of those who are lagging. So we are bringing heavy emphasis toclose that gap and regain the historical momentum from our franchisees and ourfranchise system. I want to close my remarks by once again pointing out thatthe big winner of this quarter was our international division, which didextremely well, hosting a very strong 8.3% same-store sales comp, their highestin over 2 years. This speaks loudly about the strength of our brand world-wideand strong engine of growth that our international division provides to thiscompany. Our international operators are a great example of executing thefundamentals of our business well every day, and I want to congratulate them ona great quarter. Now, with that, let me turn things over to David Mounts, whois going to take you through a more detailed look at our financial performance.As Lynn mentioned, although David has officially transferred to his newposition as the EVP of Distribution and Procurement, he is handling our callthis quarter, which will be his last act before we pass the baton over to BillCapa as our acting CFO; and Bill will execute the responsibilities of thisimportant function until we complete our national search process and fill thisposition permanently. David.

Thanks Dave, and good morning everyone. As you will note,from our earnings release we have several items that affected the comparabilityof our results to those of the third quarter last year. I’ll cover thoseshortly but first let me start with the top line. We ask you to remember that revenues can be misleading whenanalyzing Domino’s financials, and ask you always consider global retail salesas the key gauge of our top line performance. Our global retail sales increased 7.2% during the quarter.That was driven primarily by same store sales growth in our internationalbusiness, and an increase in worldwide store counts of 272 units over thetrailing four quarters. Same store sales domestically, our sales decreased 1.6%for the quarter. As Dave mentioned, our company owned stores increased 0.8%,that was versus a down 2.3% on the quarter three 2006, while our franchise samestore sales were a negative 2%. This was versus a negative 3.2% in the thirdquarter of 2006. International same store sales increased 8.3% over lastyear’s positive 3.0%. This was the highest growth in nearly three years andmarked the 55th consecutive quarter of international same storesales growth. Moving on to the income statement. Our total revenuerevenues for the third quarter were $337.3 million, a $10.6 million of 3.3%increase from last year. It was driving by higher distribution levels revenuesthat were caused by the elevated food prices, mostly cheese. This benefited theDPV revenues but it contributed to lower team USAmargins, which I’ll discuss a little bit later. Additionally, we had higher revenues from our internationalstores in the third quarter, which was driven by the increase in same storesales and the store count that I just mentioned. Our consolidated operating margin as a percentage ofrevenues decreased only 1.4% in the third quarter versus the prior year. Wewere at 24.9% in the third quarter of 2007 versus 26.3% last year. There was areduction of 1.6%, based on the impact of increased cheese prices and itseffect on the distribution percent margins. The average cheese block price inthe third quarter was $1.95/lb versus $1.19 last year. This is a 64% increase.It’s the widest spread we have seen in cheese prices between year-over-yearquarters in three years. Remember that the dollar value of margins does notchange in our distribution business when cheese prices fluctuate. Our international division’s operating margins improved withthe sale of our Franceand Netherlandsoperations, which was completed in the third quarter of 2006. Also, ourinternational franchise business, which has no cost of sales, gained as apercentage of total revenues. This helped improve our overall consolidatedmargin. Our team USAmargins were negatively impacted by higher food costs and also higher laborcosts, but not as severely as some in our industry, at only 2.3%. This reducedour overall company margins by approximately 0.5%. The resilience of our modelis clear when you consider that, if you factor out the increasing cheese costimpact on distribution, our operating margin was flat to slightly positive inthis very tough cost environment. As Dave mentioned, we are operating in an environment thatis high cost and we’re working to manage those costs down on a number offronts. As I’ve previously discussed, our team USAfood costs are net of our derivative milk contracts. These contracts had anon-material impact on our third quarter financial performance and were settledin the fourth quarter. The settled contracts will not have a material impact inthe fourth quarter. This hedging strategy provided some benefit to our corporatestores in the rising cost environment we have seen over the past year. But thehedging is a not a practical tool for the overwhelming majority of ourfranchisees. Remember, our average domestic franchisee owns and operates threestores. So they are not inclined to want to get involved in market hedgingactivities. However, in an effort to achieve the goal of loweringvolatility and improving our operators’ ability to plan and budget moreeffectively at the store level, we entered into a new multi-year purchasingarrangement during the third quarter, with our primary cheese supplier. Webelieve this contract will serve to more effectively smooth out our cheese costvolatility for both our company-owned and franchise stores. Let me turn now to G&A expense. Part of our costcontainment effort is controlling G&A expenses, and we have been verydisciplined about this during the quarter. Excluding last quarter’s $5 millionlegal reserve, and expenses in connection with our recap, we saw total G&Aturning down in the third quarter compared to levels experienced during thesecond quarter. In case you are comparing to last year, last year’s GA numberincludes gains from sales of our Franceand Netherlandsoperation, and gains from the sale of our Memphisstores to a franchisee. Our bottom line earnings, our diluted EPS and report ona GAAP basis, were $0.17 in the third quarter. This is a $0.22 decline, asreported of $0.39 in the prior year period. In the third quarter of 2006 webenefited $0.04 from a $2.7 million after tax gain on the sale of thecompany-owned operations in Franceand the Netherlands. The company’s recent recap had a significant impact onongoing interest expense. As a result of the higher debt levels, this resultedin a decrease in diluted EPS of $0.13, as Dave mentioned. Our cash interestexpense for the quarter was $23.5 million at a rate of 6.06%. Our book interestexpense, related to our debt facility for the quarter, was $25.6 million or arate of 6.6%. Our total interest expense for the quarter, including letters ofcredit, capital leases and accrued interest on a Fin 48 tax liabilities is$26.5 million. This was the first quarter with the full impact of our new capitalstructure. This gives you a good picture of our ongoing interest costsfor our 12-week quarter. Keep in mind, though, that the fourth quarter has 16weeks. Including the effect of the items discussed above, the additional $0.04decrease in diluted EPS was driven by lower team USA margins, about $0.02; adecrease in distribution profits from lower volumes, that was also worth about$0.02; and again, from the 2006 sale of the eleven corporate stores in Memphis,worth about $0.01. This was all set, in part, by the continued strongperformance in our international operations, which was a plus of a little morethan $0.01. Additionally, our effective cash rate was 39.8% in the thirdquarter. This was because, during the third quarter, we recorded a $300thousand dollar net reserve, related to ongoing state income matters. 2006 waspositively impacted by a tax benefit, associated with the sale of ourcompany-owned operations in Franceand Netherlands.We continue to anticipate that the normalized tax rate of 37% to38% is still agood target over the foreseeable future. As discussed in our earnings release, the companyre-purchased approximately 1.1 million shares of its common stock under theopen market re-purchase program. This cost $18 million during the thirdquarter. These shares, re-purchases on their own, impacted diluted EPS lessthan $0.01 for the quarter. Our OMR program was implemented, refined and madefully operational last quarter, and we will continue to be opportunistic buyersin the market. The purchases made during the quarter, when considered on anannual basis pro forma, would impact EPS positively by about $0.02. : We continue to be very comfortable with our new debt leveland we have seen no economic affects on our current financing or on our capitalstructure due to recent turbulence in the credit markets. Since our rates andterms are fixed, we expect the same conditions during the balance of our fiveyear term. In closing, despite a challenging quarter, we continue togenerate positive free cash flow andhave proven that we will utilize this in a manner that is most beneficial toour company and shareholders. We remain focused on managing cost and creatingshareholder value during these challenging times in our domestic operation. This concludes the financial update, and once again, we wantto thank you for your time today. We appreciate your support and would like toanswer your questions.

Your first question comes from John Glass with CIBC WorldMarket.

John, is that you? John Glass - CIBCWorld Markets: This is John Glass. Can you hear me?

Yea, we can hear you now. John Glass – CIBCWorld Markets: Wonderful. Okay. Sorry about that to John Ivankoe. Could youhelp put the quarter in context of the industry in the U.S.Did you feel like you outperformed the pizza category, underperformed it, or isthis sort of what everyone else has been doing as well?

It’s the obvious question. We, you know, we subscribe to theCREF data and it’s the best data that we have, and it’s certainly, you know, Ithink it’s good directional date. Our sense is that the category was totallynegative as it relates to traffic growth. Everybody was trying to inch ticketup in light of it, cost situation, but we can’t see anything in the data thatleads us to believe that there has been anything other than a significantreduction in consumer spending in the category, and the traffic is down acrossthe board. David Glass – CIBCWorld Markets: Okay. You talked about getting franchisees traffic better.You talked about that last quarter. Is there anything different in what you’veseen them doing this quarter versus last quarter, or is there anything new ordifferent in how you’re going to help them going forward, drive their trafficstronger?

Well, listen, the status quo isn’t working. I think some ofthe things we are doing with leadership changes, and some of the internalprograms that we have launched and trying to excite the franchise body withsome new brand positioning, and the new energy that’s going to come fromadvertising agency; all those things, in their own way, are a function oftrying to shake things up a little bit and create some backpressure on ourfranchise group. These are unprecedented times for us, both in terms of costinflation and the fact that we’re having a hard time growing our sales. As youknow, for many many years, it wasn’t a function of whether we were in positivesales, it was a function of how positive they were going to be. And one of thethings we’re really trying to coach this system through is how do you react tothis adversity and not do things that are detrimental to the growth of thebusiness. It’s not a time to be cutting back on marketing activitiesor cutting back on marketing spend, or cutting back on technology spend. Thisis the time you have to invest because it’s war out there, and whoever getsahead of the curve is going to be the one that’s going to get the benefit. So,again, as I’ve said in my kind of prepared remarks, we’ve got a lot offranchisees who are getting it right. They’re growing their sales in thisperiod and they’re doing well. We just don’t have enough of them; and that gapthat exists between the franchisees and team USA right now is the elephant inthe room, and we’re going about the business in every way we know how ofgetting that fixed. David Glass – CIBCWorld Market: I see. Now just one last question, David Mounts, you hadmentioned a cheese contract. Can you talk about any details? Is it an absoluteprice or is it a collar? You know, how much volatility should we still expectin cheese prices with this contract in place?

Yea, we think the volatility, the only way I can reallyanswer that because the nature of that contract is that it’s confidential,John; but I can give you a sense for volatility. We think the volatility wouldbe down about a third. David Glass – CIBCWorld Markets: Okay. Thank you.

Your next question comes from John Ivankoe.

John, can you hear us? John Ivankoe – JPMorgan: :

Well you know, I’ve got 1,275 answers to that question. John Ivankoe – JPMorgan: Okay.

Again, there are people who have done it well; there arepeople who have done it better than team USA,but we have a lot of smaller operators out there who, you know, have kind of ahistorical reflex and have been in a pattern of behavior. And what we’refinding is, in these highly unprecedented times, it’s more difficult than Ithought it was going to be to get them to understand that they have to reallysignificantly change the direction of how they’re marketing in their localmarket area. John Ivankoe – JPMorgan: Okay.

And so it’s taken longer than I thought it was going totake. It’s a bigger challenge than I thought it was going to be, and truthfullythe target keeps moving because it seems like, ah, you know, the cost pressurescontinue to spiral in a upward direction. Frankly, at the end of the secondquarter I didn’t believe it could get any worse.

Yea.

When I look at the commodity charts, and it’s gotten worse. [TECHNICAL DIFFICULTIES] -- was increased from $3.00 to $3.50 a bushel at $9.00; andit happened remarkably fast in a period of a short number of months. Now I’llturn things over to David and he can tell you what the implications of thathave been to our distribution centers and, in fact, our operators.

Yes. John, we, you know, we have been on a cycle where wehave set pricing on our wheat on an annual basis historically, because ithasn’t, there hasn’t been much variability, and it’s worked out well foreverybody. We buy about 5.5 million bushels of wheat a year; so every time theprice changes a dollar on a bushel, you know, we’re gonna feel a $5.5 millionimpact, both us and our franchisees in our distribution system the way itworks, because of the profit share. So, you know, when you start to comparethose price changes, you see a larger impact. One of the things that we will have to implement next yearis we will have to go to more frequent pricing during the year. We think thatquarterly pricing makes the most sense at this stage but we’re going tocontinue to evaluate all our options. For sure, we will not be going withannual pricing and distribution, so we won’t be in a situation where we werethis year, where we had pricing in place for the year. We made the decision, you know, given all the other pricechanges that are impacting our franchisees, not to go in and amend pricesmid-year, because our franchisees have built their budgets and their plansbased on what we told them pricing was going to be on dough balls for the year.So we’re taking, especially in this last quarter, we’re taking an impact herethat, you know, we didn’t anticipate and wasn’t planned; and, of course, someof that impact is also absorbed by our franchisees in their rebate payments.But, you know, we clearly have to get, you know, in an environment like this wehave to get to a more frequent adjustment of pricing and let these costs moreflow through, like we do with our other commodities. John Ivankoe – JPMorgan: Okay. I definitely did notice, the distribution income wasabsolutely lower than what we thought it was going to be. What was the primarycontributors to that?

Wheat was the primary contributor to that. John Ivankoe – JPMorgan: Okay.

: John Ivankoe – JPMorgan: It’s kind of a bigger question but again, we talk aboutdough balls and cheese, I mean, the franchisees really are feeling a lot ofpressure. I mean, have they really begun to push back on you, saying hey, yourknow what; we know we share in half of the distributions profitability, youknow, we think that number is, you know, should be greater? In other words, arethe franchisees trying to take from the corporate now, you know, versus, youknow, trying to make money from the customers, if that’s a good question?

John, that’s the end of the case. We, you know, we have, ourdistribution business is managed and the structure is set up where there isabsolute alignment between us and thefranchisees. We have franchisees that serve on our distribution advisory board,they are involved in and they understand the realities of the business and howthey’re affecting us, and they are part of that decision making process. And ithas been historically, and will continue to be, a very collaborative process,you know, with both sides incentivized to try to grow distribution EBITDA inways that manage the supply chain more efficiently. John Ivankoe – JPMorgan: Okay, very good. And a final unrelated question from me. Youknow, the cash balance is, from my opinion, high, given what your free cashflow yield. I mean, could you explain why that is, I mean, what that for ourcredit agreements and, you know, is it possible to assume that all of your freecash flow in the future will be used to buy back stock, or is there a necessityto put aside more funds for the debt holders.

No, you’re certainly seeing, you’re seeing an abnormallyhigh, it’s a very good question John. We’re sitting with $115 million in cash.The way that breaks down, about $100 million of it is tied just into the ABS interms of reserves and, really, timing of the interest payment. Let me walk youthrough a breakdown of the core of that $115 million. $15 million had to be setaside as a capitalized, in the new franchisor entity, to quality for theuniform franchise exemption; so, in other words, that we can continue tofranchise throughout the country as a well-capitalized franchisor. So that is aone time increase in capital and in cash that is, at this point, appears to bepermanent; but we’re going to evaluate that over time and see if other assetsalso could qualify for that exemption. But right now we think it’s mostly cash. We have $55.2million that’s set aside right now for our interest payment that we’re going tomake on October 25. Remember that the ABS interest payments are quarterly,based on a calendar basis; and, as you know, we have, you know, 12, 12 and 16 in terms of our quarters. So you endup with a little bit of a time difference; and on October 25 we’re going towrite a $55.2 million cheque to our note holders for all the interest that wasdue them for the pro-rated second quarter and all of the first quarter. We alsohave $26.9 million that is set aside in interest reserve, basically theequivalent of a little more than one-quarter’s payment, to the note holders;and that was really kind of a cushion set-up in the structure that was to beevaluated after the first two quarters of interest payments. : So those are the two main things, and then this newfranchise unit. So, when you take those into account, you’ve really only gotabout a little over $15 million left, which is probably more typical; and youshould expect to see us use that cash when it becomes available, from thereserve mechanism, and you should expect to see us continue to use cash flow topay down our, and to buy back our stock, rather. John Ivankoe – JPMorgan: Okay. All right, that’s a great answer. Thank you so muchfor that.

Your next question comes from Jeffrey Bernstein Jeffrey Bernstein -Lehman Brothers:

Jeff, are you there? Jeffrey Bernstein -Lehman Brothers: Yes, can you hear me?

We can. Go ahead. Jeffrey Bernstein -Lehman Brothers: Yes. Just first, the, kind of a bigger picture industryquestion. You mentioned CREF data and the impact on consumer spending. I wasjust wondering how you believe that the pizza category’s position relative tosome of your other QSR peers; and they had mentioned that, and of course thepizza category, and in another comment you said, you know, it’s more across theboard including more traditional QSR peers. I feel like, I have the feelingthat that pizza category is tracking more with casual dining whereas some ofyour quick service peers are performing better. Just wondering kind of how youthink about pizza versus the more traditional fast food in this environment?

: When you look across total QSR, which includes the lunch daypart, the breakfast day part, sandwich guys, people who seem to be operating inthe party check mode of $6, $7, $8, which is kind of the overall average forQSR, the ones that are at the low end of that average check range seem to bedoing better; the lunch guys, the burger guys, the breakfast folks; and thoseof us who are operating at the $16, $17, $18 average checkout, we seem to behaving the most difficulty in this environment, and that’s pretty intuitivewhen you consider kind of how the consumer is behaving and what their grocerybill is now when they’re going off and buying groceries in the grocery store,and the situation with their variable rate loans, and all the other things thatwe’re reading about. You know, those folks who are operating at the higher end ofthe ticket range are probably going to be more impacted than the guys who areoffering value menus at lunch at very low ticket. Jeffrey Bernstein -Lehman Brothers: I think it’s pretty obvious that I get for $16 to $18feeding a few people, whereas $6 to $8 is probably feeding one, whether there’sa way to somehow kind of reposition in a tough environment, focus more onindividual servings or whatever best works, kind of bring someone in that mightnot be looking to feed three or four but rather just one.

Well, listen. Value, we still have a great value message.You know, let’s face it, for less than $20 you can feed a family of five oftentimes,with some of our bundled deals. It’s still a great value message and, you know,we typically do reasonably well during these times. But in the past, when we’vehad these times of traffic slowdowns, one of the tools that we reach to veryquickly is to stimulate consumption, stimulate trial by going out and shoutingvalue in a very very bold way. That’s difficult to do when virtually everycommodity that you’re buying is at a ten year historical high. And so part one of the tough conundrums that we have rightnow is that the easiest level for us to pull is a difficult one for many of ouroperators to pull the stimulae traffic, because we are in a very very unusualunprecedented cost environment. So the dancing on the head of a pin part of it,how do we shout value and how do we get the attention that stimulates anactivity in terms of traffic in an environment where we’re getting, you know,bombarded with cost increases. This too will pass. You know, I don’t think thatthere’s any element of this that we can’t work our way through and that we’renot working our way through. But it’s a tricky set of issues. Jeffrey Bernstein -Lehman Brothers: :

Yes, without getting into details and violating kind of ouragreements with our supplier, I would just tell you that the whole objective ofthat was to put ourselves in a position when cheese prices spike high, asthey’ve shown a propensity to do in the most recent past, we’re not going toexperience as high a rise. And then when cheese prices settle back, which theywill because they always do, you know, obviously at that point we’ll be payinga premium to what we did in the past; but we’ve eliminated about a third ofthat roller coaster ride that could be very difficult for our operators to planaround. Jeffrey Bernstein -Lehman Brothers: You eliminated a third or you got it down to a third?

It’s eliminated a third. Jeffrey Bernstein -Lehman Brothers: Got it.

There will still be volatility. There’s no way to avoidthat. Jeffrey Bernstein -Lehman Brothers: Yep. Okay. And then just, actually one other thing. Youmentioned the franchise disparity. I’m just wondering what the commonalitiesare, if any, in terms of why some are performing better than others. Is there,do you see an overwhelming geographic strength or weakness in any areas, or isit it’s working for some but isn’t working for others?

We really don’t and we’ve looked at all of thosecorrelations. It’s not geographic, it’s not urban versus rural, it’s not largeoperator versus small operator. It’s all based on, frankly, the passion and theexecution at the store level. And our job, and we understand it, it’s been ourjob for 45 years, is to get our franchisees all on the same page with the toolsin their hand that allow them to be successful and keep them passionatelymoving in the direction of growing their business. It’s not enough just to give them a store concept and, youknow, list of operating guidelines and a brand and some advertising support.We’ve got to get them waking up every morning and going to the stores that theyown and putting the teams in place and engaging with their customers andexecuting against the business model at a level that supersedes what theircompetitors do in that market. It’s hand-to-hand combat, particularly in thisenvironment; and our job is to make that happen. And obviously, in theenvironment we’re in, that’s one of those “says easy” “does hard” kind ofthings; but it’s something that we’re good at, we’ve shown the ability to do inthe past, and we’ll get it fixed. Jeffrey Bernstein - LehmanBrothers: I know you had mentioned, I guess, the new ad agency andwhether you gave you an early diagnostic to say this is direction might take itin that’s different from what you have been doing, or..?

Yes, you’re going to see a remarkable change in our brandfocus starting the beginning of the year; and, you know, obviously we’re notgoing to telegraph that at this particular time it’s still a work in process.But I can tell you that if you really sit back and look at kind of where thecategory has been operating, we’ve all been launching our limited time onlyoffers and putting spends behind the, you know, kind of, this product and pricefocus. If you really look at how that’s performing, and certainly theenvironment we’re in right now, nobody is using that to really drive trafficand sustain any growth. So we’re looking at something that we can own and executeagainst and sustain at a higher level, than just in-and-out items kind of habitthat everybody’s developed; and we’re kind of anxious to get that moving andmore to come early next year. Jeffrey Bernstein - Lehman Brothers: Great, thanks very much.

Your next question comes from Glen Petraglia – Citigroup

Glen, go ahead. Glen Petraglia –Citigroup: Dave, I was hoping you could, and I know this is a questionthat’s come up on past calls; but, you know, clearly your franchisees have, youknow, scaled back their local market initiative; and I’m wondering if you needto change the break-out of the ad dollars in terms of how much are allocatedfor local versus national market?

Well, we have. I don’t know when we last talked about thisbut, as you recall, you know, we got into, I think we got into a bit of a trapwhere we believed the more money we had in Ann Arbor to spend at the nationallevel, the better that was going to be. We found that there’s probably, likeeverything else, a point where, you know, too much is too much; and I thinkwhat we did is we began to bring too much of the accountability and too much ofthe marketing focus in a centralized environment in Ann Arbor, and that’s notgood. So, as we go into 2008, there is going to be more balance inthe marketing budgets and there will be more dollars available at the localmarket level, to give resources to the franchisees around their local market,to be able to engage in things that they think will be more applicable to theirbusiness and their competitive set; and I actually think that’s a positivething. So, 2008, the media calendar will still be filled with many many weeksof national television and national offers; and in support of some of thethings that Crispin is working at, but Crispin will also be developing toolsthat will be administered at the local level in a marketing way, to allow ourfranchisees to do things that they think will work in their business, andthat’s a good thing. Glen Petraglia –Citigroup: Okay, and David Mount, in terms of your new role, given yourbackground at UPS and knowing that everybody there has quite an operationsfocus, you know, what sort of efficiencies do you think you can bring or thatyou’ve seen thus far, that would enable you to squeeze this zone a little bitmore?

Yea, you know, it’s a great question and it’s one that I’mlooking forward to getting in and digging in and finding opportunities. As youprobably appreciate, I’ve kind of got one foot, as we wrap up this quarter infinance, and one foot into my new job. My focus right now is on leading my teamand understanding the challenges that they have and where I can be helpful tothem; and I haven’t come to any conclusions, you know, at this point, butreally doing a lot of listening and learning. And I think that will be thefocus for the while. As we find opportunities, you know, we’ll communicatethose to you, and Dave will communicate those to you on subsequent discussions. Glen Petraglia –Citigroup: Okay. And just lastly, most of my other questions have beenanswered already. What sort of, what percentage of your orders are comingon-line now and how have you seen that change over the course of the lastcouple months, since you’ve begun to comment on on-line ordering opportunities?

Yea, I want to be responsive without giving anybody the keysto the kingdom. I would just tell you that if the stores that have had on-lineordering the longest are showing a propensity or getting that mix into thedouble digits, which we think is, you know, meaningful and important, and thereis a fair amount of variability, depending on the demographics of that store’slocation; but what we see is that this is a material channel for many of ourcustomers who enjoy ordering that way. If and when we get to that double digit mix mode, it doesvery good things for our business. Team USAbeing further down that track, certainly some of the benefits that we’re seeingin terms of their execution and their sales growth, we believe is attributableto that. We also have seen that in some cases there are tactics wecan use to drive that number, and we’re doing some interesting testing andgetting some interesting results from that as well. But beyond that, we just donot talk about what we’re doing there because some of it we’re pretty excitedabout and none of it we want to share with our competitors. Glen Petraglia –Citigroup: Fair enough. Thank you.

Your next question comes from Ashley Woodruff with FriedmanBillings Ramsey.

Go ahead Ashley. Ashley Woodruff -Friedman Billings Ramsey: Hi, can you hear me?

Yep. Ashley Woodruff -Friedman Billings Ramsey: Okay. Could you talk about, you know, I guess the transitionyou’ve seen throughout the year where you, you know, kind of entered the firstquarter with positive traffic, the second quarter, you know, positive, and thenobviously things dramatically slowed down in the third quarter. Can you tie that, I mean, did it really trend kind ofexactly with what the overall pizza, or fast food data that you have for CREFshowed, or did you see a real change based on, you know, what your currentpromotion was. They have a follow-up on that. Can you talk about how you feelabout the pipeline and really, how you feel about how the promotional pipelinehas been over the past, you know, 12 to 18 months in general?

Yea. First of all, we did not have positive traffic in thefirst quarter this year. We had negative sales. Domestic was negative 2.9 andit was negative traffic in the environment for us. In the second quarter we hadpositive sales of primarily ticket. Just a little bit of traffic but mostlyticket. And then, you obviously know the situation in the third quarter. The CREFdata would lead us to believe that if you go back to basically the middle partof 2005, that the vast majority of the growth that has occurred in the categoryhas been ticket. In fact, CREF would tell you there has only been twoquarters since the middle of 2005 where there has been traffic growth. One was1% growth and one was 2% growth. Now, again, CREF can only do what CREF can do.This is a big category. We have some 59,000 pizza shops and CREF is not in a position to be able to be able toreally have their finger on the pulse of exactly what’s going on. Butdirectionally, I think it’s good guidance and it tells me that the wholetraffic growth situation has been one that has been somewhat structural in therecent past in the category, and everybody has been kind of living off ticket.So when you keep moving the ticket up on your customer and then your customerstarts cutting back in their spending as a result of some of these most recentfactors, and you’ve got cost pressures, which make it difficult to go morevalue than you’re already at, you kind of see the world that we’re navigatingthrough. CREF would show that the party check average, if you go backand you take a look at really the last five years, that the guest check averagein the pizza category has increased about $2.5. And if you back and you lookedat the, you know, that’s the implementation of delivery charges and that’sgrowing the business through check and opposed to traffic. And I think what’shappening is the consumer has to catch up with these new price points. Pricepoints will continue to move but we’ve got to be creative enough in the contextof all that, to figure out a way to continue to generate some new interest inthe brand and some traffic in our store; and probably, in the currentenvironment, as I said earlier, that’s going to come from taking share fromsomebody else and winning the battle at the local level, than it is anythingthat’s going to dramatically change the current status of the category. Ashley Woodruff -Friedman Billings Ramsey: In the promotions that you’ve done, have you seen a similarkind of mix in terms of order incidents to what you saw, say a couple yearsago, in, you know, some of your stronger promotions or..?

Yea, interestingly enough, the limited time only promotionsthat we’ve put out there this year have, for the most part, achieved mixedlevels that were very typical with objective, very typical with test marketexperience; and so we don’t think the products were bad or poorly accepted ordidn’t have good re-purchase. In fact, they did exactly what they did in tests,in terms of achieving mix. So people saw the commercials, they reacted to them,they tried the products, they re-purchased the products. All that is fine butwhat isn’t fine is it isn’t driving traffic, it isn’t bringing people into thecategory that weren’t there before. And that’s the remarkable change, I think,over the last year, year and a half, with a lot of the limited time only’s; andwhen I see what the folks are doing at Pizza Hut and Papa John’s, I get theimpression that they’re in the same situation. We’re all inventing the latesttwist on pizza toppings or the latest brand name to put a limited time onlyoffer; but it sure doesn’t seem to be driving category growth for any of us. Ashley Woodruff -Friedman Billings Ramsey: Okay. And then shifting to the franchisees, I think you usedto say, maybe this goes back a couple of years, that the average EBITDA marginsfor a franchisee is, after royalties, right around 10% to 11%. Where is thattrending on average now, given all the, you know, cost pressures that we’reseeing this year.

Well, we rolled up all the P&Ls from 2006 because,obviously, we won’t know this year’s results until we roll them all up, youknow, several months, into next year. But, as we looked at the impact of 2006and the fact that it was a negative sales year for us, the first one in 13years, the average franchise store incurred 0.5 point EBITDA margin hit. Sothat’s negative, that’s bad, that’s inconsistent with our objectives but itstill puts our operators in a cash-on-cash return mode that, you know, explainswhy people are still out there building stores and why people are stillcommitted to the business. It’s still a great business, it’s still a greatbusiness model; but, you know, obviously we want margins to expand, we don’twant them to contract, and the way to do that is to get more traffic and salesthrough the front door. Ashley Woodruff -Friedman Billings Ramsey: Okay, and then just one last question on, you know, use ofcash for shares purchase versus debt paydown, I think, you know, yourinclination originally was to buy stock, at least in the first couple years atthis new facility. But, given the market, I think, pretty significant sentimentshift, against companies with a significant amount of debt. Has that changed atall your thoughts in terms of the timing of paying down your debt.

No, no, we’re very comfortable with our capital structure,extremely comfortable; and we purposely left room and got an authorization torepurchase stock; and we’ve said all along we’re going to be opportunistic; andbased on what I’m seeing on my screen today there is plenty of opportunity totake advantage of people who don’t get the long term view. Ashley Woodruff -Friedman Billings Ramsey: Okay, thank you.

Your next question comes from Joseph Buckley with Bear Stearns. Joe Buckley - BearStearns: Could you quantify the pricing you’ve taken at the companystores and maybe talk about how much you have taken versus what you think thefranchisees have done so far?

Yea, Joe. As you know, we have been very reluctant and Ithink for a good reason, to not get into specifics about ticket versus trafficand what those numbers are; because, frankly, I’d love to have that for mycompetitors and follow those trends. I would just tell you that, kind of thephenomenon that we’re dealing with, which is just inconsistent with historicalnorms, is that in the third quarter team USAtook prices up higher than our franchisees and had a lower reduction of trafficgrowth. Now, make no mistake about it, team USAhad negative traffic, as did our franchisees, but to a lesser degree; and theirability to raise increases faster than the amount of negative traffic theyexperienced was what allowed them to be positive for the quarter. Ourfranchisees did not take as ambitious and as aggressive, and as what I wouldconsider to be strategic and tactical approach for raising prices. And, infact, their traffic fell further. Now, that gives us a great story to tell when we go out toour franchisees and say, let us show you how we got more price in the business,which is exactly what this current situation calls for. At the same time itdoesn’t have to be detrimental to your traffic. And so that’s what we’re fastat work doing. You know, Patrick Doyle is on the road right now, meeting withfranchisees, sharing that information. So, we feel like, you know, there is away to get there and we’ve demonstrated that; we’ve got to communicate it;we’ve got to implement it and execute against it. But again, we do this as ashort term challenge that we’re working our way through, that will have a goodlong term result. Joe Buckley - BearStearns: Okay. The question on the global retail sales number, howmuch was that influenced by currency during the quarter?

Yea, for the total company it’s about 2% overall. There isabout a $25 million FX in terms of the currency. Joe Buckley - BearStearns: Okay. Then, lastly, this may be kind of a moot question withthe new cheese contract but will you be hedging again in the future or will thenew cheese contract kind of negate the need to do that?

Yea, the lower volatility, you know, in the new contract,will negate a lot of the need to do it. I wouldn’t say we would never hedgeagain. You know, we always like to keep a tool box open and put all the toolsin there we can; but clearly, with this new structure, there is a lot less needfor that. Joe Buckley - BearStearns: Okay. Very good. Thank you.

At this time there are no further questions. Are there anyclosing remarks?

Well, my only closing remarks are to make sure I emphasizeduring these challenging times that I want to emphasize the strength of ourbusiness model. If Lynn would havelet me, I would have put a headline on our press release that said, you know,takes a beating and keeps on ticking, because we continue to generate cash andwe continue to do very well in a very very difficult environment; and I thinkit does speak to the strength of the business model. Our total operating margins remained relatively stable atabout $85 million, which is only down 2% from last year’s level; and in theenvironment we’re in, we just think it speaks very very hard and fast to thestrength of our model and, in fact, why this business has prevailed andsucceeded over such a long period of time. So we continue to be very committed to fix what’s broken andget momentum back in our domestic sales and get our franchise business ignited,and I’ll look forward to giving you an update at the end of our fourth quarter. Thank you all for your time and interest in Domino’s Pizza.

Ladies and gentleman, this does conclude today’s conferencecall. You may now disconnect.