Delivery sales in the U.S. are expected to continue pressuring Domino’s over the course of the year, executives with the company said on Thursday.
But rather than make their pizzas available to customers on third-party delivery sites like DoorDash or Uber Eats, the Ann Arbor, Mich.-based pizza chain hopes improvements to its service and technology will do the trick.
The company is planning to bring its franchisees to corporate headquarters this summer to provide additional training in the hope of driving improvements to delivery times and overall service, in the hope that quicker deliveries of hotter pizzas will keep customers from shifting spending to other options.
But Domino’s also plans changes in its “Piece of the Pie” loyalty program to provide more rewards for carryout customers that have carried the chain over the past two years as delivery sales faltered. And the company plans to make improvements to its e-commerce functions next year to give it more functionality, particularly enabling more personalization.
“There are certain things that we want to be able to do that we’re not doing right now,” CEO Russell Weiner told investors on Thursday. “And this will really let us lean into personalization in a much bigger way.”
The comments came on a strangely active day for the company’s stock price. Domino’s reported quarterly earnings that included a 3.6% increase in U.S. same-store sales, thanks to a combination of higher prices and the introduction of Loaded Tots in February. It also featured higher-than-expected earnings, and in the morning the company’s stock was up more than 4%.
But on Domino’s earnings call later in the morning, CFO Sandeep Reddy noted that global retail sales this year would be on “the low end” of its long-term sales outlook of 4% to 8% annual growth. And Reddy suggested that its sales in the first quarter were helped along by a “boost week” promotion offering half-price menu items and easier comparisons from a year ago.
“The challenges that we were seeing in the U.S. delivery business was the primary driver of the lowered estimation of the global retail sales outlook,” Reddy said. The comment and the outlook sent Domino’s stock falling again, and it closed the day down 6.5%.
The company’s delivery challenges have persisted since 2021, when a shortage of drivers kept many of its locations from offering the service as much as they wanted. But last year, executives changed their tune, arguing that inflation-weary customers are eating at home more often, rather than ordering delivery, or they’re dining inside restaurants more often.
Domino’s has been getting a lot more carryout business. Carryout same-store sales rose 13.4% in the first quarter and are up nearly 30% over the past three years. But carryout remains less than half of its sales, and those orders tend to be smaller than delivery orders.
Company executives said there is little overlap between delivery and carryout customers. And thus the company plans to improve its Piece of the Pie rewards program “to explicitly cater to the carryout customer in addition to the delivery customer,” Weiner said.
Domino’s increased its charges to franchisees to nearly 40 cents per transaction from 31.5 cents, though operators will contribute less to the ad fund this year to make up for the charges. That will help fund a redesign of the e-commerce platform to provide for more personalization.
“When we launched it back in 2015, we were more of a delivery company with our carryout business still gaining momentum,” Weiner said. “Naturally, our loyalty program was designed more around the delivery customer.”
But it’s in service where the company hopes to have the biggest impact on delivery. The company cut one minute from its delivery times this year. Now it hopes to invite operators to Michigan for additional training and to get individualized plans to improve service at their locations.
“We’ve driven significant improvements in our back-of-house technology and our circle of operations over the last few years and we’ve got more coming,” Weiner said. “The summer of service program will allow us to share best practices with our franchisees, who we expect will leave Ann Arbor with specific plans that they create to positively impact service for every one of their stores.”
As for whether the company would adopt a strategy being deployed by rivals Pizza Hut and Papa Johns and start using third-party delivery, Domino’s executives maintain that they will not. But they will not totally shut that door, either. “You’re never going to hear that this team closes the book on things,” Weiner said. “Right now, we’re focused on making ourselves a better Domino’s.”
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