Russell Weiner arrived at Domino’s in 2008 and was named its chief marketing officer. At the time, the Ann Arbor, Mich.-based chain was focused mostly on the business of delivering pizzas directly to consumers’ homes.
But Weiner noticed something: The business of people coming to the restaurant to get their pizza themselves was even bigger. “We were only competing by accident,” he said. “We leaned in with a specific offer and an ad, and from 2011 to today, our carryout is up $2.5 billion.”
Weiner sees a similar reality with third-party aggregators. On Wednesday, Domino’s announced an exclusive deal with Uber Eats, which will enable the chain to sell pizzas and wings and Garlic Bread Twists on the company’s mobile app. It is only a marketplace deal, so Uber Eats won’t do the delivery for Domino’s. The deal will begin in four markets starting this fall but the company hopes its pizzas will be available nationwide by the end of the year.
In the process, it acknowledged that the online aggregator market is here to stay and represents a substantial financial opportunity for the chain—one the company had largely resisted until now. “If you look at the size of the aggregators, they’re much bigger,” Weiner said. “There’s $5 billion of pizza sales happening on the aggregator platforms. We deliver one out of every three pizzas in the U.S.
“That means that’s a $5 billion platform we should have a third of. But we’re not competing in.”
It’s nevertheless a vastly different viewpoint than the company held in recent years regarding third-party delivery services. When the aggregators first emerged, the company rarely mentioned them and often questioned the future of the service. Executives also said they saw little impact from the business.
By 2019, however, the brand changed its tune, acknowledging that the services were now its biggest competitor. Nevertheless, it also argued that the companies priced their services too low and couldn’t make any money doing it.
In the years since then, fueled in part by the pandemic, third-party aggregators became an important source of customers. Many people prefer having access to a marketplace of restaurants where they can get food delivered to their home. And they’re willing to pay the price.
And the aggregators themselves have built loyalty through programs such as DoorDash’s DashPass and Uber’s Uber One. There were 12 million Uber One users as of the end of last year, for instance.
“Those Uber One users order more frequently, their basket size is greater and they tend to show greater loyalty to restaurants and merchants that they find help meet their needs,” said Sarfraz Maredia, Uber’s VP of Americas for delivery, who helped work on the Domino’s deal. “That’s something Domino’s is going to have the benefit of.”
It is also a different customer from the one who frequents Domino’s app. “Uber has a very different customer group than us,” Weiner said. “They tend to be higher income and younger. That’s an incremental group there for us.”
Domino’s customers have been more prone to inflation, which the company has blamed for weak delivery sales over the past year and a half. Lower-income customers have been opting for frozen pizza over delivery. Walmart’s pizza sales rose nearly 30% in the first quarter, for instance.
Third-party delivery has not had such problems despite concerns about the cost of having food delivered. Their customers, with their higher incomes, are more concerned about convenience than about price, apparently.
Domino’s executives have recently said that they use a risk-reward calculation to determine whether they would use third-party aggregators in a market. If the benefit from using one of the aggregators was strong enough to offset the risk of losing its own customers to the apps, then the company would use them in the market.
Its decision this week is a clear indication that the reward of using the app has surpassed the risk. But, Weiner noted, “we were able in this deal to reduce the risk.”
Weiner also said the company has talked with aggregators for some time and acknowledged that it was in talks with some of them to help provide delivery last year when the omicron variant led to a massive surge of COVID that caused a huge shortage of drivers.
“More recently leaned into seeing if we can get the right deal that would work for both parties on the ordering side,” Weiner said.
The company will be doing all the delivery, which he noted makes Domino’s one of the few companies on the app where its pizzas will always remain under its control. The system will work seamlessly with the company’s system so employees won’t necessarily know where the customer is ordering their food from.
And, Weiner said, the lowest prices will remain available on the Domino’s app. “As the last big [quick-service chain] to join here, we were able to protect the economics for us and our franchisees, the data, accessibility and the precautions. The scope of the deal is positive and protective of our customers.”
The deal also gives Uber Eats exclusivity until the end of 2024. The deal is global in scope, meaning Domino’s will be available on the Uber Eats marketplace in other countries around the world. As it is, Domino’s works with the aggregator in several countries such as Australia, Belgium, France, Japan and Mexico, among others. This deal will put Domino’s on apps in several other countries, including Canada and the U.K.
“We’re a global player,” Maredia said. “They were looking to drive more incremental demand and growth not just in the U.S. but globally.”
Domino’s is relatively unique in that it uses the apps as a marketplace but does its own delivery. “We give this option to a lot of different partners,” Maredia said.
He said there is the option for Domino’s to use Uber Eats for delivery in the future, but for now this is just a marketplace deal. “This is a big step for them,” Maredia said. “This is a start to see how much demand they can get. We’re confident it can generate well in excess of $1 billion in incremental sales for them.”