Financing

Emergency Pizza and loyalty drove Domino's sales last quarter

The pizza chain's transactions increased late last year, largely due to the unique buy-one, get-one-free promotion and growth in its reconfigured Domino's Rewards loyalty program.
Domino's
Domino's generated more transactions in the U.S. last quarter. | Photo: Shutterstock.

People really needed some emergency pizzas last year.

Domino’s on Monday said its same-store sales in the U.S. rose 2.8% in the fourth quarter, largely because customers ordered its pizzas more often.

They ordered more often thanks largely to the company’s reconfigured loyalty program, Domino’s Rewards. The company made changes to its program to enable customers to redeem points for lower-priced items, and it fueled a 10% increase in membership growth last year.

The company added 3 million active loyalty members, 2 million since the change to the program, and Domino’s Rewards now has 33 million active members.

Fueling that growth was the company’s “Emergency Pizza” promotion in the quarter in which the company gave customers a voucher for a free, two-topping medium pizza that can be redeemed within 30 days.

The Emergency Pizza program required users to join Domino’s Rewards, which drove membership. But executives said the changes to the program lured new members from the get-go.

“The loyalty program out of the gate, even before we did Emergency Pizza, was doing exactly what we needed it to do, which was engage lower-frequency users and engage carryout users,” CEO Russell Weiner told analysts on Monday. “And then we brought in this powerhouse, Emergency Pizza.”

Domino’s stock rose more than 6% on the news in early trading Monday.

Domino’s had some success years ago with its “Piece of the Pie” loyalty program, which gave customers a free pizza after they ordered a certain number. The company upgraded that program last year, after sales had faltered, updating the program to reflect other successful restaurant loyalty efforts such as programs at Starbucks or Panera Bread.

For the company, the strategy was simple: Capture a greater share of its customer base. Carryout has become a greater share of Domino’s sales in recent years. But many customers order lower-priced items, such as a $6.99 carryout special, that wouldn’t be eligible for points or rewards under the old system. They can collect points with such orders now, and can redeem their points at lower levels, for items such as Garlic Bread Twists or Chocolate Lava Crunch Cakes.

“The loyalty program has worked extremely well from a transaction perspective for company stores,” Domino’s CFO Sandeep Reddy told analysts.

Emergency Pizza, meanwhile, was simply a new take on the old, buy-one, get-one-free offer. It required loyalty membership, and it also required customers to visit again. Domino’s also backed it up with marketing.

That generated additional transactions for the company. “Emergency Pizza was just a resounding success,” Weiner said. “This is your traditional buy-one, get-one free that has been marketed in such a way that it really breaks through. We’ve done buy-one, get-one-free before. We’ve done nothing like this.”

For the company, it also provides some additional momentum. Domino’s sales have faltered over the past two years as customers shifted away from its delivery service, first because of a shortage of drivers and then over pricing and economic concerns. More of its customers are also going to the stores themselves to get their pizzas.

Domino’s last year worked to improve operations and marketing. It increased the prices on its value offers so franchisees could generate more profits. It worked to improve delivery times, for instance, and plans further operations improvements this year.

It also started working with aggregators for the first time, inking a deal with Uber Eats. The third-party delivery service represented 0.4% of sales last quarter, but executives said marketing is already generating more interest and they expect that percentage to be at least 3% of sales by the end of this year.

Executives also said they believe Emergency Pizza can become a recurring promotion, similar to its “Boost Weeks,” in which the chain offers 50% off pizzas ordered through its app.

“I think at least, we have a new thing in our arsenal now,” Weiner said. “Boost Weeks have worked really well for us. We’ve got this Emergency Pizza piece now.”

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