Domino’s reports its second-quarter earnings next week and analysts will be paying close attention to the impact of the company’s recent deal to advertise its pizzas on DoorDash’s mobile app.
The deal appears to be working as expected so far, according to the data firm M Science, which suggested that Domino’s sales through DoorDash have ramped up more quickly than did its earlier deal with Uber Eats.
M Science also suggested that Domino’s sales through DoorDash are “slightly” outpacing those made through Uber Eats.
“That’s certainly a positive for Domino’s,” said Matthew Goodman, senior research analyst with M Science. “As much as they’re trying to drive additional volume through these third-party aggregators, it looks like they’ve more than doubled their volume with that launch.”
Domino’s doesn’t use DoorDash and Uber Eats to deliver pizzas. It is simply on the apps to remind a certain group of restaurant consumers that their pizzas are available, while providing the delivery using its own drivers. And that is a key change—one that will be increasingly important over time.
The Ann Arbor, Michigan-based pizza chain was one of the last major restaurant companies to jump on the third-party bandwagon, arguing that such companies were competitors. But those aggregators’ popularity continued to soar coming out of the pandemic.
Each of Domino’s competitors—notably Papa Johns and Pizza Hut—had embraced those aggregators and were gaining market share.
“They were losing share on a year-over-year basis through 2022, through most of 2023,” Goodman said.
Between the third quarters of 2021 and 2023, Domino’s same-store sales—which had not declined for about a decade—declined an average of 0.16%. By contrast, Pizza Hut’s same-store sales averaged a 0.8% increase. At Papa John’s they increased an average of 2.6%.
Those are the types of results that can force executives to rethink holdouts. The company began suggesting that it might use aggregators if the incremental sales outweighed the potential risk of losing customers on its own app. And then it announced an Uber Eats partnership in July 2023.
“There’s $5 billion of pizza sales happening on the aggregator platforms,” CEO Russell Weiner said at the time. “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.”
The company started with Uber Eats in 2023. It then jumped to DoorDash this year after the exclusivity with Uber Eats ended. Executives at the time said they expect to generate twice the sales through DoorDash as Uber Eats.
Being on both platforms is important, because about 80% of DoorDash customers only use that app, while two-thirds of Uber Eats users are exclusive, Goodman said.
“Once we’re on the aggregator platform, we intent to grow our business on that platform, just like we grew our business outside the platform,” Weiner said in April.
Aggregators have become a crucial source of industry sales as a certain percentage of consumers use those apps to make their dining decisions. As such, in a short period of time, those aggregators now dwarf the size of Domino’s.
Last year, for instance, DoorDash generated more than $80 billion in gross bookings. For Uber Eats it was $74.6 billion. Domino’s global system sales were $19.1 billion. That doesn’t account for the percentage of those sales that are actually delivery.
Domino’s experience highlights the growing importance of those aggregators, even if a company has no intention of using them to deliver food, like Domino’s.
“For Domino’s to maintain or grow their share, they’re going to want to be on those aggregator platforms,” Goodman said. “A lot of consumers, if they knew they wanted pizza, they could go to the Domino’s app. They could call the store, etc. But now they think, ‘I want to get dinner. I don’t know what I want to eat. And they go to the Uber platform.’”
It’s not just Domino’s, of course. A lot of chain restaurants—and non-chain restaurants, for that matter—need to use aggregators to access a certain percentage of consumers. And that has changed the economics of the restaurant, mostly for the not-so-good. That is the current reality in which we live.
Domino’s early holdout on third-party delivery was certainly understandable. Its decision to end that holdout was a bow to reality. Now it’s just a matter of whether that holdout will cost it the level of business that the company believes it should get. But it appears that the effort is off to a decent start.