Domino’s on Wednesday opted to end its long stand against doing business with a third-party aggregator in the U.S., announcing that it has a deal to join the Uber Eats Marketplace starting in four test markets this fall.
The company will enable customers to order pizzas or Loaded Tots on the Uber Eats or Postmates app, with the chain’s own drivers providing the delivery. “Domino’s has a history of successfully entering new marketplaces,” CEO Russell Weiner said in a statement. “Now that aggregators are at scale, the next logical marketplace for us to enter is order aggregation.”
By entering the marketplace, he said, Domino’s will reach a new segment of customers who prefer using those apps, which feature numerous restaurant chains.
The agreement will also cover Domino’s international markets under a single agreement. Domino’s and Uber Eats have 27 countries in common, which covers about 70% of the chain’s locations around the world.
The agreement ensures that Uber Eats will be the exclusive platform for Domino’s until 2024.
The move comes as Domino’s has struggled to generate sales coming out of the pandemic. Delivery weakness in particular has been a challenge for the Ann Arbor, Mich.-based chain, which has largely blamed that weakness on inflation, which is driving away low-income customers concerned about the cost of the service.
But the rise of third-party service has also provided a substantial level of competition for the chain. Domino’s rivals, including Papa Johns and Pizza Hut, have embraced the aggregators, both to provide delivery and get access to the apps’ customers. The top executives of both chains have proclaimed the benefits of using the apps, though they do so both to provide delivery and get access to customers. Their comments, coupled with Domino's weakness, have only added to questions about whether it would join them.
Domino’s has resisted, arguing that Uber Eats and DoorDash are competitors. But the company has also indicated a willingness to eventually move onto those apps. Last month, CFO Sandeep Reddy noted that Domino’s uses many aggregators around the world and uses a risk-reward calculation to decide whether to use one of the apps.
“We just look at what is the incrementality of a potential partnership, weighed against the potential risk of customers who are on our platform, switching out of our platform into an aggregated platform,” he told investors. “And if we see that on a long-term basis, the incrementality of the opportunities is greater than the risk, then the calculus leads us to actually partnering with a third-party aggregator.”
That calculation must have concluded more recently that it risks losing more customers by not using the apps.
“As the No. 1 pizza company in the world, it is not surprising that Domino’s is a brand people have been asking for on Uber Eats’ global platform,” Weiner said. “Given certain customers only order their delivery from the Uber Eats app, this deal could make Domino’s available to millions of new customers around the world.”
Domino's stock, which has been hit hard by its sales and delivery challenges, jumped more than 15% in early morning trading on Wednesday on the news.
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