Digital technology and a tasty sauce are the keys to Domino's success
In 2008, the United States faced a severe economic decline. Businesses lost money and people lost homes and jobs, leading to unemployment. At the same time, Domino's Pizza Inc. was sinking, too.
The pizza delivery chain was under attack for having lousy food and poor service. Complaints poured in that a Domino's pizza crust tasted like cardboard. People said its tomato sauce tasted like ketchup.
The company's investors were not happy, either. In late 2008, Domino's stock had fallen to a measly $3.85 a share. The stock shares are tiny parts of the company as a whole, so with the stock price falling, the company's value fell, too. Domino's even put out television commercials admitting its faults and promising to do better.
Under the guidance of Chief Executive J. Patrick Doyle, Domino's has done better. That's mainly because the chain completely overhauled its pizza recipe and rooted out poor franchisees. Domino's also aggressively embraced digital technology, to make ordering more efficient, customer friendly and maybe even cool.
Franchising is when a company, or franchisor, sells the use of its business model and brand to an individual buyer or franchisee, for an agreed upon period of time. Success for the franchisor depends on how well the franchisees do. Domino's is almost entirely a franchise operation.
Domino's Sales Are On The Rise
The Ann Arbor, Michigan, company's income and profit have increased. Its same-store sales, or sales from stores open for at least a year, have risen in the U.S. market for the last six years. Same-store sales are a key measure of retail performance. Financial analyst Brian Bittner of Oppenheimer & Co. recently called Domino's rise in sales "incredible." Domino's has also been expanding worldwide. It recently opened its 14,000th store in Malaysia.
The Domino's chain delivers more than 1 million pizzas a day. Its global sales, including those of franchisees, totaled $10.9 billion last year. It earned nearly double what it made in 2008.
Yet Domino's notes that although it has 5,400 stores in the U.S., including more than 500 in California, it only sells 1 of every 7 or 8 pizzas sold in the country daily.
Domino's is about three-quarters through a years-long project to remodel all of its stores. About two-fifths of its sales are still carry-out orders.
Remodeling The Stores To Help Sell Pies
The stores "needed a freshening-up," Doyle said in an interview. "They just didn't look great." He says the remodels help sell more pies by enabling customers to better see the pizzas being hand-prepared.
More than 60 percent of Domino's orders are now made on digital platforms, rather than by phone. Domino's often refers to itself as a "technology company."
Customers can order on Domino's own smartphone app, Amazon's Echo speaker or online via Facebook, Twitter and other platforms. They can also order at the Domino's website. Discounts often are included when ordering online, and there's a loyalty rewards program.
In the cool technology department, the Domino's app includes an order tracker that lets customers follow the preparation and delivery of their food. It also has a voice feature allowing customers to order by simply speaking into their phones.
It All Comes Down To Delivering A Great Pizza
"We fundamentally believe that voice is a far more effective and efficient way for people to interact with technology," Doyle said.
But Doyle said that for all the benefits technology provides, "we're still a pizza company. At the end of the day, if we don't deliver a great pizza to people, then none of the rest of this matters."
That's especially true on New Year's Eve, Domino's busiest delivery day. It's followed by New Year's Day and Super Bowl Sunday. The most popular American topping? Pepperoni, then mushrooms and sausage.
I'll Trade You Half The Business For A Car
Domino's was started in 1960 when brothers Tom and James Monaghan borrowed $900 to buy a pizza store named DomiNick's in Ypsilanti, Michigan.
The next year James traded his half of the business to Tom for a Volkswagen Beetle. Tom later renamed the business Domino's Pizza. It had 1,000 stores by 1983 and 6,000 by 1998, when Monaghan sold the company to Bain Capital Inc. for a reported $1 billion. Six years later, Domino's began to sell shares of its company on the stock market.
The Secret's In The Sauce
After Domino's pizza was heavily criticized in 2008 to 2009, Doyle led the effort to change the recipe. The new pizzas had a richer, spicier sauce, tastier cheese combinations and a buttery crust with garlic and herbs.
Jeanette Morales supervises seven stores for a Domino's franchisee in Los Angeles. She says the new recipes made a huge difference.
Domino's also sells chicken wings, sandwiches, salads, bread and desserts but tries not to roll out too many new menu items.
But on the technology front, Doyle said, Domino's "is going to take risks."
"That's the sort of thing that's not going to generate a fast return, but that's part of how you stay ahead of the market," he said.