Pizza is About to get a Makeover

The Lempert Report
February 11, 2020

Domino’s Pizza is seeing its earnings slide and are turning to technology to fix the problem.

I’ll admit that pizza is one of my favorite foods – and it’s the thin crust NY Style pizza that you can fold in half and watch the oil drip as you take your first bite.

I’ve said it before, and now again, and the best pizza is from Star Tavern in Orange New Jersey.

But the pizza business seems to need an upgrade. Domino’s Pizza, which is the world’s largest pizza brand, is seeing its earnings slide as same store sales are down; and they are turning to technology to fix the problem. And its not the first time.

Patrick Doyle then CEO in 2010 implemented a digital strategy that led to orders on smartphones and a zero-click purchase experience through smart TVs. Overall sales zoomed from $1.6 billion in 2011, to $3.4 billion in 2017. 

But that was before Uber, Door Dash and others could take the pizza maker’s unique fast delivery and make it mainstream for all pizza places and restaurants including McDonald’s.

Now Domino’s is testing drones and autonomous vehicle deliveries to catch up and its important to note that according to the Wall St Journal 65% of all its sales came through digital channels for the first quarter of 2019. Rich Allison, the new CEO, is going brick and mortar and wants to add 10,000 new stores that he believes will ensure faster delivery times and more pick up orders (which lowers costs). He also predicts $25 billion in sales by 2025. And is adding new menu items at a $7.99 price point. He’s re-upping the company’s original pledge to customers of fast delivery and reasonable prices.

The strategy also offers the unique benefit of better margins, because no delivery costs are incurred. Allison expects use these savings to offer a wider variety of new $7.99 carryout menu items.

Across the US the average cost of a pizza is $13.21. What I’d like to see Domino’s do is head in a different direction than a cheap price. How about meeting the trend where people want to know where their ingredients come from? Have a shorter list of ingredients? And how about making a pizza that tastes great?