Domino’s Preps For QSR Industry ‘Shakeout’

pizza

Get ready for some drama ahead in the food delivery space — that was one message that came from Domino’s Pizza on Tuesday (Oct. 8) in the aftermath of third quarter 2019 earnings that disappointed investors.

The context for that outlook? The increasing pressure posed to the pizza chain by third-party delivery services — unlike Pizza Hut and other operations, Domino’s has decided to handle its own delivery, and has embarked upon an effort to build more brick-and-mortar locations so that it can be closer to more real and potential customers, reducing its own delivery times. At least that’s the view of seasoned observers and Domino’s CEO Ritch Allison, who, on the company’s post-earnings conference call, predicted that a “significant shakeout” is coming to the industry.

Domino’s Results

This view of the future came as Domino’s reported a less than stellar Q3, at least from an investor point of view. Global retail sales increased 5.8 percent year over year, but the Q3 revenue of $820.8 million was lower than the anticipated Refintiv mark of $823.9 million. Domino’s, for its part, mainly credited the revenue increase on “an increase in worldwide store counts during the trailing four quarters as well as U.S. and international same store sales growth, resulting in higher supply chain and global franchise revenues.”

U.S same-store sales for the quick-service restaurant (QSR) increased 2.4 percent year over year. Earnings per share stood at $2.05, below the $2.07 expected by analysts.

Allison talked up the results. “It was a good quarter for Domino’s, as we continue to lean on our fundamental strength against a unique competitive environment,” he said. “Strong unit growth and positive comps yielded a solid and balanced quarter of retail sales growth across both the U.S. and international businesses. We remain steadfastly focused on driving profitable growth for the Domino’s system, and most importantly, for our franchisees.”

Even as investors seemed unhappy with Domino’s Q3 results, the chain continues to help push the frontier on retail and QSR innovation. For instance, Domino’s and other major restaurant chains have already invested in voice-based solutions to connect with consumers. In addition to voice-based tech, the company has also invested in a wide range of solutions that include mobile apps, a new loyalty program and even self-driving delivery vehicles. In a recent interview with PYMNTS, Christopher Thomas-Moore, vice president of digital commerce and eMarketing for Domino’s, explained how a broad technology portfolio and loyalty program helps the company to focus on “meeting customers where they are and where they’re comfortable.”

Loyalty Push

He said the availability of these programs can go a long way toward building a company’s brand in the eyes of consumers. Such offerings can demonstrate tangible benefits to customers by rewarding them for deciding to eat or drink at certain establishments.

“These loyalty programs mean so much to customers,” he said. “I think that, in the current atmosphere, consumers across all industries really value the acknowledgment and direct appreciation that companies can provide.”

Domino’s Piece of the Pie Rewards loyalty program launched in 2015. The company released a Points for Pies offering earlier this year, allowing members to earn 10 points for any pizza they purchase, including those that are not from Domino’s. Customers who earn 60 points receive a free medium pizza with two toppings.

Thomas-Moore said the program allows Domino’s to more effectively engage with customers who have proven to be more “loyal” to the brand. The availability of such a program, he said, helps “provide reasoning” as to why they should continue ordering pizza from the company.

Now Domino’s just has to find a way to fend off that pressure from outside delivery services.