Domino’s Plans to Add More Stores to Ease Delivery Woes

Domino’s to Add More Stores to Ease Delivery Woes

As ongoing labor challenges continue to impact the delivery channel, Domino’s Pizza is looking to reduce the distance between customers and their nearest store to improve the economics of the channel.

“The delivery business continued to be more pressured,” Domino’s Chief Financial Officer (CFO) Sandeep Reddy told analysts on a call Thursday (July 21), discussing the brand’s second-quarter fiscal year 2022 earnings results.

He noted that because of the decline in this channel, same-store sales in the quarter were down 11.7% year over year. The Ann Arbor, Michigan-based quick-service restaurant (QSR) chain with more than 19,000 stores worldwide.

Consequently, Domino’s new CEO, Russell Weiner, who took over for previous CEO Ritch Allison following Allison’s retirement Friday (July 15), argued that the brand’s fortressing strategy, by which the company opens many stores in the same market, can make all the difference when it comes to making the channel work.

“When we look at the top quintile stores on delivery, the ones that are really doing well, those are the ones that have fortressed the most,” Weiner said. “What happens when you fortress is you get close to your customers. Getting closer to your customers, from a delivery perspective, during a capacity-constrained, labor-constrained environment, helps delivery.”

Certainly, demand for first-party delivery remains high. The July edition of PYMNTS’ ConnectedEconomy™ series, “The ConnectedEconomy™ Monthly Report: The Rise of the Smart Home,” which drew from a May survey of more than 2,600 United States consumers, found that 45% of consumers had purchased food for delivery from restaurants’ direct ordering channels in the prior month. This share exceeded that of consumers who had placed a delivery order via a third-party aggregator, 43%.

Get the study: The Rise of the Smart Home

In addition to fortressing stores, executives discussed an intention to find ways to meet drivers’ demand for greater flexibility, which Weiner defined as “the ability to work shorter shifts, fewer hours in a week and sign up for shifts with short lead time,” to ameliorate some of the labor issues the brand faces.

Moreover, the company has also been testing out solutions that could mitigate the need for driver labor entirely. In late June, Domino’s New Zealand drone delivery partner SkyDrop announced that it completed production of the drone fleet for its commercial delivery trial with the pizza chain, which is expected to go live in the months ahead.

Read more: Domino’s Drone Push Lifts Last-Mile Delivery Fight to New Heights

Plus, in spring 2021, the brand began partnering with autonomous delivery company Nuro, which creates self-driving vehicles that operate on public roads, to launch robotic delivery in Houston, Texas.

See more: Domino’s Partners With Nuro to Launch Autonomous Delivery

As these delivery challenges persist, the brand is also trying to guide consumers away from the channel, incentivizing them to adopt pickup options instead.

“We have seen sustainability and continued momentum and continued growth and carry out not just over the last three years, but over the last decade or so, since we decided to really focus in on that area,” said Weiner. “One of the reasons it’s so important for us is, it’s very incremental to deliver.”