After hitting rock bottom in 2009 (when its CEO publicly apologized for how bad its pizza tasted), Domino’s has undergone a dramatic makeover and become a posterchild for 21st century food business. Since 2010, the company’s stock price has increased 700%, crushing competitors like Pizza Hut, Papa Johns, and even McDonald’s, who have experienced anemic results by comparison. The company’s overhaul of its menus, recipes, and ingredient lists was a necessary but insufficient condition for its impressive growth. The real fuel for Domino’s success has been the relentless prioritization of digital and mobile tech across its operating model, making it an unlikely winner.
Since 2009, Domino’s has aggressively incorporated digital technology into its ordering process, creating easy-to-use apps that cover nearly all smartphone types on earth. It launched an online portal where customers can customize their favorite pizza combinations and order in a few clicks. In May of this year, the company even began allowing customers to order via tweet, further expanding its reach into the mobile devices of its young customer base. Coupled with swift expansion into new markets, this strategy has paid dividends. The company’s online/mobile business now accounts for more than half of its revenues and orders in the US, which is only going to increase.
Getting mobile right has allowed Domino’s to create more value than its competitors (through improved convenience and customization), but also to capture more value by cultivating loyalty and efficiency. What Domino’s realized is that a huge portion of the value in food delivery is its convenience—not just the taste or quality of the food. Pizza customers are fickle and hardly loyal. A boozy college kid who needs food at 2am is not going to be particular about where his XL Meat Lover’s pie originates. But you can bet that he will care about how quickly and easily he can get it. Tweeting “@dominospizza please send me my usual” is just about as convenient as it gets. Value creation? Check.
Like many online retailers, Domino’s stores customer information, including credit cards and billing info. Saving info and preferences has lowered the barrier for customers to return, boosting loyalty and allowing Domino’s to capture more value. Taking orders online (rather than on the phone or in person) allows Domino’s to eliminate data entry steps from its operations, which frees up its labor force to focus on making and delivering pizza. As well, new digital tools on Domino’s backend allows the company to automatically route orders to the store with closest proximity and/or the most capacity to fulfill them. These shifts lower Domino’s costs and improve efficiencies, effectively giving them a bigger piece of the value pie they create. Value capture? Yep.
Integrating digital technologies into Domino’s operating model has not been without costs, however. Training expenses and timelines have been increased by incorporating new tech tools, and those training periods are now the primary drag on Domino’s international expansion. As soon as the company has reached a critical mass in a new overseas market, however, efficiencies emerge and these new costs decline. Since the company is opening stores at a breakneck pace and continuing to build out new features on its applications, no other restaurant chains have been able to match its online presence.