Domino’s: Pizza Giant, or Tech Startup?

How Domino’s Pizza leveraged technological innovation to re-establish itself as one of the top two pizza distributors in the Unites States, and what it means for their future.

Domino’s Struggles in the Late 00’s

After strong performance through the turn of the century, Domino’s Pizza had fallen from one of the most highly regarded pizza franchises in the US, to one of the most disliked franchises in late 2008. The company’s initial stores had limited patron capacity, influencing the owners to hire laid-off factory workers to distribute their pizza’s instead of selling in store, and in turn, renovated the pizza industry. [1] By the early 2000’s the franchise had grown to nearly 7000 stores in the U.S., with annual earnings of $36.8M. [1]

However, throughout the decade, competitive franchises such as Papa John’s and Pizza Hut won the public’s vote on taste, and had acquired the same delivery capabilities that gave Domino’s their competitive advantage. In 2009, Brand Keys found in a U.S. pizza taste test, Domino’s ranked tied for last with Chuck-E-Cheese’s among public opinion. [2] By Dec. 2008, the company’s stock price had fallen to $3.86/share from $32.47/share in Mar. 2007, a drop of 88.1%. Comparatively, Papa John’s had only fallen approximately 40% during the economic recession. [3]

The Domino’s Resurgence via Digital

In 2010, Domino’s hired CEO, J. Patrick Doyle, to focus on restoring the taste of their product, while seeking a new competitive advantage. [4] Doyle determined that by creating an online marketplace that was both user friendly, and efficient, they could significantly improve their user experience. Starting in 2010, combined with a marketing campaign that admitted the low quality of their pizzas’ taste, Domino’s created a transparent relationship with customers through a series of digital products.

Establishing a goal of earning at least 50 percent of 2015 sales via online platforms, Dominos started with developing an online Pizza Tracker and Pizza Builder for customers. [5] The Pizza Tracker allowed customers to have immediate updates as their order was received, assembled, cooked, packaged, and delivered. Additionally, the Pizza Builder allowed customers to customize their order online. This was soon followed by Pizza Profiles, allowing returning users to have their preferences, payment information, and locations pre-entered, significantly reducing order time and improving usability. [5] By October 2011, the company had passed its 2007 stock price of $32.47/share and had reached all time high rates. [3]

Business Implications of Shifting to Online Orders

By 2015, Domino’s had achieved selling more than 50% of revenues online, and in the process, recognized benefits that coincided with the growth of their e-commerce division. Domino’s recognized that orders placed online, were on average, larger than orders received by over the phone sales. Yum!, owners of Pizza Hut, also identified the same sentiment, claiming 30% larger sales online than instore. [6] Additionally, studies showed that customers also preferred the convenience of digital ordering. [7] Via digital sales, Domino’s had created value for customers by again focusing on speed of delivery, and usability, but by using a more current methodology. In the process, they also garnered more recurring customers, that spent more on their products.

Operational Implications of Shifting to Online Orders

While supply costs and capex associated with stores had not faced stark increases over the past decade, Domino’s recognized an impending challenge of increasing minimum wage. [6] Recently, legislation has passed increasing both the cost per hour that the company pays its employees, and required employee benefits. Digital orders required fewer employees to manage phone calls and customer interfaces, creating significant labor savings. Additionally, the company’s tracking apps dispersed more information at the end of the supply chain, providing detailed delivery information, reducing complaints. Finally, the platforms gathered more detailed information regarding user trends, better allowing them to predict demand.

Challenges Moving Forward

Competitors were quick to follow Domino’s online model, with Papa John’s recognized as the leader in digital orders at 55% of its sales coming from online. [6] Additionally, the market is not promising, with only 0.77% of e-commerce coming from Accommodation and Food Services, and with average pizza store sales among companies down $514,679 from 2014 to 2015. [8, 9] With their competitive advantage matched again, Domino’s must continue to innovate, and evolve their operations. Signs of this path include the launch of their own version of Siri (DOM), Apple Watch apps, and Twitter orders, along with Domino’s Robotic Unit (DRU). [10] DRU includes a drone delivery service that was launched in New Zeeland in November 2016, and investigations into autonomous vehicles.

Moving forward, Domino’s should double down on their DRU division. This may be the only identifiable differentiating value proposition for both customers, and the company. To do so, requires significant investments in capital (robotics, vehicles, new centralized production centers), and in R&D (GPS Map Development, safety conscious robotics, and UI development). The best way for Domino’s to accomplish this, may be to target unsaturated markets such as in China via traditional routes, and using these increases in revenue to pursue future developments.

Word Count: 779 (excluding citations and titles)

[1] Domino’s, Inc. History,, Accessed November 2016.

[2] Baertlein, Lisa. December 16, 2009. Domino’s Revamps Pizza Recipe Amid Competition,, Accessed November 2016.

[3] Yahoo Finance. Domino’s Pizza, Inc. (DPZ),, Accessed November 2016.

[4] Le, Parshut, Domino’s The Turnaround,, Accessed November 2016.

[5] Miller, Michael. March 29, 2016. Why Domino’s Is Now a Tech Company That Sells Pizza,, Accessed November 2016.

[6] Levy, Adam. May 21, 2016. Why Papa John’s and Domino’s Are All About Digital Pizza Ordering,, Accessed November 2016.

[7] Pizza Industry Analysis 2016 – Cost & Trends., Accessed November 2016.

[8] US Census, E-Stats 2014: Measuring the Electronic Economy. June 7, 2016., Accessed November 2016.

[9] Hynum, Rick, The 2016 Pizza Power Report: A State-of-the-Industry Analysis,, Accessed November 2016.

[10] Domino’s Website, Technology & Innovation,, Accessed November 2016.


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Student comments on Domino’s: Pizza Giant, or Tech Startup?

  1. Thanks for this great post – Your description of the rise and fall of Dominos over these last few years is very interesting and, frankly, almost reads like a pleasantly-condensed HBS case!

    I hadn’t realized just how big of a role online sales/technology has played in the revamp of the Dominos business and operating models. It is interesting to see that while they were first movers in the online pizza order/delivery model space, they were not able to create enough of a competitive edge to isolate competitors such as Papa John’s. I would imagine in the ever-evolving world of technology, any promise of a long-lasting first mover advantage is contingent upon the speed with which the company can innovate and execute new digital advancements. The drone delivery system sounds quite promising, particularly from a labor costs perspective. However, as drone delivery is still a relatively new frontier across all industries, it may be too early to determine whether moving in this direction would be an economically viable investment.

  2. Great post!

    I love the Pizza tracker feature, I used it yesterday! As a person who orders food frequently, I can tell you that tracking and customizing are probably the two most important aspects of food delivery. Great job Domino’s! By providing these features through a user-interface, Domino’s reduces the mistakes made by employees taking orders over the phone and manages customer’s expectations. Even though I was not aware of the impact of this on the company’s financials, I am not surprised at all. As technology advances, we as customers become more demanding, and as millennials, on-time information is a most for us. I encourage you to skim this article as it supports your argument even more (1). I like the idea you mentioned about domino’s investing more in its DRU, but I am skeptical of the additional benefits drone technology can bring to Domino’s. After all, in my opinion, pizza in 30 minutes seems very reasonable, and I am afraid company’s like Domino’s will incur in enormous expenses to keep competitive in aspects that simply do not add to the perceived value by the customer and hence may risk big investments without concrete monetary return.


  3. Thanks for a great post! While these technological innovations may help boost Domino’s returns in the short-term, I’m concerned about the long-term impact on the company. In my opinion, initiatives such as the DRU are short-term ploys that make customers curious enough to order a pizza. However, as you mentioned in your post, their pizza still ranks low in terms of preferences. Updating technology will only have short-term benefits if nothing is done to your underlying product. It’s also unclear how much drones will be regulated in the US, so I would be cautious with the amount of investment in this business unit.

  4. Thanks for the post!

    I’ve actually used Domino’s app to order pizza before and have to agree that it is a far better experience than ordering by phone. The fact that you can create your own pizza and then receive updates on the delivery process makes the overall experience way better. It also reduces the possibility of the store making a mistake on the actual order, driving down costs. As you mentioned, there are now many companies trying to imitate this, but I don’t think that any have been as successful as Domino’s.

  5. Great article! I started ordering from Domino’s in college after Doyle was already CEO. Even then their website surpassed my expectations. I found the Pizza Builder super engaging and it made online order a more fun chore. It was the first delivery service that I used online with ease. I’m not at all surprised to see Domino’s staying ahead of the Internet of Things revolution. Recently, I’ve heard that Domino’s invested in even drones for delivery. They also partnered with Messenger for delivery options. Clearly staying ahead with technology is important to them. I have faith that as they continue to invest in partners, Dominos will still be a staple in our future.

  6. Great post MS. Glad to see Domino’s adapting to Digitalization ( as a huge fan of their pizza, it would be a shame if they ceased to exist)

    Wanted to share a few thoughts on your post:
    – The build your own pizza feature on the online app is a fantastic idea; it offers consumers more flexibility
    – I have a big concern about the sustainability of Domino’s, given the recent customer shift in preferences towards healthier food options. How do you think Domino’s will react to this? Do you see them introducing new menu items?

  7. Excellent and relevant read as I’ve been a loyal Domino’s online customer for several years now! What I find fascinating about your post is that because pizza is a commodity food, it’s incredibly difficult to maintain a competitive advantage and remain differentiated. Even if Domino’s invests in drone delivery services, there is nothing preventing a competitor from copying Domino’s business model.

    On top of being a mass-market product, the entire category is experiencing little growth. In fact, despite the pizza market generating $39 billion dollars in revenue in 2015 in the US, the overall industry growth is stagnating at 0.2% from 2010 to 2015 [1]. In my opinion, especially as trends in major cities shift towards casual, yet healthy establishments such as Lemonade, Chopped, etc., pizza may become more challenged. As a result, Domino’s and other pizza chains should focus on targeting and building their customer base: young, tech-savvy teens, students, and millennials who have purchasing power, but are not yet in a health conscious life stage. Regardless, I see Domino’s and the category being challenged by a fractured market place, an increasingly health-oriented consumer mindset, and a fundamental lack of differentiation.


  8. Great post! Domino’s has a fascinating story and I also wrote about their transition in my post.

    One suggestion that I had for them going forward that seemed to resonate with many people who commented on our posts was offering healthier options in an attempt to capture the growing millennial customer base. Traditionally, QSRs have limited their product assortment so they can minimize preparation time and shorten the delivery cycle but as you pointed out in your post, orders placed online, were on average, larger than orders received over the phone, which is driven by the convenience of digital ordering but also by the increased variety and higher quality of the product offering. So my question is – if Domino’s continues to innovate its menu and increase the assortment of healthier options to drive larger online orders, would that lead to pressure on delivery time, customer dissatisfaction and churn over time? And how can Domino’s balance changing its menu while maintaining speed of service and low labor costs?

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