Domino’s Pizza (DPZ) Make your mark by offering a fast food pizza service option. Domino’s Marketing promotions for pizza delivery in 30 minutes really helped the company grow.
The company expanded by attracting customers eager to sit on their couches and wait for their food to arrive. On-time delivery is one of the key factors to its success.
Another key ingredient to Dominos’s success is its approach as a cheap pizza option. Faster delivery and lower pizza prices than the competition proved to be a winning strategy for the Michigan-based company. The pizza company started in 1960 and has grown primarily through franchising to 85 different countries. Since the company is primarily an independent franchise owner, owners can determine if their store charges for delivery and at what fare thresholds for free shipping.
Pizza businesses are fiercely competitive, and in times of pandemic, the industry is prioritized for the essential business, home delivery. Most other industries have had to rotate business models, but pizza delivery has not. More people order pizza during the pandemic more often than ever before. Dominos reported a big increase in sales in stay-at-home orders.
Dominos can’t hide from pandemic economic problems, inflation
Pandemic could be the root cause of inflationary globally and no industry is immune to its effects. Worldwide inflation is driving prices up all the time. During the Q3 earnings call, Domino’s CEO, Russel Weiner, said, “Given the continued inflation we’ve seen, our analyzes now suggest we should be pricing in. [up] about our national performance agreement. We will continue to strike a balance between customer value and franchisee profitability by executing a combined sales contract of USD5.99 to USD6.99 starting Oct. 17. From a capacity perspective delivery, we saw progress throughout the quarter, thanks to our initiatives in this area.”
The price hike at a company that has built its business on cheap pizza and on-time delivery is a pretty big blow to loyal customers. Customers have felt burned by the higher prices, and the low-priced dinner option is a gift of savings, as its deal is still much cheaper than going out to other fast food restaurants like McDonald’s (MCD) . Prices have risen much more slowly but the sticker shock at McDonalds is still happening. McDonalds is said to have increased prices by 6% this year, and Domino’s $1 price increase reflects a 15% increase.
Since franchisees can decide whether to charge a delivery fee, it’s really a consideration of the amount of money saved between fulfillment and delivery. All the things that are considered an extra $1 per item in a mix and match deal may sound like little potatoes, but getting a $1 off everywhere consumers actually shop start to increase.
Overall, Pizza is still a scary dinner option
Dinner is increasingly difficult to bring to the table for many families, especially those who are living in the salary scene. All those families who could previously afford to go out to dinner once a week or occasionally, are now looking for the most affordable place option to treat their families.
The curbside pizza pick-up or take-out options are still popular with affordable prices. Since the pandemic, many restaurants have increased their capacity and started delivery options to reach customers. Although favorable, most of the restaurant chains and small businesses had to raise prices to cope with inflation. Considering that a family can eat pizza in one meal and only pay $1-$2 more for the same meal than delivery, which increases the cost of many food items, pizza is still a formidable competitor in the food industry.
Pizza restaurants are also experiencing the pain of staffing shortages, just like any other industry. It has gotten to the point where pizza delivery will be done through outsourcing through other delivery companies that have employees serving dinner on the table on time.
Companies are getting creative on how to attract customers. Most recent Domino’s Pizza marketing urges customers to save 20% on “Inflation Reduction Deal”. The deal is available when a customer places an order online through Domino’s app, online, by phone or in person. The special promotion runs for a limited time through October 16 and applies to both make and delivery orders.
