The Problem
Domino’s Pizza (www.dominos.com), with approximately 14,000 stores and 260,000 employees in 85 countries, is the largest U.S. pizza chain in the world, measured by global retail sales. Domino’s 30-minutes-or-free guarantee set the fast-food industry’s customer expectations for convenience, speed, and efficiency. Domino’s business model consists of three segments:
ordering, producing, and delivering.
At the end of 2008, Domino’s was experiencing decreasing sales and troubled franchises. The company recognized it had a serious problem. In short, its pizza was not very good. It was still cheap, but the recipes and ingredients had not kept up with the foodie movement. (Customers are foodies when they have great interest in their food, where it came from, and how it was raised,
processed, and transported.) In addition, Domino’s had abandoned its key marketing slogan—its 30-minute guarantee—after several accidents involving its drivers—one of them fatal—which generated two lawsuits that cost the company millions of dollars.
Making matters worse, in the spring of 2009, a video appeared on YouTube of two Domino’s employees. One filmed the other putting cheese up his nose and then adding that cheese to a sandwich. The video went viral, and the local health department temporarily shut down the restaurant. Domino’s had the two employees arrested for tampering with food. (The orders never left the store, and both workers received probation.) The president of Domino’s U.S.
operations, J. Patrick Doyle, recorded a two-minute apology that, unfortunately, did not go viral.
A Variety of Solutions
The Production Process. Domino’s instituted a variety of efforts to turn the company around. First, the chain overhauled its pizza recipe. Company chefs enhanced the quality of the
mozzarella and the flour, added garlic butter to the crust, and added flavor and sweetness to the marinara sauce. After 18 months, Domino’s had a new and improved (and expensive-to- make) pizza. In addition, Domino’s revamped about 85 percent of its menu.
Domino’s then began a new marketing campaign, with Doyle again creating videos for television ads. The ads acknowledged the chain’s problems, were funny, and poked fun at the company as well. Morning talk show hosts began discussing the campaign, and local television anchors started to conduct taste tests.
As part of a new ad campaign, Domino’s solicited photos from its customers and received almost 40,000 of them. One photo in particular showed a badly mangled pizza delivered to a customer, which the ad agency featured in its next ad.
The company’s efforts were very successful. By February 2010, Domino’s was selling so much pizza that it was three days away from running out of pepperoni. The company’s successful
initiatives caused problems with the ordering process. Most orders still came in by phone, so when workers were overrun with orders, they could not answer the phone. Consequently, Domino’s focused on improving its ordering process with digital technologies.
The Order Process. Since 2012, Domino’s Pizza has
emphasized all the ways that its customers can digitally order food.
The company began to introduce many new ordering methods:
Facebook Messenger, Twitter, Twitter with emojis, Apple Watch, and a voice-activated, “zero-click” wedding registry. Customers can track their orders online, and they can also track their drivers. In Australia, Domino’s can track customers on the way to the store so that their order will be ready just as they arrive to pick it up.
In June 2014, Domino’s released its voice-ordering chatbot system, called Dom. However, when a CNBC reporter tested the system on air on the floor of the New York Stock Exchange, Dom did not work because of the surrounding noise.
Domino’s wants customers to be able to place their order via any device as normally as they would if they were ordering from a person. For example, they can order pizza with Alexa (from Amazon) and Google Home, both of which are voice-controlled intelligent speakers.
The Delivery Process. The next segment of Domino’s
business model is delivery. More than half of Domino’s employees are drivers. The chain is examining a number of initiatives to
improve its delivery process.
For example, a Domino’s franchisee in Australia who owns 2,000 stores around the world is using drones to deliver pizza from a store in the New Zealand town of Whangaparaoa. The drones can travel about a mile from the store, and the customers must have a backyard so that the drone can land safely.
Domino’s is also testing robots for delivery throughout Europe and New Zealand. Reports have noted that the robots have difficulties navigating uneven sidewalks and are not allowed on roads. In 2017, Domino’s partnered with Starship Technologies
(www.starship.xyz) to use Starship’s delivery robots in Hamburg, Germany. A second test was performed in the
Netherlands in 2018. Although not yet widespread, robotic pizza delivery is coming to Europe.
Domino’s has not yet offered robot pizza delivery in the United States although Virginia and Idaho have allowed robotic delivery since 2018. Other U.S. states and federal regulations have not been determined.
Although not a digital effort to improve its delivery process,
Domino’s ordered a fleet of vehicles specifically designed to deliver pizzas. The cars, called Delivery Experts (the DXPs), were 154
Chevrolet Spark subcompacts with special side doors and warming ovens.
In mid-2017, Domino’s decided not to expand its DXP fleet of cars, primarily because the company knew that autonomous vehicles are coming. Domino’s executives recognized that if a competitor used autonomous vehicles, then it would be able to provide quick, reliable delivery without having to manage a staff of drivers and coordinate routes. In doing so, the competitor would gain a huge competitive advantage over Domino’s.
Despite Domino’s digital efforts, many customers do not use
technology (other than their phones) to order pizza, and most pizza
is still delivered by humans. Domino’s is also in the process of upgrading their stores because approximately 35 to 40 percent of its sales come from customers visiting a store for takeout or to eat in the store. As a result, the chain is improving all of its stores so that customers can see their pizzas being made and then eat in a clear, bright seating area if they choose to.
The Results
Domino’s does face competitive challenges. On-demand delivery services pose a threat to the chain. UberEATS
(www.ubereats.com) and GrubHub (www.grubhub.com) pose serious challenges. Delivery of a variety of good, healthy foods straight from these companies will target lower- and middle-
income customers, a key demographic for Domino’s. Adding to the competition, Panera Bread announced plans in 2017 that allowed them to create 10,000 new delivery and retail jobs within the year.
This aggressive plan enabled them to deploy delivery service in roughly 40 percent of their stores.
Domino’s finances have been improving for more than 10 years.
From 2008 to 2018, the company’s share price increased by 6,000 percent. At that time the company’s global retail sales totaled
approximately $12 billion.
By mid-2018, more than 60 percent of Domino’s orders were executed on digital platforms. Of these orders, nearly 70 percent were from mobile devices.
The chain continued to enjoy good news from its efforts. According to consultant Brand Keys, Domino’s had the highest loyalty among pizza chains. Furthermore, same-store sales grew almost 7 percent in the second quarter of 2018 compared to the second quarter of 2017.
In July 2018, there were about 5,650 Domino’s locations in the United States. At that time, the company announced that it
planned to open an additional 2,350 locations in the United States over the next 10 years. In anticipation of this expansion, Domino’s planned to invest approximately $120 million in its supply chain.
Sources: Compiled from D. Wiener-Bronner, “Domino’s Wants to Open Thousands of Stores,” CNN Money, July 19, 2018; S. Whitten, “Domino’s Stock Slips on Revenue Miss, Weak Same-Store Sales Growth,” CNBC, July 19, 2018; N. Meyersohn, “Why Domino’s Is Winning the Pizza Wars,” CNN Money, March 6, 2018; J. Peltz, “Domino’s Pizza Stock Is Up 5,000% since 2008. Here’s Why,” Los Angeles Times, May 15, 2017; C. Forrest, “Panera Bread Increases Automation, Leads to Hiring 10,000 Workers,”
TechRepublic, April 26, 2017; L. Kolodny, “Domino’s and Starship Technologies Will Deliver Pizza by Robot in Europe This Summer,”
TechCrunch, March 29, 2017; S. Berfield, “Delivering a $9 Billion Pizza,”
Bloomberg BusinessWeek, March 20–26, 2017; J. Dunn, “Some of the Biggest Tech Stocks in the World Have Been Outpaced by… Domino’s Pizza,” Business Insider, March 24, 2017; T. Lien, “How Food Delivery Apps Have Changed the Game for Restaurants,” Los Angeles Times, March 17, 2017; M. Fox, “After Betting Big on Digital, Domino’s Pizza Is Now Eyeing Voice Technology,” CNBC, March 16, 2017; B. Hill, “Domino’s New Digital Strategy,” The Trading God, March 8, 2017; B. Taylor, “How
Domino’s Pizza Reinvented Itself,” Harvard Business Review, November 28, 2016; L. Feldman, “How Domino’s Pizza Reinvented Itself as a Tech Company,” Forbes, November 28, 2016; J. Maze, “How Domino’s Became a Tech Company,” Nation’s Restaurant News, March 28, 2016; and
www.dominos.com and www.starship.xyz, both accessed July 20, 2018.
Questions
1. Describe how information technology has impacted Domino’s production process.
2. Describe how information technology has impacted Domino’s order process.
3. Describe how information technology has impacted Domino’s delivery process.
4. Which Domino’s process has been impacted the most by information technology?