Domino's (DPZ) built its business on delivery. In its early days the company had a 30-minute delivery promise -- which it had to drop because it led to drivers making dangerous decisions. In recent years it has leaned on its ability to bring people pizza pretty much anywhere.
Delivery carried Domino's business during the pandemic. People couldn't leave their homes in the ways they previously had and the pizza chain had an inexpensive, convenient, comforting option. That led to very strong sales, something that has typically been the case for the chain.
Now, however, Domino's has a delivery problem that it can't blame on The Noid. The company can't find enough workers to deliver its pizzas and it's taking a number of steps to solve the problem.
Domino's
Domino's Subtly Discourages Delivery
The pizza chain can't directly tell its customers not to order for delivery. Instead, it has to encourage them to pick up their orders. That's something Domino's has been aggressive about, according to retiring Chief Executive Ritch Allison's comments during the chain's fourth-quarter earnings call.
We drove greater awareness of Domino’s Carside Delivery during the fourth quarter through our Carside Delivery two-minute guarantee. I continue to be pleased with our Carside Delivery performance. Our research shows that it is appealing to both existing and new customers. And we have consistently averaged below two minutes out the door and on our way to our customers’ cars.
Allison also made clear that Domino's intends to use pricing to encourage customers to pick up rather than have food delivered.
During the fourth quarter, we went on air to launch three great new products to support our signature $7.99 carryout offer. We call them Dips & Twists, and they hit the mark for great taste and consumer appeal with terrific economics for our franchisees. Results indicate that these products contributed meaningfully to our carryout ticket growth in the fourth quarter as many customers added these incremental items to their orders, resulting in the smart ticket growth we’ve been so focused on driving.
Domino's has also made some of its best deals available only via online order (which costs the company less since nobody has to answer the phone), only for pickup. The chain recently made its $7.99 carryout order offer available only via online order.
"This supports a balanced approach of bringing value and a great experience to our customers online while supporting our goals of growing the digital carryout business and supporting the profitability of our carryout orders," he said.
"Online carryout orders generate a higher ticket and require a lower cost to serve than phone carryout orders, in addition to driving digital engagement and the opportunity to add members to our loyalty program."
Domino's has literally started paying customers to pick up their orders by offering a $3 "tip" for each online carryout order.
"This approach also aims to drive repeat purchases as the tip comes in the form of a coupon that the customer can use on their next order," Allison added.
Staffing Drives Domino's Business
Allison made very clear that Domino's understands the depth of the impact of staffing struggles on the company's business. He laid out the numbers starkly.
When we break our U.S. stores down into quintiles based on staffing levels relative to a fully staffed store and then compare their sales performance in the fourth quarter, it gives us a sense for the magnitude of the impact that staffing is having on our U.S. business. Stores in the top 20%, those that are essentially or close to fully staffed, produced an average Q4 same-store sales increase of almost 6%. By contrast, stores in the bottom 20%, those that are facing the most significant labor shortages, saw Q4 same-store sales decrease by an average of almost 7%.
Domino's has taken some big steps to solve its hiring issues. That has included not just efforts to find more people but also taking steps to make stores more efficient.
A new applicant tracking system that we rolled out a few months ago has made it easier for candidates to apply for openings and to be onboarded at both corporate and franchise locations across the U.S. system. We are also sharing operational best practices to eliminate unnecessary and time-consuming tasks in the operation of our stores, tasks like pre-folding boxes that could drive both team member and customer satisfaction. We now have over 2/3 of our stores which are not pre-folding boxes, saving an estimated 30 to 40 hours per store per week in labor.
That change may seem silly, but it's all about efficiency, according to Allison. And, of course, like so many of its rivals, Domino's has resorted to raising wages, though it can't force franchisees to do the same.
"In our corporate stores during 2021, we rolled out increases in team-member compensation and benefits totaling more than $6 million over and above required minimum wage increases," he said.
"In 2022, we are currently anticipating committing an incremental $8 million investment in team member wages over and above required 2022 minimum wage increases in our corporate stores."
