Is Domino’s Rethinking Third-Party Delivery?
After 41 consecutive quarters of positive same-store sales growth, Domino’s has seen declines in two of the last three (negative 1.9% in Q3, positive 1% in Q4 and negative 3.6% in Q1).
Breaking down the first quarter results further, same store sales fell 3.2% at franchise stores and 10.5% at corporate units. Domino’s attributed the difference to company-run restaurants facing greater operational challenges and implementing conservative price increases. However, the company acknowledged that when adjusting for uncontrollable items, company-owned units underperformed similar franchise-owned stores.
“That hasn’t been the case historically, and the gap is being filled by our leaders at this company,” Weiner said. “They have already been several weeks into the plan to resume operations with milestones of 30, 60 and 90 days. “While corporate stores represent only 2% of our global footprint, they remain a critical strategic tool for developing talent, testing and refining innovation and, in some cases, accelerating the growth of a market. under-penetrated. We need to restore their leadership from a performance perspective.
Due to the ramp-up of Omicron, Domino’s first quarter got off to a slow start, but the business returned to slightly positive same-store sales in February. However, the comps turned negative when the pizza chain outpaced the federal stimulus rollout in March 2021, and the trend continued into April. In the second quarter, the brand is competing with two-year same-store sales of 19.6%.
Delivery prices decreased by 10.7% in the first quarter, due to the fall in the number of orders, offset by an increase in the average ticket. Restaurants in the top 20th percentile, which have appropriate staff, saw delivery sales 17 percentage points higher than those in the bottom 20th percentile, and that gap keeps widening.
On the bright side, delivery times improved at 42% of stores year-over-year, with sequential increases each month during the first quarter.
Deferral commissions increased 11.3% year-over-year, fueled by higher average ticket, order growth and Domino’s decision on Jan. 31 to move its 7.99 domestic bid $ in the online market only. The best and worst performing stores saw little difference in carryover sales, which makes sense given the relatively low labor intensity associated with carryover.
Restaurants in the top percentile are positioned in tightly squeezed markets, which brings better delivery service times and additional take-out customers. Stores also have more drivers on the road, process new hires faster and are run by tenured general managers, Weiner said.
“My job is to help everyone get to that top quintile,” said Weiner, who will take over as CEO in May. “But our job is also to make sure that anyone who wants a Domino’s Pizza gets a Domino’s Pizza. And so, while we continue to research best practices internally, I’ll tell you, nothing is out of place when we think long-term and get people who want Domino’s their delivery order.