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Digital continues to deliver for Domino’s Pizza

Derek du Preez Profile picture for user ddpreez October 19, 2016
Popular pizza delivery franchise Domino’s Pizza has seen almost 17% year on year growth in revenues, with CEO Patrick Doyle praising digital investments.

Domino’s Pizza has this week delivered another successful quarter, with digital and data investments playing a key role in the company’s continued growth.

CEO and President Patrick Doyle told investors that he has never felt stronger about the brand and that the company’s “relentless, meaningful innovation” has never been more “energised and aligned”.

Shares in the company jumped on the news that Domino’s Pizza saw revenues of $566.67 million, a 16.9% increase year on year. What’s more impressive is that the company has seen 22 consecutive quarters of positive sales in the US business, and 91 consecutive quarters of same store sales growth for its international business.

For those unaware, Domino’s is a pizza delivery business, which has standardised its processes and offerings globally for its thousands of store franchises. It was early to invest in innovative online and mobile delivery tools - offering out platforms to its stores, which could use the tools for a per-transaction fee.

Last year Domino’s saw $4.7 billion of digital sales.

Doyle said:

The business model continued to demonstrate tremendous strength, delivering once again with solid flow through our bottom line. A big part of this is continued, meaningful, responsible investment in the business.

And when coupled with an innovative customer experience, terrific food and consistent, reliable value, we are left with the foundation of fundamentals that are dependable as ever across the globe each and everyday.

Digital = dollars

As highlighted above, Domino’s has spent many years investing significantly into its own proprietary technology platforms that it then leases out to its franchises. The stores then use these and are charged a fee every time a sale is made.

Some of the platforms that have been key include Domino’s digital royalty program, called Piece of the Pie Rewards, as well as its point of sales system, and its mobile application (which we have covered previously here). Doyle said:

The digital royalty program continued to perform very well. It is proven to be a strong case study demonstrating the importance of consumer insights, simplicity and implementing the program that through its focus on order counts is consistent with our overall strategy. It is fair to say we are very pleased with where the program stands after a full year in existence. Providing yet another great boost to the momentum created by our domestic leadership, corporate teams and operators and of course an efficient, determined US franchisee based that is second to none.

Our worldwide digital participation keeps ramping up. We continue to increase participation in our global online ordering platform and now have nearly 70% of stores outside the US using Domino's PULSE, a proprietary point of sale system. We continue to take advantage of the master franchisee model by sharing digital best practices and remain committed to technology growth as a true worldwide initiative for the business. I continued to be extremely encouraged by our relentless approach to innovation and our unquestioned lead within a competitive technology space.

Not only this, but Domino’s is now partnering with leading online brands to further its reach and give its consumers new ways to order pizza - including integrating with Facebook Messenger. Doyle said:

We launched yet another ordering platform to the expanding AnyWare suite. With ordering via Facebook Messenger available beginning last month. Much the same is our partnerships with Apple and Amazon to name a couple; we seek to partner with leaders within their space.

And Facebook clearly remains the largest social network in the US. Between that and an easy order platform that is simple to execute, featuring a box that is actually quite fun, we are very excited to be the first pizza company to deliver this technology to our digital customers and fans.

Clearly investments that we've been making have been working. As we talked about often, the return on investment on our digital platform has been terrific. You've seen that playing out in our comp growth. We are committed that we are going to generate a good ROI off of that and what good means for the future we will work through.

Growing pains

One other interesting point that came out of the Q&A session with financial analysts, was that CEO Doyle hinted that the company would be making investments into Domino’s supply chain. Given the year on year growth - which has been experienced for a number of years now - it’s perhaps unsurprising that Domino’s is thinking about this increased capacity. Doyle said:

We absolutely are going to have to increase capacity in our supply chain. The team has done a great job kind of keeping up with the volume that has been coming through. But we've talked about this before. There are certainly in the next few years are going to be some increased investments into the supply chain. Volumes are up very dramatically if you go back six, seven years now. And we've been kind of in an ongoing repair and maintenance mode as opposed to a significant capacity increase.

We had excess capacity but we are certainly using that up and we think that there is an opportunity to build more capacity which frankly will help efficiency because they are getting busy enough and at some point you are going to be as smooth with operating those supply chain centers as you would have been otherwise.

It is a very high class problem. I love trying to figure out how to deal with higher volumes going through our system. But it is up to that we are definitely going to be addressing.

My take

A company that was early to make the digital investments it needed for a modern consumer facing business. And is now reaping the rewards as a result.

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