Domino’s is very well situated as the largest US pizza chain (#1 delivery & #2 carryout sales dollars) with a 38% domestic share among the top 4 players. Its brand positioning emphasizes leading-edge, digital ordering convenience/speed and seamless payments as opposed to “flavor-of-the-month” LTOs. The brand’s reputation as a delivery leader is reinforced by efforts to promote tech solutions to speed/improve delivery (like GPS tracking, expansion of its AnyWare order platforms & automated delivery cars). Pizza represents perhaps the best value in QSR as an affordable treat for families/larger groups with per person pricing ~$3 each and Domino’s believes that its scale fuels its value leadership. Thus, the brand’s everyday value positioning is centric with long-running everyday deals (price certainty) at $5.99 & $7.99. Affordable delivery charges are also centric and Domino’s delivery infrastructure costs are much lower than DSP platforms with its “fortressing” market fill-in strategy helping to further lower delivery costs while also improving speeds. Domino’s believes it stands to benefit when economic realities force DSP delivery subsidies to end. The chain’s fortressing strategy also helps drive incremental carryout sales by adding convenience to better address the largest segment of the pizza industry. Notably, Domino’s impressive 70% – 75% digital sale mix drives higher group checks with its check also benefiting from add-on sales enabled by its broad menu (salads, chicken, stuffed cheesy bread & desserts). Having said all this, delivery is a challenging business given increased competition from DSPs which extend the reach of new competitors (including smaller pizza chains) that previously did not offer delivery. In turn, the DSPs are driving-up delivery labor costs and creating a short-fall of delivery drivers. This creates an impetus for Domino’s to emphasize carryout, a line of business that it is less well known for (remembering Domino’s delivers core equity). In conclusion, while it is our opinion that Domino’s is doing a great job in strategy and execution, its competitive bar is certainly the highest ever with much resting on what the DSPs do about their delivery charge pricing over the long-term.
