Domino's CEO: International will far surpass domestic footprint

June 6, 2012

Since Domino's Pizza overhauled its recipe in 2010, the company has been on an upward sales trend. During Tuesday's Goldman Sachs Lodging, Gaming, Restaurant and Leisure Conference in New York City, CEO Patrick Doyle said the change has also shifted consumers' perception of the company.

"We've always been known for service and delivery. We were the 30-minutes-or-less guys. Since we relaunched the brand aggressively about two and a half years ago, we now get credit for food quality, along with speed of service and value for consumers," he said.

Doyle covered the domestic and international systems, and predicted what the company might look like 10 years from now.

Domestic system

About 92 percent of the brand is franchised in the U.S. and Domino's owns and operates its own supply chain stateside. Both factors provide positive economics for the business, Doyle said.

Mobile and digital sales have also driven positive results for the past few years. Seven percent of Domino's orders now come from a mobile platform, including apps and mobile sites, while total digital sales are approaching one-third of all company orders.

"This is fast growing and it's positive. Tickets are a little higher, accuracy is higher, customer service is higher and our costs are lower since customers are the ones doing the labor," Doyle said.

International system

International units have been an "extraordinary part" of Domino's story, Doyle said. The global system is entirely franchised and, since the end of the first quarter, the chain's international footprint is larger in size and sales than the domestic system.

"We've had very consistent results in the international business, including over 73 quarters of positive same-store sales growth. Of the major international restaurant chains, our store growth on a percentage basis is the fastest of any other restaurant operating internationally," Doyle said.

Doyle was asked how big the chain's international footprint could potentially get.

"Whatever that number is, it's big enough that we're not going to have to worry about it in our lifetimes," he said. "Constraints on growth just aren't there."

Domino's, he added, could end up at 10,000 and even 20,000 units strong eventually, particularly if India, China, Indonesia and Brazil continue on their current growth paths.

As it continues to grow internationally, Doyle said consumption typically starts in markets where there is a GDP per capita of at least $2,000 to about $10,000.

"Also, where there are two-income households is good for us. Having both adults working is when the convenience of prepared food and delivered food gets more attractive, so as we're seeing countries with dual-income families, that's a good indicator for category growth," Doyle said.

Finally, Doyle was asked how the company will move forward considering its recent success that included a 9.9 percent same-store sales growth year.

"The odds of repeating that are pretty low," Doyle admitted. "But we don't need to. Our long term guidance is 1 to 3 percent up and we'd like to beat that if we can."

Rise in technology

To do so, Domino's will continue to improve its menu offerings and its technology options.

"What's really important, while our national competitors have digital platforms, is that the regional and local players will have a hard time matching what we have and we think that provides a real opportunity to take share away from some of the regional players," Doyle said.

There is a lot to be taken away. The top four chains – Domino's, Pizza Hut, Papa John's and Little Caesars – make up about 38 percent of the total pizza category. That means, Doyle said, 62 percent aren't able to compete as strongly in the digital realm.

To market in the digital space, Domino's is using paid search, banner ads and email blasts, as well as social media.

"The ROI on marketing investments in digital are terrific and we'll continue to shift our dollars in that direction," Doyle said.

Carry out versus delivery

Although Domino's leads the delivery space in the pizza category, Doyle said delivery hasn't been growing as quickly as carryout. For unit economics, however, this isn't a bad trend.

"The tickets are a little lower in carryout, but the costs are also lower because we're not paying people to deliver to homes," he said. "It's a healthy shift. Our competitive advantage will continue to be around the delivery side, but we'll continue to get better at carryout as well."

Deep discounting

Although a lot of criticism has been aimed at some of the larger pizza chains for deep discounting in recent years, Doyle said the strategy has worked well for the category overall.

"If you look at unit level economics for us and our competitors, they've gotten better over the past couple of years. We're giving better value for the consumer, and the category has been growing," he said. "Overall from a pricing perspective, I think it's been pretty healthy for category and consumer."

Ten years from now

Finally, Doyle was asked where he envisions this company 10 years from now and he noted it will be dramatically different.

"We'll be far bigger outside of the U.S. than we are inside the U.S. and you'll see more ideas because of that," he said. "We'll also be selling the majority of our pizzas through digital ordering, without any question, which is a big positive for us."

Read more about operations management

Topics: Business Strategy and Profitability , Domino's Pizza , Equipment & Supplies , Food & Beverage , Franchising & Growth , Marketing / Branding / Promotion , Online / Mobile / Social , Online Ordering , Trends / Statistics

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