Number of stores charging delivery fees increases

Aug. 8, 2002

LOS ANGELES -- Pizza Hut, Papa John's and Domino's Pizza are increasingly charging delivery fees of up to $1.50 in selected markets, including Los Angeles, San Diego and Orange counties. Some believe it soon will be standard practice nationwide.

According to the Los Angeles Times, the pizza industry's largest companies say consumer opposition to the fees has been limited. Drivers, however, say their tips have dropped since stores began charging for delivery, and that operators should simply raise prices to compensate for current revenue shortfalls.

"I'm really upset about this," said Rick, 23, a part-time driver for Domino's in West Los Angeles who asked that his last name not be used. He said his tips have fallen 25 percent in recent months.

With the pizza business among the most competitive in the foodservice industry, chains "can't raise prices. They're stuck," said Christopher Muller, a professor of restaurant management at the University of Central Florida in Orlando. That's why they are resorting to "hidden price increases," he said, which are more palatable to consumers and can allow the chains to continue offering such promotions as $9.99 for a large pizza.

According to Dennis Lombardi of Technomic Inc., a Chicago-based foodservice industry research firm, pizza sales nationwide grew just 2.5 percent in 2001 to $24.9 billion. Between 1996 and 2001, pizza revenue increased by an average of just 3.4 percent per year, compared with 4.7 percent for the entire fast-food sector.

Pizza Hut, the nation's biggest pizza company with 8,000 units in the U.S., was the first of the three major pizza chains to charge delivery fees at many outlets. After testing the concept for a year and a half, the Dallas-based subsidiary of Yum! Brands Inc. last summer started charging an average of 50 cents to 75 cents for delivery at almost all company-owned stores. About 30 percent of its U.S. stores are company-owned.

Papa John's, based in Louisville, Ky., also is experimenting with delivery fees at about 15 percent to 20 percent of its franchise stores, more than double last year's number.

Ann Arbor, Mich.-based Domino's began charging fees at 100 company stores last year and has since expanded to 200 more outlets. Forty San Diego franchised stores charge fees. According to spokesman Tim McIntyre, the 7,096-unit chain expects to make a final decision on delivery fees by year's end.

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