Pizza Delivery 'Down Under'

Aug. 8, 2004

CAIRNS, Australia — Gabe Pasche logs 30 hours a week delivering pizzas in his 1988 Mazda 323, and yet he rarely receives a tip.

He's neither rude to customers nor slow delivering the goods. It's just that tipping largely isn't part of the service culture in Australia.

But don't pounce to pity Pasche, a driver for Eagle Boys Pizza and a former maitre'd in a fine dining restaurant, where tipping was only occasional. Australia is a labor-friendly nation, where entry-level workers earn high hourly rates. That allows Pasche to pocket $10.40 an hour, plus $2 per order ($7.28 and $1.40, respectively, in U.S. dollars).

Drivers at Domino's Pizza receive about the same according to Don Meij, master franchisee and CEO of Domino's

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Pizza Australia: an hourly rate of $11.60, plus $1.26 to $2 per order, depending on the distance driven (U.S. $8.12, 88 cents and $1.40, respectively).

Labor relations aren't wholly to blame for the high rates. A tight foodservice labor market combined with a predominance of carryout sales make drivers somewhat scarce and often unwilling to sign on for just a handful of hours a week. Chain operators say that on all but the busiest nights, only a few drivers are on hand to deliver pizzas because between 50 percent and 80 percent of Aussie pizza customers pick it up themselves.

Why? Because carryout pizzas sold at chains typically cost $2 less than delivered pizzas.

"We never say, 'Free delivery,' we advertise a delivery price and a takeaway price," said Tom Potter, managing director of Eagle Boys, a 150-unit chain based in Brisbane. Unlike the U.S. where some operators blur the cost lines by claiming free delivery and then charging a reduced price for carryout, Australian lawmakers don't allow it. "If you got caught doing that, not only would they fine you, they'd make you spend a solid month advertising the fact that you advertised illegally."

Delivery still important

Delivery wasn't always second to carryout. In 1993, the year Australia's pizza price war began, delivery accounted for 85 percent of Pizza Hut's sales, said Danny Diab, CEO of the Diab Group, a Pizza Hut franchisee based in Sydney. "But now that pricing is set based on takeaway price, it's changed consumer habits

Eagle Boys Pizza delivery driver Gabe Pasche (right) said customers in the resort town of Cairns, Australia, are generally nice because "it's hard to be grumpy in paradise."

and preferences to takeout. And when you see $3.95 (U.S. $2.78) takeaway pizzas, you know which customers will choose."

Despite the minority share of their business going to delivery, Aussie ops still take the service very seriously. Induction heated-core bag systems such as those made by Aladdin and CookTek are costly, but fairly standard gear for chains aiming for the 30-minute delivery window. At independent operations, where delivery accounts for about 20 percent of sales, insulated bags of all types are used.

As in the U.S., the majority of delivery drivers use personal automobiles for work, but some operators, like Eagle Boys franchisee Andrew Spirou, maintain a fleet of delivery vehicles.

"I used to buy old bombs, but that became a maintenance issue for us," said Spirou, who operates two units with partner Julie Spiller. "Now we have about 10 new vehicles — 2001s and such — that the drivers really like. ... It presents a good image for us to have the newer cars." (Running their own delivery fleet also reduces insurance costs, Spirou said. A $10 million [U.S. $7 million] policy covering his whole business costs around $10,000 [U.S. $7,000] annually.)

In densely populated urban markets, such as Brisbane and Sydney, some operations use branded motor scooters saddled with hotboxes. But given a choice, Pasche said he'd always pick his 23-year-old car — a rolling concert hall while he's on duty.

"It's just me and the hip-hop every night," he said. "I've gone through so many CDs since I got this job two months ago. You really get to know your albums when you're driving pizza."

A delivery comeback?

Domino's Meij believes a very gradual shift back toward delivery is already underway in Australia. The current carryout-delivery mix at his stores is already 55-45, and he expects those numbers will further

Delivery scooters are increasingly popular in densely populated urban markets in Australia.

equalize with time.

"People still enjoy delivery; it's still a valuable service," he said. "As (Domino's) makes greater market penetration, I think you'll see more people using it."

Diab also believes delivery could enjoy a steady rebound, but not because of any one company's success. Rock-bottom carryout prices cannot remain forever, he said, and as prices move northward, i.e. closer to delivered pizza costs, he predicted more customers will choose delivery.

"The market will have to rationalize itself because these prices are not sustainable long-term," Diab said. "And as it stabilizes, the delivery segment will grow."

Potter said he wouldn't be surprised if delivery increased. Though Australians by and large are active outdoorsmen and sports fanatics, they like the convenience of having pizza brought to their doors.

"The fact is people here can be bone lazy," said Potter. "And if they can get a delivered pizza at a price they think is fair, they'll have someone bring it to 'em. It's human nature, don't you think?"

Topics: Marketing , Operations Management

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