Top three pizza chains assess delivery surcharges

March 19, 2002

Pizza Hut is charging customers of its 1,700 company-owned stores for delivery, while Domino's Pizza and Papa John's are experimenting with surcharges at select stores.

According to a report in the Dallas Morning News, Mike Rawlings, president of Dallas-based Pizza Hut, said the fee will help offset rising costs.

"Our costs continue to escalate," said Rawlings. "Salaries continue to go up. The cost of cheese, gas, and insurance go up."

Some Pizza Hut franchisees are tacking on surcharges of $1.50 or more in some markets.

During 2001, fuel prices in many markets stayed in the $2-per-gallon range, while cheese prices peaked at $1.72 per pound in August. The cost of both dropped remarkably in the fall, but as of the second week in January, cheese prices were up to $1.36 per pound.

Making matters worse was a sluggish fourth quarter for both Pizza Hut and Papa John's, chains whose traffic typically mirrors that of the overall industry.

At Ann Arbor, Mich.-based Domino's, 100 company-owned stores and 30 franchise shops are testing a $1 delivery fee. Deciding to do so, said Tim McIntyre, vice president of corporate communications, was not easy.

"There certainly were numerous and long-detailed soul-searching discussions about our heritage as being the first really national chain to specialize in pizza delivery," he said. "Once the discussions stopped being emotional, we started looking at the state of the rest of the world and what costs are."

Papa John's began a surcharge test late last year at about 20 stores. Karen Sherman, senior director of communications and public relations, said the charge was typically about a dollar or less, but she wasn't certain franchises were participating.

While Rawlings said the surcharge will remain in place at Pizza Hut's corporate stores indefinitely, neither McIntyre nor Sherman said they knew when their respective company's test might conclude.

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