Article

Domino's iPad app yields highest conversion, ticket of company's digital ordering channels

Voice ordering was also a highlight of Q3, with more than 200,000 voice orders placed despite no promotion of the platform since the June launch.

October 15, 2014 by Nicole Troxell — Associate Editor, Networld Media Group

Domino's reported solid results for shareholders in Q3, according to its latest earnings call on Tuesday.

The company reported global retail sales grew 13.8 percent. A major factor in global growth was credited to domestic same store sales, which rose 7.7 percent during the quarter.

Domino's total revenue is up $42.5 million or 10.5 percent from the prior year, attributed to three factors, according to CEO Patrick Doyle:

• Higher supply chain revenues from increased supply chain center volumes and higher commodity prices (specifically cheese) and increased sales of equipment and supplies to stores as stores' reimaging programs accelerate;
• Higher international royalty and supply chain revenues from increased same store sales and store count growth; and
• Higher domestic franchise royalty revenues from higher same store sales and store count growth.

Delivery fees on the whole have not increased for the company, with the exception of some franchises raising fees opportunistically. However, the company raised the price of its two-topping pan pizza from $7.99 to $8.99 because "the demand is there for it," Doyle said during the company's earnings call.

Domino's reported a percentage of revenues for the consolidated operating margin as flat for the quarter, compared to the prior year's quarter at 29.9 percent. Key impacts to the operating margin for Q3 were a change in the mix of revenues and a lower percentage of revenue from food sales at supply chain centers and company owned stores.

The increase, the company reported, was offset by the impact of higher commodity costs on the operating margin. For example, cheese averaged $2.04 per pound this quarter as compared to $1.72 Q3 of last year, leading to the overall market basket increasing 4.2 percent Q3. Domino's reminded shareholders that commodities are priced on a constant dollar mark up to franchisees, mitigating the effect of commodity prices on supply chain dollar profit. However, supply chain margins as a percent of revenues are negatively impacted, the company said. Year-to-date, commodity prices have run over by about 5 percent, Domino's reported.

This is Domino's 14th quarter of positive same-store sales growth in the US, which Doyle said is "pretty evenly driven by ticket and traffic growth," the promotion of chicken, advertising efforts and good digital order growth.

Digital order growth continues to be higher than traditional phone orders, with UK master franchisees reporting 70 percent of delivery sales via digital orders and a flattening 45 percent in the US. Domestic gains in digital ordering are usually experienced in the fourth and first quarter, Domino's said, and flatten out in the spring and summer as warmer weather brings more people out of their homes.

Domino's iPad app "exceeded performance expectations" with the highest conversion and ticket of all digital ordering channels, setting new benchmarks almost immediately upon launch, Doyle said.

Voice ordering was a highlight of Q3, with more than 200,000 voice orders placed despite no promotion of the platform since the June launch. Domino's expects to see more voice ordering since the unveiling of commercials, which the company uses as a venue for promoting technology instead of new products.

The company reported solid results for the international division in Q3 with India, Turkey, Japan and the UK continuing to be the leaders in store growth. The company opened another international division in Norway in Q3, where it plans to open two more locations by the end of the year. Digital ordering on the international front is more than 40 percent.

Remodeling of stores contributed to some of the lift seen in Q3, with a "modest increase" in individual reimaged stores. The company believes this effort will continue to drive brand momentum, with real gain coming from reimaging of the whole system.

When asked about the future of loyalty and rewards programs, Domino's reported that it's something they keep their eye on, but noted that what's driving the frequency in growth right now is giving people a better experience overall.

About Nicole Troxell

---

None

Connect with Nicole: