Domino's Has a Plan for Pizza Hut and Papa John's

Domino's Has a Plan for Pizza Hut and Papa John's

Domino's has a new strategy, completely different from what Pizza Hut and Papa John's are doing

Sometimes you need to focus on what works.

Domino's Pizza hasn't been doing too well lately.

The competition uses apps like UBER EATs, winning new customers with free delivery and other incentives. Such behavior, which already eats into thin margins, is unsustainable and, as he said on CNBC, "A significant shake-up is coming to the industry."

Domino's new strategy

In an appeal to investors, CEO Ritch Allison presented a new strategy for Domino's, a company that originally grew on the promise of 30-minute delivery. Domino's will no longer focus on delivery. Instead, it will focus on where 45 percent of its sales come from — fulfilling orders that are more profitable because they don't require hiring a driver.

Allison said he will increase the number of physical Domino's locations and renovate many existing ones. The emphasis on carryout orders means an opportunity to increase market share, since the overall carryout market is larger than delivery (2.5 times larger, according to analyst Matthew DiFrisco).

Why is this such a surprising strategy?

Why is this a surprising move?

Domino's is abandoning what it is known for (fast delivery), while Papa John's and Pizza Hut focus on the digital space, luring customers with apps and promoting free delivery as their big advantage. Domino's, in turn, is focusing on an environment it can control better, both in terms of quantity and quality. In this way, it is focusing on a different area that is larger and more profitable.

Challenges and a lesson for the market

However, the convenience and habits of consumers accustomed to having pizza delivered to their door mean that the strategy will undoubtedly be a challenge.

Domino's carryout strategy — will it beat the competition?

Pizza Hut and Papa John's are capable competitors and are probably still looking for ways to improve the quality of the consumer experience in the delivery process. And a strategy of returning to creating an in-store experience and investing in increasing physical points of distribution is a strategy as old as the world, so will franchisees lack ingenuity?

The strategy is all the more interesting because it is being introduced by the company that popularized home delivery.

Will the strategy pay off?

This story also carries an important lesson for entrepreneurs: you cannot stand idly by and watch when business isn't going well — you need to adapt and try new solutions. You need to understand market dynamics, your strengths and weaknesses, what works and where the greatest potential lies, and not be afraid to change course, even if it upends your entire previous strategy. Sometimes it's worth going back to something you know works.
However, only time can show whether Domino's move will pay off and give it an advantage over the competition.

See also: Pizza Tag

Summary

Domino's is abandoning its focus on delivery, which was the foundation of its brand, in favor of fulfilling orders in stores — the source of 45 percent of sales. CEO Ritch Allison's strategy calls for developing physical locations and renovating existing ones, while Pizza Hut and Papa John's bet on digital channels and free delivery. The carryout market is 2.5 times larger than delivery, which offers a chance to grow share. For entrepreneurs, this is a lesson about the need to adapt and make bold changes even against previous successes.