Domino`s Pizza Situation Analysis Tiffany Robbert Fall 2014

Transcription

Domino`s Pizza Situation Analysis Tiffany Robbert Fall 2014
Domino’s Pizza
Situation Analysis
Tiffany Robbert
Fall 2014
INDUSTRY ANALYSIS
Pizza was originally introduced to the United
States in the early 1900s when Italian
immigrants arrived and settled in places such
as Chicago and New York. Pizza was sold
in independently owned restaurants until
1958 when Pizza Hut launched the first pizza
franchise. In 2012, experts estimated that
approximately 65,000 franchises existed in the
United States, and today, they make up nearly
17 percent of all restaurants in the country. As
long as pizza remains relatively inexpensive,
consumers will continue to use this service.
It is not quite clear when pizza was first
delivered to customers, but Domino’s founder
Tom Monaghan noted in an interview that
establishments would normally deliver to
attract customers before eliminating the service
entirely. Pizza boxes can be traced at least
to patents filed in 1968, and in the decades
following the original design, some styles
have included different ventilation solutions,
perforation to create plates from the box, and
sauce holders. In addition, a 3-legged plastic
shape was created by Carmela Vitale in 1985
that is known colloquially as the “pizza saver”
and helps protect pizza from the lid of the
cardboard box. Later, with the development
of the personal computer, pizza delivery
franchises have been able to track order and
delivery times, manage calls and orders, and
control driver schedules and delivery charges.
The invention of the thermal hot bag allowed
drivers to easily transport ordered items to
customers while maintaining an adequate
amount of heat to keep the food warm enough
to please.
In the past few decades, places that have
been historically dedicated to pizza delivery
and related items have tried to expand their
businesses into chicken wings or tenders,
breadsticks, pastas, and desserts items.
According to the Pizza Power 2014 Report,
current trends in the pizza industry include
gluten free pizza, novel toppings, and flatbread
pizzas. With people turning to healthy
alternatives and organic offerings, as long as
pizza delivery franchises continue to innovate
the way they have for decades, the market will
continue to be profitable.
PIZZA CONSUMPTION FACTS
•
1 in 8 Americans eat pizza any given day.
•
Pre-teens eat about twice the amount of
the national average
•
Americans over age 60 eat half of the
amount of the national average.
•
More than 25% of boys between 6 and 19
eat pizza every day.
•
People who eat pizza receive between
25% to 33% of their daily calories from
pizza.
INDUSTRY’S TOP COMPANIES
According to Alexa rankings:
Domino’s Pizza (613 US/2942 Worldwide)
Sales of $78.9 for Q1-Q2 2014
Pizza Hut (664 US/3227 Worldwide)
Sales of $282.0 for Q1-Q2 2014
Papa Johns (661 US/3290 Worldwide)
Sales of $58.74 for Q1-Q2 2014
Little Caesar’s (7741 US/39013 Worldwide)
Sales information not available
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INDUSTRY ANALYSIS
TOP U.S. PIZZERIAS:
RANKED BY SALES
Based on 2012 Sales
* designates Techonomic estimate
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INDUSTRY ANALYSIS
TOP U.S. PIZZERIAS: RANKED BY UNITS
Based on 2012 Units
* designates Techonomic estimate
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COMPANY ANALYSIS
DOMINO’S PIZZA SNAPSHOT
Employees: 220,000 (including
franchisees and their employees)
Name: Domino’s Pizza, Inc.
Industries Served: Pizza Delivery
Carryout Restaurants
Stores: 10,988 locations
Net Income: $143.0 million in 2013
NAICS Code: 722513
Geographic Distribution: Worldwide
(70 countries)
In 1960, Tom Monaghan and his brother
James purchased a pizza store in Ypsilanti, MI
called “DomiNick’s” for a $500 down payment.
When James decided to quit the store to
remain at his full-time job as a mailman eight
months later, Tom bought his brother’s half
of the pizzeria with the Volkswagen that they
had used to make deliveries. After struggling
for a few years, Tom had acquired three more
pizzerias and wanted to brand them all with
the DomiNick’s name. Unfortunately, the
original owner refused to allow it, so Tom and
his employees found the Domino’s name and
started using the domino image as their logo
in 1965. To this day, the three dots on the sign
signify the original three stores that started a
national change.
In the following years, Domino’s faced various
obstacles such as having their headquarters
and commissary destroyed by a fire in 1968
and facing a trademark infringement lawsuit
from Amstar Corporation, the maker of Domino
Sugar in 1975. Fortunately, a federal court
ruled in favor of Domino’s Pizza in 1980,
and, three years later, Domino opened its
first international store in Winnipeg, Canada
which was closely followed by its first store in
Australia that opened in Queensland. In 1985,
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Net Sales: $1.8 billion in 2013
Chief Executive Officer: Patrick Doyle
Domino’s expanded its business to the United
Kingdom and Asia. By 1988, five continents
had at least one Domino’s Pizza location.
In 1989, Domino’s Pizza entered a period of
innovation starting with the introduction of the
Pan Pizza. In the years to follow, Domino’s
added bread sticks (1992), thin crust pizza
(1993), buffalo wings(1994), and flavored
crusts (1996). It was also during this time that
the company was forced to discontinue its
original 30-minute guarantee and attempt to
emphasize the Total Satisfaction Guarantee to
fight the “public perception of reckless driving
and irresponsibility” and put an end to an
enormous amount of lawsuits from delivery
drivers’ attempt to speed to their destination in
1993.
Original Owner Tom
Monaghan tossing
pizza dough at the
first Domino’s Pizza
COMPANY ANALYSIS
In 1995, Cairo, Egypt opened up the first
Domino’s store in Africa. Domino’s embraced
the emerging techonology of the internet the
following year by launching its website at www.
dominos.com As Domino’s Pizza launched a
campaign to update the company’s branding
and store interiors and as it implemented its
newly invented Domino’s HeatWave® hot bag,
Tom Monaghan retired as company CEO.
After David A. Brandon became the new CEO
for Domino’s, the company made a name
for itself by launching its new Cinna Stix®
dessert product and supporting New York
City following the September 11 tragedy with
more than 12,000 pizza to relief workers and
$350,000 donated to the Disaster Relief Effort.
The following years, the company introduced
its Buffalo Chicken Kickers™, secured a
multi-year partnership as the “Official Pizza
of NASCAR,” and launched its Philly Cheese
Steak Pizza. In 2004, Domino’s entered two
exciting new ventures—it becomes a publicly
traded company on the NYSE under the ticker
symbol DPZ and it develops a three-year
partnership with St. Jude Children’s Research
Hospital.
Domino’s continued to diversify its offerings
with at least one new menu item nearly
every year for the next five years: Domino’s
Cheesy Dots™ in 2004, American Classic
Cheeseburger Pizza in 2005, Brownie Squares
in 2006, OREO® Dessert Pizza in 2007, oven
baked sandwiches in 2008, American Legends
premium pizzas in 2009, Chocolate Lava
Crunch Cakes in 2009, Breadbowl Pastas
in late 2009, Domino’s Artisan™ Pizzas in
early 2011, Stuffed Cheesy Bread in 2011,
Parmesan Bread Bites in 2011, and Handmade
Pan Pizza in 2012.
During this period of time, Domino’s invested
heavily in its user experience technology
and launched online and mobile ordering in
2007 and a web widget called the Domino’s
Tracker™ to help customers follow the
progress of their online order. After hiring the
current CEO Patrick Doyle in 2010, Domino’s
pizza debuted an ordering app for iPhone
users in 2011 and Android users in 2012 to
make it simpler for customers to order from
their stores.
Domino’s developed the first pizza tracking
app in their online ordering system, a mobile phone app to easily order and locate
stores, and a thermo bag to keep foot hot.
DOMINO’S INNOVATIONS
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THE PRODUCTS
PIZZA - 5 DIFFERENT STYLES
The original hand-tossed pizza launched
the brand into what it is today, but the
chain also offers thin crust, gluten-free
crust, personal pan style, and artisan
flatbread style to appeal to as many
audiences as possible.
Recently the original recipe was altered
in a campaign to increase the company’s
flavor profile. The sauce was flavored
with roasted red peppers and shredded
provolone was added to the original
mozzerella-only cheese mix. Packaged
in fun, modern pizza boxes, these are the
most ordered item that Domino’s Pizza
sells. Unfortunately, exact sales figures
are not available to the public.
The average price for a one to two
topping pizza is $10 - $16 depending on
the style, size, and number of toppings. Pricing decisions are made on a
franchise by franchise basis depending
on their desire for a specific profit
margin.
PASTAS & SANDWICHES
In 2008, Domino’s launched its premiere
line of oven-baked, toasted sandiwches. These new items used pizza toppings
to appeal to a whole new audience,
especially the lunch crowd, and pushed
Domino’s to become the largest sandwich
delivery company.
A year later, Domino’s introduced its
Breadbowl Pasta with a variety of
delicious flavors and the option to use a
breadbowl or not. For the carbohydrateconscious consumer, the pasta itself
is offered without a breadbowl at a
discount. Unfortunately, exact sales
figures are not available to the public for
these offerings.
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The average price for a toasted sandwich
is $5.99 for eight different, customizes
types. The average price for a breadbowl
pasta is $6.99 each. As always, pricing is
up to the franchisee.
THE PRODUCTS
CHICKEN - 3 TASTY STYLES
While buffalo wings were launched in
1994 and their boneless Chicken Kickers
were introduced in 2002, the two chicken
offerings recently received a recipe
upgrade in 2011. The new boneless
chicken item was made with 100% white
breast meat, and the company developed
five sauces with which customers dip.
Early in 2014, Domino’s unveiled its
new Specialty Chicken, twelve pieces of
boneless chicken topped with sauces,
cheeses, and pizza toppings. There
are currently only four varieties, but the
response to this new offering has been
largely positive.
The average price for any of these
chicken items is $5.99. As always,
pricing decisions are made on a
franchise by franchise basis.
SIDES & DESSERTS
1992 launched the first side offering of
the company--breadsticks. In the years
that have followed, Domino’s Pizza
has added Stuffed Cheesy Bread, and
Parmesan Bread Bites. These side items
have significantly increased sales for
the company and were created using
supplies the stores already had on hand.
In 2001, the first dessert item, Cinna
Stix, were added with the addition of a
cinnamon sugar mix and an icing dipping
sauce to breadsticks. Since then, only
one other dessert has been added,
Chocolate Lava Crunch Cakes. These
desserts have become popular as a
relatively inexpensive add-on to meals.
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The average price for either dessert is
$3.99 for an order of Cinna Stix or two
Chocolate Lava Crunch Cakes. Pricing is
up to the franchisee.
SWOT ANALYSIS
STRENGTHS
WEAKNESSES
Hygenic environment
Carbohydrate heavy offerings
Leader in online ordering
Franchises may not be uniform
Leader in mobile technology
Inability to lower prices
Leader in carry-out system
High turnover for employees
Heavy advertising and marketing
Local issues shift to national
consequences
Locations across the globe
Inconsistent branding between
franchises
Excellent supply chain
Strong brand loyalty
Inconsistent messaging across
franchises
Strong brand recognition
OPPORTUNITIES
THREATS
Offer a wider range of products
Strong rivals in Pizza Hut, Papa
Johns, and Little Caesars
Market expansion to spur sales
and increase brand awareness
Changes in customer demands
Improvement in home delivery
Improved usage and
engagement utilizing technology
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Economic forces can stifle
growth due to a drop in
customers
THE COMPETITORS
In 1958, two college students in Wichita,
Kansas opened the very first Pizza Hut. One
year later, the first franchise opened in Topeka,
Kansas. Today, Pizza Hut is owned by Yum!
Brands, the parent company of Kentucky
Fried Chicken, Taco Bell, Long John Silver’s,
Wing Street, and other fast food chains. Pizza
Huts are often located in combination stores
featuring another branch of Yum! Company’s
restaurant division.
which features two rectangular pizzas and two
sides that all fit in a one long box. The pricing
structure is very similar to Domino’s own.
Currently the largest pizza delivery chain in the
world, Pizza Hut is indeed Domino’s primary
rival in this industry. Today, there are over
13,300 locations worldwide in 88 countries.
Recent promotions include a marketing
campaign that offered a cologne called Eau
de Pizza Hut to random fans ont heir social
media accounts. Pizza Hut has also offered
a discounted pizza for National Cheese Pizza
Day at the season kickoff for the NFL and a
free, large one-topping pizza to the first one
million customers to use the Visa Checkout
platform. Currently, Pizza Hut is working on
unveiling a new menu utilizing novel toppings
and new flavors.
Pizza Hut is known for its cheese-stuffed crust
option, pan pizza, and sweet pizza crust flavor.
Their menu also includes waffle fries, buffalo
wings, breadsticks, calzones, pizza rolls,
cookies, and sweet bread sticks. They also
promote an item called the “Big Dinner Box”
While Pizza Hut features a strong brand name
and the support of a large parent company, its
weakness lies in its lack of innovation and its
focus on unhealthy options. It is my thought
that its new menu will try to address these
issues.
PIZZA HUT SNAPSHOTS
Pizza Hut’s creative cologne promotion, its ingeniuous
family meal box, and its future menu offerings are excellent
examples of why they are largest pizza delivery chain.
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THE COMPETITORS
In 1985, after scrimping and saving money
up to purchase his first store, John Schnatter
opened the very first Papa John’s in
Jeffersonville, Indiana. His focus was on
quality with the formula “Better Ingredients,
Better Pizza,” and the chain soon grew to 100
restaurants in 1991. Papa John’s has been
rated #1 in customer satisfaction among all
quick serve restaurants for 7 consecutive years
between 1999-2006 by the American Customer
Satisfaciton Index. Today, the company has
over 4,400 restaurants in 36 countries.
Papa John’s menu is simple compared to
its rivals: pizza, breadsticks, cheese sticks,
chicken tenders, chicken wings, dessert
and pizzas. The chain is also well-known
for including a pepperoncini with each pizza
and the option to include sardines with your
order. The prices of these items are similar to
Domino’s pricing structure.
PAPA JOHN’S SNAPSHOTS
In the past, Papa John’s has promoted itself
as the $1 in customer satisfaction and product
quality among national pizza chains. In an
interesting marketing stunt, the company
earned a Guiness World Record in 2006 by
making and delivering 13,500 six-inch pan
pizzas to construction workers who completed
the U.S. Navy ship Lewis and Clark after
working on it for two-and-a-half years. Papa
John’s has also relied on its charismatic CEO
appearing in every commercial to personally
speak with the audience about his pizza. It
also currently offers a rewards system for
frequent buyers.
While Papa John’s strengths include its
dedication to quality ingredients and customer
service, its limited menu and minimal
advertising are weakenesses that will allow this
company to be the third largest chain in the
world behind Pizza Hut and Domino’s Pizza.
Papa John’s lovable and charismatic leader has given the
company a face while its innovation with a pizza reward
system and its dedication to high quality pizza drives sales.
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THE COMPETITORS
In 1959, Michael and Marian Ilitch founded
the first Little Caesars Pizza in Garden City,
Michigan. The owners focused on personally
assisting franchisees with growing their
businesses and offering amazing employment
opportunities to their lower crew members.
Today, there more than 3,763 stores in the
US and other locations internationally in 32
countries. The Ilitch family is very secretive
about information that they find would reveal
too much to their competitors, including
financials and location information.
of the pizza delivery restaurants called the
Crazy Bread. The chain has focused on a
selection of Hot-N-Ready pizza offerings for
the consumer who would not want to wait for a
standard type of pizza.
Their menu mainly focuses on pizza,
breadsticks, cheesy bread, and chicken wings.
The pricing for these items is cheaper than at
the other chains, and this focus on affordability
is a tenet of the Little Caesar’s business plan.
Little Caesars sported an efficient campaign
that featured their mascot, a little roman man,
that would shout “Pizza! Pizza!” To this day, it
is a memorable ad for people who had seen it.
In September 2013, an ad for Hot and Ready
Pretzel Crust Pizza had the highest brand
memorability for millenials. The year prior,
Little Caesar launched an ad campaign using
obvious reverse psychology that warned users
to stay away from forbiddenpizzawebsite.
com to order pizza and not to call their phone
number to order pizza.
The company premiered the two-for-one pizza
deal and created a conveyor oven that is still
used by pizza delivery companies today. Little
Caesars also developed the first breadstick
Although their strengths lie in being a private
company and focusing on affordability, their
true weaknesses are in a lack of menu variety
and very little advertising for brand awareness.
LITTLE CAESARS SNAPSHOTS
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The great relationship of the owners, the focus on
food ready to carry out, and the lovable mascot
drive sales for this special pizza chain.
THE MARKET
Pizza delivery chains, especially Domino’s,
focus on attracting a specific market: lower to
middle class students, young adults, or families
who are focused on cost and affordability. The
average consumer purchases pizza during
high ranking sporting events or small holiday
such as Halloween or New Year’s Eve when
it is convenient for them to order food to be
delivered rather than stop enjoying what they
are doing at the moment.
The food provided by these chains are sold
at a low price, and pizza delivery stores often
use coupons to entice customers to utilize their
services. Typically, this food has been sold
with a low profit margin that varies depending
on the franchise owner’s personal choices.
Consumers typically want the best price for
the most food while franchisees would like
consumers to purchase products with the
highest profit margins. Often, Domino’s Pizza
corporate offices will issue challenges to stores
to sell the most of a new product in order to
drive sales for the item.
Since pizza delivery stores have a hard time
competing with each other with only prices
or promotions, most chains focus on menu
creativity and customer service. At current,
Domino’s is trying to focus on a positive social
media experience for its consumers, utilizing
technology better than its competitors, and
focusing on the Golden Question: “Would you
recommend us to others?”
In the past several decades, large pizza
delivery chains have grown into the
international market where they see the option
to earn money alongside American fast food
companies such as Kentucky Fried Chicken
or McDonald’s. Pizza chains are offering
an American experience that has been high
profitable in other countries as seen by the
sheer number of international branches a
company has. In addition, pizza delivery
chains in America have been focusing on the
current trends of gluten-free pizza, low carb
offerings, and exotic flavors such as Sriracha
to surpass their competitors.
As some chains
do, Domino’s Pizza
controls its own supply
chain in order to drive
more revenue to its
corporate headquarters
and control the quality
of the food served at
its many franchises. Income from this
branch of the company
generates a large
portion of its overall
revenue.
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PROMOTIONS
Typically, promotions are created and
advertised on two levels: a franchisee might
run a local promotion limited to just his or her
territory or corporate headquarters creates a
promotion that is followed to the letter by all
stores in a region. Some coupon programs are
held and promoted nationally through emails,
websites, and television commercials while
local coupons may be distributed in direct
mailings, flyers, and social media accounts.
In the past, Domino’s used a mascot called
the Noid to represent the annoyances and
challenges for drivers who tried to get the
pizza delivered in 30 minutes or less. He was
created in 1986 and featured extensively in
television commercials as well as in a video
game for the Nintendo Entertainment System
called “Yo! Noid!” The campaign was highly
successful and led to a massive profit in the
late 80s; however, a 22-year-old schizophrenic
man named Kenneth Lamar Noid believed the
commercials were specifically targetting him
and took employees of a Domino’s in Atlanta,
GA hostage. The character was immediately
retired until a brief role in a promotional
marketing campaign for his 25th anniversary in
“The Noid’s Super Pizza Shootout.”
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In 2013, Domino’s launched a campaign using
a tablet game called “Pizza Hero.” The game
simulates every aspect of creating a Domino’s
pizza from rolling out the dough, spreading
sauce, placing toppings, using an oven, and
slicing the finished pizza. This game was
exceedingly popular with iPad users and
generated more than 140,000 downloads in
its first two weeks on the Android. If a player
works hard enough on their tasks to earn a
perfect score, they are invited to apply to work
at Domino’s.
The game can also be used to create your
own pizza that you would like to order from
Domino’s. The app is still in use today and
available on both on iTunes and Google Play.
PROMOTIONS
There most recent and most successful
campaign by far started with an ask for
customers to submit their non-photoshopped
pizzas, both good and bad, to the company’s
website. After receiving a slew of bad photos
and in lieu of findings that Domino’s was
ranked last among its competitors in taste,
CEO Patrick Doyle promised that the pizzas
would not be delivered in such an ugly manner
and that they were rebranding. The campaign
was brutally honest about how bad their pizza
looked and tasted, and the company welcomed
all the feedback America had to offer. They
received 40,000 pictures and showed some
of the awful pictures in their ads promising to
do better. The response was amazing with
same-store-sales gains increased by 14.3%
in the middle of a bad economic climate
while competitors only grew at nearly half the
amount.
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The first step was to change the recipe that
was used for over fifty years for their pizza.
They updated the flavor profile of the dough
and sauce to be more appetizing and tasteful.
They altered the original recipe for their
Chicken Kickers to contain white breast meat
for better quality and flavor.
At the same time, they improved their
technology usage to include the pizza tracker,
a customizable themed animation that would
tell you exactly where a customer’s order was
in the process at the store that received the
order.
Currently, in the last step of this campaign,
the company is modernizing its look with an
updated logo sporting its famous domino
symbol and ordering a rebrand of each of
its American franchises to become a “pizza
theatre.”
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