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 2 INDUSTRY ANALYSIS TOP U.S. PIZZERIAS: RANKED BY SALES Based on 2012 Sales * designates Techonomic estimate 3 INDUSTRY ANALYSIS TOP U.S. PIZZERIAS: RANKED BY UNITS Based on 2012 Units * designates Techonomic estimate 4 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, 5 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 6 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. 7 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. 8 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 9 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. 10 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. 11 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 12 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. 13 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.” 14 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. 15 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.” BIBLIOGRAPHY "The 2014 Pizza Power Report." Pizza Power 2014. N.p., n.d. 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