What is in this article?:
- How Domino‚Äôs became a tech company
- The Easy Order
The pizza chain evolved from near bankruptcy into one of the most advanced companies in the restaurant business
A few years ago, as consumers were quickly replacing flip phones with smartphones,Pizza CEO Patrick Doyle charged his company’s IT team with this request:
Make it so a customer could order a pizza while waiting for a stoplight.
Think about this for a second. There are 34 million potential combinations of pizza on the Domino’s menu. Maybe some customers order a large pepperoni. But there are others who might go through the menu and order a spinach and provolone pizza with barbecue sauce.
How could an app enable customers to wade through all those selections in the 17 seconds it takes, on average, for the light to turn green?
The answer to this question goes a long way toward explaining how Domino’s became the most technologically adept chain in the restaurant business — one that has revolutionized the way concepts think of technology and its potential to bring in business.
Customers can now order on an app, by voice, by sending a pizza emoji over social media, or through their television.
Domino’s has backed these efforts with an unprecedented marketing campaign aimed at the ease of ordering. Customers are now more likely to order from one of these digital platforms than they are to order via phone. And they’ve done so in droves: Company sales and franchisee profits have surged.
Domino’s is an old dog that taught itself a bunch of new tricks. The seemingly tired, old, pizza delivery chain became a major e-commerce retailer in just a few short years, one that operates as much like Amazon as it does. The ease has helped Domino’s fit in nicely with a culture populated with smartphones where precious seconds matter — even if those seconds are spent at a stoplight.
Sales surge, and the stock goes with it
It’s difficult to overstate how far Domino’s has come as a company.
Between 2006 and 2008, same-store sales at Domino's domestic locations fell a cumulative 10 percent. Over that period, revenues dropped from $1.5 billion to $1.4 billion. The company had $1.7 billion in debt. And the worst of the recession hadn’t even started.
The company was shedding franchisees, and the number of domestic locations in 2008 fell by more than 100, to just over 5,000 locations. The company’s stock fell below $3 a share in November 2008.
The company then introduced several new products and famously changed its pizza recipe the next year, and sales began to grow. Same-store sales have risen in each of the past seven years, including 12 percent last year. Franchisees are more profitable, and the stock is up — way up.
If you’d been lucky enough to purchase $1,000 in shares that November, you’d have nearly $52,000 right now. By comparison, investors who bought $1,000 worth ofMexican Grill stock that November, and then sold it at peak last August before its recent $300 freefall, would have had nearly $20,000.
Ease of ordering has helped the company generate consistent sales growth. “The technology portion is a significant part of their sales driver,” said Peter Saleh, analyst with financial services firm BTIG. “You can order on your watch, order on your phone, however you feel comfortable ordering it. Those are playing a major role in their sales growth and market share gains.”
Kevin Vasconi, who has been Domino’s chief information officer since 2012, said that the company’s product quality remains the most important element of its improvement.
“It does seem like technology recently has been the driver,” he said. “But a lot of groundwork was laid before we doubled down on technology. We have a great product and a really good value, and if we didn’t have those things, the technology story wouldn’t be nearly as big.”
Kelly Garcia, Domino’s vice president for e-commerce development, likens the company’s technology efforts to a series of Lego bricks. Every platform and every system, he says, is built to adapt to future uses.
“When you’re thinking from a technology perspective, you can’t guess the experiences they want,” Garcia said.
The first such brick was laid many years ago, in 2002, five years before Steve Jobs introduced the iPhone and eight years before Doyle was promoted to CEO.
That was when Domino’s started converting company-owned units to its own point-of-sale system, called Pulse. The company then required franchisees to convert to this system by 2008.
The decision was controversial — franchisees wanted to shop around for a system, sued the chain and ultimately lost. At the same time, however, Domino’s made the system more efficient and less costly, assuaging some of the operators’ concerns.
Bringing franchisees and company-owned units onto the same POS system would prove remarkably prescient. “It was maybe the most important technology decision made in the last decade at Domino’s,” Vasconi said.
By going with a single point-of-sale system, Domino’s can build e-commerce or food-ordering platforms while only worrying about that single system. It doesn’t have to manage multiple vendors or systems with different technologies. The single system speeds the process and enables the company to do things more quickly.
“That is the original, fundamental piece,” Garcia said. “If you don’t have the same POS system, you’re writing software that, at a minimum, must interface with software across different sets of technology. That’s been a huge piece for us.”
Domino’s also brought the technology in house, so it can control the system and not work through a vendor. Working in house speeds the process because when Domino’s wants to add new functionality, it simply does it, rather than contract through a vendor.
These in-house efforts enabled the company to add a loyalty program more quickly last year than it would have been able to do so otherwise, Garcia said. “It was easy for us because we managed the POS system,” he said. “We were able to do it very quickly for the size and scale of that project.”
Domino’s was able to add its Tracker function to the mobile and online sites. “It wasn’t hard to do,” Vasconi said, noting that the POS system already tracks the status of orders.
Any innovative company that works quickly to add functionality to its processes needs to understand that failure is part of the business.
“Not everything goes perfect here,” Garcia said.
Domino’s has instead built a “fail fast” business culture. Risk taking is encouraged, but so is testing and analyzing early in the process to see if an idea works — or doesn’t — early in the process.
“We’re going to try a lot of things,” Vasconi said. “And we’re going to work really, really hard to figure out as soon as possible whether that project has legs and whether we should take it to the next phase.”
That testing takes numerous forms, and demonstrates in part how Domino’s is different from many of its restaurant industry competitors.
Yes, the company has many traditional testing methods. “We build a lot of prototypes,” Vasconi said. And it tests ideas in its company-owned locations to see how customers will respond.
But it also has a team of data scientists who gather customer data, mostly from the company’s online and mobile app but also from its POS system, to analyze results and determine if an idea will work.
“We have an absolutely unbelievably talented data scientist team that does research and analysis on concepts with consumer-based techniques to understand what would happen if we go down a path,” Garcia said. “They test it out with user groups or with various statistical methods to give you an idea of the likelihood of success.”
The company also employs A/B testing, a strategy used primarily by large e-commerce and web firms like Amazon. In short, it compares two versions of a web page to determine which one works better, then steers a percentage of traffic to the changed site.
It then gathers data from the two sets of customers to see how they interacted with the new page.
“We very much are testing in real production ideas that people may or may not think are good ideas,” Garcia said. The testing “takes the emotion out of it. We let the data speak.”