Why the CEO of Domino’s Pizza thinks consistently raising prices is a bad strategyWhy the CEO of Domino’s Pizza thinks consistently raising prices is a bad strategy

While pricing continues to be a hot topic and challenging conundrum for restaurant operators in 2024, Domino’s Pizza is confident in its firm stance on the pizza delivery value equation. The Ann Arbor-based company purposefully did not raise prices this year and has not done so thus far this year, which has been beneficial for the bottom line, Domino’s CEO Russell Weiner said in a fireside chat during the annual Bernstein’s Strategic Decisions conference.

“The best way to raise price is to not raise price and to [instead] give people something that they want to pay for,” Weiner said. “Then they choose to pay more versus you telling them they need to pay more….it’s great to make a lot of quarters rather than just one or two dollars. By pricing where we are, it’s priced for volume.”

As most quick-service restaurant chains struggle to balance profitability with perception of value and affordability, particularly for lower income consumers, raising prices has been a common strategy. However, as NRN recently reported, 78% of Americans now believe that fast food is a luxury purchase, according to a new LendingTree study.

According to Russell Weiner, Domino’s saw the writing on the wall about consumer spending in this inflationary environment and pumped the brakes on pricing a bit earlier than most.  

“A lot of folks were taking pricing last year, and we took pricing on our national offers in 22 but we didn’t in 2023,” Weiner said. “Inflation is continuing to go up and those prices are never going to go back to where they were. It was clear that we're getting to a point where things are just too expensive, and it’s not just restaurants that are experiencing that. Grocery stores are too. Pricing is an issue.”

As quick-service restaurants become keenly aware that consumers think their menus are too expensive, many have been scrambling to change their stances on value by introducing weekly discounts and the return of $5 meals, including brands like KFC, McDonald’s, and Burger King.  But according to Weiner, this is not a quick fix for restaurants because customers are smart:

“We're about to be hit with a slew of price promotions from restaurants,” Weiner said. “I think when you do price-off, it essentially tells people, we've been charging you too much money….people think they’re being ripped off.” 

This is why, Weiner said, Domino’s has only changed the pricing of its national offer twice over the decades (most recently from $5.99 to $6.99) and he expects the $6.99 offer to “be here for a while.”

The current contentious environment of tipping and pricing fatigue was part of the reason behind Domino’s recent bounceback offers marketing initiatives. The rebranded offers rewarded customers for ordering pickup or for making a one-time purchase and receiving a coupon for later, as per the carryout tips and “Emergency Pizza” promotions that were successful for Domino’s in recent quarters.

“The difference between value and renowned value is buy one, get one free vs. emergency pizza,” Weiner said. “We’re just tapping into the tensions around value.”

A consistent pricing strategy that respects consumer value over time is only one piece of the puzzle, however. Weiner also spoke about the importance of menu innovation, which he did not think was as crucial when he first arrived at Domino’s.

“A lot of what we sell are plain, pepperoni, cheese, and sausage pies, and every time you launch something, the idea has to be great,” Weiner said. “But how many great ideas can you have in a year?...At first, a lot of consumer-facing technology is how we've innovated. Well, we did research that showed we’re not innovating enough, so… now we’ve committed to two product innovations a year.”

This year, one of the first big menu innovations is New York-style pizza, which launched earlier this month with a thinner crust and a provolone cheese blend.

“In the restaurant business, folks typically do really well on value, or they do well on taste perception,” Weiner said. “It's really hard to do well on both. With our Hungry for More strategy, we know we're doing well on value, but this is us saying, ‘what’s the point if a pizza tastes great but people don’t know that?’ We don’t have to change the product. We just have to change how we talk about it.”

Contact Joanna at [email protected]