• by Teresa Buyikian , July 25, 2023

Love or hate the taste of its pizza, no one can argue that Domino’s has delivery down better than any other chain in its food category -- or frankly, ANY company that delivers ANYTHING other than Amazon. You order online (or in my case, on my phone -- at least once a month, for the last 30 years or so), pay online, and the pizza pie Santa arrives in about 30 minutes with a hot meal for the ENTIRE FAMILY. Even Amazon can’t do that (yet).

So when Domino’s announced its collaboration with Uber Eats earlier this month, enabling customers to place orders on the food-delivery app, yet still (thankfully) be serviced by Domino’s drivers, it appeared an interesting move, contrary to Domino’s previous anti-food-aggregator stance.

Why did the company do it? (If it isn’t broken…. ?)

Post announcement, stocks soared over 11%, an 11-month high.

Aggregator sales for delivery for quick-service pizza restaurants have reached almost $5 billion for the year ending May 2023, said Domino’s CEO Russell on Monday’s earning call, citing research from Circana. Weiner added that the collaboration could add as much as $1 billion in new sales for Domino’s -- which would be a good outcome considering the chain’s same-store delivery sales declined for an eighth straight quarter.

“Peers like Papa John’s and Pizza Hut have seen a low single-digit to a mid-single-digit SSS (same-store sales) growth lift once they joined 3PD (third-party distributor),” Nick Setyan, Wedbush Securities managing director, equity research, restaurants, told QSR Insider.

We reached out to Domino’s to ask why it chose Uber Eats vs. GrubHub, DoorDash or other 3PD, and were told on background that there were many reasons -- including that the 3PD offered the most competitive terms for franchisees as well as corporate stores on a global basis, enabling a larger and better opportunity to target incremental customers. (Uber Eats partners with over 890,000 restaurants and merchants in more than 11,000 cities across six continents).

As to why Domino’s has decided to go with a 3PD now after resisting for so long, the company has actually been working with 3PDs overseas for quite some time -- and, after learning to make the model profitable, Uber Eats offered attractive pricing and an order aggregation-only model. (where Domino’s still uses its own drivers, not those supplied by the Uber Eats). The agreement gave Domino’s the “scope, scale and incrementality” it needed to move forward (in the U.S.).

It will be interesting to see how this collaboration is received by both potential and existing Domino’s customers in the United States as it rolls out this fall.