Because of these pressures, Domino’s U.S. same-store sales dipped 2.9 percent in Q2, which is the third time in the past four quarters that it’s seen negative comps, after a streak of 41 straight quarters of positive results. Declines in order count were offset by ticket growth, thanks to an average price increase of 6 percent. Q2 was the first full quarter of Domino’s $5.99 Mix and Match deal being bumped to $6.99 for delivery orders.
Franchises saw same-store sales slip 2.5 percent, while corporate locations decreased 9.2 percent. To resolve this gap, Domino’s implemented an operations recovery plan with 30, 60, and 90-day milestones. In June, Frank Garrido, the chain’s EVP of operations, began overseeing the company-operated footprint.
Internationally, same-store sales dropped 2.2 percent, ending a streak of 113 quarters, which dates back to the early 1990s. This was mostly fueled by the lapping of a tax holiday in the U.K., Domino’s largest international market in terms of retail sales. Discounting the unfavorable impact, comps would’ve been slightly positive.
On an annual basis, the brand has seen positive U.S. same-store sales for 13 consecutive years; with two quarters of negative comps, the streak could be in jeopardy.
“I can assure you that no one at Domino’s is happy with our recent performance, however I have tremendous confidence in the teams that we have assembled to leverage some of our current successes, address our current pressures, and proactively work to mitigate the negative impact of those external factors that we can’t control,” Weiner said.
To better meet customer demand, Domino’s focused on returning to core operating hours, added automated call centers to 40 percent of its stores, and implemented a boost week—for the first time in more than two years—to increase guest and loyalty acquisition. The promotion resulted in the best sales week all year and the best carryout business in history. There are plans to do another one before the end of summer. Additionally, Domino’s has phased out box folding, which adds up to 40 hours per week, in about 90 percent of its footprint.
Although Q2 is far from where Domino’s wants to be, the initiatives appear to have had a notable impact. In Q1, the combined number of lost hours equated to the entire U.S. system being closed for six days; in the second quarter, that figure improved to a little more than four days. Also in the previous quarter, the difference between the top 20 percent (essentially fully staffed restaurants on average) and bottom 20 percent (facing the most labor headwinds) was 7 percentage points, up from 12 percentage points in Q1. Same-store sales on a three-year basis were more than 500 basis points better than the first quarter.
Carryout sales rose 14.6 percent year-over-year, an acceleration from the 11.3 percent rise in the previous quarter—undoubtedly fueled by the boost week and the tips promotion in which Domino’s gave customers $3 off their next digital order. On a three-year basis, comps were up 33 percent.
Weiner, who’s been with Domino’s for more than a dozen years, said the chain has seen continued momentum in its carryout business for the past decade, let alone since the pandemic arrived. One of the reasons it’s so important is because of its incrementality; there’s only a 15 percent overlap between guests using both delivery and carryout. The CEO also noted Domino’s is gaining most of its carryout market share from outside of its pizza competitors.
“We are incredibly pleased with our carryout momentum, especially considering carryout is a much larger segment of [quick service], giving us a significant runway for growth in the future,” said CFO Sandeep Reddy.