The top 20 percent of restaurants, which are close to fully staffed, averaged a nearly 6 percent increase in same-store sales in the fourth quarter. In comparison, the bottom 20 percent, which have the worst labor situations, saw comps decline by almost 7 percent.
The gap is alarming, but for Allison, it’s proof that staffing is the main source of sliding sales and that it's not an indictment on brand strength.
The unit economics are still formidable; U.S. Domino’s units earned $1.3 million in sales on average last year, and more than $170,000 in store-level EBITDA. Also, domestic same-store sales for 2021 rose 3.5 percent (14.7 percent on a two-year basis), marking the 13th straight year of positive growth.
“We believe that the sales we saw in Q4 2021 and have seen so far in 2022 for the U.S. business are not indicative of the demand our great brand is capable of generating,” Allison said. “That demand gives us confidence about our ability to drive long-term growth once we adequately address these labor constraints.”
Domino’s is taking several steps to address staffing issues, including a new applicant tracking system that makes it easier for candidates to apply and the elimination of time-consuming tasks, like pre-folding boxes. More than two-thirds of the system is no longer pre-folding boxes, which saves an estimated 30–40 hours of labor per store per week. The end goal is to keep drivers in their car longer, which means more tips and higher wages.
At corporate stores last year, the brand rolled out raises in compensation and benefits totaling more than $6 million above required minimum wage increases. In 2022, Domino’s plans to commit an incremental $8 million.
“Over the course of February, we've certainly seen some stabilization,” Allison said. “We've seen some improvement in applications. And we've seen some improvement in our delivery times and ability to serve our customers.”
The current macroeconomic environment meaningfully affected development, as well. The U.S. opened a net of 89 and 205 restaurants in Q4 and 2021, respectively, which was softer than what Domino’s expected. Numerous stores were delayed last year because of slowdowns in permitting, inspections, delivery of equipment, construction, utility hookups, and staffing.
Despite those issues, an important milestone was clinched. Domino’s ended 2021 with 6,560 U.S. stores, surpassing Pizza Hut as the biggest pizza chain in terms of unit count. Pizza Hut ended the year with 6,548 stores.
While domestic business is pressured, the international segment continues to soar. Markets outside the U.S. saw same-store sales rise 1.8 percent in Q4, good for the 112th straight quarter of positive growth. On a two-year basis, comps lifted 9.1 percent in the quarter. For 2021, same-store sales increased 8 percent, or 12.4 percent on a two-year stack. International markets opened a net of 379 stores in Q4 and 999 in 2021.
Overall, Domino’s opened a net of 1,204 restaurants last year, which equates to more than three store openings per day on average. The chain ended 2021 with 18,848 units across the world, or growth of 6.8 percent year-over-year. This aligns with Domino’s two to three-year outlook of 6-8 percent annual unit expansion.
“With an estimated remaining potential of over 10,000 new stores in our top 15 international markets alone, we look forward to continuing to work with them to drive long-term global growth for Domino’s,” Allison said.
The chain’s digital channels represented $6.6 billion of U.S. retail sales, an increase of more than 36 percent since 2019. Domino’s also surpassed 29 million active members in its loyalty program, and has almost 70 million enrolled in its database.
The brand earned $17.8 billion in global retail sales in 2021, which is $3.5 billion more than 2019. For perspective, $3.5 billion was the size of the entire U.S. business in 2011.