After 41 straight quarters of positive same-store sales growth, Domino’s has seen declines in two of the past three (negative 1.9 percent in Q3, positive 1 percent in Q4, and negative 3.6 percent in Q1).
Breaking down first quarter results further, same-store sales dropped 3.2 percent at franchise stores and 10.5 percent at corporate units. Domino’s attributed the difference to company-run restaurants facing more substantial operational challenges and implementing conservative price increases. However, the company acknowledged that when adjusting for uncontrollables, company-owned units underperformed relative to similar stores owned by franchisees.
“This has not been the case historically, and the gap is being addressed by our leaders of that business,” Weiner said. “They are already several weeks into operations recovery plan with 30, 60, and 90-day milestones. “While corporate stores represent only 2 percent of our footprint around the world, they remain a critical strategic tool to develop talent and to test and refine innovation and in some instances, to accelerate the growth of an under-penetrated market. We must restore their leadership from a performance perspective.”
Because of Omicron’s surge, Domino’s Q1 started sluggish, but business returned to modestly positive same-store sales in February. However, comps turned negative as the pizza chain lapped the rollout of federal stimulus in March 2021, and the trend has continued into April. In Q2, the brand is competing against two-year same-store sales of 19.6 percent.
Delivery comps declined 10.7 percent in the first quarter, driven by declines in order counts, offset by higher average ticket. Restaurants in the top 20 percentile—which are appropriately staffed—experienced delivery sales that were 17 percentage points better than the bottom 20 percentile, and that gap keeps widening.
One bright spot is that delivery service times improved in 42 percent of stores year-over-year, with sequential rises each month during Q1.
Carryout comps rose 11.3 percent year-over-year, fueled by increases in average ticket, order growth, and Domino’s decision on January 31 to move its national $7.99 carryout deal to online only. Top and bottom-performing stores saw little difference in carryout sales, which makes sense considering the relatively low labor intensity associated with carryout.
Restaurants in the top percentile are positioned in highly fortressed markets, which bring better delivery service times and incremental carryout customers. The stores also have more drivers on the road, process new hires more quickly, and are led by tenured general managers, Weiner said.
“My job is to help everyone move to that top quintile,” said Weiner, who will take over as CEO in May. “But our job as well is to make sure that anyone who wants a Domino's Pizza gets a Domino's Pizza. And so while we continue to look internally for best practices, I will tell you nothing is off the table when we think about long-term and getting folks who want Domino's their delivery order.”