Carryout versus delivery, sales, and a look ahead
Domino’s crossed $1.3 billion in sales in Q4 as it posted revenue of $1.36 billion. U.S. same-store sales grew 11.2 percent, while international increased 7.3 percent. It marked the 39th consecutive period of positive domestic gains, and 108th straight intentionally.
Domino’s opened 116 net U.S. stores in Q4 and 272 internationally. Remarkably, the brand has brought nearly 1,2000 new restaurants to market in the U.S. over the past five years, while closing fewer than 80.
This past year, Domino’s also surpassed $8 billion in U.S. retail sales for the first time.
Naturally, COVID provided its share of tailwinds for the pizza segment’s top player. Domino’s entered the year generating 70 percent of its sales through digital channels. It exited 2020 at 75 percent.
Yet there was a bit of tug-of-war going on. Although Domino’s felt a significant tailwind with its delivery business, there was a headwind on the carryout side.
Allison said fewer customers were comfortable getting out of their cars and walking into restaurants, which pressured order counts with carryout. Before COVID, carryout was one of the buzziest topics at Domino’s. It served as a crucial source of customer acquisition and order count growth.
What’s important to note, too, is Domino’s carryout customer is different than its delivery one. This past year didn’t simply see a shift from one to the other with the same customer base. Delivery increased, while carryout headed in the other direction.
In fact, pre-virus, only roughly 15 percent of Domino’s customers used both delivery and carryout. Meanwhile, the company took its carryout mix to about 45 percent of orders.
Domino’s generally reports lower tickets on carryout compared to delivery, but there’s a lot less labor cost in tow. So the higher the average hourly labor rate gets in the market, the more the profitability equation tilts toward carryout orders.
Given everything that’s happening these days from a wage perspective, it’s no surprise Domino’s plans to circle carryout as one of its lead 2021 drivers. Not to mention, the brand will start lapping some of its delivery tailwinds as dine-in returns across America.
“We're not looking at it so much as a shift from one or the other as it is a reemergence or kind of gaining back some of those carryout customers that have been on the sideline,” CFO Stu Levy said.
Another lever at work is Domino’s Carside Delivery, which didn’t exist at the start of the year but is now fully rolled out.
Long haul, Allison believes the system will help Domino’s compete against the drive thru—only 10 percent or so of its footprint boasts windows currently. “Our aspiration here, which is well within reach, is that we get to a point where you can get a carside delivery at Domino's faster than you can wait in line at a [quick-service restaurant] drive-thru to get your food through the window,” he said.
Domino’s also now has 27 million active members in its Piece of the Pie Rewards program, which grew, year-over-year, without any aggressive week-long promotions across the last three quarters of 2020.
“While we certainly brought new customers into the brand over the last year, the story of 2020 was more about the frequency and loyalty of our existing customer base. Our customers ordered more often,” Allison said. “And when they did, they also ordered more items. And we saw that specifically among our loyalty program members.”
Value will be a big focus as well.
“As a lot of folks who have been paying a lot to have food delivered to their houses, as behaviors start to change, and other options open up, we're going to continue to have Domino's as the unquestioned value leader in the [quick-service restaurant] pizza segment,” Allison said. “And frankly, broadly across the restaurant industry, when you think about what it costs to have food delivered to feed a family of four, we really like our positioning in that space.”
Domino’s shared a two- to three-year outlook of 6–10 percent global retail sales growth and 6–8 percent global net unit growth. It ended Q4 with 17,644 locations, including 6,355 domestic. Of those, 363 were corporate run and 5,992 franchised.