Domino’s legacy is rooted in delivery, but carryout has undisputedly been the chain’s growth driver in recent years. 

Carryout same-store sales rose 5.6 percent in Q2, rolling over 14.6 percent in the year-ago period. During an age of inflation, customers continue to gravitate toward the channel to avoid paying tips and delivery fees. The channel’s retail sales in 2022 were more than $1 billion higher than pre-COVID levels. CEO Russell Weiner said in February that if Domino’s carryout business were standalone, it would rank among the top 20 quick-service brands in the U.S. based on consumer spending during the year ending December 2022, according to Circana (formerly The NPD Group). 

Weiner followed that up in July by stating the carryout business is almost $2.5 billion larger than it was in 2011 when the brand really started leaning into the segment. This makes Domino’s the No. 1 carryout pizza chain in the U.S., but there’s room for further growth. To drive its carryout market share to the level of its delivery market share, an additional 10 points is needed. This gap represents $2 billion worth of opportunity. 

“[The carryout market share projection] includes the normal components of same-store sales growth, which I think is there with all of the initiatives we’re talking about, plus unit development,” said CFO Sandeep Reddy during the Piper Sandler Growth Frontiers Conference earlier this month.

Domino’s launched a revamped loyalty program that’s more user-friendly to its growing carryout consumer base. For instance, rewards members can now earn 10 points on every order of $5 or more, which allows customers who love the $7.99 carryout deal to rack up points. Previously, guests had to spend at least $10. Additionally, customers had to buy from Domino’s at least six times to redeem something even though many guests have fewer than six occasions per year, especially carryout consumers. The new loyalty program has tiers of 20, 40, and 60, so customers can start redeeming after two visits. 

“We think redemptions are going to go up quite a bit. Some of the redemption costs will go up in our stores, but the incremental occasions that we’re going to drive are more than going to offset those costs,” said Joe Jordan, president of U.S. and global services. 

The company also plans to update its website to better reach U.S. carryout customers. 

“We need to make sure that our own channels are as sticky as possible,” Jordan said. “So our [e-commerce] site, in terms of conversion and in terms of the ability to drive revenue for the business, when you think about 80-percent-plus of our business being digital right now, it’s industry-leading. But it can be better. We’ve had essentially the same platform for a long time. Our business has changed during that time. We were predominantly delivery when we launched that platform. Carryout consumers are looking for a little bit of a different flow through that. It’s designed a bit more for delivery now. How can we make that a little bit easier, a bit more seamless, and how can we take advantage of all the data we have from the existing [e-commerce] as well as loyalty to drive more personalized occasions in that new website?”

Meanwhile, delivery has been a struggle. In the second quarter, the channel’s same-store sales dropped 3.5 percent, rolling over an 11.7 percent decrease in 2022.

Domino’s spent many years turning away from third-party delivery aggregators before taking the plunge with Uber Eats this year. Jordan has a simple explanation for the holdout. 

The pizza chain prides itself as being the leader of the pizza delivery segment, so there was no incentive to help them develop their business. That’s now a different discussion given the impacts of the pandemic. 

“Their business is developed at this point,” Jordan said. “When we look at the overlaps of the market leaders, our customer overlaps have relatively flattened, if not slightly declined in recent quarters. So the risk of us driving our customers over there is significantly lower than it would’ve been had we worked with them when they were first ramping up.” 

Plus, Domino’s didn’t enter its Uber Eats deal with a blindfold. The brand has meaningfully engaged in order aggregation—when customers order off third-party websites, but Domino’s drivers take it to the door—throughout international markets in the past few years. It’s seen more than $1 billion in sales in the trailing 12 months. That’s exactly how it will work in the U.S.; orders will be delivered by uniformed Domino’s drivers.

As the brand went through that process internationally, it understood how third-party sales could be incremental and profitable for the business overall. 

In some cases, Jordan said, it could be incremental to Domino’s own channels, with new guests from aggregator websites transitioning to the website/app. Consumers will have an incentive to choose the pizza brand over third-party delivery because of lower prices. Local coupons or national deals like the $7.99 carryout or $6.99 Mix and Match promotions won’t make an appearance on Uber Eats or Postmates’ platforms. 

“On this channel, this is a less price-sensitive consumer,” Jordan said. “In many cases, they’re membership customers who have paid to have free delivery, so they see a value there. … We’ll learn over time, and again, this is something we’ve done over the 50-plus markets in international. We are working with order aggregation. We’ve found over time how to find that sweet spot for our consumers where we’re still offering value within this virtual food court that aggregators are without pulling customers from our own channels.”

Before the Uber Eats deal was announced, Domino’s estimated that the average store-level EBITDA this year would be $150,000, up from about $139,000 in 2022. For comparison, the EBITDA was $174,000 in 2021, $177,000 in 2020, and $143,000 in 2019.

“These are expected to be incremental transactions and very profitable and incremental transactions and accretive, frankly, to margins as well because they are going to be not inclusive of the national promotions on our own channels, which are probably less margin flow-through,” Reddy said. “I think it’s going to really accelerate profit growth into ’24 and beyond once we are fully live on the aggregator platform.”

Tests at corporate stores started this month in Michigan and New York. Soon, Las Vegas will be added to the pilot. Franchisee markets will be tacked on in October and November ahead of a nationwide rollout by the end of 2023. Domino’s won’t use advertising dollars to drive customers toward third-party websites, but funds will be spent to drive share among guests who already exist on the platform. The brand supported this move by hiring analytics and marketing officials who have experience dealing with third-party delivery aggregators. 

Domino’s opened a net of 27 new outlets in the U.S., raising the total number of stores to 6,735. In the last year, it shut down only 16 of its restaurants. This is a mere 0.2 percent of its total outlets, while the average closure rate for fast-service eateries is about 1.5 percent to 2 percent, according to Weiner. The year 2016 was the last instance when Domino’s shut down over 20 stores in a single year.

Domino’s experienced a 0.1 percent growth in comps during Q2, supported by an increase in average check. However, this was counterbalanced by fewer orders. The price inflation for that quarter stood at 3.9 percent and is expected to remain similar for Q3, with a drop to approximately 2 percent in the final quarter of 2023.