This past quarter, Domino’s chief executive officer Ritch Allison fielded a series of questions about third-party delivery and how it was pressuring the pizza giant’s business. Mainly, the conversation swirled around competition for customers, acquisitions especially, and how the chain combated massive marketing spend from aggregators fighting to one-up each other.
But what about drivers? Some vendors have begun to separate delivery fees from service fees. Is that an opportunity? And what about the record low levels of unemployment coupled with expanding positions?
Allison hinted at one area of growth that joined the larger picture Tuesday morning. Domino’s announced that stores across the nation will soon have the option to use custom e-bikes for delivery through a partnership with Rad Power Bikes—North America’s largest e-bike brand.
During its second-quarter review in July, when same-store sales climbed 3 percent in the U.S., Allison said e-bikes were testing in some markets, including corporate stores. The interesting part, he added, was that it presented not only a lower cost way to deliver food, but also opened up an additional workforce to Domino’s, “because not everyone has an automobile and increasingly young people in that 18-year to 28-year-old range, fewer of them seem to have cars,” Allison said.
THE DELIVERY BATTLEGROUND HEATS UP FOR DOMINO’S
Tom Curtis, Domino’s EVP of corporate operations, said in a statement Tuesday that Domino’s tested e-bikes across Houston, Miami, and New York, and saw improvements in overall delivery and service.
“They also experienced labor benefits, as the stores were able to hire from a wider pool of candidates, including those who might not have a car or driver's license. Plus, stores that were already delivering with traditional bikes saw improved team member satisfaction with e-bikes,” he said.
Now, Domino’s will roll out “hundreds,” of them across company-run units throughout Miami, Salt Lake City, Baltimore, and Houston later this year.
The e-bikes have small, integrated motors to assist with pedaling, and can run 25–40 miles depending on the user before needing a recharge. Domino’s custom models include front and rear insulated soft-sided cargo areas, which can hold its Heatwave bags, drinks, sides, and dipping cups. One e-bike carries up to 12 large pizzas. They’re also equipped with lights in the front and back, reflective materials for driver safety, and have a top assisted speed of 20 mph.
As Allison mentioned during July’s call as well, this form of delivery is actually rather common in Domino’s global system. It’s just not the case in the U.S. market, where nearly all of the pizzas are delivered by passenger automobile. “That's not how we do business most of the other places around the world,” Allison said.
However, in many large U.S. cities, bike deliveries are prominent, including New York and Seattle, Domino’s said.
"E-bikes make a huge difference in my stores," said Greg Keller, a Seattle Domino's franchisee, in a statement. "While delivery on a traditional bike solved many of our traffic and parking issues, the hills in Seattle were tough on even our best cyclists. E-bikes were a game-changer for us, and we've been delivering with them for three years now. We have been able to save money, provide better service, increase hiring and maintain a happy workforce."
Domino’s is working on a series of other delivery innovations to stay ahead of the rising pack. This past quarter, the chain unveiled self-driving vehicles with Nuro. The custom, unmanned vehicles, known as R2, are also an opt-in feature for customers who receive a unique PIN code to unlock the compartment and grab their pizza. This is set for a fall test in Houston.
Domino’s piloted GPS driver tracking April at 27 corporate stores throughout Phoenix. The technology lets customers track the location of their order and driver via a map from the order confirmation page of Domino’s website or app. Guests can also receive an estimated delivery time and opt into SMS notifications that tell them when the order is about 2 minutes away.
That platform is headed systemwide by the end of 2019.
Additionally, Domino’s continues to multi-market trial DOM, its voice-order taking system, in 40-plus company units.
“Record low levels of unemployment in the U.S. and the rise of third-party delivery not only in the restaurant business but in grocery and other areas is definitively heated up the competition for drivers,” Allison said. “And we are working with our franchisees everyday to continue to improve our service. And having the right scheduling and staffing is critically important.”
On that note, he added, non-customer facing technologies, while they don’t garner headlines, are equally important in this race for delivery supremacy.
Domino’s is working internally on its store scheduling algorithms and has started to see success, Allison said, by making sure drivers are on the books at the right times on the right days.
And on the point of third parties separating delivery fees from service fees, he said, “We are taking a look like the fees that they charge in the marketplace just as we regularly take a look at the delivery fees that our pizza competitors charge. We take all of that data and use that to inform where we think our delivery fees should be on a market-by-market basis around the country.”
“So we are constantly keeping an eye on that and adjusting the dials with the mindset that we want to make sure that we are not just taking short-term price or profit at the expense of long-term transaction growth over time, that’s always the balance that we try to strike,” Allison said.
Domino’s U.S. comp of 3 percent was its slowest same-store sales performance in seven years. But Q2 marked 33 consecutive quarters of U.S. gains and 102 internationally. And the 3 percent figure lapped a prior-year increase of 6.9 percent, which paints an impressive two-year stack few brands could rival, especially in this space.
Domino’s opened 42 net U.S. stores in Q2 (45 openings and three closures). The international division added 158 locations (171 openings and 13 closures). The brand has grown by 50 percent more units globally than at the same point last year.
Domino’s has brought 100 net units to market, per month, over the last year. The boom helped drive Q2 revenue up $32.2 million, or 4.1 percent, year-over-year, to $811.7 million.