How Domino's long-term strategy delivered amidst COVID-19's disruption

ANZ boss Nick Knight also confirmed the pizza chain’s new Carpark Delivery service will roll out nationally soon.

Once hit with concerns it could cannibalise the sales of existing franchises, Domino’s boss for Australia and New Zealand says its “fortressing” strategy - adding more stores to existing markets in an effort to cut down on delivery times and be closer to carryout customers - proved to have a critical role in the chain’s performance amidst COVID-19.

“If anything, the pandemic demonstrated the importance of our fortressing strategy and having more stores closer to customers. It’s been suggested by some that the pizza category did well throughout the pandemic, but in actual fact the category shrunk. Domino’s was able to grow market share by offering digital delivery, value for money and high-quality meals delivered quickly,” Nick Knight told QSR Media in an interview.

Despite being one of the fortunate few to operate almost unhindered throughout the pandemic, Domino’s was no stranger to the impact of COVID-19. The ASX-listed firm’s earnings for Australia and New Zealand declined 5.8% to $129.4 million for the latest financial year, despite a boost in online orders. Daypart-wise, the firm saw growth during lunchtime.

Like most chains, CBD-based areas were most impacted. Staff, Knight said, were either encouraged or mandated to work from home. Globally, the firm spent $14.1 million into supporting stores globally and reported that not a single franchisee exited the business due to the pandemic.

“We supported these stores by offering things like food and rental subsidies so they could continue to trade. It’s important to note that this was not a loan that needs to be repaid, but rather an investment in our people and the long-term success of our business. While our national support has since tapered down as it is not currently needed, we will continue to provide support to a small number of CBD stores as appropriate,” Knight said.

Domino’s earlier revealed its Car Park Delivery strategy, an initiative Knight described as having been “fast tracked” due to COVID-19. So far, the service has rolled out in Victoria and New South Wales and “will be available nationally very soon,” Knight confirmed.

Whilst not anticipating the changes induced by COVID-19, Domino’s said its long-term strategy anticipated a global shift to food ordered online and delivered, arguing its decade-long investment was essential to meeting the challenge. Aside from its store growth strategy, the firm has earned a reputation for investing in tech-based services, such as their DOM Pizza Checker, a delivering robot amongst others. At this stage, Knight said the chain will currently focus on its off-premise channels.

“Our investment in technology is a key ingredient to our growth as a business, but we don’t innovate for the sake of innovating. At this point in time, our main focus is on ensuring our team members and customers are as safe as possible and that we can continue to serve our communities and those on the frontline,” he said.

In terms of any changes to store formats, Knight said the chain does not have any significant changes planned, but stressed they are looking to ensure “maximising the efficiencies of delivery as demand increases.”

Standing at 820-plus stores, the chain wants to reach 1,200 by 2025 to 2028. No details were given about where the stores will be per state, but Knight expects the move will create an additional 30,000 jobs for Australia and New Zealand.

Knight also echoed the pizza chain’s earlier point on delivery, saying it is “more important than ever before”, a channel he expects the industry to further invest in.

“This change was already coming, but it’s certainly been accelerated due to COVID-19 and we’re seeing so many companies change their business model to adapt. I expect this will increase over the next 6-12 months. What I can predict is our ability to be agile, fast-moving and continue to deliver what customers need, want and expect from us.”

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