How Domino’s Is Winning The Pizza Wars

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For decades, pizza and Chinese food were basically the only meals available for delivery. But that’s changing now.  Uber Eats, GrubHub and other third-party delivery services mean that you can get anything from bagels to Baked Alaska delivered to your door.

That’s bad news for pizza chains even for Domino’s, America’s number one pie maker. After all the company built its business on fast delivery. The pizza chain has seen same-store sales go slow amid the delivery boom. Still, Domino’s has come back from much worse.

At the height of the financial crisis, his same-store sales shrank by six point one percent. So how did Domino’s managed to claw its way back and how can that help the pizza chain stay on top today?

A slice of pizza can come topped with gold leaf or caviar costing you up to three hundred and thirty seven dollars. But the dish has much more humble origins. It first appeared in Naples, Italy in the 1700s as food for the lower class.

When Italians immigrated to the US, so did pizza. At the beginning of the 20th century, New Yorkers were starting to perfect the dish. Factory workers in a rush would pick up a slice for lunch. New York was already a multicultural city in the early 1900s, but if you were to visit a northeastern pizzeria at this time you’ll likely be surrounded by mostly Italian Americans.

To become a mainstream favorite, pizza needed a little help from a few restaurant chains popping up in the Midwest. Domino’s wasn’t actually founded by anyone with Italian heritage. In 1960 Tom and Jim Monahan – Irish American brothers brought nine hundred dollars to buy a pizzeria called Dominic’s.

Within months Jim gave up his half of the business to Tom in exchange for a Volkswagen Beetle the same car that they were using for deliveries. The company was now all Tom’s. He changed the name from Dominic’s to Domino’s.

The original Dominic store had grown into three Domino’s locations. By this point in 1967 Monahan started franchising restaurants. New franchisees didn’t have to pay an initial fee to open their own store. Instead they just had to manage an existing Domino’s for a year.

The company focused on placing at stores near colleges and military bases. Both have lots of customers looking for a cheap meal. Unlike mom-and-pop pizzerias Domino’s was sufficient. Its ovens had rotating racks. It had standardized the delivery box and all of the pizza started to look the same, too.

Around the same time Pizza Hut and Little Caesars were also getting their start in the Midwest. Little Caesars had 50 stores by 1969, but Pizza Hut was far in a way the fastest growing chain of the 1960s. Unlike Domino’s they wanted customers to eat their pizza inside their restaurants and it had more options; a salad bar, pasta, dishes and alcohol.

In 1970 just 12 years after is founded, Pizza Hut opened its 500th location, but Domino’s was doing its best to catch up. By 1978 it had 200 stores and the chain just kept growing. From there the pizza chains 30 minutes or less delivery promise help set it apart from the competition.

Domino’s created the guarantee in 1984 and for nearly a decade the incentive worked, but the company dropped it in 1993 after several lawsuits stemming from car accidents involving delivery drivers. By 1998 Domino’s had thousands of stores and 3.2 billion dollars in annual sales.

Monaghan decided to sell the company so he could focus on philanthropy instead. He found a buyer and Bain Capital Mitt Romney’s private equity firm in 93 percent stake went for 1.1 billion dollars. In 1998 Monaghan retired from the pizza biz with money from the sale, enter David Branden as the new CEO in 1999.

Before joining Domino’s he was the chief executive of coupon distributor molasses which had one of the biggest IPOs of the 1990s. In 2004 Brandon took Domino’s public. At the time it was a market leader in delivery pizza. And only Pizza Hut had higher annual sales, but there were already signs of trouble in the 90s.

Frozen pizzas had their big break. Rising crust customers started choosing cheaper frozen to journos pies over fresh options from Domino’s, Pizza Hut or Papa John’s. With a fresh pizza market shrinking competition between the biggest players brute fierce.

The Pizza wars started heating up in the late 90s. Pizza Hut even sued Papa John’s for false advertising. Papa John’s had long claimed it used better ingredients for better pizza. Pizza Hut disagreed arguing that there was no scientific evidence that said that fresh taste better than frozen.

In the early 2000s China and India became new battlefields for these Pizza wars. As the three major American Pizza players started to open franchises overseas, to stay competitive Domino’s couldn’t boost sales by hiking prices. So starting around 2003 sales unsurprisingly flattened.

Another big problem for Domino’s, it’s Pizza became forgettable as it cut corners on ingredients. In order to keep its pizzas cheap Domino’s used frozen canned and pre-made ingredients. To cut down a cost as the economy started to slip we were making independent changes that in small doses seemed like good ideas.

For example people were trying to drive a little bit of cost out of sauce and so they cheapened it and and they said “we can save some money here and nobody’s gonna notice.” And another team did the same thing with cheese and another team did the same thing with dough and with meats and what happened was that there was a collection of individually good ideas that all added up.

One bad idea that meant pizza could be assembled quickly, but customer satisfaction surveys show customers just weren’t satisfied. Papa John’s better ingredients on the other hand make customers think that its pizza used fresh ingredients. Domino’s try to get creative and out of new products like cheesy dots in 2004 and sub sandwiches in 2008.

Its rival Pizza Hut was also expanding its menu by reintroducing pasta, but new menu products weren’t solving Domino’s deeper problems. A viral 2009 YouTube video that showed Domino’s employees tampering with food only made things worse.

Pizza Hut was much better at using social media to sell its pizza. Domino’s annual sales sunk to their lowest point since 2003. When the recession hit in 2009 Pizza Hut was still the market leader at this point but its sales also shrunk that year. Investors weren’t happy.

(To continue the rest of the story, please watch the video above)


Source: CNBC News Channel on Youtube


  1. Domino as a manufacturer of pizza making in America has decreased its annual profit. If this continues, it is feared the company will go bankrupt. One of the causes of the decline is the amount of trade competition with other brands of pizza in the region

  2. In the past I used to eat pizza when I was a child and I ordered a large size pizza, and the taste was different from the general pizza and the price was quite affordable

  3. Pizza Hut was much better at using social media to sell its pizza.So domino’s pizza has to initiate an update in sales to have competitive sales

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