How Domino's Created And Dominated The Fast Pizza Industry

How Domino's Created And Dominated The Fast Pizza Industry

Domino’s Pizza Inc. is an American multinational conglomerate pizza restaurant chain. It was founded in 1960, and the company is branded as “Domino’s.” They have had one of the most significant impacts on the restaurant industry.

Domino’s was built on very simple ideas. They offered only takeout and delivery for the first thirty years and more. Now, they have over 5,700 outlets throughout the United States and 58 other countries. In the second quarter of 2020, Domino’s was able to generate a total global sale of over $3.4 billion. Their revenue all over 2020 has been an average of $ 4.12 B. 

Here are some statistics so you can have a better idea about Domino’s: 

  • Number of employees globally in 2020: 14,400
  • Stock Price as of July 23, 2021: $538.82

This growth study will focus on how Domino’s slowly became one of the biggest pizzerias in the world. The focus will be on marketing strategies, tactics, innovation, customer relationship, and quality.

The Mission of Monaghan 

DomiNick’s Pizza is what the name of Domino’s would be today if things had gone according to the founder’s plan. Tom Monaghan and his brother ended up purchasing a small pizza restaurant chain in 1960. This was the foundation of Domino’s Pizza. 

Tom MonaghanSource

Tom Monaghan was born in 1937 in Ann Arbor, Michigan – the same place where Domino’s headquarters stand today. He had lived in some foster homes after the death of his father. Tom would grow up working many jobs, but it was not possible for him to get along with his mother. This is when his father’s aunt was able to take him in during his senior year of high school. 

This would not stick either, however, and he was back on his own. Monaghan would come back to his hometown of Ann Arbor and start living with his brother. Jim Monaghan used to work at the Post Office, and also did carpentry work at a pizzeria called Dominick’s. Jim and Tom ended up buying the pizzeria when they heard that it was on the verge of being sold. 

The Start of Something New 

This is how the story of Domino’s would start, then under the different name of DomiNick’s. The pizzeria did well under the brothers. The weekly earnings started with a very slow $99 but climbed steadily to as much as $750 per week. The menu had a couple of special items at first, like a six-inch pizza and submarine sandwiches. These had to be dropped however in order to make pizzas more efficiently and within a time frame.

This move served well for the company as the profits had increased by a large margin. Despite the salary having turned $20,000 per year – it was not enough for Tom Monaghan. He ended up opening a Pizza King store with a local chef, Jim Gilmore. Gilmore was a partner in the original DomiNick’s. By the year 1962, Gilmore was able to persuade Monaghan to start a new Pizza King store at the Ann Arbor location. 

Gilmore further tried to convince Monaghan to expand the business, but his bankruptcy was imminent at this point. When all the differences were made clear, it was discovered that Gilmore liked stores that would stay a dine-in one while Monaghan was a strong believer in delivery services. Eventually, Gilmore was bankrupt and all papers were in the name of Monaghan.

Domi Nicks Pizza

Source

The Origin of the name - Domino’s 

In 1964, Gilmore expressed his differences clearly and told Monaghan that he wanted $35,000 in shares. Even though the price was considered beyond reason by Monaghan, he agreed to pay Gilmore $20,000 under a lawyer’s advice. 

The empire of Monaghan continued to grow, however at this point, DomiNick’s original owner still wanted to maintain rights to the name. Jim Kennedy came up with the name “Domino’s Pizza,” and this is the name that stuck on till now. By 1965, Monaghan had successfully been able to pay off all the debts. Now, Monaghan was ready to take his brand to the next level and start franchising.

Monaghan established a team for the board of directors for Domino’s at this point. They had decided that 2.5% would be kept as royalties from sales, 2% for advertising, and 1% for bookkeeping. The royalties were considered by Monaghan to be too low, but he stated that it was fair for what it was back then.

Little Steps to Success 

The very first franchisee of Domino’s Pizza was Chuck Gray. He ended up taking over one of the original stores that were located in Ypsilanti. Another franchisee, Sperling and Monaghan, started to gather a group of staff. Dean Jenkins was handpicked by Monaghan to take over the first store, and by 1967 the Jenkin’s store was going on and running.

In 1968, a fire ended up causing some damage at Monaghan’s original store. The pizza store was able to reopen a couple of days later, but the store suffered damages of $40,000. The biggest challenge that Monaghan had to face was not just having to pay $150,000 for the total losses caused by the fire, but also paying the lease for five other new franchises. Additionally, he also had to find store operators and locations as soon as he could. 

Key Takeaway: 

The rise of Domino’s was a slow but simple one. There was no sudden big break for the company started and continued by Monaghan. Moreover, the struggles that came their way were handled properly and professionally. This was just an example of how Domino’s company was not just a one-time luck shot, but it had promise from the start.

Introduction of the Logo and Franchising

Some plans had started to expand Domino’s to the Midwest as a franchise. Although Monaghan was trying to expand his business to college campuses – it was not enough. Opening new stores every week in 1968 was a grueling experience. By 1969, Monaghan was the owner of 32 stores and was considered an entrepreneurial genius. 

Using loans, in 1965, Monaghan bought 85 delivery cars in order to increase business. He also hired someone to computerize all bookkeeping. Unfortunately, going this route would prove to be problematic for temporary means. Computerization required all information to be moved from paper to computer, which made Domino’s lose all their records. Monaghan ended up being forced to sell his stock in order to have the money needed to pay the IRS. 

It was evident by now that Monaghan was trying to move far too fast. Stores in Ohio were opened before the spread of reputation, and thus sales were not significant. There was also a need for marketing that was not done in many of the further places as properly as needed. On May 1st, Monaghan lost the control he had at Domino’s. Domino’s additionally became the target of lawsuits from franchisees.

Trouble in Paradise

Now that Monaghan was not in control, he was recommended by Dan Quirk to contact Ken Heavlin, someone who may know how to turn a business around. Heavlin decided to run the company and take the loans needed to cover IRS debts. Two years of being in control with 51%, while Monaghan had 49%, and things seemed stable.

Heavlin ended up leaving after their agreement was over in 1971. He was able to persuade other franchisees that Domino’s would be able to survive in the long run and that they would fare better working with the brand. All lawsuits were soon dropped. Richard Mueller, a future franchisee, would become instrumental in the growth of Domino’s soon.

The Significance of Richard Mueller 

In 1970, Richard Mueller became a franchisee in Ann Arbor. This was one of the lowest points of Domino’s Pizza. Running this store for a year made Monaghan send him to Columbus. The intention was to revive a dying store. Amazingly, Mueller managed to raise the sales from $600 to $7000 a week! 

Mueller soon was given ten different Domino’s franchises to operate. In six and a half years, Mueller managed to launch 50 stores. Mueller would become the vice president of operations in 1978. Focused on rebuilding Domino’s, Monaghan motivated his employees and friends to continuously expand. Through this, Dave Black would rise to become president and COO of Domino’s Pizza.

Key Takeaway: 

Even though things didn’t seem like they would work out well, through the motivation of one man, the company survived. This showed that he needed the right people to support and manage things when things got too difficult to handle alone. Evident from the management and success of Richard Mueller. 

Revolutionary Growth

The growth that Domino’s Pizza experienced in the 1980s was rapid, to say the least. Unlike before, Monaghan and the company were prepared now. Even though Monaghan was always in fear of the budgeting systems, with the advice of individuals like Doug Dawson, he knew what to do - Designing budget procedures that would continue to provide training tools for potential franchisees.

Doug Dawson made sure he implemented some necessary accounting methods and eventually became vice president of marketing and treasurer. John McDevitt played an important role in Domino’s success. He created and also became the president of TSM Leasing, which was a financial service company – the goal of which was to loan franchisees necessary money.

Pizza, please!

The popularity and success of Domino’s was making rounds now. Primarily responsible for this was the marketing that some of the members of the franchise were able to take part in. Dave Black went from being the position of field consultant to vice president of operations. Dick Mueller and Monaghan went to the top. In 1981, Black implemented strategies that gave them the opportunity to create nearly 500 stores a year.

Stores that grew weak in sales were refurbished and given the needed attention to improve. Don Vlcek was also responsible for the growth, who was heading the commissary operations. When he was able to discover that one commissary saved laundry bills, he made everyone else do the same. He made sure he took care of the basics and did all that was necessary for opening a new commissary a month. 

The Challenging 80s

The 80s played a crucial role in the growth of Domino’s as well. Domino’s became among the fastest-growing money makers in restaurants, as labeled so by the Advertising Age magazine. The company not only had to keep pace with their competition of Pizza Hut but also other pizzerias.

Pizza Hut had 4000 units more in comparison to Domino’s. They eventually decided to raise their advertising and spent 249% of their revenue on it in 1984. Pizza Hut did not deliver Pizzas before 1986, but now they would. This would pose a threat to the empire of Domino’s and Monaghan.

Key Takeaway: 

Trust in the right people and know how to judge your associates well. Businesses might not do well at first, but what’s important is to keep track of the current market. The only way to do this is to have the right people do a proper analysis and keep a check on the sales. 

Dominance in the Market

Domino’s Pizza was able to reach $1.44 B in sales by 1987. There were now 3605 units of Domino’s spread all across countries like Canada, Australia, UK, West Germany, and Japan. 33% of the stores in the United States had one operator, who was able to sub-franchise. 

The challenge that came with international marketing was to convince the customers for delivery. In 1989, there were over 20 deaths that involved Domino’s drivers. This ended up calling their 30-minute delivery marketing in question. A franchisee decided to hire a police officer who was off-duty to track the drivers under him, making sure they obeyed the law. 

In January 1989, Domino’s Pizza opened its 5000th store. They stretched across countries like Colombia, Costa Rica, and Spain. Sales in the US went to $2 B. Dave Black became president and COO. Pan pizzas were also introduced in order to keep their ideas on the menu new. 

Monaghan’s Intention to Sell

Monaghan wanted to sell the company in 1990. Domino’s ended up cutting their public relations and other international marketing departments. Their payroll decreased by a stunning $24 Million. Kevin Williams replaced Mike Orcutt as the vice president of operations. At this store level, Domino’s opened less than 300 units in 1989 and 1990. He let go of David Black and other executives. Domino’s closed 155 stores and went from 16 to 9 offices.

Staying at the Helms

Monaghan intended to stay at his position for a long time, saying that God meant for him to be a pizza man. For the most part, he knew how to handle the market and handle the office. While he was in a bit of a rut, the sales of Domino’s went up once again. By 1996, Monaghan returned and stayed in his position.

Sales stood at $503 million, while there were 3000 stores by then. Domino’s was also able to enter their 50th international market by this point. Earnings had been recorded in 1997 to be $50.6 million on sales, which was a fraction of the total $2.8 B. 

Key Takeaway: 

Monaghan was able to make the key decisions and let go of those needed to keep the company going. Even though he wanted to sell it at a point, he saw potential and charged back. The success of Domino’s is in part to the simplicity of the product and this can probably be said even for today.

Creative Marketing Strategies 

Dominos delivery adSource

Since starting in 1984, many customers have been able to associate Domino’s with their “30 minutes’ delivery guarantee.” It has proved to be extremely popular for Domino’s. It might be one of the highlights of their marketing strategy - the confidence in guaranteeing customers that they will deliver their pizzas in 30 minutes or less was the selling point for some.

In 2017, they launched an advert that positioned Domino’s as “The Official Food of Everything.” This may have been a bold claim, but it seemed everyone and their families adored the deliciousness that was pizza.

Paving For Pizza Campaign

Dominos paving for pizzaSource

To personally engage with their consumers, Domino’s made use of the local marketing power and launched a campaign called “Paving For Pizza” back in 2018. This campaign was targeted towards fixing the potholes in different U.S cities. Even though this campaign was less pizza-based, Domino’s gave paving grants so that the pizzas could get “back home safely”. 

This ended up generating quite a bit of good publicity on social media and even managed to get around 35,000 mentions on social media within the first week. 

Cheeky Marketing 

Additionally, Domino’s has had some really creative marketing strategies. One of them being, the autonomous pizza robot. With a partnership with Starship Technologies, which was known for being involved in robot tech, they made several robots that could deliver pizzas within a one-mile radius. This was only possible in Dutch and German cities. 

dominos nuro pizza robotSource

Domino's has been testing out a new autonomous vehicle in Houston. It is called the R2, made in partnership with Nuro, a leading company in the world of self-driving vehicles. This self-driving vehicle delivers prepaid orders placed on dominos.com to a some select customers.

Dom the pizza bot Source

There have also been talks for a pizza bot. Dom the pizza bot is a bot with a very cheeky tone of voice, which sends out humorous, clever replies to users in facebook messenger.

These tech-related ideas aside, many advertisements in question can be considered useful for Domino’s. In 2016, they had a great Snapchat face-swapping tribute where anyone who went out for a pizza would become speechless. This ad campaign gained a good amount of popularity, especially amongst Snapchat users. 

In 2020 Domino’s spent an insane $35.7 million on advertisements.

Key Takeaway: 

As competition stays strong with Domino’s, so does their marketing! They have implemented some very cheeky and creative ideas. They have stirred up the market to become the topic of the conversation through these ad campaigns and marketing strategies. 

Striving to Adapt 

Domino’s has been affected quite a bit by the pandemic. Whether that is for the better or worse, is still to be seen. Thanks to this pandemic, Americans have ended up crowding up to Domino’s. On the other hand, the running expenses for Domino’s have also gone up higher. From worker pay to cleaning supplies, costs have all gone up. Ingredient costs also ended up fluctuating. 

Cheese, one of the most essential items needed to make their pizza, has gone from being at an all-time low to an all-time high. Domino’s increased sales have ended up muting profits that even disappointed those at Wall Street. 

Quarantine Food

It’s needless to say how bad the situation has been with the pandemic. Pizza, however, has proved to be a great dish for foodies to enjoy at home. Adding the fact that the company is delivering the pizzas to your door at this time, there is little reason why they won’t sell well with an already established market.

Over many years, the Domino’s empire has needed to make many decisions that got them to this point. Features such as “hotspots” and self-driving robots are just part of the reason for their popularity. Now, they also have two additional pizzas and wings which adds even more value to their market. 

In 2020, Domino’s held 27% of the existing market along with their larger pizza chains. Pizza Hut stands second in place in the rankings of pizzerias. Pizza Hut stands at 21%, and Little Caesar is at 15%. Meanwhile, Papa John’s sits at just 10%.

Domino’s pizza gains market shares in 2021 and has done so in 2020 as well. Technomic expects Domino’s to hold on to the top spot as their current position in the market is very dominant. 

Managing Expenses 

Although they are trying, it seems that Domino’s is having some struggles with its expenses. It does not mean that they are suffering any losses or deficits, but they would be making a lot more per year if their expenses were lower. The pandemic seems to have left no company or brand to exception, and Domino’s is an example of more of the same. 

The Evolution and Diversity of Product Offerings 

There are various products anyone can buy at Domino’s and they vary from region to region. Right now, the menu that is present in the United States features dishes mostly considered of Italian-American type. Pizza is obviously the main focus, especially given how much experience they have with this particular item.

With traditional and practical experience in pizza making, they also stretched their market to side dishes as well. Additional entrées were added in around 2011. This included pasta, bread, bowls, oven-baked sandwiches, fried chicken, bread sides, and beverages. It was mainly because they wanted to test the waters to check if people would buy items other than pizza from them if demanded. 

Segmentation

Domino’s caters to cultural and geographic differences by having varied menus available. For example, cows are considered sacred in India, and most of the demographic refuse to consume them. So, in Indian chains of Domino’s, there are no items with beef compositions. 

The Early Days

In the beginning, Domino’s was proud to serve only pizzas. They knew what they were good at, and they knew how to deliver it. Compared to other fast-food restaurants, they were on a more simplistic style when it came to delivering quality. The pizzas did not tend to go over the top, and were only available in two sizes, with eleven toppings, and had soft drinks as the only optional add-on.

The 90s Era

Dominos 90s menuSource

Menu expansion started around 1989. This was when they introduced pan pizza and deep-dish pizza. There was research conducted that ended up showing that customers actually preferred thick crusts. This new product launch cost them quite a bit. However, this would also soon lead them to launch The Dominator, which is now a signature item for them.

Around this time, they also started to launch experimental pizzas, which they would keep around – only if they received enough positive feedback. Unfortunately, this also cost them a bit, as many of the pizzas would not go well with their customers – thus being shut down in production. 

Present

Now, Domino’s has a wide variety of items that fit the demand of their customers. In addition, they have added some pasta dishes, wings, and dessert items. 

CHOC LAVA CAKESource

A dessert item, the Choc Lava Cake that they added to broaden their dessert menu, seems to go well with the audience. Domino’s also introduced a vegan pizza in 2013, which added more traction to their brand as a whole.

Key Takeaway: 

The variety and enthusiasm of the products kept the menu fresh and the customers happy. Domino’s knew that their business would struggle to survive if they just stuck to pizzas the whole time and ended up adapting to the situation when called for.  

How Domino’s became the Kings of Pizza 

Well, from the struggling days of Monaghan to the time he wanted to sell the company off – Domino’s is now at the top. When it comes to pizzas, they have overcome the odds and the challenges and went beyond the success of Little Caesar’s and Pizza Hut. The plethora of reasons that led to this cannot be stated in short.

The focus of the company on trying to make pizzas deliverable to the doorsteps has been important in their journey. Although it is possible to go to restaurants for food, even now as the world is going through a pandemic, the option to deliver is important. For many customers, this 30-minute delivery or money-back guarantee is what sold them. 

Domino’s also went forward and abandoned their fifty-year-old recipe in order to keep the innovation strong. After many years of complaints from customers about how bad the crust tasted, they did what was necessary. Now the crust remains thin and tasty – while new toppings have been introduced to make sure that they can attract new eyes.

The thickness of the pizza may be one of the biggest hidden factors that led Domino’s to its success. Blaze, MOD, Pizza Hut, and Little Caesar’s are still doing very well, but their pizzas are simply too thin to care about in today’s time. Customers want an ample amount of thickness, but also while making sure that it is not so much that it turns undesirable.

Key Takeaway: 

The main reason why Domino’s was able to overcome all the odds was their willingness to keep going. Even after Monaghan wanted to sell the company off, he remained resilient. The commitment to the customers' needs and willingness to adapt to meet the market demands, is a large reason for the success Domino's has today.

Recap

Domino’s is able to design its strategies effectively because of how much attention they pay to the market. The company also has a healthy history regarding its employees. This can be seen from the days of DomiNick’s, to today. Domino’s succeeded because they care about the experience their customers have, especially if it guarantees that they become returning customers. 

Growth by Numbers

Year 

2020

2000

Number of stores

17,800

2000

Revenue in USD

$4.12 Billion

$2.54 Billion

Number of employees

14,400 employees

4000 employees

 

Domino’s is able to keep going forward due to their focus on pizza and their delivery of it. Not only do they know how to market the pizzas, but they know what pizza lovers want. This is what has led to their growth all over the world. The increase in stores and units across the world that they have now is truly an astonishing feat. Everyone involved with Domino’s and who believed in Monaghan is worthy of the credit for this success in 2021. 

Domino’s Ultimate List of Strategic Takeaways

  • Perseverance is key

Despite having faced so many challenges, Monaghan and Domino’s were not willing to back down from the fight. Despite having 4000 less units in comparison with Pizza Hut, they continued to go forward. Even if there was any doubt in the vision of these people, they did not let it hold them back. The rivalries with Little Caesar’s and Pizza Hut also ended up contributing greatly to Domino's continuous innovation.

  • Think outside the box 

Domino’s is a prime example of how a company’s willingness to broaden its horizon can deliver well - starting with their franchisee approach to the entire brand to their expansion to countries that they were not even too familiar with. It all contributes to how they were not afraid, nor reluctant to step outside of what is considered the norm. 

  • Driven by the customer

This is something that is often underestimated in today’s time, but a customer decides everything that happens to the future of a company. Domino’s success is very much in credit to how they paid attention to their consumers. Starting from changing their menu every now and then, to improving their quality and taste of food – it all factored in in the end. 

Even though markets are always changing, consumer behavior has some factors that will always remain constant. Giving the people what they want, and making the changes necessary to get there is the key to making sure people love the brand. Adaptation, improvisation all play a role. Giving the customers the best products and the employees the best incentives is what made Domino’s the kings of pizza today!

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