Domino’s Pizza drove increase in stock value by acting like a startup
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Controlled experiments and/or causal analysis.
Does statistical causal analysis work when there are this many variables? Feels like that would just be essentially a case study again.
Yes, that's the whole point. It works when you can "simulate" experiments by looking at a large number of events.
E.g. DNA evolution in genetics, drug testing in medicine, studying failure modes in aeronautics...
Clayton's Christensen's disruption theory was useful.
But nothing's bulletproof, of course.
So maybe looking at the methodologies serious business academics use to write their PHD, and their work in general, is a good alternative to case studies ?
There is a lot of knowledge in the world that we'll never get RCTs for and we just have to learn the best we can.
This is what investing is.
Also, when they did this no-one had apps or delivery. The pizza market is growing but DPZ took massive share as well. It is surprising to me that so many people are armchair quarterbacking this (I know someone who bought them at $5...all of the stuff mentioned in the article was the bull case: online growth, mismanaged, etc.).
- Lowest minimum order value
- Fastest delivery (bc of own delivery guys)
- No perfect pizza but still great enough
- For me, ordering food == instant gratification == doesn't have to be healthy
The garlic-hollandaise thing they come with is disgusting but the actual pizza itself is usually pretty good, if unhealthy. I enjoy making my own pizzas from scratch so I rarely order but the quality is impressive for the volume they have.
The delivery times don't seem to be particularly different from Uber eats or similar.
I was surprised visiting Taiwan, the Domino's there is actually pretty passable.
It really is unbelievably horrible. And every.single.time I order online and hit the checkout button, it pops up asking me if I want to add an extra large tub of it to my order!
I order Domino's on occasion just because my kids like it, and the online ordering process is great, but I'm not a huge fan of their pizzas TBH. I find them very greasy, and strangely the quality seems to vary from time to time - sometimes the dough is thicker, sometimes it's a little undercooked etc.
Also the pricing in the UK is weird. The official prices are actually pretty expensive, but there are always vouchers for 30% or whatever off. Annoyingly, this means I always have to buy more than I want to qualify for the voucher, because it ends up being cheaper to buy more.
Domino's is the only place that will deliver to me, being on the outskirts of the city. Luckily that Domino's is pretty good and reasonably low on the grease quota, compared to some I've had elsewhere. The one thing I do particularly like about that franchise is the cleanliness; I've been into the shop itself and it's really well kept, compared to some of the other "big" pizza places here.
Now, that Papa John's dip... Disgusting.
The coupons/special offers are good but recently at least Dominos have started moving the minimum order for delivery from like ~£10 to ~£12+. Really expensive just for pizza! They used to do a 'build your own pizza' delivered for about a tenner medium/large size which was a godsend when I was in university halls.
Barely use them nowadays, just get a decent fresh oven pizza from Tesco or the Co-Op. Shame because I used to like Dominos.
1) Open late
2) Variety and style of toppings often better than traditional NYC pizza places.
Ex. Dominos uses thin pepperoni that crisps on the edges, regular pizza places use fat ones that grease up your pizza. Dominos uses dried jalapeno, regular pizza places use pickled that gets some brine on your pizza. etc.
A few weeks ago my wife and I had a craving for a burger. We went to some hipster place, hoping for something a bit healthier than McDonalds. They said there was a 40 minute wait (for takeout), so we ended up getting McDonalds after all.
There wasn't anyone else waiting there, but I assume they had orders queued up from delivery services. Still, it seems a bit stupid to tell someone in your restaurant to wait - even though you are probably getting more profits from them.
Or is there a place where one could see some approximations? I’m curious as someone who loves the McChicken but knowingly keeps his consumption of them to a minimum.
Domino's aren't currently delivering pizzas by drone or self-driving cars at significant scale, certainly not enough to affect their stock price. They aren't putting enough money into drones or self-driving cars to make investors think that they might have some head start- they will get self-driving delivery the same time as every other pizza company, because they will be buying the solution from another company that is selling to everyone. Domino's pizza tracking and online ordering is cool, but nobody orders Domino's because of it. Because regardless of their tech, they are just about on par with most pizza places when it comes to delivery times.
Edit: want a "free pro stock tip" from me (/s)? Domino's is steady/level at ~$400 right now, but they were steady/level at ~$300 in 2018-2019. They got a 33% bump in price from the coronavirus. So 30x of the 90x bump this article brags about has nothing to do with management decisions. Once the Western world has gotten vaccinated, Domino's is not staying at $400. They may not go all the way back to $300, but they won't be keeping every customer once normal life resumes.
But I will rant that the article/blog doesn't have a publishing date at the top or bottom of the article, nor the URL. Plus, they don't seem to define a firm end date, they usually just referred to the present. So I'm not ashamed by not realizing the article was from 2018, because apparently the only way to pick that out is by noticing their stock chart cuts off in 2018 and they have no mention of current events.
"Acting like a startup" gets you investor's money these days. See Nikola, Theranos, AMD, and more. They're not necessarily all bad products, but there's a lot of high-rollers who want to invest into risky companies.
In effect: companies pretending that they're risky satisfies a market... a market to sell shares.
AMD currently doesn't have the capacity to grow its marketshare. Its only got so many TSMC slots. We're in a period where every chipmaker is selling out every single chip they make, but AMD still isn't making as much revenue as NVidia or Intel because they're simply capacity constrained.
AMD will stick around for sure IMO, but they're not nearly as strong as their stock price makes them seem. With that being said, the Xilinx purchase (lolwut?) will put them in a stronger position.
Frankly though, AMD has no business buying a behemoth like Xilinx. But... if their investors give them enough money, then sure, I guess its a good move.
Being capacity constrained is a nice problem to have.
Maybe that has got something to do with Domino's stock price ?
Pizza Hut would never ever consider talking about drone delivery, or real time order tracking. Dominos is embracing those technologies, meaning they’re open and quick to adopt change. That makes the company much more resilient (reduction in risk) and able to capitalize (larger upside). That is value.
It’s comparable to Tesla’s stock price. Yeah the product is good etc, but Elon talks about going to Mars. Part of dominos growth is because they talk about “going to Mars”.
To be clear, there is actual value or potential value in this, it’s not just posturing.
But besides the rise in stock price - talking has no value, in my opinion.
If you want high stock prices, manufacture a bunch of hype. If you want to win in the stock market, figure out how to properly model and predict hype.
Fundamentals are important but they don't themselves drive the market because fundamentals are already known and should be factered in.
Most cities have a hundred pizza joints to order from, with quality and price being the only differentiator. That Dominoes was able to do that by branding might be "management school BS" (I love how tech people use that as a slur btw), but it has paid off for shareholders.
...while staying competitive in an extremely price-sensitive market, and figuring out how to get it to your door faster and hotter than VC-backed delivery services can. Not so easy.
"You can have it fast, cheap or good. Pick 2" -- it's so common, it's a cliche. Domino's does all 3.
Delivery from Dominoes is a seamless, reliable process. It is extremely easy to place orders however you want to place them; you can track the product through the stages of production and delivery in a highly granular way and be confident about when it will arrive; deliveries are fast, usually under 30 minutes; the product that is delivered always hits a certain level of quality in my experience; and you need basically zero interaction with a human to get it done.
Contrast this with food delivery services like Doordash which take FOREVER (eg > 1 hour and frequently much longer than that); have unreliable tracking mechanisms and ETAs; result in food that usually arrives cold; are extremely expensive; always require interaction with a human; frequently result in mistakes; and have a dispute resolution process which basically involves Doordash et al saying not my problem or sorry but we don't give refunds, here's a 15% off coupon for your next order.
Edit: Adding link to story where guy verifies tracker is not real - https://melmagazine.com/en-us/story/i-staked-out-my-local-do...
Also, the Dominos tracker is real. (I have some knowledge of their IT systems). It doesn’t estimate delivery times, it just tells you the state of the order. It’s up to employees to actually move the state along, so it isn’t perfect. But it is an actual tracker.
2) Domino's was always great at delivery, and was always better than all other options (even for pizza). That they bothered to make a slightly better iPhone app than everyone else doesn't somehow affect this: you have to look only at strategy changes. Even the article gets this correct, by stating multiple times that Domino's has always been optimized as a pizza delivery company.
> The most impressive part about Domino’s growth from 1960 to the early 2000s is that they became one of the biggest pizza delivery chains in the world with some of the worst pizza in the world.
I wish it were that simple. I mean, you can't have one without the other, but that's not the only important thing they did. The other really important thing they did was improve customer experience. Being able to order in whichever method has the least resistance for each customer is an important thing that shouldn't be ignored. They were the first pizza chain that made it possible to order by tweet, from your digital assistant, smart watch, etc.
Then, after you order, they actually gave transparency into the order process, making more customers comfortable that the order had been received and was progressing. At the time, this level of transparency was missing from delivery -- there used to be this black hole between placing the order and receiving the delivery where you didn't know for sure if someone had actually seen your order come in. That improvement in trust was game changing and you know it's great because it seems so obvious after you see it.
But who knows - maybe Applebee’s will become a great restaurant without improving their food.
That's not what I said though... I agreed that improving the product is important. But, just because you build a better mousetrap, that alone doesn't guarantee that customers will beat a path to your door. There are many examples of an inferior product becoming the defacto product in a category even though a better product exists. So, there must be something else to Dominoes story, and there is!
There is other pizza that I like more than dominos, but I still order dominoes sometimes because they've taken away so much friction and sometimes that outweighs a better product -- when you're time/focus limited and also need to get your family's dinner on the table. But, the product still needs to be good for that to work. Dominoes won because they did both.
All of these reasons are driven by technology. The process is automated so it runs very efficiently and with minimal human intervention. No person has to constantly be opening the oven to see the progress being made, which lowers the temperature of the oven and leads to inconsistency, and takes longer. The app is nice and most importantly the product is consistent. I think once I got received a pizza with a missing topping, but didn't follow up on it.
If you compare apples to apples you're paying $8 for a reasonably acceptable pizza.
When the pandemic started I stopped eating food prepared and handled by random people. I am surprised to see in these threads that so many people started ordering food prepared and handled by other people.
But I agree. Surface contamination is a much lesser issue. And one I think it still makes sense to pay attention to.
First, I largely agree with what you wrote. The core improvement is significant and was also not “risky” or “daring”.
But:
> Domino's pizza tracking and online ordering is cool, but nobody orders Domino's because of it.
I do! Their app is executed beautifully, and is much nicer than phone orders where I hope my crazy order is interpreted correctly. It’s also better than the thinly-wrapped web pages from competitors.
And getting a heads up when the driver left the store allows me to shoo the dogs outside.
Seems like a small thing, but it makes a difference.
Apparently delivery is not available in my area. The nearest Dominos is 2.5 miles away.
I am deleting this app now.
Edit: Yeah I know this probably doesn’t have to do with the app itself, but it’s mildly infuriating anyway
Edit 2: I don’t think it is due to Covid because they are advertising contactless delivery and I can also walk into their store right now. Also, I recall having this same problem 1 year ago.
I think the real explanation is that I live in a relatively new (2 year old) community and they haven’t bothered to update their delivery address database. I thought 2.5 miles was close enough, and 2 years was long enough to get a database update. I don’t really know, though.
My point, to clarify, is that this isn’t a very good user experience. Here’s a constructive suggestion: tell me why you won’t deliver, because otherwise we’re left to guess in the HN comments.
Sorry if my comment came off as shallow and dismissive.
I'm not really sure I understand this-- surely there's not more risk to the driver in delivering to you than in you coming to get it yourself, which they definitely still support. Maybe it's because their delivery drivers can't share cars anymore or something.
I used to work as a pizza delivery person and there were some locations that were extremely inconvenient and were money losers to the shop in terms of effort, time I'm away from and order size. I remember spending 40 minutes to deliver a $10 sub for a $2 tip.
You can get even more granular with this and fire customers that live in complicated building complexes that take forever to traverse.
But on the other had, a national chain like Dominoes may want to serve some customers as a loss leader purely for the reputation
Sounds likely this is it. 2.5 miles isn't crazy, but maybe it is in your area? Who knows.
So, either your address is still not tallied in their system, or they have enough delivery area as it is. Either way, it would be nice to see the reason.
If I get to rave about how much I like the app, you should be able to rant about the same :)
I disagree.
Ordering from your local pizza place (pre Uber Eats) usually meant ordering from the default options because there was no way you could get a custom order in without having some sort of mix-ups. And good luck if you tried to order to a non-standard location (like a college campus building).
Ordering from the website removed all these issues, plus you could pay with a credit card beforehand so no cash transactions required. This combined with
> Keeping it around long enough and word gets out that Domino's is good again, which means more sales and growth.
and the ubiquity of Domino's locations made it the default option in many cases. It was good enough that it wasn't worth it to see if the local pizza place was better.
That's not how it went down, and that's not how these things work. The Domino's brand value was in the gutter and would've taken forever to recover - management had to greenlight an absolutely massive advertising campaign to let people know about the new improved product, which is the only reason you know about it. They spent a ton of money and there's a chance it might not have worked. The prevailing theory at the time was that people don't give a shit about fast food quality, they just want food that's fast and affordable to shut the kids up for a bit. Cost cutting and squeezing every last penny out of the margins is the logical call in that environment, but management was competent enough to recognize there might be an untapped market for better tasting corporate chain pizza, and they were right.
The article is overvaluing fluff like drones and self driving, but you're undervaluing their investments in streamlining the ordering process online and via the app. Arguably, they were the first major pizza company to really nail it, and it's paid off in spades. It used to be universally horrible everywhere, so everyone would still call in all their orders, and young people loathe picking up the phone.
But no one could possibly have believed this was true, right? Other "corporate pizza chains" it competed with were fine... Domino's pizza wasn't. As a college student, I heard--and participated in--people calling for "anything but Domino's" many many times. There is 100% a market for "food in the shape of Pizza that is as cheap as possible", but Domino's pushes that boundary really hard and for anyone to have believed that that market was anywhere near the size of the addressable corporate pizza market size ignored both common sense and the reality that their competitors seemed to exist and sell pizza (despite it being slightly more expensive).
NOTE: I don’t work at Domino’s, and I haven’t used their services in over a year.
Understand that quick-serve restaurants are typically as conservative as retail when it comes to anything not core product because of their low margins.
I do agree that Domino’s has done quite a lot to cost-optimize their product, including significant investments in line automation and process improvements.
If you need proof, tell me another pizza quick-serve that has a Terraform provider for ordering pizza: https://github.com/ndmckinley/terraform-provider-dominos
And they’re running AWS: https://aws.amazon.com/solutions/case-studies/dominos/case-s...
And from what I can tell Kubernetes based off of some headers from their store locator service.
Now, other, not-Dominos, companies are making some/all of these moves. Using the tech is easy. It’s Domino’s commitment to reduce delivery times to 10 minutes from first order that makes them different. Management realized that they would need a massive investment in tech to make this happen. So they microserviced their API and worked on the delivery process. That is worth giving them some credit.
> Domino's aren't currently delivering pizzas by drone or self-driving cars
But it gets them a ton of free publicity -- even better than paid advertising. And it gets into your subconscious -- the idea that Domino's really cares about getting you a hot pizza, and is actively developing technology to make that happen, certainly more than any of the competition. "Hot" (or lack thereof) is likely the attribute most-highly correlated with customer satisfaction vs disappointment, so this is huge.
> Domino's pizza tracking and online ordering is cool, but nobody orders Domino's because of it.
Yes, plenty do. It adds accountability and transparency to a rather chaotic process. Would you continue to use Fedex if they got rid of all tracking numbers? When Domino's delivers as promised, and the transaction went smoothly, and all the steps along the way were displayed, people remember it -- especially the next time they want a pizza.
> they finally improved their product after years of cost optimization. Better pizza = more sales
So if they stopped optimizing costs, how do their prices stay super-competitive? Better pizza doesn't translate to more sales if it also means higher prices
No coupons, just "I hand you $5 and you hand me a pizza."
For comparison, by me the equivalent dominoes pizza is $14.
Everyone else seems to be constantly trying to go upmarket. Not Little Caesars. They just make it as easy as possible to get the best pizza one can buy for $5, and that is amazing in its own way.
They also have the fastest drive thru I've ever done.
They've joined a lot of other fast food joints in terminating their desserts though. My GF has seen four desserts at four different chains disappear in the last few months.
I thought dessert was always the second highest margin item besides fountain drinks.
A lot of dominos early success was because they thought of their core product as convenience and speed, and not pizza.
When people complain about your product (pizza) make it better. (This article talks about this was a brilliant and brave maneuver but I'm not convinced)
They seem to have a pretty good strategy and team to execute on it.
Deliveroo, Uber Eats etc can not provide competing guarantees without vendor cooperation; for which they have no availablity.
A good example of not understanding the market while still forging on. In Sweden everyone has their own mostly immigrant ran local pizza place which is "the best", with pizzas ready for pickup within 10 minutes after a call or delivery through some Delivery Hero subsidiary [1], or on their own. Couple this with razor thin margins and all take home essentially being paid below table.
Domino's tried to take on this market through upscale restaurants in premium locations with lower quality pizzas, really mindboggling. Here they are on the Delviry Hero app/page, though using their own people, probably because otherwise no one would even consider them as an alternative.
[0]: https://www.theguardian.com/business/2019/oct/17/dominos-to-...
On the other, this is the 'industrialization of food and culture' - and not remotely a 'leap forward'.
Technology is supposed to support our lives, not replace them. I don't want all the local pizzerias, with all their bits of diversity steam-rolled by an algorithm.
Instead of 'Ribs' we have 'McRibs' once every few years when McD's product managers decide to roll them out.
Yes for chipsets, no for food and culture.
Having worked at a Domino's location in the past, I wouldn't trust any Domino's worker to make my food unless I made it personally.
Are you in a market that rewards quality and premium pricing that can support investment, or are your customers just so many that you can get by, booking revenue from people who will tolerate the minimum viable product until something clearly better comes along?
I think for Domino's, pizza was the 2nd situation, until they found it wasn't any more...
Too hard for general experience (high attrition) part time workers to manage?
Would a proper crisp crust just fail to survive the delivery ride anyway?