In a bid to boost sales and offset a recent decline in their delivery business, Domino’s Pizza, the world’s largest pizza chain, announced a strategic partnership with Uber on Wednesday. This collaboration will see Domino’s products listed on Uber’s delivery apps, Uber Eats and Postmates, The Wall Street Journal reported. The news spurred a positive response in the market, with Domino’s shares rising 11% in early trading. Although the ordering system will remain the same – with uniformed Domino’s drivers handling delivery – the company anticipates the increased visibility of the apps will draw in more potential customers.
A Significant Shift in Strategy
This move marks a shift in Domino’s stance against third-party delivery companies, an approach that was once seen as a distinct business strategy in the U.S. pizza delivery sector. Domino’s maintained a direct relationship with customers by keeping their orders in-house, something third-party delivery services often disrupt. However, its competitors, including Pizza Hut and Papa John’s, have already been working with third-party delivery apps in the U.S. since 2019.
Implications of the Deal
The partnership is set to kick off in four pilot markets in the U.S. this fall. It is expected to be operational across the country by the end of 2023. Domino’s will extend the service to 27 international markets later this year, including the United Kingdom, Canada, and Australia. Despite the significant strategic shift, Domino’s assures that the customer experience will remain consistent. After placing an order, customers can track their delivery through Domino’s Tracker or the Uber Eats app.
The Potential Upsides
Domino’s aims to create new revenue streams by tapping into Uber’s customer base. The Wall Street Journal reports that Domino’s hopes to generate a billion dollars in new sales through this arrangement, with franchisees expected to profit from these new sales. According to Circana, a market research firm, the popularity of third-party delivery apps soared during the COVID-19 pandemic. While direct orders to restaurants began to plateau, food delivery apps saw their sales rise significantly. The Journal notes that about 14% of pizza sales were made through third-party apps in the year ending May 28th, a substantial increase from 4% before the pandemic.
Messages from the Chief Executives
The CEO of Domino’s, Russell Weiner, expressed optimism about the partnership. He pointed out that using Uber Eats Marketplace for order placements introduces Domino’s and its franchisees to a novel customer segment that is likely to generate significant additional delivery orders as it expands. Uber’s CEO, Dara Khosrowshahi, reiterated Weiner’s positive views. He conveyed his enthusiasm over this special collaboration stating, “The convenience, technology, and experience integral to both our brands can’t wait to be shared with customers.”
Peek into What Lies Ahead
Domino’s has chalked up Uber Eats as its single third-party platform in the U.S., which will stay exclusive until at least 2024. This offers a glimpse into possible future partnerships with other food delivery apps such as DoorDash and Grubhub. It signifies an industry-wide pivot in the fast-food business towards joining hands with third-party delivery apps. This trend is expected to largely influence the industry’s future by moving towards an epoch characterized by increased comfort and wider consumer options.
