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Domino’s Pizza: A Case Study in Organizational Evolution
Transcript of Domino’s Pizza: A Case Study in Organizational Evolution
Dominos began in December of 1960
Two brothers Tom and James Monaghan borrowed $900 and bought DomiNick’s, a small pizzeria in Michigan
Soon after acquiring the pizzeria, James Monaghan traded his share of the pizzeria to Tom for a Volkswagen Beetle.
How it all began…
In 1965, sole proprietor Tom Monaghan changed the name of the Michigan pizzeria
DomiNick’s --> Domino’s
Founded as a result of cutting their menu options to reduce their workload on two busy short staffed days
profits and sales rose these two days
Offering a limited menu with quality pizza and great customer service served as their philosophy for the next 30 years
DOMINO’S PIZZA INC
“Provide quality pizza and great customer service.”
Limited menu items
Franchised locations, focused on carry out and delivery
30 minute delivery guarantee
Focused cost leadership strategy
What should they aim at next?
Brand Positioning Analysis
Domino's ranks 2nd to Pizza Hut in the fast food industry. Consumers have become loyal to the Domino's brand for its commitment to their dedication for consumer satisfaction.
Continue to utilize Social Media for consumer interaction
Integrate new products; improve existing ones
leverage supply chain and distribution system to introduce new products
Through the years...
New concept of franchising encouraged the strategic expansion of Domino’s
Recognizing a captive and hungry audience Monaghan decided to target college campuses across the Midwest
Monaghan spent much of his time on the road and invested in learning about his competition
1973: First delivery guarantee: “Deliver within a half hour or a half dollar off.”
Introduction of The College of Pizzaology (a training program for future franchisees), the belt oven, decentralization of operations, a new logo and several acquisitions.
A Look into the Future
--international presence markets, especially in India, China.
--leverage supply chain and distribution system to introduce new products
--growth of the internet, more online purchases.
--changing customer habits
-- awareness the harmful health implications
--delivery pizza substitutes
--franchise operations affected by currency exchange fluctuation
--intensive competition from a fragmented number of small competitors
Through the years...
In 1983 Dominos opened its first international location in Winnipeg, Canada.
Expanded into Austalia, Europe, Asia, and South America
Averaged 500 new stores each year
Opened its 5000th store in January '89
Dominos first new product, the deep pan pizza, was introduced in the late 80’s
Don Vleck joined Domino’s to take over the commissary
In one eight month period, he opened one new commissary a month all with state of the art equipment
Breadsticks became Dominos first national non pizza items
Buffalo wings were also introduced
30 minute delivery guarantee eliminated
Heat Wave bag introduced
a hot bag using patented technology that keeps pizza oven-hot to the customer's door.
Change of Leadership
Threat- customer may change preference to healthier option
Threat of substitute (Competitor)
Direct competitor: Pizza Hut
Indirect competitor: Mcdonalds
The entrance of substitute had a significant impact on Domino’s Pizza working to shrink the market and drive down prices.
Firms in the pizza delivery industry, low switching costs, similar products, and maybe healthier options, the threat of substitutes is very high.
Sales Distribution in 2010 was 53% Domestic and 47% International.
Retail Sales of $3.3 billion in Domestically and $2.9 billion internationally.
2010 Revenues showed a healthy return, cost of sales decrease by 3.5% between 2008 and 2010
Annual 2010 income was $87.9 million an increase of 10.25% over the following year.
Decreased debt to 1.45 Billion for 1.72 Billion in 2007
Dominos driven by 3 business segments:
domestic supply chain services
At the time of the case, there were 455 company owned stores, 4475 franchise stores in the US and 4422 international franchise stores.
Of publically traded restaurants, Dominos is the 4th largest international business.
Supply chain management system
In 1998, Tom Monaghan gives up his ownership of the company to Bain Capital for $1 billion
David Brandon assumed the Chairman and CEO position
A Case Study in Organizational Evolution
Name this character
Dominoes competes in a very competitive market and pizza continues to remain a popular product that serves a wide demographic of consumers
The pizza segment of the food industry represents 11.7 % of all restaurants
(Dominos most prominent competitor)
Part of the Yum! Brands (who also operates and licenses Taco Bell, Long John Silver, A&W Restaurants and KFC)
While Dominos remains the leader in the US delivery segment, Pizza Hut maintains the top spot in the US pizza segment.
Two years older than Dominos, Pizza Hut has over 13,000 stores in 95 different countries
Focuses on a variety of different ready-to-eat pizza products that customers can customize with an assortment of toppings tailored to local taste and culture.
Pizza Hut is working to make their menu items more competitively priced and to be known as a “pizza pasta and wings” brand.
Have a known interest in expansions into China, one of the fastest growing market places.
Pizza Hut’s financials are consolidated along with the other Yum! Brand holdings
Accounted for 13.78% of the market share as of December 2009
Founded in 1984 by John Schnatter
Ranked third in the world for pizza delivery and carryout behind Pizza Hut and Domino’s
Owns and franchises 3,646 restaurants in all 50 states and 32 countries.
Papa Johns operates through six segments: Domestic Restaurants, Domestic Commissaries, Domestic Franchising, International Operations, variable interest entities and other business units.
Accounted for 5.67% of the market share as of December 2009
Publicly traded company ticker symbol PZZA
Family owned Enterprise
Owns and franchises over 2,600 units in the US and 11 other countries.
In 2009, Little Caesars was the fastest growing pizza restaurant chain in the US.
About 80% of Little Caesars locations are franchises with stores located in strip malls .
Little Caesars is know for its two for one Pizza! Pizza! Marketing campaign that started in 1971 and became a permanent fixture in 1975.
Accounted for 4% of the market share.
Comparison to Papa John’s
Dominos has higher revenues $1.55B compared to $1.14B
Dominos has higher income 87.9 MM compared to 51.6 MM
Dominos has lower Price/Earnings Ratio $10.19 compared to $13.68
Important to consider the Sizes of the Company
Domino store count 9,300
Papa John store count 3,600
Comparison to Papa John’s
A change was needed to improve their situation.