Domino’s ‘fortressing’ strategy to deliver monster growth

By Nick Hall | 14 Oct 2019 View comments

Franchised pizza giant Domino’s has unveiled a controversial new strategy that is set to see the chain’s Australian stores jump by nearly 400 by 2025-2028. The new Domino’s ‘fortressing’ plan will see more stores open in existing catchments, in an effort to reduce delivery times and boost sales.

The Domino’s ‘fortressing’ strategy was laid out to investors by CEO Don Meij, alongside country heads on Thursday.

The company reportedly aims on continuing its expansion throughout Australia and New Zealand, opening the opportunity for further franchise growth. Domino’s expects store numbers across the region to jump from today’s figure of 820 to 1200 by 2025-28.

Underlying the strategy is Domino’s need for speed. A focus on fast and fresh is seeing the chain prioritise delivery times, providing a much-needed differentiator in the competitive and evolving fast-food landscape.

Domino’s ‘fortressing’ plan

It’s interesting timing for the Australian-based pizza operation. Just last week, Domino’s US franchise partner Domino’s Pizza Inc revealed a decidedly different approach, announcing it would cut costs and investments following a difficult year marred with increasing third-party aggregator pressure.

However, the Domino’s ‘fortressing’ plan does address a number of key components, both in Australia and abroad.

The chain suggested that having more stores within a closer distance to one another would drive additional sales, providing incremental sales from carry-out customers. Further, Domino’s also expects the reduction in wait time for delivery to increase delivery orders.

Where there is merit to the Domino’s ‘fortressing’ strategy is in the reduction of costs. According to the pizza giant, the reduced delivery times will cut labour costs, resulting in a wage per delivery drop and mileage cost reduction.

Additionally, shorter delivery distances open the opportunity for alternative vehicle use. In recent years, Domino’s has become a leader in the alternative delivery space, introducing digital and technological initiatives such as the DOM Pizza Checker and the autonomous delivery robot, DOM.

Franchisee impact

While the announcement of Domino’s ‘fortressing’ strategy has been met with contention from industry columnists, the company suggested that opening the additional stores will not affect pick-up sales, a strong portion of franchisee-operated outlets.

According to data Domino’s collected on previously fortressed stores, the new stores generated new pickup sales and continued growth.

For the new Domino’s ‘fortressing’ plan to work, the fast-food giant acknowledged that high-quality franchisees are the key. Over the last 12 months, the chain has made efforts to improve the franchisee network, even going so far as to cut 22 underperforming franchisees.

The move came as the pizza franchisor reported a fall in profits, thanks to loans referred to as ‘short-term franchisee support’.

“We have identified some of those franchisees who have demonstrated they no longer had the passion or capability to execute successfully as we grow,” Domino’s Australia and NZ chief executive Nick Knight said at the time.

It followed reports that the chain was facing a class-action lawsuit, alleging systematic underpayment of delivery drivers and in-store workers.

Irrespective of the outcome, the new Domino’s ‘fortressing’ strategy is already underway, and with the chain expecting massive growth over the next decade, there may well be a Domino’s on every corner before too long.