Strategic Analysis of Domino’s Pizza

Cara Kovall and Nicole Herrick

Grand Valley State University

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Executive Summary

Domino’s Pizza is an international chain with over 11,000 stores worldwide. Once known

for their speedy delivery, Domino’s has grown into one of the most successful pizza companies

in the world with over $3 billion in annual revenues. The company has experienced bad times

and good times, most notably the Pizza Turnaround campaign, in which executives publicly

admitted their failures and made a significant effort to improve the recipe and their products.

Domino’s Pizza competes most directly with Pizza Hut, Papa Johns and Little Caesars, as

well as smaller, independent pizza brands (depending on the store location). Through this

analysis, the competitive position of Domino’s Pizza can be determined as well as what the

company can do to maintain and increase their standing within the industry. The environment

plays a large role in the success of the company, which is also outlined in this report, as well as

the capabilities Domino’s has as a company. It was discovered that Domino’s, who once was

trailing behind with their “cardboard pizza” now has some of the best technology and company

culture in the industry.

This report also outlines the various options that Domino’s has in response to these

market trends and analyses, ranging from menu expansion to adding on a dining feature to the

restaurant. It is recommended that Domino’s continue expanding and focus on an increased

number of locations to tap into new markets.

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Organizational Mission and Values

Domino’s Pizza is a restaurant chain in the United States that was founded on June 10,

1960 in Ypsilanti, Michigan. Tom and James Monaghan, the founders, borrowed $500 to buy the

first store and named it “DomiNick’s”, which, five years later, was renamed “Domino’s Pizza”.

James then sold his half of the business and with the money, Tom bought two additional stores in

the Ypsilanti area. The three dots on the company’s first logo, in fact, represent the first three

Domino’s locations (Sloane & Monaghan, 2003).

The company had great success and by 1983, in only twenty-three years, its 1,000th store

was opened. Throughout the 1980’s Domino’s Pizza started opening stores in different countries

across the world, including Australia, the United Kingdom, Japan and Canada. By 1990, the

company had opened 5,000 stores with 1,000 franchises. Record sales of $2.8 billion dollars

were reached for the company in 1996 when they first launched their website, dominos.com, and

by 2003 Domino’s Pizza was named “Chain of the Year” by Pizza Today magazine. In the

2000’s, Domino’s started trading stock and continued opening stores around the world with its

franchising opportunities. Today, Domino’s Pizza is a top leader in pizza delivery and the brand

is very well-known to many people across the world (Domino’s Pizza, 2012).

Domino’s Pizza, today, is the largest pizza chain in the world with over 11,000 stores and

a yearly revenue of over $3 billion (Hynum, 2014). The mission of Domino’s Pizza is to “sell

more pizza, have more fun!” with a vision in being number one in pizza as well as number one in

people. The company’s values include treating people as you’d like to be treated, producing the

best for less, setting the bar high, training, never stop learning, and promoting from within

(Domino’s Pizza, 2012). Based off of these visions, it is clear that Domino’s has a company

culture not easily found in other organizations.

According to the company website, managers work to create a fun working environment

where employees feel not only motivated and productive, but also important to the organization

as a whole. The company holds competitions between employees region-wide to determine who

can make a pizza the fastest, awarding the winner with cash and other incentives. According to

the website, “It takes leadership, commitment and an ever-evolving team of passionate people

who love what they do” to grow a company so large and successful (Glassdoor, 2015). This

shows that Domino’s Pizza really cares about its products and the satisfaction of its employees.

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This company demonstrates a formal take on social responsibility. Domino’s Pizza

maintains a corporate social responsibility program where the company actively gives back to

the community by engaging in projects, charity events and education assistance. According to

the company website, employees at Domino’s are given one day each year to donate to a charity

of their choice. Domino’s also has programs in place that include giving back to the environment

such as reducing emissions, a staff engagement day, charity champions and helping out with the

Department of Health’s Responsibility Deal (Domino’s Pizza, 2015). Domino’s efforts to give

back to the people who helped them grow and succeed are admirable. Their high social

responsibility standards help not only the community, but also the reputation of the company,

which in turn increases sales.

According to many customer reviews, the company pays its employees well and gives

them a competitive environment to work in, as well as the experience of handling a large variety

of different situations. Management thrives on positive reinforcement and the environment is

friendly, fun and social. However, Domino’s also becomes very busy during the day and

employees will work long hours, making it a tough entry-level job. (Glassdoor, 2012).

Analysis of the External Environment

Industry Assessment

Domino’s is an American restaurant chain with an emphasis on delivering quality service

and quality pizza. This places them within a particular market of pizza delivery companies, with

major competitors including Pizza Hut, Papa John’s, and Little Caesar’s. The target market

focuses on people who enjoy pizza as well as working and lower-middle class families (The

Marketing Guy, 2013). The pizza industry is very attractive because it is very easy for new

companies to enter (Barrett, 2012). Pizza also appeals a large variety of people, making it easy to

sell. While pizza is a very popular food in the United States, it can be challenging to compete

with the top leaders in the industry and advance to the top.

Domino’s, unlike many other pizza companies, is 96% franchise-owned (Domino’s

Pizza, 2014). According to PMQ Pizza Magazine, independent chains make up for over half of

the pizza stores in the US (see Appendix A). Pizza Hut, Domino’s, Little Caesars and Papa

John’s alone account for most of the remaining market share, demonstrating that although

independent restaurants as a whole seem to dominate the industry, one particular brand does not

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stand out against these industry leaders. Even though it seems that these more popular chains

own only a small percent of the market share, these numbers are huge compared to the smaller

chains and individual independent brands (Hynum, 2014). This makes it difficult to compete

with these larger chains, even though entry into the industry may not be as challenging.

The industry structure has definitely changed over time in regards to the huge increase in

use of new technology and customers wanting different types of foods offered to them, rather

than just the normal pizza and breadsticks. Today, pizza companies are doing everything they

can to make their products different and better than those of the competition. Different types of

foods, such as sandwiches, pastas, and desserts, are now being added to menus. People are

becoming more interested in healthier and gluten-free options, which is another thing these top

industry leaders are working to accommodate. Domino’s and Pizza Hut are already featuring

gluten-free products in light of the trends taking place within their target market.

Domino’s has also made significant strides to go online and mobile to keep up with technology

trends. The company has developed smartphone applications, an online pizza tracker, and Pizza

Profiles (in which customer’s preferences and billing information can be stored) (Touryalai,

2013). These have seen tremendous success, with 45% of their sales coming from online

ordering (Halzack, 2014). Domino’s also reinvented itself in the beginning of the decade,

surprisingly going back on its once “30-minute or less” delivery guarantee to take more time on

cooking a better pizza. The company’s revenues increased 10% that year and its stock tripled

(Brownell, 2013). Even though Domino’s may not deliver pizzas the fastest anymore, the new

strategy of improving the product quality is increasing the bottom line better than the quick-

delivery promise did in the past.

Competitive Analysis

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Tool 1: Competitor Analysis Chart

As aforementioned, Domino’s top major competitors are Pizza Hut, Papa John’s, and

Little Caesar’s. The following section will discuss a brief history of each company, as well as

competitive advantages within the market.

Pizza Hut was founded in 1958, also by two brothers with a dream of opening a pizzeria.

They borrowed $600 and opened the first Pizza Hut store on a busy intersection in Wichita,

Kansas (Entrepreneur 2014). Now a subsidiary of Yum! Brands, Inc., Pizza Hut has over 6,000

restaurants in the US alone, making close to $6 billion in annual sales (Hynum, 2014). As

illustrated in Tool 1, Pizza Hut has always had a higher number of stores compared to Domino’s,

but in recent years they have had a slight decline in number of units (Hynum, 2014). However, in

addition to pick-up and delivery, Pizza Hut also offers an in-house dining option (featuring a

lunch buffet), as well as a number of wider menu options including salad, pastas, and wings,

which places them in a slightly higher-end market.

Papa John’s was founded in Jeffersonville, Indiana in 1983 by John Schnatter. He started

the business by selling his car and purchasing used restaurant equipment. He opened his mini

pizza store in the back of his father’s restaurant and sold pizza to the customers who came by.

The pizzas were very successful and after some time, John expanded his business and opened his

first real store a year later. Papa John’s now operates over 3,000 stores across the world (Papa

John’s, 2013). The company is dedicated to delivering a “superior quality” pizza to its

customers, offering delivery and mobile options, and makes $2.5 billion annually (Hynum,

2014). Papa John’s prides itself on delivering fresh, natural ingredients in its pizzas and offers a

variety of options, such as cheese sticks, buffalo wings, chicken poppers, apple pies, cinnapies

and chocolate chip cookie pizzas (Papa John’s, 2015). Papa John’s also has a Papa Rewards

program in place, where customers can order from the company’s website with their own,

personalized account. Each customer earns one point for each $5 they spend; by the time a

customer reaches 25 points he/she is eligible for a free pizza (Papa John’s, 2015).

Little Caesar’s was founded in Garden City, Michigan, in 1959 by Michael and Marian

Ilitch (Little Caesar’s, 2015). In their 60 years in the industry, Little Caesar’s has had a variety of

industry firsts, including a conveyor oven “designed to bake pizza quickly and consistently,”

Crazy Bread breadsticks (which later became a natural pairing with pizza), as well as the famous

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“Hot-N-Ready” offer that has pizzas ready when a customer walks in the door without having to

call ahead of time (Little Caesars, 2015). In 2014, they launched their new soft pretzel crust

pizza, the first in the industry to do so (Blaskovich, 2014). As of 2013, Little Caesar’s had just

under 4,000 stores in the United States with sales exceeding $3 billion (Hynum, 2014).

Environmental Analysis

Focusing on the external environment as it relates to a particular industry is important in

determining what a company needs to do to increase its market share and keep its employees

satisfied with their jobs. Being aware of industry trends can help a company to stay ahead of

their competition and provide better service based on their customers’ changing needs. Tool 2:

environmental analysis, as outlined in Appendix B, illustrates an overall look at the trends in the

market.

Demographic trends in the U.S. are changing. The middle class is shrinking because

people are earning different incomes than before, whether they be higher or lower than those of a

middle-class income. Families are falling into the lower-middle class, which is great for

Domino’s -- their target market is expanding. The increase of immigration to the United States as

of late is also helping grow the population and lower-middle class. These are the type of people

who like to buy pizzas for dinner. With different promotions put on by the company, Domino’s

Pizza can expect an increase in sales in the coming years with this demographic shift and

increase in target market (Carter, Gebeloff & Parlapiano, 2015).

Hyper-efficiency is a very big and important sociocultural trend; society is constantly

“seeking [...] efficient ways to solve age-old issues” (Barkworth, 2014). It is because of trends

like this that the popularity of smartphone applications and online ordering is so successful in the

pizza industry; it is easier than spending several minutes on the phone and all of the options are

just a click away. Additionally, people are wanting things to be much more personalized and

catered to their needs, which is also where online ordering and Domino’s Pizza Profiles come in

handy. No longer do customers have to re-enter their information; they can click one button and

their regular order is sent.

Technological trends, such as the above-mentioned smartphone applications and online

ordering, are becoming increasingly popular these days. The American culture prefers things to

be done quickly and efficiently, which relates to the hyper-efficiency trend (Barkworth, 2014).

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As technology advances in the coming years, these pizzerias are going to have to keep up with

the trends and cater to the fast-paced lifestyles their customers maintain, such as easy-to-use

applications and pizza profiles for customers. This increase in technology use is a global trend as

well, providing the need for companies to be “socially smart” (Global Trends, 2013). For

Domino’s, this means ensuring that they have a technological presence in the social world;

creating mobile applications, as well as being active on social media sites will help them to keep

up with this trend. Online ordering is also vital in today’s culture. Research shows, “Every

minute of the day, $272,000 is spent by consumers online, a figure that is growing daily as more

and more consumers make purchases and purchase decisions, not in a physical stores, but online”

(Global Trends, 2013). Pizzerias need to have an easily-accessible online site for customers to

navigate in today’s fast-paced way of living to stay on top of the competition.

Since the U.S. population is growing and more people are available to work, the economy

is growing as well (Conerly, 2014). For businesses, this is a great thing. Many companies these

days are expanding and hiring more people, which, in turn, is increasing the job market. These

people are then spending the money they are earning, rendering the economy healthier than it has

been in recent years. For Domino’s, this means the opportunity to expand is even larger and

easier to go about than before. Companies are making more money, which is eliminating the

need to take out loans. Ultimately, hiring more people and selling more pizzas will increase

profits, which is the goal of the company.

The latest increase of minimum wage will, without a doubt, have a big impact on the

pizza industry; this means more money coming out of the bottom line in order to support

employees. Additionally, advocates are expected to “wage [a campaign] in Michigan,” which

affects Domino’s National Headquarters in Ann Arbor (Farmer, Kardish, Wogan, Maciag &

Holeywell, 2014).

Five Forces Analysis

As previously mentioned, and as illustrated in Tool 3: Five Forces Analysis (see

Appendix C) entrance into the pizza industry is relatively low. It is easy to enter into the

industry, however, with three or four top chains, it is difficult to compete and rise to the top

despite the large number of independent restaurants (Barrett, 2012). Because of this, there is a

large number of substitutes and other options for pizza consumers should they decide to change

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brand loyalties or preferences. This also creates high rivalry due to the previously mentioned

high number of competitors and not much differentiation between all of the pizza chains and

restaurants (see Appendix C). For Domino’s, this means staying on top of competition in order to

continue holding their current market share, which will be further discussed in the next section.

Domino’s Pizza has a good relationship with its many suppliers, which is great for the

company. On the corporation’s Form 10-K, the supplier section reads, “We are one of the largest

domestic volume purchasers of pizza-related products such as flour, cheese, sauce and pizza

boxes, which allows us to maximize leverage with our suppliers…[they also] use a combination

of single-source and multi-source procurement strategies” (Domino’s Pizza, Inc., 2014). This

shows that the company does not heavily rely on a few single suppliers, and since they purchase

so much product, supplier dependency is not likely going to be a problem for them.

Additionally, the industry's target market, which focuses on middle-class families, is very

broad. Because of this, there are a wide range of customer markets available for the company.

Markets change rapidly at times, meaning buyer loyalty can fluctuate as companies continue to

implement changes. However, due to the size of the market, there is room for this fluctuation

without affecting the company’s bottom line. This shows that Domino’s buyer power is also low,

another asset the company maintains.

Analysis of Competitive Position

The Pizza Turnaround

While Domino’s Pizza has always been very successful, they reached an ethical dilemma

not very long ago and decided to change how the company was doing things for the better. For

years, they had prided themselves on being the fastest in delivery, but unfortunately while being

speedy, the company sacrificed the quality of pizza it was producing.

In 2009, Domino’s realized they needed a change after bouts of negative reviews,

including a repeated “the crust tastes like cardboard” complaint. Soon after, they took a risk and

launched their “brutally honest” advertising campaign, which highlighted just how bad their

pizza was - and all of the methods they took to correct and improve it. A new website was

created to illustrate their efforts of the “Pizza Turnaround,” the name of the campaign and their

documentary is posted right at the top for viewers to watch. In the documentary, Domino’s

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employees are featured hard at work re-creating and “starting fresh” with their recipes to make

them better (Domino’s Pizza, 2009). “The honesty of the commercials captured not only

customers’ curiosity, but their sympathy as well,” because there is something “appealing about a

[...] company willing to admit its mistakes and put in the effort to correct them” (Herold, 2010).

Not only did this campaign illustrate Domino’s’ dedication to making the best quality pizza, but

it also marketed the fact that their pizza was better, as they also loaded a video in which they

delivered pizza to their harshest critics.

Soon after the campaign was launched, results illustrated that this change in recipes was

for the better when Domino’s outscored Papa John’s and Pizza Hut in a national independent

taste test (Domino’s Pizza, 2010). Additionally, profits reported that the company more than

doubled their figures from the previous year, and store sales increased 1.4% (Herold, 2010).

The Pizza Turnaround experiment was a tremendous improvement for not only the pizza

and the customers, but for the company as a whole. As mentioned previously, annual revenues

increased, the company's stock value tripled, and it seems as though Domino’s Pizza is more

reputable since they publicly admitted their mistakes. Domino’s values itself on creating the

“best for less”, as mentioned in the beginning of the present report, and the Pizza Turnaround

definitely coincides with this company value. This decision is consistent with the organization’s

culture in such that it truly takes its “mistake” to heart and management took a risk in openly

criticizing themselves. It is clear that employees and managers are proud of the company and the

product they are selling, and they took these significant steps in order to improve that. Although

it is possible for every other competitor to change their recipe, this public campaign really helped

to put Domino’s ahead by illustrating how much they care about their customers’ preferences

and providing a quality product for them.

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Stakeholder Analysis

Tool 4: Stakeholder Map

According to Webster, a stakeholder is, “a person or business that has invested money in

a company,” (Webster, 2015). It is vital that a company understand who its primary and

secondary stakeholders are in order for them to prosper and grow. A primary stakeholder is a

business/person who is directly involved in the success of the company. Tool 4, the stakeholder

map, helps us visualize who these stakeholders are and how closely they are related to the

company. For Domino’s, primary stakeholders include its employees, customers, shareholders,

suppliers, competitors, and franchisers. Without all this support, Domino’s would not be a

successful company. Secondary stakeholders, on the other hand, are those people/businesses who

do not necessarily involve themselves directly with the company, but who can affect the

relationships between the company and its primary stakeholders. For Domino’s, secondary

stakeholders include its competitors, the community, the government and the media. Competitors

are included in both categories because although they are external influences (reflecting that of a

secondary stakeholder), it is crucial that the company pay attention to what they are doing in

order to stay competitive and improve itself; this puts them within a primary role as well.

It is important that a company understands its primary stakeholder’s interests in order to

keep them happy, which in turn keeps the company growing. Customers, for example, are huge

primary stakeholders. If customers are not happy, they will not go to Domino’s, eventually

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putting the company out of business. Employees are also large primary stakeholders – without

them, the company would not be able to prepare menu items, deliver pizzas or serve customers,

among many other things. Lack of employee satisfaction can also put a firm out of business;

unhappy or unsatisfied employees lead to higher turnover rates and a higher training cost.

Without suppliers, Domino’s would not be a successful company either, since the firm needs raw

materials and food items to make their products. Franchisees, the owners of Domino’s franchised

stores, are vital in growing the business and opening stores in new locations. Without

franchisees, the company would not have as many stores in as many locations as it does and

likely, not as much annual revenue. Lastly, shareholders are important because they have

invested money into the corporation to help it grow. While shareholders are not as important as

customers or employees, they still directly help Domino’s prosper within the pizza industry.

Secondary stakeholders do not have as much of an interest in the company as primary

stakeholders do, but their interests still matter. The government, for example, has an interest in

food safety and how restaurants are regulated. If the company does not abide by food laws, it

will not be successful -- no matter how many great stores, employees or customers it has. The

media also plays a part in Domino’s Pizza. If the media has any bad coverage on Domino’s

whatsoever, the company will lose profits and customers; in turn, positive publicity will yield for

a better reputation and likely cause an increase in customers. Today, media plays a huge role in

attracting and losing business.

In addition, the competition plays a great deal in the success of a company. If there is a

Domino’s store located on a busy street in a downtown suburb, it is likely the store will make a

lot of money. If Papa John’s moves in across the street, however, that restaurant will drastically

affect the profits of Domino’s and take away some of its market share in that particular area.

Understanding the competition and how it works is incredibly vital to the success of Domino’s

Pizza.

Capabilities Analysis

Domino’s Pizza does many things to remain on top of the competition and please its

customers while keeping a competitive advantage (see Tool 5: Capabilities Analysis, Appendix

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D). This past decade, Domino’s took advantage of new technology and launched a pizza tracker,

a mobile smartphone application, pizza profiles and online ordering.

The pizza tracker was introduced first in 2008, and was the first in the industry to do so.

The tracker allowing customers to watch the progress of their pizza as soon as they submit it

online, being notified when their pizza is being made, when it is placed in the oven, and when it

is on its way (Domino’s Pizza, 2008). This first of its kind creation allowed Domino’s to prove

their commitment to excellent service by allowing customers to see the pizza-making process, as

well as post reviews or feedback about their experience online.

With the increase in popularity and dependence on smartphones, developing a mobile

application was the next logical step for Domino’s; in 2011, they released a smartphone

application that allowed mobile ordering (Domino’s Pizza, 2012). In addition to the mobile

ordering, the application also features a “coupon search, full menu, GPS store locator, and the

ability to follow your order with Domino’s Tracker” (Domino’s Pizza, 2012). In June 2014,

Domino’s added a voice-ordering feature to its smartphone application, allowing customers to

speak their order to their app in order to add items to their cart, much like a phone order, but

without having to dial the number (Domino’s Pizza, 2014).

Finally, in 2013, Domino’s introduced their pizza profiles, allowing customers to save

their favorite order, address and payment information (Domino’s Pizza, 2013). Following their

mantra of excellent service, the goal of the pizza profiles was to “bring together convenience and

value” and make it as easy as possible for customers to make their orders. This feature was added

to the smartphone applications, allowing full integration among all of Domino’s’ technological

advances.

Today, 45% of Domino’s US sales comes from online ordering, which has helped to keep

them ahead of the competition (Halzack, 2014). However, their mobile and online success has

not gone unnoticed, and because it is easy to imitate, their competition is catching up by

implementing the same technology. All the top industry leaders offer online-ordering, and Little

Caesar’s is the only one within the competitive set that does not have a smartphone app

available. Pizza Hut has had great success with its online and mobile presence, setting an all-time

company record in just two weeks “for sales received by a method other than traditional phone

calls” - including mobile, apps, Xbox 360 and their online website (Halzack, 2014).

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Additionally, Domino’s is having great turn-outs with its pizza profile implementation,

but every other company has the ability to do the same thing. However, these features are unique

to Domino’s in that they were the first among their competitors to implement them. These

capabilities, in combination with the “Pizza Turnaround,” illustrate that Domino’s number one

priority is providing for their customers.

Domino’s is very well known for having a positive and fun work environment for all of

its employees, as mentioned in section one of the present report. With the positive employee

reviews, easy-to-use equipment, highly trained staff and long-lasting positivity within the

workplace, it is likely that this capability will thrive for a long time. High-quality pizza, while it

has always been valued as an asset to the company, is more important now than ever before in

regards to the Pizza Turnaround implementation. As illustrated in Tool 5 (see Appendix D),

many different tasks are applied to create a high-quality pizza, be it the training of the staff or the

utilization of Domino’s new recipe. Lastly, customer service is a successful company strength as

well. At Domino’s, new employees need to go through training to learn how to serve the best

slices of pizza they can. Domino’s also offers the opportunity for employees to work towards

Food Safety Certificates (Domino’s Jobs, 2009). When customers have positive interactions, or

“moments of truth” with employees, it gives the company a good reputation. It was decided that

the work environment, use of technology, pizza quality and customer service is all aligned well

with the company, both internally with its values and employees as well as externally by

providing the customer with the quality of service he expects.

Strategy Maps & Analysis

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Tool 6: Strategy Map

Tool 6 illustrates Domino’s competitive position in relation to their yearly revenue,

average price, and total number of stores in the US. These were the three factors that we felt

were most important in determining where Domino’s is at in comparison to the rest of the

industry’s leaders. Pizza prices (based off a large, one-topping pizza) and store locations are very

large factors that a customer takes into consideration when purchasing a pizza. For example, if

one chain is not present in the customer’s area, that brand will obviously not be taken into

consideration for ordering pizza. On the other hand, a few extra miles of driving may not change

a customer’s dinner preference if they are receiving a lower price for their pizza at a different

chain. This shows that number of stores, and their subsequent locations, are highly important in

regards to customer purchasing decisions.

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Each competitor is placed on the map, and the number of stores dictates the size of their

circle on the chart. Their place is based on the company’s revenues and prices. We placed

revenue on the chart because it is important for a company to know where their profits stand in

regards to the rest of the industry. This knowledge, in combination with the total number of

stores, will help them determine their success relative to their company size. For example, Pizza

Hut has the highest yearly revenue, but this is very likely influenced by the fact that they have

the highest number of stores. It is probable that the more stores there are in an area, the better the

opportunity for profit.

Recommendations for Strategic Action

Scenario Planning

Looking forward, Domino’s has multiple options in the planning for their future. Before

making a recommendation, all of these alternatives must be carefully considered in order to

choose the best option that fits most coherently with the company’s values. In the next section,

Tool 7, these scenarios will be laid out and discussed in further detail.

The first option that Domino’s has is to continue expanding their reach. This can be done

by opening more stores in order to reach a larger number of consumers. Domino’s has options all

over the world, including countries they do not yet have a presence in, as well as locations in the

U.S. This scenario will cost the company money to open a brand new store, taking into

consideration building fees, training costs, and branding efforts, but the investment will pay itself

off and increase company profits should the proper marketing research be done in said location.

However, if this scenario is chosen, Domino’s should be wary of the risk of oversaturating the

market and ensure that they are conducting proper area and market research.

The second option that Domino’s has is to add a dine-in feature. Even though this is very

similar to Pizza Hut’s ways of doing business, a dine-in restaurant may help Domino’s to

increase store sales and create a more family-friendly environment to make dining at Domino’s

less of a meal and more of an experience. This aligns well with their values and company culture

of “setting the bar high” that they have worked so hard to uphold (Domino’s Pizza, 2012). If

Domino’s chooses this alternative, many Pizza Hut customers may be tempted to see the spin

Domino’s puts on the formal dining experience. This is one way the company can win some of

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the market from its competition. However, a potential downfall of this alternative is that some

consumers may view Domino’s as “copying” Pizza Hut. Even though this option could cause a

potentially negative view of the company, it is unlikely that they will lose customers due to this

type of add-on.

A third option is to expand the menu. Domino’s has already made significant strides in

offering more than pizza, adding wings, sandwiches, and pasta to their menu, and it has been

largely successful. Some potential menu options could include beer or spirits, ice cream, salad,

more sandwich and pasta options, and soups. Again, this has the potential to be a costly

investment; however, it would likely be beneficial to continue offering more options. Of course,

most of these options go well as sides or appetizers, so as not to distract from the main product of

pizza and complement the main course. These additional menu items also serve well as sides or

other dishes for catering orders, as well as light lunches for consumers who may not want to eat a

large pizza.

The last option executives have is to sell the company. This, of course, is not a viable

option since Domino’s has been doing so well with the Pizza Turnaround and is the number two

leader in the industry. After strategically analyzing the company, we do not recommend selling

the company, but it is likely that the company would earn a lot of money from the sale.

Real Options Analysis

Following the scenario planning, it is important to look at the more realistic options and

determine the process it will take into making it a reality. Of all of the potential scenarios, the

dine-in option is one that would take Domino’s to the next level, so to speak, by amplifying their

competition and providing a more in-depth dining experience. This scenario would require a

significant change to daily operations within all of the stores, as well as expanding the properties

themselves. Additionally, this would require training of staff to wait tables and attend to

customer needs in a more intricate fashion than the current over-the-counter style. Staff will also

need to be taught to upsell menu items and with a more in-depth level of customer service. This

is not an impossible task, but is one that will take commitment of both the staff and managers at

Domino’s. It is believed that this change within Domino’s stores will increase not only customer

satisfaction, but also sales and store visits.

  18

Tool 8: Real Options Map

As illustrated in Tool 8, the first step in this process would be to develop plans for how

the day-to-day operations of a Domino’s with a dining room will run, as well as determine the

financial necessities for the project. From here, Domino’s can determine if the project is worth

the investment; if it is, they can continue in the planning process. If it is not, however, they can

abandon the plans or keep them for later date in the company’s future.

If the project seems to be worth the company’s time and money, it will then go into a data

collection stage, where executives will gather information about what it will take to put the

operation into action. This includes choosing specific locations to test the dining room out,

researching the area’s market, current sales data of the store and the likelihood of success for

such a feature, as well as potential suppliers for necessary dining items (such as furniture, dining

ware, etc.). From there, the company has yet another chance to determine whether or not the

investment is worth the risk. The project can either go into the construction phase or be

abandoned.

If the project moves into construction, blueprints will be created and labor companies will

be brought in to build the dining room onto a current Domino’s store. Tasks and processes will

be recorded and logged so Domino’s will know how to keep building, should they do so. After

the first wave of dining rooms are installed, the company then has the opportunity to research

and analyze the success of this feature and determine whether or not to continue expanding the

project. Store data to be analyzed will include number of customers eating in the dining room,

times they visit, money they spend, the increase (or decrease) of sales and the amount of traffic

in the first few months of the new operation. Additionally, the customer experience can be

reviewed and analyzed through surveys and observation to determine aspects that should be

altered or improved if the dining room is to be continued.

  19

This is just a sample for the planning and implementation process for any of the scenarios

discussed previously, and these are very broad guidelines that should be followed should

Domino’s decide to take the dine-in route.

Recommendations for Action

To improve the company’s current competitive position, Domino’s has a variety of

options. As previously illustrated in the present report, although the company has improved its

figures since the “Pizza Turnaround,” the company is still beat by one major competitor: Pizza

Hut. This competitor not only earns a higher yearly revenue, but also has more stores and has a

larger global presence (Domino’s, 2014). Pizza Hut also offers a dining room for customers to

“go out to dinner” and have a more formal experience as well as get their pizza delivered, unlike

Domino’s, who only offers the latter.

Pizza Hut has many things to offer: the in-store dining room, a buffet, pasta dishes, many

desserts and a cheese stuffed crust pizza. Domino’s, however, is running behind, but not too far

behind. As illustrated in Tool 6: Strategy Map, this is apparent. Domino’s has expanded their

menu to include wings, sandwiches and pastas, mimicking the larger menu of Pizza Hut

(Domino’s, 2014).

In order to have a larger presence, the company needs to expand. Customers already love

the “Pizza Turnaround” project and enjoy watching their pizzas being made with the Pizza

Tracker, something Pizza Hut has not caught up on (Fleming, 2012). The organization is clearly

competing very well and, with an expansion, has a great chance at being number one in the

market. As previously mentioned, the number of stores a chain has impacts the reach they have

to current and potential markets. Expanding and creating new locations will allow the brand to

grow and prosper.

  20

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  27

Appendix A

U.S. Pizza Stores in 2014

  28

Appendix B

Tool 2: Environmental Analysis Chart

  29

Appendix C

Tool 3: Five Forces Analysis Chart

  30

Appendix D

Tool 5: Capabilities Analysis Chart