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With some reported sales figures as flat as its famous pizzas, Domino’s announced this month that its U.K orders have fallen (for the first quarter of this year like-for-like sales grew by 3.1%, but order volumes fell by 2.7%) and that for another year its international operations will remain loss-making.
This might be surprising news to many. Here in the U.K, the takeaway pizza market has been dominated by only 3 or 4 main players for more than a decade now, with Domino’s being one of the most well known and with branches on most suburban shopping streets across the U.K.
The first U.K Domino’s franchise branch opened in Luton in 1985 and the franchise network has seen a steady pattern of growth over the years, with just under 1,200 units now operating across the U.K
These recent figures will be another headache for Domino’s bosses, who are already facing a backlash from their U.K franchisees. Franchisees have become disgruntled at the franchisor’s decision to split geographical territories, resulting in new stores being less profitable. They are also face rising costs generally and as a result, franchisees have joined forces to demand an increased profit share. The Domino’s Franchise Association U.K and Ireland which represents around 90% of the UK franchisees, has stated that its members will not open any more U.K stores until the issues are resolved. And in a hugely public and embarrassing comedown, the pizza chain franchisor was forced to cancel its annual UK franchisee awards event last month when nearly all of the Domino’s UK franchise network said that they would boycott the event.
Chief executive David Wild said that the group is continuing an “open and ongoing dialogue” with its unhappy franchisees to look at ways in which to resolve the dispute without simply cutting the cost of the food supplied to stores, which of course would significantly affect overall group profits. He said: ‘We’re working with our franchisees to try and resolve their concerns, but we want to resolve their concerns by finding a win-win solution. We don’t want to resolve them by finding lose-win solutions.’
With all of this in-house turmoil to deal with, its not surprising that the pizza chain may be struggling to improve its numbers.
Dominos isn’t the only Italian casual dining chain here in the U.K to be feeling the heat. Whilst not a franchise, the Jamie Oliver Italian restaurant chain last week fell into administration with a loss of around 1000 jobs. Pizza chain Prezzo also announced last year a plan to close 100 restaurants U.K wide.
These financial troubles must in part be due to the widely reported change in casual dining habits – British consumers who are feeling the financial pinch or are Brexit-nervous either choosing not to dine out or order in but to cook at home, or using their treat night outs to sample more diverse cuisine experiences now on offer on the High Street. Pizza is also now no longer the most popular takeaway cuisine in the U.K, in third place behind Chinese and Indian food. Domino’s also faces considerable competition from independent takeaway businesses with the introduction of meal delivery services such as Deliveroo and Just Eat.
In light of all of the above, will Domino’s be able to weather the storm and remain at the top of the pizza game? It is trying to respond to customer demands, having recently introduced a new low calorie “Delight” range of pizzas, and rumor has it that a vegan pizza is in the offing. Whilst the dispute with U.K franchisees remains ongoing, Domino’s is focusing on perhaps happier overseas territories, installing a new management structure in Norway, Sweden and Switzerland where its operations have remained loss-making, and focusing on store level performance. Clearly lessons have been learned from experiences over here.
What the Domino’s business journey to date shows us is that as a brand it is very self-aware. When customers criticized the very core of its business – its pizza recipe – it took the criticism on the chin and took the brave decision to completely scrap its existing offering and start from scratch again. They understand that their customers love them because of the convenience factor and have continued to use all technology available to improve convenience, speed and delivery for their loyal fans. So having demonstrated in the past that they are agile, customer focused and forward-thinking, there’s every reason to think that Dominos will be able to successfully navigate this particularly tricky chapter in its franchise story and continue to deliver pizza success right to our front doors.
May 28, 2019 at 07:11AM
Forbes – Entrepreneurs