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Domino’s pizza delivery fees don’t “resonate” with customers

Domino’s pizza delivery fees don’t “resonate” with customers
Domino’s pizza delivery fees don’t “resonate” with customers

Many things pair well with a big slice of greasy pizza. But one thing that didn’t go off that well, was the delivery fee added to Australian customers’ bill. 

“In some cases, the pricing increases we passed to our customers, or how we did so (such as a delivery service fee in Australia/New Zealand), did not resonate with more price-conscious customers who typically ordered delivery,” admitted group CEO & MD, Don Meij during an investors briefing.

Meij started as a delivery driver in 1987 and knows how important it is to price items and delivery fees correctly. “These customers reduced their frequency over multiple purchase cycles, a delayed effect that we subsequently identified and have been addressing over the second half of the financial year,” said Meij. 

ALSO READ: Study reveals how free delivery is used strategically

At least the company has now changed their delivery fee system, to attract more customers again. “This period showed the resilience of our carry-out customers. We offered incredible value and choice compared to other meal choices, even after offsetting inflation,” Meij said. 

Financial performance sliced

In the 2023 financial year which ended on 2 July, Domino’s Pizza delivered network sales of $4.0 billion. That is a growth of 2.2% compared to the previous year. The company delivered an underlying EBIT of -23.3% lower than the prior year, at $201.7m, on revenue of $2,366.8m (+3.4% vs. FY22). 

“This reflected the volume decline in stores flowing through to our warehouse margins. Domino’s margins were also affected by our inability to pass through ingredient cost changes as we ordinarily do. [This followed] some suppliers declaring force majeure on supply contracts at short notice, largely due to regional impacts of conflict in Europe, such as spiking energy prices,” said Meij.

The impact of a tight economy and high inflation

Two months ago Domino’s announced plans to strictly focus on operations, while it also closed some underperforming stores. It closed up to 70 underperforming stores and franchised more than 70 others. It made good of its plans to close its Southeast Asia stores and streamline core operations. But this alone was not about to help steer this ship to safety. 

Domino’s leadership had to adjust their prices to match the enormous pressure consumers were faced with. “Domino’s leadership needed to adjust our pricing and cost base faster than in our history. Without decisive action, we faced the prospect of inflation eroding the entire profit pool. For both Domino’s and our Franchisee Partners (FP),” said Meij. 

Domino’s relies on FP having a profitable, sustainable business. It employs more than 100,000 team members who serve local communities worldwide. 

One door closes and another one opens

Opening more stores closer to customers is Domino’s Pizza’s number one strategy. Despite just closing nearly 70 underperforming stores elsewhere, it’s not wasting time on trying again. Over the next decade, the company “intends to almost double” its store footprint to 7,100 pizza outlets. 

“By being closer to our customers, we deliver a hotter, fresher pizza by reaching our customers faster. Not only does this delivery higher customer satisfaction and sales, but also it reduces the cost of delivery,” said Meij. 

In Australia, Domino’s opened 23 stores in FY23 and wants to grow and upscale its network further.

About the author

Mia is a multi-award-winning journalist. She has more than 14 years of experience in mainstream media. She's covered many historic moments that happened in Africa and internationally. She has a strong focus on human interest stories, to bring her readers and viewers closer to the topics at hand.

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