Why Dominos and Papa John's sales are up in a food service downturn
Most U.S. restaurant chains are experiencing sluggish growth at best as we begin this new year. And overall uncertainty around minimum wage legislation, the Affordable Care Act and new labor relations standards is likely contributing. While many consumers are becoming more cautious in their spending, as restaurant operational costs continue to grow, even as it becomes increasingly difficult to attract customers to dine out.
But an exception is showing up in some pizza brands' sales, which you may have recently read about in this Bloomberg article that relays information that, despite the overall downturn in the number of people eating out, the number of people ordering pizza in is increasing, as demonstrated by sales increases at delivery-centric brands like Dominos and Papa John’s.
So while the Standard & Poor's 500 Restaurant Index reports a gain of just 3.4 percent for those major brands, 2016 shareholder gains for Dominos and Papa John’s indicate those share prices are up 40 and 60 percent respectively. Pizza chains then, appear to be progressing, while restaurants in other QSR and Fast Casual segments are struggling to some degree.
In some ways, that’s not surprising. If any segment of the restaurant industry can be considered "recession-proof," pizza's overall convenience and value perception has traditionally made this segment a contender. But, there may be more lessons for restaurateurs in all segments to learn from pizza's current Teflon-like resistance to the kinds of pressures that have other restaurant segments scrambling.
Convenience is king
Today, convenient delivery and new options for web and mobile ordering — including technology that lets people order from Facebook or Apple TV — make pizza an increasingly easy choice for consumers. But a deeper dive into recent sales data shows that gains at Dominos and Papa John’s have been driven by sales from digital channels. Both chains are heavily invested in web and mobile ordering solutions, apps and new technology that support ordering via Facebook, Apple TV and Google Home.
For rival pizza brands and others across the limited-service spectrum which possess fewer or sometimes non-existent capabilities in this realm, it is far more difficult to provide the overall level of convenience consumers now demand. The combined impact of starting late with these types of initiatives, as well as an overall lack of necessary investment in these tools leaves many brands racing to catch up in a restaurant environment that increasingly demands fast, easy delivery as a key sales driver.
Simply put, the chains that succeed will ultimately be those that optimize their online delivery capabilities. Today's consumers are increasingly reluctant to order by phone, so the key to victory across limited service will be the quality of a brand's digital ordering experience.
Jennifer Wiebe / Jennifer Wiebe manages marketing for leading pizza and delivery point of sale developer SpeedLine Solutions Inc. She is also editor in chief and a regular contributor to On Point: The Restaurant Technology Blog.