Domino's is still suffering declines in its delivery business. One solution? More cars.
Delivery is a key part of Domino's business, and the chain has tried to stay away from third party aggregators like DoorDash, which give restaurants access to its online platforms and drivers for a fee, in order to maintain control over its operations. But between a shortage of drivers and customers cutting back as prices rise, the chain's delivery business has been flagging for over a year. And so it finally caved, announcing in July that it would partner with Uber Eats and Postmates to help boost sales.
But Domino's still doesn't want to use outside delivery drivers. That means that it is preparing to hire even more drivers to meet an anticipated spike in demand from the new channels -— and it's hoping that expanding its own fleet of delivery vehicles will help woo drivers.
"I very much hope and expect that we do not currently have the number of delivery drivers we will need for this incremental volume," from the third-party delivery services, said Domino's CEO Russell Weiner during a Monday analyst call discussing the company's second-quarter financial results. But, he added, "I expect to be able to get them."
Weiner said that Domino's is getting more applications for delivery drivers now than it did in 2019, an encouraging sign. And unlike Uber, it doesn't necessarily require drivers to have their own car. A Domino's spokesperson did not have a breakdown of how many drivers don't own vehicles, however, citing the franchised nature of the business.
"There are plenty of people with driver's licenses that don't have access to vehicles that want to drive for Domino's Pizza," said Weiner. In June, the company announced that it was growing its fleet of Chevy Bolt electric vehicles.
Currently, Domino's has over 800 electric vehicles in use, according to a company representative. By the end of the year it plans to have over 1,100. In addition to the electric vehicles, Domino's has more than 1,000 non-EV cars in its fleet, Weiner said on Monday.
A double-edged sword
For Domino's, the Uber Eats partnership is tricky.
On the one hand, Domino's hopes it can provide relief after months of declining delivery sales. In the second quarter, delivery sales at locations open at least a year dropped 3.5%, CFO Sandeep Reddy said during the call on Monday. This quarter isn't turning out to be any better.
"We expect Q3 same-store sales trends in our delivery business to be challenged similar to Q2," Reddy said. Overall, US sales at locations open at least a year ticked up just 0.1% in the second quarter.
The company is planning to update its loyalty program in the fall, which should offer a "slight" increase, Reddy said. But the Uber Eats partnership, among other efforts, is expected to result in "a considerable improvement" next year.
When Domino's announced the partnership, its shares soared. The deal was "a positive step forward for [Domino's] ... representing flexibility and willingness to take necessary steps to drive improvement in [Domino's] US delivery business," wrote Christopher Carril, an analyst with RBC Capital Markets, in a recent note about the deal.
But delivery is Domino's calling card. Innovation in delivery "is the core of who we are," said Weiner during Monday's call. "We are obsessed with delivery." Outsourcing delivery could mess with its reputation.
Because of that, Domino's is treading carefully when it comes to third-party delivery providers. By using its own drivers, Domino's has more control over the delivery experience. And though it plans to advertise on the platform, it's not too interested in driving traffic to Uber Eats.
And Domino's is keeping the best deals on its own platforms. "The best value, the best prices, the best offers will be at Dominos.com or our apps," Weiner said.
