For Part 1, head here. This article could be given a more flattering title but there’s nothing like some good clickbait to increase readership.
As I’ve patently laid bare in earlier commentary, the restaurant industry is decades behind others by any meaningful metric. There are a myriad of reasons why, but those won’t be re-litigated here. So when Domino’s claims to be a “technology company”, I’m incredibly skeptical.
If Domino’s instead said, “We use more technology, more efficiently than other restaurants and it’s driving outsized results,” that’s something I can get behind.
Here’s why:
1. Domino’s has embraced the move to online/digital. Domino’s has realized consumers want convenience and will pay up for it (a-la last-mile delivery companies Uber, Postmates and DoorDash make clear). Thus Domino’s has done a terrific job of making its goods as easy to order as possible. You can now order a Domino’s pie from connected cars, smart watches, and even via social media. Yes, some of these are marketing gimmicks, but directionally Domino’s is on the ball and these first-mover efforts are paying off handsomely (proof below). This is only possible because Domino’s can connect online ordering platforms to each of its stores via POS…
2. Domino’s has established a uniform POS across all its stores – even across franchisees, who sued to negate the POS update and lost. A uniform POS means transactional data is now consistently reported and collected. There are no walled gardens to jump over with legacy POS. Instead, Domino’s has created a data platform where anything can be transparently measured. It’s so obvious, but no other restaurants I’m aware of have come close to executing this yet. In a twist of obvious irony, Domino’s franchisees are outperforming others in the industry due to Domino’s data collection (numbers below).
3. Domino’s is using collected data for better marketing and loyalty. The whole purpose of being in business is to get better and grow, right? Produce more value for customers, investors and employees, no? Yet restaurants seem to misunderstand this – or at least they refuse to take corrective action to make it a reality. Domino’s uses the data generated from its POS systems to sell more product. They can quickly test marketing activities to determine if they should be rolled out further. They have a central repository of all customer information and can automate email marketing campaigns to drive reorders. They can test new pricing or menu items without much risk of loss, and they’re not reliant on dangerous discounting. They have a way to connect the POS to revenue-generating portals like ordering on Alexa or Google Maps. Brain-dead simple, but again, entirely overlooked by other restaurants.
In Domino’s Q4 2016 earning release, Domino’s CFO Jeff Lawrence said, “Technology is permeating our brand.” This has resulted in these dominating financial metrics:
- CAGR of 33% over past three years
- 23 straight quarters of same-store sales increases
- Killing comps who reported sales decreases
- Franchisee profit increases for eight straight years to $135,000 annually (coincidentally the same year they lost the lawsuit and standardized POS… maybe there’s a f&cking relationship!)
What’s so crazy is that implementing these changes is trivial once leadership agrees to do it.
The issue isn’t that the technology doesn’t work or is unproven, nor that technology is too expensive to realistically consider (I’ll firmly disagree with Domino’s CFO who claims it is in a self-serving argument to dissuade competitors from looking into it).
The bottleneck is the (thus overpaid) executive who refuses to do right by the shareholders.
So no, Domino’s is not a technology company; calling itself one is a bridge too far. But that’s not to say other restaurants shouldn’t follow suit in embracing the benefits of technology – in fact their shareholders should demand it.
In that respect, Domino’s can claim that it is something that other restaurants are not, and they’re proving it every quarter.
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