Domino’s “complicated” menu to achieve its first billion

To attract new customers, the chain will offer the option for consumers to customize their pizza with the ingredients they prefer. The menu also includes a subscription club and new store formats

Already busy, the schedule of Fernando Soares, CEO of the Domino’s pizza chain in Brazil, has become even more intense in the last two weeks. With little sleep, he has divided his time between screens and data that monitor the operation and visits to stores in São Paulo, Rio de Janeiro and Belo Horizonte.

Behind this script is a project that has been in the works for six months and has just come out of the oven: the change in the company’s menu, which now offers the possibility for consumers to customize their pizza with the ingredients they prefer.

With a focus on attracting new customers and literally expanding revenues, the new alternative is still in the soft launch. but some numbers give a taste of the options present in this menu. Customers have 18 ingredients and more than 7,300 possible combinations at their disposal.

This is another step by Domino’s towards what the market believes to be a magic number, R$ 1 billion in revenue, a figure that would be fundamental for an eventual IPO of the network that, in 2020, the last public data, recorded revenue of R$ 455 million. In addition to this front, the company will launch a subscription club and is testing new formats to expand its store base.

“We realized that the advantages we had, in terms of technology, of delivery, would not be sustained, as the market is closing this period. gap”, says Soares, NeoFeed. “And we decided to change the menu because we understood that, at this moment, few players can deliver that level of customization.”

The result of an investment of R$ 7 million, the model starts with an offer of R$ 32.90, which includes cheese and two more ingredients. From this option, the customer can add other items and choose, for example, if he wants more or less sauce, the size of the pizza and the type of dough.

The price varies according to the addition of these items. According to Soares, the expectation is that the consumer will show an appetite for more stuffed orders and close to the current average ticket of the network, of R$ 66.

At the other end of this offering, one of the elements that required the most attention is what happens behind the counter. With its own delivery people and the support of automation and artificial intelligence, Domino’s has an average of 25 minutes between ordering and delivering the pizza in the hands or at the consumer’s home.

In this model, the ingredients have an exact amount and each stage of the preparation is timed, with a sequence to be followed. As the new format subverts this logic, more than 90% of the 300 stores – 213 of which are franchises – underwent online and face-to-face training.

“This model increases customer satisfaction, but generates operational challenges, as Domino’s already has a level of productivity and a standardized flow”, says Cristina Souza, CEO of the consultancy Gouvêa Food Service. “But once this barrier is overcome, their bet will make noise and generate a reaction in the market.”

From a technology perspective, the turnaround was facilitated by an investment made in 2019, a year after the Vinci Partners fund took over the operation. At the time, Domino’s changed its online platform and implemented a system that integrates data from all its stores.

“We know exactly all the best-selling items and the stock of any store, in any city, and we monitor consumption behavior all the time”, says Soares. “All this change is being made from this follow-up, based on data and sales history.”

The work didn’t run out of preparation behind the scenes. On the night of August 22, when the model went live, Domino’s set up a “war committee” at its São Paulo headquarters. To the sound of a DJ and fed, of course, by lots of pizzas, teams from different areas followed orders being placed in real time, from screens that replicated the operations of some of the main stores in the chain.

This approach is ongoing and makes it possible to track, for example, whether a consumer has given up on a purchase and at which specific stage this has happened. With this data, Domino’s has confirmed some of its theses and, at the same time, made adjustments to the model.

One of the revised premises was the decision to eliminate traditional combos from the menu. With three days of operation, the chain realized that the option of assembling the pizza fell in the taste of new customers. But many regular consumers gave up on the purchase when they didn’t find what they were used to asking for.

Thus, the new model will be highlighted on the menu, but there will be space for traditional offerings. “We are in this test and learn, day by day”, says Soares. This intense routine to adjust the gears will continue, at least, until the 12th of September, when Domino’s promotes another debut. To communicate and mark the official launch of the personalized menu, the company will broadcast, for the first time, a campaign on open TV.

no distractions

In the dialogue with the market, another possible chapter of this trajectory came to light last week. In a report, based on a meeting with Soares and his peers, Credit Suisse highlighted that Domino’s paves the way for an IPO. The offer would take place after the network exceeds R$ 1 billion in sales.

“That was their conclusion and the number they set is kind of obvious to get into this dance, but this is an agenda of the fund, of liquidity, which cannot pass through my day to day”, says Soares. “I’m more concerned about our deliveries, because nailing something like this, with a deadline and number, doesn’t help us. It just distracts us.”

This was also the stance adopted in the failed merger with Burger King. Announced in July 2021, the deal ended in pizza three months later when both parties backed out of the transaction.

“It was a friendly decision and it had no impact, because the negotiation was being done via Vinci”, he points out. “Our routine has not changed. From then on, we went on with life.”

In this trajectory, delivery continues to be one of the focuses. Today, this modality accounts for 64% of Domino’s sales. For comparison purposes, in the second quarter of 2022, deliveries represented 28% of the sales of Pizza Hut and KFC, flags of the IMC group. At Burger King, this rate was 32.6%.

Data from the consultancy Euromonitor indicate that, in 2021, the segment that includes self-service and delivery restaurants moved R$ 3.48 billion in Brazil. In terms of pizzerias, Domino’s has a market share of 17.3%. Following is Pizza Hut, with 7%, and Patroni, with 6%.

Soares does not reveal how much Domino’s earned in the period. The latest data published refers to the year 2020, when revenue was R$ 455 million.

In 2020, in the latest data published by Domino’s, the chain earned BRL 455 million

In addition to its own channels, Domino’s continues to bet on apps like iFood and Rappi as another alternative to feed its delivery and attract new customers.

“Not being in this space is neglecting an occasion of consumption”, says Soares. “But they are complementary channels and a way for people to experience Domino’s, with the difference that delivery is always ours.”

If the personalized menu and partner applications are rational as a gateway for new consumers, Domino’s also has news for customers who are already in its base.

The company created a subscription club, scheduled to be launched in October and which will bring more affordable price alternatives. At first, the initiative will include four monthly plans, with values ​​ranging from R$9.90 to R$29.90.

On another front, the network has been testing new expansion formats. One of the models involves compact units, measuring 80 square meters and investments of R$ 750 thousand. Today, standard stores have areas from 150 square meters and demand an investment of around R$ 1 million.

A second aspect involves the conversion of pizzerias in smaller cities that, traditionally, would not enter the chain’s radar. The process targets establishments with an average monthly turnover of R$ 100 thousand. There are already 12 stores in the state of São Paulo and the next market to be tested is Ceará.

In line with this expansion, which provides for at least 50 units in 2023, Domino’s does not rule out expanding its production area. Currently, the company has a factory in Itapecerica da Serra (SP) and another in Fortaleza, which opened in September 2021. The two units supply pizza dough to 96% of the chain’s stores.

“The Fortaleza factory paid for itself in eight months, against an initial projection of two years”, says Soares. “Which gives us a perspective, not necessarily short-term, of increasingly verticalizing our operation.”

Source: Neofeed