Domino’s and Papa John’s, two of the nation’s biggest pizza chains, have been tackling significant pressures in their delivery business.
Not only are they facing high inflation, forcing more people to prepare meals at home, but also staffing issues.
Nevertheless, the chief executives of both chains remain confident about their respective businesses in 2023 despite such headwinds.
|DPZ||DOMINO’S PIZZA INC.||304.00||-4.05||-1.31%|
|PZZA||PAPA JOHN’S INTERNATIONAL INC.||88.53||+1.83||+2.11%|
“We experienced significant pressure on our U.S. delivery business in 2022,” Domino’s CEO Russell Weiner said in an earnings call to investors Thursday. However, the company has focused their efforts on “creating solutions,” he added.
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During the call, Weiner said inflation had “impacted delivery due to the added expenses of fees and tips in that channel.”
These higher deliver costs during inflationary times forces some customers to prepare meals at home, he said. It’s a trend they believe “will continue to pressure the delivery category in the short term, as long as consumers’ disposable income remains pressured by macroeconomic factors,” the executive continued.
Weiner also noted that there’s also more work to do in terms of staffing its delivery business, but he acknowledged that “answers to this challenge exist within the Domino system,” and that staffing has already improved positions in its corporate restaurants.
To help, it’s also leveraging innovations such as its new electric delivery fleet.
“I am proud of the work that we and our franchisees have done to address labor constraints in the delivery business, and know we have more to do,” he said.
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Despite these challenges, Domino’s U.S. delivery sales for in 2022 were more than $0.5 billion higher than the pre-COVID baseline in 2019, according to Weiner.
He also touted that the company is “better positioned than ever to win in the marketplace and create meaningful value for our shareholders.”
Meanwhile, Papa John, which had also been battling staffing issues, is finally seeing staff stabilize but plans to lean on third-party service for help when it comes to delivery.
CEO Rob Lynch told analysts during an earnings call Thursday that the company has been able to handle service, especially during times of peak demand, due to its partnerships with third-party delivery services.
“We’ve been able to mitigate some of those staffing challenges with our partnerships on the delivery-as-a-service,” Lynch said. “These relationships enable us to reach new incremental customers and help us service existing customers during periods of peak demand.”
When staffing shortages were exacerbated by Omicron in 2022, for instance, the company was “able to lean into these relationships to increase our delivery-as-a-service option,” he added.
The company plans to continue leveraging “this channel to introduce our brand and products to even more customers in the future,” according to Lynch.
“While we cannot control inflation or a customer’s budget, we can control how effectively we execute superior operations,” Lynch said.
He said that the company has leaned into its corporate-owned restaurants, focused on faster service, optimized labor allocation, enhanced operational efficiencies and effectively managed margins in order to weather the challenging economic environment.
“We’re realizing early wins with improved product quality, faster out the door times and better customer satisfaction while also optimizing unit margins,” he added.
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