Source of this article: Times Weekly Author: Li Huan
When encountering extreme weather, the "30-minute delivery" promised by Domino's Pizza will seem a little overwhelmed.
Around 3:00 pm on July 27, 2022, heavy rains broke out in Chaoyang District, Beijing. Times Weekly reporters found that the WeChat mini program and Meituan ordering system of the Jinsong store of Domino's Pizza have been closed. The system shows that "the delivery is temporarily stopped to take orders. It is recommended that you choose 'diant in' or 'self-pickup'" and "the store is closed."
"Now the ordering system has been stopped, and the orders are too busy at all, and the delivery orders are all late." Li Hong, a takeaway deliveryman who has worked in Domino's pizza for more than a year, told the Times Weekly reporter that in rainy days like this, no one wants to go out, and the orders will be more than usual.
Go back to history, Domino Pizza proposed the slogan of "30 minutes of delivery, free time" in 1979, and it rose rapidly in the Western pizza market. In 1997, Domino's pizza entered the Chinese market and continued the core brand concept of "30-minute delivery", but the difference is that "delivery coupons" replace "free timeout".
In the past two years, Domino Pizza's global revenue growth rate has declined, changing the previous year's rising trend. On the evening of the 21st, Beijing time, Domino Pizza announced its second quarter results this year, with revenue of US$1.065 billion, up 3.17% year-on-year; net profit of US$102 million, and fell 12.11% year-on-year. Domino Pizza explained to the outside world that its performance has been curbed due to rising costs and a continued shortage of delivery drivers.
In order to retain core employees, in the second quarter of this year, Domino Pizza increased the salaries of members of the front-line team of its own stores in the United States. In the second quarter of 2022, labor costs increased by 1.6 percentage points to 29%.
But in the Chinese market, Domino Pizza is compressing employee costs.
More than Domino's pizza takeaway delivery staff told reporters that since JD withdraws from the outsourcing business of Domino's pizza delivery, the salary structure of Domino's pizza takeaway delivery staff has changed significantly. "No basic salary, no , five insurances and one fund, , each order commission is changed from ten yuan to nine yuan."
Times Weekly reporter sent to the official website of Domino Pizza and the email address of Shanghai Domino Pizza Co., Ltd. (Headquarters) on the changes in the salary of employees in the Chinese market and their related issues of their development in the Chinese market. As of press time, the other party has not responded yet.
No delivery, Bumeile
Times Weekly reporter called Domino Pizza's consumer hotline and learned that the food in the store is delivered by its own delivery staff. If the consumer's address exceeds the delivery range, he can only place a self-collect order.
Regarding the promise of "30-minute delivery", the above-mentioned consumer hotline person said that after placing an order online, the expected delivery time will be displayed. If the timeout is exceeded, a 9-inch pizza free redemption coupon will be given and will be sent to your mobile phone in the form of a text message. The redemption coupon will not be restricted to the price selection.
"On rainy days, the store is too busy, so it will stop taking orders, because every late order will be given a 'heart coupon', but if you give too much coupon, it will affect the store data and the performance of relevant leaders." Li Hong, a deliveryman, added.
In fact, Domino's "fast" takeaway has not achieved a Western victory in the Chinese market.
Dalmino's exclusive general franchisee in mainland China, Dashi Co., Ltd. (referred to as "Dalshi Co., Ltd."), submitted a prospectus to the Hong Kong Stock Exchange on March 28, 2022. The prospectus shows that the revenue in the three years from 2019 to 2021 was RMB 837 million, RMB 1.104 billion and RMB 1.611 billion, respectively, and the net profit was RMB -182 million, RMB -274 million and RMB -471 million, respectively. The cumulative losses in three years exceeded RMB 900 million, and the losses expanded far exceeded the revenue growth rate.
Domino Pizza insists on its own delivery staff for full-time delivery, but at the same time, employee costs have greatly compressed its profit margin. According to the prospectus, employee compensation expenses are the highest-proportion cost expenses of Dashi Co., Ltd., which were RMB 340 million, RMB 470 million and RMB 700 million in the three years of 2019-2021, respectively, accounting for 40.1%, 42.5% and 43.7% of its total revenue in the same period.
Another Domino Pizza Takeaway Deliveryman Wang Qiang told reporters that Beijing Domino Pizza Jinsong store has a total of 7 to 8 delivery staff, and the store is still being recruited. Li Hong also revealed to the Times Weekly reporter that Domino's pizza delivery service was previously contracted by JD.com, but later withdrew. Currently, those who work as a takeaway delivery staff in Domino’s like him are considered part-time jobs, and only in the kitchen in the store are full-time.
"When we worked at JD.com, we had five insurances and one fund and a basic salary of more than 2,000 yuan, and we had a commission of 10 yuan per order. At that time, we earned a lot, and our monthly income exceeded 10,000 yuan." Li Hong said that now he delivered food at Domino's pizza, and the commission was only 9 yuan per order, and there was no other benefits. "I am not lazy now. I can run about 1,000 orders a month, and I earn about 9,000 yuan per month."
Wang Qiang has been delivering Domino's pizza for two years. He also told reporters, "When he was affiliated with JD.com, he not only had social security and basic salary, but also had high temperature subsidies. Since JD.com withdraws, these benefits have not been deducted, but Domino's delivery will not deduct money from overtime, and it is not tiring to do this work."
cannot beat Pizza Hut
In fact, Domino's pizza's performance in the Chinese market has not been very good.
Judging from the number of Domino Pizza stores in the top ten international markets, the 2021 financial report shows that the number of stores in the Chinese market is only 472, ranking second to last. In the domestic market of the United States, as of January 2, 2022, Domino Pizza has 375 self-operated stores and 6,185 franchised stores.
According to the prospectus of Dashi Co., Ltd., in 2020, Domino's pizza had a market share of only 3.6% in the overall Chinese pizza market, ranking third, and a huge gap with the company with the largest market share. In terms of the number of stores, as of the end of 2021, Domino had only 468 direct-operated stores, of which about 57% were located in Beijing and Shanghai. As of the end of 2021, the number of stores in Ningbo was only one, while Pizza Hut had more than 2,000 stores.
Source: Screenshot of the prospectus of Dashi Co., Ltd.
On the consumer side, the brand popularity of Domino Pizza has always been lower than that of Pizza Hut.
Zhang Tong, who works in Beijing, told the Times Weekly reporter, "I have eaten Domino once, and the price is a little cheaper than Pizza Hut. The snacks taste good, but in general, they are not as good as Pizza Hut." When asked about Domino's guarantee of "thirty-minute delivery, time-out coupons", she said she had not paid attention and joked, "That must be done on rainy days."
In this regard, China Food Industry analyst said, "The efficiency abroad is relatively slow, so Domino Pizza's '30-minute Pizza promises to be more core competitiveness abroad. But in China, whether from taxi to takeout, the overall speed is very fast. So this is not the core demand of heavy consumer groups at all. It should be highlighted more in the entire product innovation, upgrading, iteration, and cost-effectiveness."
It is worth noting that Beijing and Shanghai have always been the main base of Domino Pizza, and in the market that Domino has not reached, its brand influence is far less than that of Pizza Hut.
A fast food enthusiast in Wuhan told the Times Weekly reporter that he had never heard of the pizza brand Domino, and he would still choose Pizza Hut when he had pizza. Regarding Domino’s promise of “30-minute delivery, time-out coupons”, he said, “Pizza Hut’s home delivery is also fast, there are frequent activities, which is also very cost-effective.”
cannot be rescued and declined
not only in the Chinese market, but also in the United States, the hometown of Domino’s pizza, the situation is still worrying, and the problem seems to lie in “delivery”.
Today, pizza has become the second largest category in the US fast food market. Especially due to the impact of the epidemic, the overall sales of pizza in the United States have been driven. Domino Pizza itself alone, citing data from NPD Group/CREST (the year ended November 2021) in its 2021 annual report, "By 2021, sales of the pizza delivery business were US$19.8 billion (up from US$13.1 billion in 2016), accounting for about 49% of the total pizza in the United States. "
But in the first quarter of 2022, Domino Pizza's quarterly sales were declining.At that time, CEO Richard Allison said on the earnings call: "The company's U.S. business will face earnings and sales pressure in the next few quarters."
As expected, in the first quarter of this year, same-store sales of Domino's U.S. stores fell by 3.6%, while same-store sales of U.S. stores fell by 2.9% in the second quarter. In addition, same-store sales of international stores fell by 2.2% in the second quarter (excluding the impact of forex ).
and employee shortage and inflation are the main sources of Domino’s performance under pressure and share price decline. Just like the frequent flow of employees in the catering industry in China, it is also a common phenomenon for American restaurant employees to change jobs. To address the shortage of delivery drivers, Domino’s Pizza encouraged consumers to pick up the goods themselves in the first quarter of this year at the cost of providing them with a coupon code of $3.
But the situation has not been alleviated, and the rising costs and the continued shortage of delivery drivers continue to curb performance. The second quarter financial report shows that Domino's pizza's profits are still not as expected. In the second quarter of this year, Domino's pizza's revenue was US$1.065 billion, up 3.17% year-on-year, and its net profit was US$102 million, down 12.11% year-on-year. Overall earnings per share was $2.82, less than the market expectations of $2.91.
In order to retain core employees, Domino Pizza has increased the salary of members of the front-line team of its own stores in the United States. The second quarter financial report of this year mentioned that the labor cost of Domino Pisa increased by 1.6 percentage points to 29%, and increased by 2 percentage points to 29.9% in the two fiscal quarters in 2022.
Delivery drivers are an important part of connecting pizza and customers, and the fact that there is a shortage of delivery drivers is bringing a "decline of unrescue" to Domino's pizza.
(As required by the interviewees, Li Hong, Wang Qiang, and Zhang Tong are all pseudonyms)
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