Domino's and Pizza Hut Face a Surprising New Problem

Forget supply chain worries and inflation, this could be good for consumers but bad for the leading pizza chains.

Wawa, a convenience store chain started in New Jersey, has created a cult-like fandom where word of mouth has fueled the chain's expansion. The chain has earned that devotion by offering a better take on what has become a familiar model.

This isn't a 7-Eleven where the food offerings spin on an endlessly rolling hot dog wheel or your typical gas station spot which offers all the usual snacks and drinks. Wawa has those items, but it also has its own coffee shop-like beverage service and offers food that's arguably better than what you might get at a McDonald's (MCD) - Get Free Report or other fast-food chains.

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Wawa has legitimately decent sandwiches -- arguably a lot better than a Subway -- made fresh as you order. It also has a full breakfast lineup and recently added burgers after 4 p.m. The chain, which operates in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Florida, and Washington, D.C., has been rapidly expanding its footprint.

The 100th Wawa location recently opened its doors in Faifax, Virginia.

During the festivities for that opening, Wawa executive Brian Schaller made a surprise announcement that should have fans of the chain excited.

Wawa Enters the Pizza Game

Wawa food might not be gourmet, but it's generally much better than what you can normally get at other convenience stores. In addition, the chain stays open 24 hours a day which means and is available at those late hours when only Wendy's (WEN) - Get Free Report and McDonald's are available. And after 2 a.m., Wawa literally has no competitors in most markets.

Now, the well-loved chain plans to roll out a new offering this summer and even its biggest fans are likely to be surprised.  

“We have pizza coming,” Schaller said, according to the Courier Post, which covered the 1,000th store opening.

Wawa had been testing pizza at select locations and it will add it to menus at all its store this summer. Schaller did not say whether it would be an after 4 p.m.-only offering like its burger menu, or a lunch, dinner, and late-night option like its sandwiches, bowls, and wraps.  

Wawa Takes On Domino's and Pizza Hut

While 7-Eleven and other convenience store chains offer pizza, it's generally last resort pizza. You might eat it because you don't have time to go elsewhere, but nobody considers it a true rival to even mediocre chain pizzas like the ones sold by Domino's (DPZ) - Get Free Report and Yum Brands (YUM) - Get Free Report Pizza Hut.

Wawa has shown that it can make a decent food product. Nobody will mistake a Wawa hoagie for a locally-owned sub shop (at least one in Pennsylvania or Massachusetts), but the quality is much better than what you expect from a 24-7 convenience store.

The company should be able to bring that to pizza. Domino's and Pizza Hut don't really set a high bar. Both companies offer a good enough product that's very convenient for customers to get.

Wawa should be able to deliver on the same model. It won't be challenging for any "best pizza" awards but it will likely be able to offer pies that satisfy their customers at very affordable prices. That could take some business away from the established market leaders simply based on convenience. And, with Wawa's devoted following, it's also possible that some of its fans will actually go for the chain's pizza even when they have other choices. 

In addition to adding hundreds of locations in the states where it currently operates, Wawa plans to expand to Alabama, Georgia and North Carolina, Tennessee, Ohio, Indiana, and Kentucky.