Domino's Finally Moves to List on a Third-Party Delivery Service

Years ago, Domino's  (DPZ) - Get Free Report set the standard for the pizza delivery business when it came to technology implementation.

It became a massively successful enterprise by prioritizing convenience and value. In fact, measuring by revenue, it is currently the largest pizza chain worldwide.

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The technology innovations it delivered to outpace its competition and continue to grow at an outsized pace included an early focus on online ordering.

It also has always insisted on using its own delivery drivers. That won't change, but the practice of exclusively using its own technology for placing orders just did.

"Reversing its long-held stance against working with third-party delivery apps in the U.S., Domino’s Pizza has agreed to make Uber Eats  (UBER) - Get Free Report its exclusive third-party delivery service," wrote RetailWire on July 18. 

The Details Behind the Deal

In the past, Domino's was never interested in working with third-party delivery services.

"Restaurants are charged between 15% and 30% in fees for listing, payment processing, and delivery. Reputational risks of using an outside delivery service have also been an issue," the RetailWire story said. "In 2021, Domino’s ran a promotion giving away $50 million worth of free food to call out the 'surprise fees' being charged by delivery apps."

"Being listed on Uber Eats and its sister site Postmates enables Domino's to reach new customers who are used to ordering there," it continued. "Uber's customers tend to be younger and more affluent than those ordering directly from Domino's."

Under the deal, orders placed on Uber Eats' platform will still reach their destinations using Domino's drivers. This preserves Domino's control over that part of the operation.

Uber Eats will be sharing data it collects with Domino's on things like sales trends and delivery times.

'We Need to Play in a Big Category Like This'

The exclusive deal is currently scheduled until at least 2024. This seems to leave open the possibility that Domino's may one day decide it would be a good move to work with other third-party delivery services, including DoorDash  (DASH) - Get Free Report and Grubhub.

"It's a multibillion-dollar marketplace that sells food and pizza," Domino's CEO Weiner told the Wall Street Journal, according to RetailWire. "We need to play in a big category like this."

Weiner also reportedly acknowledged in the WSJ story that "direct orders from pizza chains have stagnated while those through delivery apps have accelerated over the pandemic. Third-party app loyalty programs also keep customers from ordering directly from Domino's," RetailWire wrote.

The retail publication added a few more thoughts on the deal.

The partnership comes as Domino’s had flagged a slowdown in deliveries in April. Pizza Hut and Papa Johns have said their moves to start working with delivery apps since 2019 have broadened their customer reach and helped them find drivers amid the late-pandemic labor shortage.

Domino’s has no plans to use the apps to deliver pizzas in the U.S., but Mr. Weiner suspects the Uber Eats alliance will help franchisees overcome labor challenges because the locations will be busier.

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