Domino's Is Back

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In the late 2000s, Domino's became known for their cardboard tasting pizza. Led by Patrick Doyle, the CEO, Domino's turned things around starting in 2010.

The first step was to acknowledge that their pizza sucked. Next, Domino's threw away their 49 year old recipe and revamped the recipe which included that delicious garlic, buttery crust that we all love. They also expanded the menu to include things like the "Specialty Pizza" that consisted of lightly breaded chicken topped with cheese and such toppings as bacon and jalapeno which boosted profits.

But I think it was their transformation as a technology company that allowed Domino's to really take over the quick-service pizza business.

More than 60% Domino's sales come through digital channels. All digital orders run through Domino's custom operating system. The data collected through the system became a "competitive advantage," which helped launch a loyalty rewards program.

Their other competitive advantage is their fortress strategy. Despite Domino stores cannibalizing each other, having more locations means closer proximity to diners, which generates lower delivery times and boosts customer satisfaction.

Over the past 18 months, Domino’s has come under attack by the food delivery companies that popped up in the last couple of years in which stay at home diners have a lot more options at their disposal. Domino’s have been very vocal about not wanting third party vendors to delivery their pizzas. The biggest complaints among customers regarding third party delivery have been the food isn’t warm or fresh and the order.

Hence the fortress strategy… more stores equates to being closer to the customer, which equates to faster delivery times. Now the caveat of the fortress strategy has been same store sales growing at a slower pace than Wall Street expectations over the last several quarters. And Wall Street has let Domino’s know by crushing the stock…until today.

Domino’s Pizza Inc. jumped the most on record after reporting U.S. sales growth that outpaced expectations in the latest quarter -- a sign the pizza chain’s ongoing investment in delivery and carryout is paying off.

U.S. same-store sales climbed 3.4% in the fourth quarter that ended Dec. 29, the company said Thursday, topping analysts’ average estimate for 2.1% growth, according to Consensus Metrix. Domino’s also reported profit and revenue that beat estimates, and its operating margin expanded from a year earlier.

Growth in the U.S. restaurant industry doesn’t come easy these days, and Domino’s already has 6,000 locations in a market that’s overly saturated. Still, Domino’s has been quickly expanding -- pouncing on the so-called fortressing strategy -- to offer easier carryout and faster delivery than rivals. It added a net 141 units last quarter in the U.S.

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So how high can the stock price go, lets just say the skies are the limit?

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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They are leading edge on technology. They have tested a number of automated delivery options, including one that I believe is successful in Germany.

They also rebranded from pizza to food, offering more than just Pizza.

It is an incredible turnaround story.

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I love Domino's...just the pizza though (wings aren't crunchy enough for me), but love that the have embraced technology to move ahead of their competition.

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Another in that space is McDonalds. They are one to watch for separating themselves from the competition by implementing technology.

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