Domino’s dominance of the delivery at an end says fast-food king Jack Cowin
The global pizza brand was one of the hospitality world's most advanced thanks to its IT and delivery. New executive chair Jack Cowin says those days are numbered.
It’s a dance that has become so regimented and formulaic that increasingly it is blending into the scenery to become just part of everyday life in cities and suburbs across Australia.
On any given day or night, delivery drivers sporting their puffer jackets, gloves and helmets march in and out of restaurants to pick up orders, fill up their oversized backpacks and then weave in and out of traffic to get to their customers.
But while all manner of foods are piled into the back of motorcycles, bikes and cars, making the Uber Eats or DoorDash delivery drivers look like very fast snails with oversized shells on their back, it is highly unlikely these third-party delivery platforms will be transporting a Domino’s pizza and garlic bread.
That’s because while these platforms only account for about 12 per cent to just under 25 per cent of Domino’s orders across its 11 global markets – including Australia – only a tiny fraction of actual deliveries are handled by Uber Eats or DoorDash. Domino’s has its own fleet of drivers, employed by the store owners.
And therein lies part of the problem for the ASX-listed Domino’s operator, which was candidly detailed last week by its new executive chairman, billionaire Hungry Jack’s founder Jack Cowin. A rapid expansion into Europe, Japan and South-East Asia by former CEO Don Meij as well as a “free kick” from Covid-19 lockdowns papered over the cracks in the business, sending Domino’s shares to around $160 a share, and shifting investor and management attention away from what has proved to be a damaging force eating the business from the inside.
“There is a fundamental change in the industry,” Cowin told analysts at an investor update on Thursday after Domino’s shocked the market with news that its CEO of only seven months, Mark van Dyck, had decided to step down.
“Up until Covid if you wanted food delivered at home, pizza was kind of the default you thought of, Covid came in and we got a free kick.
“But the advent and growth of Uber and Uber lookalikes have made some dramatic changes in this industry in that now the little corner pizza shop can also have a delivery service, and he doesn’t have to employ those people (delivery drivers) he just pays a percentage his the bottom line to Uber.
“McDonald’s, KFC, Hungry Jack’s, they all previously were not in the home delivery business but now these businesses are doing upwards of 10 or 20 per cent of their volumes in home delivery.”
It’s rare for investors to witness the chair of a company explain the evaporation of a company’s economic moat – the barrier that helps a company maintain its competitive advantages and protect its long-term profits and market share from competitors – but that’s exactly what happened last week as Cowin simply but astutely described the challenges facing Domino’s, particularly in the area of delivery.
“The home delivery business is not something that is going to go away, it will continue to grow, and there are more players in it and the fact that the ‘Ubers’ and lookalikes can supply that service has definitely been a factor over the last couple of years. So we just have to continue to find a better way to be more competitive and run this business better.”
Domino’s formidable competitive advantage included its technology and huge investment in IT. many investors argued Domino’s was a tech company rather than just a simple pizza maker which helped its share price skyrocket.
Now with any corner store hopping on to the Uber Eats or DoorDash service that competitive moat has completely dried up.
“At one stage of the game we were a leader in technology,” said Cowin, “I think as we sit here today I don’t think necessarily our technology is any better than the Ubers and the other people that we have to deal with.
“I think the previous management spent a lot of money on trying to come up with better ways to do the IT side of the business. That costs a lot of money to do that; here we are in 2025 I think the competition is largely a much more level playing field today.”
And it was Cowin’s next comment that landed like a thud: “We don’t think we have a competitive advantage today on the technological side of the business compared with Ubers and some of these other (platforms) who spent a lot of money to get out there.
“So if you don’t have a competitive advantage let’s stop trying to recreate the wheel, let’s do what we can do in the most cost-effective manner.”
The seed of this problem facing Domino’s was planted years previously by its ex-CEO Meij, a veteran of the pizza industry and who led Domino’s for 22 years before stepping down late last year, and who shied away from deals with third-party delivery platforms such as Uber.
“(Former CEO) Don went through a very interesting stage in which he said ‘we aren’t going to use the Ubers because they are going to be our competitors, we are going to do it all ourselves’,” Cowin told analysts last week.
But the days of business management where the likes of Henry Ford scoffed that his customers could have their car painted any colour – so long as it’s black is – is now firmly behind glass at a corporate museum.
Choice is in. Whether it’s ordering a car or a thick-crust pizza.
“I think the customer then said, ‘I like this broader menu where I can go pick and choose what I can have delivered,” noted Cowin, “rather than just have one single app to go to and order from.”
Other fast-food chains have taken notice. Before Covid-19 global giant McDonald’s stepped back from its exclusive arrangements with Uber to sign up DoorDash for its delivery service, recognising the benefits of choice to its diners.
And while Domino’s does use the Uber platform, it was only a few years ago that Domino’s Pizza Inc US parent boss Ritch Allison discounted the benefits of allying with a third-party delivery service.
“We’ve had a very strong and profitable delivery business for many years now,” Allison told US broadcaster CNBC in 2019. “So unlike a lot of the other restaurant brands, we don’t have to decide to get in or not, or try to figure out which of these third-party aggregators is ultimately going to be the winner at the end of this shake-out.”
Now the challenge is on for Domino’s to find a new moat, one which is compelling to diners as well as franchise owners who often mortgage their homes to buy a Domino’s store. Uber, DoorDash and others have shown they can smash these well-crafted and expensive moats with ease, as simply as one of their motorbikes weaves in and out of traffic.
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