Domino's Is Losing Customers in 2023

Domino's may hold the coveted title of the largest pizza chain in the United States (and the world!), but it is struggling to continue attracting customers.

The chain's Q2 earnings, released today, revealed that the company saw lower order volumes and a $40.6 million, or 3.8%, drop in revenue during the second quarter of 2023. This means that fewer customers flocked to Domino's, and some recent changes in the chain's prices might explain why.

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Many major restaurant and fast-food chains have raised their prices in recent years after supply chain issues and inflation exacerbated costs for food, labor, and other commodities. Domino's is no exception to this trend.

Company executives predicted in October 2022 that their prices would rise around 7% in the final quarter of the year, according to Market Watch. Those price increases have continued into 2023 as well. In an earnings call this morning, Domino's CFO Sandeep Reddy said that prices had increased an average of 3.9% in the United States during the latest quarter. The company expects pricing to be similar in the third quarter before moderating to about 2% in the fourth quarter of 2023, Reddy said.

These price hikes have affected the demand for Domino's food. For example, some customers said they were completely done with the chain after it raised the price of its popular Mix and Match deal in 2022. While the company did report a small 0.1% increase in same-store sales in the second quarter of 2023, Reddy noted that the increase was driven by the higher prices.

Another major reason behind Domino's recent struggles is its delivery business. The company has reported decreases in same-store delivery sales during the last few quarters, including a 3.5% decline during the most recent quarter. Domino's executives have blamed its struggles on delivery driver shortages and budget-conscious consumers wanting to avoid the extra fees and tips that come with delivery.

The company expects same-store delivery sales to be "challenged" during the third quarter of this year. However, they anticipate that those issues will ease in the fourth quarter of the year due to an upcoming September update to the company's loyalty program that will reduce the requirements for customers to earn and redeem points. They also expect a newly-announced partnership with Uber Eats and Postmates to lead to a "considerable improvement" in 2024, Reddy said.

So far, Domino's has resisted partnering with any third-party delivery services, but the new agreement will allow customers to order Domino's from Uber Eats and Postmates for the very first time. The company expects to roll out the partnership in four test markets this fall and then nationally by the end of the year, though all of the deliveries will still be carried out by uniformed Domino's drivers.

"We're excited to begin accepting orders to the Uber Eats channel later this year, and look forward to reporting the results of this important growth initiative," said CEO Russell Weiner.