**Domino’s Pizza Partners with Uber Eats for Deliveries**
Domino’s Pizza has announced a partnership with Uber Eats to expand its delivery services in the US and 27 international markets. Despite previously stating that partnering with delivery companies didn’t make economic sense, Domino’s has made a major reversal and will now collaborate with Uber Eats.
**Details of the Partnership**
Under the agreement, Domino’s drivers will continue to make deliveries, but customers will place their orders through the Uber Eats platform. Domino’s will also receive data from Uber Eats regarding delivery efficiency and incremental sales. The specific percentage of each order that Uber Eats will take has not been disclosed by Domino’s. The partnership will begin in four US markets and is expected to be available nationwide by the end of 2023. Uber Eats will be Domino’s exclusive partner in the US until at least 2024.
**Market Impact and Reason for Partnership**
Following the announcement, Domino’s shares rose by 10% in morning trading. The decision to partner with third-party delivery apps in the US comes after Domino’s previously expressed reluctance due to the desire to maintain control over the delivery process. However, the pandemic significantly increased demand for delivery services, and Domino’s market share suffered as competitors established partnerships with third-party apps.
**Growing Importance of Third-Party Delivery Apps**
According to market research firm Circana, third-party delivery companies such as Uber Eats and DoorDash accounted for 14% of US pizza sales in the year ending May 28, 2023, amounting to $4.7 billion. In response to the changing market dynamics, Little Caesar’s—the third-largest pizza chain in the world—formed a delivery partnership with Uber Eats in April.
**Domino’s CEO Rationale for Partnership**
Russell Weiner, CEO of Domino’s since 2022, stated that the large scale of third-party delivery operators makes partnering with them a logical move. Meanwhile, Uber Eats’ delivery volume grew by 12% to $15 billion in the first quarter of this year. Domino’s global retail sales also grew by 6% during the same period.
**Challenges and Future Plans**
Domino’s has faced challenges such as rising food costs, labor shortages, and increasing competition. In 2022, its same-store sales in the US decreased by 1%, while international same-store sales remained flat. However, the company has expressed confidence in meeting increased demand from Uber Eats orders, and it has resolved many of its labor challenges over the past year.
**Analyst’s Perspective**
Peter Saleh, a managing director and restaurant analyst at investment bank BTIG, believes the partnership is the best possible path for Domino’s. Saleh notes that Domino’s will still maintain control over the delivery experience and have access to relevant data. He also suggests that the agreement does not preclude future partnerships with other delivery providers, including DoorDash. Saleh predicts that Domino’s will continue to offer competitive deals on its own website to encourage customers to order directly, but consumers are likely to remain loyal to third-party apps.
In conclusion, Domino’s Pizza’s partnership with Uber Eats marks a significant shift in strategy as the company seeks to capitalize on the growing demand for delivery services. This collaboration allows Domino’s to maintain control over the delivery experience while benefiting from the widespread reach and convenience of Uber Eats.
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