Dive Brief:

• Carryout order count was 3.9% on a same-store sale basis during 2019 and a positive 8.1% across the entire U.S. system, CEO Ritch Allison said during a Thursday earnings call with investors. It contributed to 3.2% same-store growth across its U.S. system during 2019.
• "As far as the comp in Q4, the carryout business was just on fire in a great way," CFO Jeff Lawrence said during the call. "[We're] leaning hard into that strategically, giving our franchise operators the tools and tech to really make the most of it and … really advertising heavily behind it. It's what a big cross-section of our customers want. We're getting better at carryout everyday that we focus on it and really saw a big surge in comp for carryout."
• The pizza chain plans to continue improving the carryout experience by removing points of friction, such as a parent having to get out of the car with kids to pick up a pizza, and has pickup windows at over 600 stores where customers can drive up and get their pizzas, Allison said. The company also rolled out its Pie Pass program earlier this week, where customers can order ahead and can skip the line to pick up their pizzas.

Dive Insight:

One strategy that has helped Domino's combat continual pressures from third-party delivery competitors is leaning heavily on carryout, which doesn’t require customers to pay any delivery fees. And it’s paying off: carryout represents 2.5 times the number of transactions compared to the delivery segment in the U.S., Allison said. As of Q3 2019, carryout made up nearly 45% of the company's orders.

The off-premise channel poses a strong revenue opportunity. From 2014 to 2019, carryout grew to from over $16.9 billion $18.8 billion, according to the company's 10-K, which cited data from The NPD Group/CREST. Four industry leaders, including Domino's, make up 51% of that segment as of November 2019. The company said it was the number two pizza carryout company in the U.S. as of November 2019 with 16% market share.

The company began heavily shifting toward carryout in 2012 when it rolled out its Pizza Theater redesign. This design allows customers to see their orders being made fresh and a majority of Domino's U.S. and international stores completed these remodels by the end of 2019, according to the company's 10-K.

Domino's has offered its $7.99 large three-topping pizza for carryout for many years, extending it to seven days a week in 2016. This offer has been popular among customers and helping drive much of this positive performance, Lawrence said on the call. Last year, it extended the offer again, allowing customers to chose from five crust offerings, which resonated well with customers, Allison said, adding that the company is considering other products and opportunities to continue to drive this business. That could be technology similar to its Pie Pass and pickup windows that help remove some of the friction points carryout customers experience.

Domino's is also pushing for more increases in digital mix for carryout, and its Pie Pass platform requires customers to order ahead on the app oronline in order to receive the benefits of skipping the line and having a digital board greet them when they arrive. Digital transactions for carryout can also help drive smarter upsells and ultimately ticket sales, he said. 

While the company has increasingly focused on carryout, it hasn't been losing focus on delivery either, especially now that it sees pressure from third-party delivery flattening out, Allison said. 

"If you look particularly in the high wage markets in the U.S., if you’re trading drive-thru business or pickup business for delivery business, then you’re moving your customers to a higher cost channel to serve," he said. "When we think about how we’re going to grow our business and continue to have a very profitable base of franchisees, we've got to hold, serve and defend that delivery side of the business, but we’re pushing hard on carryout. Because as you approach $13, $14, $15, $16 per hour on labor, that carryout business becomes the profit engine over time."