Domino’s/Uber: outsourcing lead generation today, logistics tomorrow

Domino’s has found it harder to earn a crust since Americans started ordering fewer of its pizzas. On Wednesday, the one-time pandemic darling acknowledged the new reality by announcing a partnership with food delivery service Uber Eats.

Domino’s will appear on Uber’s app in four pilot US markets this year. Ultimately, the partnership could include 70 per cent of Domino’s locations around the world.

The US pizza chain had long resisted sharing order data. It has invested heavily in its own app. That paid off as the company’s stock price soared from under $10 a share to nearly $600 between 2010 and the end of 2021.

But since that apex, Domino’s market value has dropped nearly a third. Americans eat out more these days and spend less time gobbling pizza in front of the TV. Moreover, Domino’s admits that a large cohort of consumers order food strictly through delivery apps like Uber Eats. It wants a bite of that business.

The best brands — whether in junk food or entertainment content — prefer to avoid aggregator apps, keeping prized customer relationships to themselves. But consumer habits have changed and even dominant brands have to adjust.

Meanwhile, Uber’s most recent results reveal an improvement. Overall sales commission, or “take rate”, on food orders has climbed to 21 per cent. In the quarter, Uber’s group free cash flow is $550mn after years of deficits. Its shares are up 77 per cent in 2023. Despite its pricey fees, some customers like to see a marketplace of several restaurants. Uber’s flat monthly fee membership and loyalty programmes may also appeal. 

Domino’s may hope that some customers download its app after discovering the chain on Uber. The group still plans to use its own drivers in parallel. Perhaps all its deliveries could eventually be outsourced to Uber or similar groups. Already much of Domino’s revenues comes from royalties paid by franchisees. If this trend continues, Domino’s could then simply focus on designing its pies and strengthening its franchise.