Cold subs and hot pizza. It seemed like a good idea at the time, says David Brandon, chairman and CEO of Domino’s Pizza Inc.
A few years ago, the leaders of the Ann Arbor-based pizza delivery giant decided to try their hand at making submarine sandwiches part of their menu. The move was aimed at capitalizing on a growing market in the restaurant industry.
“We brought in the equipment and tried to fit it in our stores,” Brandon says. “We trained our excellent pizza makers on how to make cold sandwiches.”
But a funny thing happened on the way to taking a bite out of the cold sandwich market. Domino’s quickly found out that not only were its cold sandwich products not as competitive, the sandwich wing of the business was becoming detrimental to its core business of pizza.
“If you had an order come in for pizza and sub sandwiches, you had two different products that had to be prepared in two different parts of the store,” Brandon says. “The supply chain and inventory you need to keep on hand for subs is just very different from that of pizza. All that space and attention and focus was drawn away from our core business.”
Domino’s quickly abandoned the sub sandwich idea and got back to focusing on hot foods, where it has historically excelled.
Brandon says Domino’s foray into subs provides other CEOs a pair of important lessons.
First, even an industry leader with $5 billion in global retail sales and $1.5 billion in revenue last year can make a bad decision.
Second, and more important, once a business gets to the top, staying there requires constant evaluation and re-evaluation of its goals, products and marketing, along with a willingness to admit mistakes.
Building a brand
Domino’s is the leader in the pizza delivery business. The company’s drivers traveled more than 9 million miles last year, dropping off pizzas at dormitories and doorsteps around the world, says Brandon, who has been president and CEO since 1999.
Yet out of every 10 pizzas delivered on any given night, only two of them will be handed to a customer in the familiar red, white and blue Domino’s delivery box.
“We are a leader in this category, but we only have a 20 percent market share,” Brandon says. “I’m not about to go in to a victory dance until we are a much larger player.”
In an industry flooded with competitors, Brandon says one key for Domino’s has been maintaining an identity apart by building a brand. He says the same holds true for any mass-marketing business.
In the case of Domino’s, it continually emphasizes its ability to quickly deliver hot food to a customer’s door. It is Domino’s self-professed area of expertise, something the company has been doing since the first store was opened in Ypsilanti in 1960.
“It’s all about building a brand,” he says. “Probably the best indication of how we have tried to do that is with our current tagline, ‘Get the door, it’s Domino’s.’ What that means is that the heritage of this brand is we’re the pizza delivery experts, that we’re the leader in this channel.”
Domino’s has its roots on college campuses across Michigan, where the company’s founders first discovered a niche delivering pizzas to college students who had virtually no hot food options once the school cafeterias closed for the day. But as the lifestyles of Americans picked up speed, Domino’s leaders soon realized the hot meal delivery concept they were constructing could be applied to dinner tables as readily as dorm rooms.
Brandon says Domino’s has been able to capitalize on the accelerated pace of American lifestyles by using advertising to draw a direct link between the Domino’s brand and a fast, easy meal.
“As time went by, consumers got busier and there were more two-wage-earning households,” he says. “We found out this was about consumers looking for quick, stress-free hot meal solutions.”
The company branched out from college towns and military bases to urban and suburban settings, where families with two working parents became its target.
Focusing on the company’s pizza delivery niche and structuring advertising campaigns that made consumers recognize the company as a delivery specialist has helped Domino’s growth to skyrocket. The pizza maker now has more than 8,000 stores, both company-controlled and franchised, in 55 countries.
Growth goals
Brandon wants Domino’s to tackle growth like it’s a pizza-eating contest.
Lofty goals grab the attention of employees and make them think big. Interested, motivated employees bring energy to work every day and help ward off complacency.
“We have long-range goals that are formidable,” Brandon says. “People understand that where we want to get to aspirationally is a far cry from where we are today.”
Brandon recently clipped the ribbon on Domino’s 8,000th store. The next day, he says, he was back at the office, planning for the opening of a 10,000th store.
“Until we get that 10,000th store, we are not satisfied,” he says.
Brandon applies that same long-range thinking across the organizational board, setting lofty goals for sales and earnings, and expectations for employees.
“We put incentives in place to reward people for achieving those kinds of goals,” says Brandon. “We set a tone that doesn’t settle for incremental growth. We want transformational growth and change. To me, that’s leadership.”
Brandon says that to help set the tone for large-scale growth, he tries to overcommunicate with his employees and department heads.
“I try to engage in a lot of interactive practices that make me a CEO out among our organization and team,” he says. “I don’t want to be a CEO that’s kind of quarantined in a corner office.”
Brandon meets annually with Domino’s leadership from around the world, reviewing old objectives and setting new ones. He frequently meets with department heads to get their ideas and opinions about the company.
Quarterly, he gathers all Southest Michigan employees together for a session called “What’s Up, Domino’s?” The session is a large forum for employees to listen to management, communicate their own ideas and ask questions.
Brandon also conducts a monthly lunch meeting called “Lunch With Dave,” in which a computer randomly selects 12 Domino’s employees to have lunch with him.
“I listen to the things they’d like me to know about what’s happening out there in our company, right and wrong,” he says. “I learn a lot from that.”
Research results
For a company to stay on top, a CEO must be more than just a visible presence. Brandon says he or she must also be behind the scenes, repeatedly checking research data.
Feedback from employees is an important barometer for a business, but most decisions are influenced significantly by what the numbers say.
Brandon views analysis of research data among his most important jobs. Like many businesses, Domino’s compiles lists of data on customer satisfaction, product success, store growth and other variables. New products are tested in focus groups before they are sent to market.
The data helps Brandon formulate questions he wants to ask those under him.
“The questions I ask are typically dependent on what’s happening,” he says. “Once I’ve looked at all the metrics, I go to the leadership team responsible for that business unit and ask the right questions. ‘Have you identified what is going on here?’ ‘Are you aware that this particular number is changing?’ Those are intuitive, based on a knowledge of business.”
Brandon says a CEO must also not be afraid to ask the tough questions.
“It happens all the time,” he says. “We don’t live in a Utopia here in Ann Arbor. Weaknesses are uncovered. Sometimes you have to have the courage to ask the questions that force your leadership to face reality.”
It’s that method of research and questioning that led Domino’s away from submarine sandwiches and toward hot foods that better compliment the company’s pizza offerings.
Domino’s menu now features additional items such as breadsticks, cinnamon sticks and chicken wings.
“We don’t put anything on the menu unless we test it and find a consumer demand,” Brandon says. “We also balance those things with the items that fit our operational platform.”
Breadsticks and chicken wings are prepared using much of the same equipment that is used for pizza. All the items can be baked in the same oven and transported in similar packaging.
Selecting menu items with similar preparation requirements has allowed Domino’s to keep operations relatively simple for store owners and managers, which, in turn, allows them to get the product to the doors of customers faster.
“Our menu is efficient enough that we can operate with speed in the store and within the operational capacity of the store but yet offer a lot of variety to our customers,” he says.
Parting advice
Brandon’s advice to other CEOs centers primarily on two principles: Work hard, and stay focused on your area of expertise.
“Remember what you are good at, what your competitive advantage is and continue to build on that,” he says.
Brandon says there are many cases of business leaders who bought their own hype, and it was their company’s undoing.
“There have been a number of companies out there who reach the top of their industry, and pretty soon they start to think they are better than they are,” he says. “They start to believe that because they are successful at one thing, they can run off and do something else.”
Those companies are the ones ripe for a fall.
“A lot of times, the way they get dethroned from their leadership position is that they lose focus, get kind of fat, dumb and happy, and some more aggressive, hungrier competitor gets in the passing lane and goes past them.”
For Brandon, a former University of Michigan football player, a constant competitive edge is a must in the business world.
Whether it’s a group of executives poring over research figures in a board room, or a store manager taking an order from a customer, Brandon says the goal is to keep working to make Domino’s an efficient outfit that is constantly trying to get better and even more efficient.
“We are proud of what we have accomplished, but there is a lot more we want to achieve,” he says.
HOW TO REACH: Domino’s Pizza, www.dominos.com
