Dominos pizza - Failures and key success factors
With beginning of the year 1960, the pizza pie registered such an obsession in the USA that many specialized chains were created in order to answer the requests. The first Dominos Pizza opened in 1960 in the State of Michigan. In order to meet the needs of its customers, the students of the University of Michigan, its creator decided to deliver the pizza pies to residences.
The success of the delivery to residences was not contradicted and allowed Domino's to give rise to many other restaurants throughout the United States. In addition, Domino's does not cease in innovating while proposing, since the 1980s, new types of pastes with Pizza (Side, Twisty), and is the first to propose the delivery drink and dessert accompanying the pizza pie (Coca-Cola and Haagen-Dazs ices).
Today, Dominos Pizza, world leader in the delivery of pizza to residences with more than 9 million pizza pies delivered each week throughout the world, is an international chain present in 55 countries and which counts more than 9,000 sales outlets. Its world turnover in 2009 amounted to 1.4 billion dollars, for a benefit after taxes of 79.74 million dollars.
Our study relates to the factors which explain the successes and the failures of Dominos Pizza since its first establishment abroad in 1983. Why did this company at the same time gain adhesion in certain countries, and know strong losses in others?
To do this, we identified several key success factors that enabled Domino's Pizza succeed in setting up overseas. Unlike the implantation, failures result from a failure to take into account some of these factors: choosing a suitable local franchisee partner; using the basic model and methods of Domino's: if, training, cost control and process, quality; consideration of local culture by adapting the basic model; installation to understand the gradual development of market outlets; competitive advantage; know how to reposition and policy change, be prepared to support a pay-back on a "long period".
Domino's Pizza is located outside the U.S. since 1983 and established its first outlets in Canada and Australia. The company used it for different strategies. In most cases, it turns out that Domino's has chosen not to join a market directly, but through franchises which is the operating principle of the master franchisee.
In 1995, Domino's only managed 700 points of its own sales, whereas 4000 were managed by franchise restaurants. The master franchisees correspond to firms or individuals themselves responsible for developing the brand in their country. This master franchisee must purchase the right to use the mark for each new point of sale ($ 5,000) and pay an annual fee (royalty) at 5.5% of turnover. Moreover, the costs of construction and development of the restaurant are the responsibility of the franchisee and average about 120,000 euro in the USA.
Other units, the master franchisee may, in turn, sell sub-franchises, which entitles local entrepreneurs to create new outlets. Sub-franchises pay 5.5% of their turnover in royalties to the master franchisee, who himself pays 3% royalty to Domino's.
The Master Franchisees are bound by contract to Domino's Pizza to strict conditions regarding compliance with quality standards of society. However, Domino's Pizza also chose to give them some freedom of local leadership, it allows them to measure and mitigate the degree of adaptability of the product and concept in the country.
Tags: Domino's Pizza, history of Domino's Pizza, failures and key success factors of Domino's Pizza