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
[...] In the first case, this is due to standardization, and in the second case, these results reflect the premium positioning / luxury products. In the case of France and Australia, the scores of restaurants in this country have declined between 1993 and 1996. That said, it may be noted that inspectors are local inspectors who can give advice based on their different standards. We saw that it was necessary that the master franchisee uses the basic methods provided by Domino's Pizza (information system, personnel training, local optimization) to ensure quality standards. [...]
[...] The price of pizza is a key factor of success or failure depending on the country. Compared to the base 100 of the United States, there are two countries that have a higher position and the model is sustainable. Firstly, Japan, whose sales prices are explained by the high-end / luxury positioning decided by the master franchisee, and secondly France who also has a higher position. The premium positioning in Spain, the Czech Republic and Germany may explain the failure in these markets. [...]
[...] Conversely, implementation seems doomed to failure. Moreover, the will of the local franchisee is not enough. It must meet a number of basic precepts, proven over many years on the market history, namely SI, quality. However, Domino's has chosen to leave franchisees to decide how to use "tools "offered by Domino's, which we believe can lead to notable failures. The success of a franchise of Domino's overseas thus results in the combination: use of basic precepts and local adaptation. [...]
[...] This share is the lowest worldwide. In the second step, we distinguish two categories of countries: - Those who have a share of fixed costs of around the majority of countries. - Those who are around that is to say, Australia and France in their infancy, the Czech Republic and Germany. We find that countries where Domino's has not been able to impose fixed costs are ranked very high. To analyze this, we study the composition of fixed costs in detail. [...]
[...] Leaving some liberties to its franchisees allows Domino's to not bear all risks for failure, as it turns out that it is the master franchisees who take more risks in such a situation. Market penetration with master proven franchisees: The history of the company Domino's Pizza brings us to the realization that the successful implementation of DP in a country depends on the choice of a master franchisee who is very familiar with the local market, and is taking steps to adapt the model to local specificities. [...]
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