In a recent interview with Bloomberg, Domino’s CEO Russell Weiner expressed his views on the current state of the fast-food industry, particularly focusing on the value meals offered by competitors this summer. He criticized the size and effectiveness of these meals, which often include smaller burgers, arguing that they fail to genuinely satisfy customers. Weiner’s remarks come at a time when many fast-food companies are experiencing a slowdown in spending due to inflation, yet Domino’s has seen a rise in order growth, underscoring the success of its strategic decisions.
Domino’s stock performance this year reflects its resilience and strategic acumen, with the stock appreciating by 3% year-to-date. This stands in stark contrast to the declines seen by its competitors: Wendy’s, McDonald’s, and Burger King. Specifically, Wendy’s and McDonald’s have both experienced a 14% slide from the beginning of the year, while Burger King’s parent company, Restaurant Brands International, has fallen by 9% during the same period.
Weiner’s criticism centered on the approach of offering smaller, discounted items as a way to attract customers. He argued that this strategy is flawed because it offers limited value on a few items while the rest of the menu remains expensive, ultimately failing to make customers happy. In contrast, Domino’s opted for a more comprehensive approach by providing discounts across a broader range of their menu. This strategy, according to Weiner, has been more effective in resonating with consumers. An example of this approach is Domino’s $6.99 meal deal, which allows customers to choose any two items, including pizzas and cheesy breads, thereby offering substantial value.
This broader discount strategy has resulted in increased orders from all income groups, as reported in Domino’s second-quarter earnings. The company’s decision to offer wider discounts, rather than limited promotions like its competitors, has driven both repeat business from regular customers and new orders from first-time customers. Additionally, Weiner noted that Domino’s has raised prices less aggressively than its competitors over the past few years, which has likely contributed to maintaining customer loyalty and driving order growth.
The competitive landscape this summer has seen nearly every major fast-food chain introducing value meals to attract price-sensitive customers. Wendy’s, Burger King, and Taco Bell have all launched meal deals under $7. McDonald’s, a pioneer in value meals with its $5 bundle, has extended its offer until August. McDonald’s $5 meal includes options like the McChicken or McDouble, four-piece McNuggets, fries, and a small drink, which has been a significant draw for customers.
Despite the intense competition and varying promotional strategies, Domino’s stock performance has outpaced that of its peers. This relative stock performance highlights the effectiveness of Domino’s value strategy in a challenging market. The company’s broader discount offerings and a more measured approach to price increases have likely contributed to this success.
However, not all news is positive for Domino’s. The company’s shares dropped by 14% on July 18 following an earnings report that included the announcement of plans to close about 100 stores in Japan and France operated by its international franchisee. This development reflects the complexities and challenges of maintaining growth and profitability in diverse international markets. The closures indicate that even successful strategies need constant adaptation and fine-tuning in response to market dynamics and operational realities.
Weiner’s comments and the company’s strategic moves underline a significant point: in a competitive and inflation-sensitive market, offering genuine value across a wide range of products can be a decisive factor in attracting and retaining customers. Domino’s broader discount strategy, combined with a more measured approach to price increases, appears to have positioned it favorably compared to its fast-food rivals. As the industry navigates through economic challenges, Domino’s focus on value and customer satisfaction may continue to drive its growth and differentiate it in a crowded marketplace.