Was Patrick Doyle shocked at the thought of publicly admitting that some people didn’t like Domino’s pizza? “Oh, sure,” the company’s CEO says. “First time around? Absolutely.”
But in 2009, Domino’s was struggling. When the company went public in 2004, its stock had sold for $13.90 a share. It hovered in the $20-$30 range in the next few years but fell below the offering price in 2007. And in November 2008, it hit rock bottom, closing at $2.52.
Jonathan Maze, senior editor of Nation’s Restaurant News, says that the stock hit an “artificial valley” due to the Great Recession–but that the company’s troubles at the time can’t be overstated.
“They were in terrible shape,” Maze says. “They were not expanding in the U.S. at all … They had a very difficult relationship with franchisees.”
Doyle, who then headed the company’s U.S. operations, says it was clear that Domino’s needed to do something different. “Marketing 101 is you know your point of differentiation”–what makes you distinct from the competition–“and you stick to [that] in all of your communications and your strategy,” he says. “Our point of differentiation was, ‘We’ll bring you your food and we’ll do it reliably and quickly.’
“We always knew we had issues with perceptions of the quality of our food in consumers’ minds, but we were being disciplined and saying, ‘Look, as long as we drive our point of differentiation we’re going to be able to continue to grow this business.’ And fundamentally it stopped working.”
Well over six feet tall and wearing a well-cut suit, Doyle seems imposing, but his manner is warm and folksy, a smile never far from his lips. In his office on the second floor of Domino’s Farms, he’s on the edge of his seat as he retells the story of the company’s daring turnaround.
In 2008, Doyle and then-CEO Dave Brandon decided to reformulate Domino’s pizza recipe. “That was clearly not a decision that one of us was going to make on our own,” Doyle says. “We had to be pretty aligned around that.”
Over the next year, the company reworked every element of its recipe–crust, sauce, and topping. By late 2009, Domino’s was ready to roll out its “New and Inspired Pizza.” That was when new chief marketing officer Russell Weiner suggested admitting why it was needed.
After the shock wore off, Doyle gave the okay. Weiner developed a series of TV commercials in which focus group participants bad-mouthed the old recipe–“worst excuse for pizza I’ve ever had,” said one–and Doyle and other execs admitted how lame the old pizza was.
Ann Arbor franchisee David Cesarini says the admission initially worried him, too. “Where do you go from there?” he remembers wondering. If “New and Inspired Pizza” flopped, “that could have really spiraled in the opposite direction.”
The company planned a one-two advertising punch: admit the subpar quality of the old pizza, then follow up with ads touting the new recipe. But, Doyle says, “the fascinating part was that second part never ran.
“We went out with the first part, and our sales were up double digits the first week,” he says. “The news changed people’s minds. They were willing to go out and try it. They said, ‘If somebody’s as willing to go out and say this and own this as bluntly as these folks did, we’re going to at least give them the benefit of the doubt and try it and then pass judgment.'”
Cesarini says his sales hit “record levels” immediately after the campaign �xADdebuted–and haven’t stopped climbing yet. “You know it worked,” he says, “because this is my sixth record year in customer growth.”
The new pizza debuted in December 2009, and Doyle took over the CEO’s job a few months later. (Brandon remains chair of Domino’s board, but after a contentious tenure as U-M athletic director is now CEO of Toys R Us.) Under Doyle, the company has experienced what Cesarini describes as “sustained, explosive growth.”
Since New and Inspired Pizza debuted, U.S. sales per store have grown 37 percent. Domino’s has also opened nearly 3,500 new stores, more than 90 percent of them outside the U.S.
Last year global sales hit $9.9 billion, up 60 percent from 2010. And in mid-April the company’s stock price was sitting pretty at $136. Maze notes that anyone bold enough to have purchased $1,000 worth of Domino’s stock at its 2008 low would now be more than $50,000 richer.
Doyle, too, got rich from the company’s turnaround, earning $43 million from 2011 through 2013. Though most of that money came from options on the skyrocketing stock, in 2014 several pension funds tried unsuccessfully to unseat the director who heads the board’s compensation committee. Bloomberg, the business news bible, puts Doyle’s total compensation last year at almost $9 million.
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Raised in Midland, Doyle earned a U-M bachelor’s in economics followed by an MBA from the University of Chicago. He was running Gerber’s baby-food business when Domino’s hired him as senior VP of marketing in 1997.
Doyle arrived just before founder Tom Monaghan sold a controlling stake in the company to Bain Capital. Back then, he says, Domino’s was a “classic, founder-led entrepreneurial company,” he says, built around a single idea: speedy delivery.
“Tom Mon-aghan kept things very simple and very focused, and that’s the way our stores ran,” recalls Cesarini, who worked at headquarters for twelve years before buying his first franchise in 2002. “We didn’t have menu expansion. It was all about being exceptional at delivery service.”
Management was simple, too. “We didn’t have a head of human resources,” Doyle recalls. “The person who ran human resources–it was fundamentally a payroll function here–reported to the person who ran IT, and that person reported to the CFO. HR was a function of paying people, as opposed to starting to look at future needs and strategic needs.”
Doyle says the company went through a “big, big change” with the shift to Bain ownership, particularly after Dave Brandon began “professionalizing” the organization when he began his tenure as CEO in 1999. Doyle says Brandon recruited talent already skilled in the pizza business, as opposed to the many executives who had “found their way” into the business under Monaghan’s tenure. The company also added new pizza varieties and chicken wings.
When Domino’s went public in 2004, Doyle says, it didn’t really change much for the business. (“If a company goes public and it really does [change], I would argue that something has gone wrong,” he says.) But then sales went flat. “We weren’t keeping up with the times,” Cesarini says.
In addition to reinventing its pizza, since 2008 Domino’s has added baked subs, pasta, and desserts to its menu. And now Doyle is deep into Domino’s next revolution: leading the charge into e-commerce.
The company first dabbled in online ordering during the dial-up era of the late ’90s and fully rolled out the feature in the mid-2000s. Today, Doyle says, Domino’s is “fundamentally now as much an e-commerce company as we are a pizza company.” Its business is still founded on providing quality pizza either by delivery or carryout, but “the front end of that relationship now is the same as the front end of a relationship with Amazon or with eBay or with Zappos or anyone else online,” Doyle says. “We have to approach our business that way.”
Doyle says about half the nearly 700 employees at Domino’s headquarters now work in technology, and he describes an “aggressive” approach to offering customers a convenient way to order on any digital device, from an Apple Watch to Amazon’s voice-activated Echo.
Making that work involves not only developing a robust online ordering system but also looking further down the road to new technological trends. Domino’s rolled out “Dom,” its voice-ordering feature, in 2014. Like Echo’s Alexa virtual assistant, Dom takes users’ spoken orders from a smartphone.
“I’m convinced that we’re all going to look back even ten years from now, not that far out into the future, at the days when we were walking around with these little devices and thumbing things into them, and say, ‘Wow, what a really awful interface that is with technology,'” Doyle says. “It’s not natural. It’s not easy.”
Amazon’s continued expansion of Alexa’s capabilities reinforces Doyle’s conviction that voice activation is the next big thing in technology. He says Domino’s has “a very significant investment in doing it, in doing it right, in being leaders in the space and not [just] leaders in the space for restaurant companies–we want to be a leader in the space, period, full stop.”
Not everyone is so sure that the future lies in technology. Since Monaghan’s day, Domino’s has battled another southeast Michigan pizza giant, Little Caesars. Still owned by the founding Ilitch family (including Denise Ilitch, a U-M regent), Little Caesars has also displayed remarkable growth in recent years with a strategy almost the exact opposite of Domino’s. The chain’s “$5 Hot-N-Ready” campaign emphasizes unfussy, low-cost pizza that’s ready when you walk in, whether you’ve called ahead or not.
Little Caesars doesn’t even offer online ordering, let alone an app, and last year CEO David Scrivano said the chain had no plans to create one, describing a technological interface with the company as a “burden on customers.” “The overarching thing that both Little Caesars and Domino’s have done in recent years is make it more convenient and easy to get your pizza,” says NRN’s Maze. “They just have two very different directions of doing it.”
Little Caesars boasts that it’s the “fastest-growing” pizza maker, with sales up more than 150 percent between 2010 and 2015. But last year, Domino’s outsold it more than two-to-one.
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Having reignited Domino’s flagship product and redirected the company’s energy towards the online world, Doyle is now focused on “re-imaging” all of Domino’s stores. “There’s still a lot of stores that you go into and they don’t look great,” he says bluntly. “It’s not a great experience.”
Despite the shift into e-commerce, plenty of customers are still coming into Domino’s stores. The company now takes the majority of its domestic orders online, and about two-thirds choose delivery–but the overall percentage of carryout orders has actually crept up.
So in 2014 Domino’s announced that it would refit all its restaurants worldwide–there are now more than 12,000–with a design the chain dubbed “Pizza Theater.” For an example of Domino’s new look, Doyle points to David Cesarini’s Traver Village store. It replaced an older location in Plymouth Mall that, Doyle says, “had a lot going for it–other than the fact that it was really ugly.”
The new upgrade sports a variety of design elements, but the most dramatic change is that the kitchen is now open, with food made in full view of the customer. Doyle says open kitchens caught on long ago in traditional restaurants, but “quick-service restaurants took a lot longer to realize that people want to see the food.” “We start with a fresh dough ball when we’re making our pizza,” he says. “It is handcrafted food. And for some reason we were hiding that. It was behind a big wall where no one could see it.”
Doyle isn’t satisfied with changing just the stores’ appearance. He says the company has “got to get better at hospitality” too. He traces that problem, too, back to the days when Domino’s sold itself solely on speedy delivery, putting little thought into customers’ in-store experience. “Are they really feeling welcome when they walk into the store?” Doyle asks. “Are they feeling valued as a customer? Are they greeted, ideally, by name?”
He’s continuing to rethink other aspects of Domino’s business. While the company has shown remarkable growth, it still trails Pizza Hut in store count and sales. With 19 percent of the domestic pizza market and an estimated 8 percent globally, Domino’s is in second place, but “in the grand scheme of things we’re still pretty small,” Doyle says. And at fifty-two, he himself is “still young.”
“There is a lot of room for Domino’s to continue to grow,” he says, “and I’m going to be part of it for as long as they’ll keep me around here.”
