The Secret Behind Domino's Epic Turnaround

Over the last decade, one company has put on a master class in reengineering a business and divinghead first into the digital age. 

That company is Domino's Pizza (NYSE: DPZ)

In this video from our YouTube channel, we explain how Domino's changed its recipes, rebranded itself, and went full omnichannel -- and how its stock has soared as a result.

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Host: In an era where tech stocks have dominated headlines and seemingly every adjacent industry, you might be surprised to learn that over the past 10 years, a chain started in the 1960s has put up returns that absolutely crush those from the likes of Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL).

The company: Domino's Pizza.

In this video we're going inside Domino's to explore how a nearly 50 year old company reinvented itself and put up monster results in the process. 

To start, we're going to order a pizza from Domino's because we're at Fool HQ in the game room, and we're hungry. 

Okay, our pizza is on the way, on with the show.

The life of Domino's the publicly traded company only began in 2004 and in the 6 years that followed, the company put up pretty uninspiring results. 

Looking at the company's restated financials, the business posted $1.5 billion in sales in 2004. After years of low year-over-year growth or (mostly) declines, the company's top line fell to $1.4 billion in 2009.

That coincided with the financial crisis, but it also happened at the same time that Domino's tied for last in a consumer taste survey of national chains completed by Brand Keys. 

The company it tied with? Fellow pizza purveyor Chuck E. Cheese. 

Hitting rock bottom forced Domino's to take a hard look at what they were doing and how they were doing it. 

Specifically, this guy took a look at what the company was doing, and didn't like what he saw. This is Russell Weiner, then Domino's Chief Marketing Officer.

As a college student, Weiner loved Domino's, but as he got older his tastes changed and suddenly their pizza didn't seem so appealing 

Rather than put lipstick on the pig that was Domino's pizza, he and the folks at ad agency Crispin Porter had another idea. 

Let's own the fact that our pizza isn't great, and commit to totally overhauling how we make it.

Here's what they had in mind....

It was an approach that Ad Age later called "Radical Authenticity" and it resonated with consumers that had grown sick of half-hearted apologies from major institutions like banks after the great recession. 

Then CEO Dave Brandon green lit the idea and then handed chief executive responsibilities to this guy -- J. Patrick Doyle. 

Doyle and team had a reconfigured recipe that consumers seemed to love

But he and his team did not stop there. 

Encouraged by the early appreciation for Domino's online pizza tracker in 2008, the company dove headfirst into digital. 

Speaking of, let's see where our pizza is at... 

Okay, we've still got time. 

Under Doyle, Domino's went full omnichannel -- that's retail slang for basically having a presence anywhere that customers could possibly want to order your product. 

In fact, they even went beyond conventional omnichannel, giving people the ability to order pizza online, within the Domino's app, but also by Tweeting, via Facebook (NASDAQ: FB) Messenger, or using digital assistants like Amazon's Alexa-enabled devices.

Some of these are more buzz than substance, but they're all geared toward the same thing, making it as easy and frictionless as possible for people to order from Domino's AND pushing more of Domino's sales into digital. 

In 2009, 20% of Domino's sales were happening online... By 2018, that figure was up to 65%. More digital ordering means more rich data collection for Domino's, and the ability to push more users to its loyalty program efforts.

Online sales also give the company the opportunity to push combos and add-ons like Parmesan Bread Bites, or bottle of soda, or desserts like lava crunch cakes, and all those things help boost average ticket, which means more money for Domino's.

Let's go back to the game-tape on me ordering this pizza -- you can see as I check out, I'm getting hit with tons of different ways to add to my order. 

As Domino's began its omnichannel onslaught, it also continued with its quirky marketing messages and efforts to build customer loyalty. 

It ran ads showing all the tricks and manipulations that go into a food advertising shoot and ran the "Show Us Your Pizza" campaign -- asking Domino's customers to post pictures of the pizzas that were delivered to their door. 

Not all the photos were winners -- some showed mishaps most companies wouldn't be proud of. But Doyle appeared in ad spots owning the mistakes and the company reached out to dissatisfied customers. 

All these furthered Domino's authentic approach to marketing and customer service and positioned the company as an innovative business. 

In later campaigns, Domino's pointed out that potholes in local roads could cause pizzas to be damaged and led them to launch the "Paving for Pizza" campaign, where the company is asking customers to report bad roads in their hometowns so the company can send a crew to repair them and prevent them from ruining good pizza. 

Beyond all the incredible engagement with its followers, these kinds of campaigns have essentially given Domino's free marketing as outlets everywhere have covered them.

Domino's product improvements, intense focus on customer satisfaction, and order pizza any way you want approach has led to HUGE growth for the business. 

The company has gone from just under 9,000 stores in 2009 to over 16,000 as of mid-2019. and about two-thirds of those stores are outside the United States -- proving folks abroad like the new-look Domino's too

Over the same time, the company's revenue has ballooned from $1.4 billion to $3.5 billion and the company's net income has nearly 5x'd. 

And shares of Domino's have followed suit -- they're up over 2,500% over the past 10 years. 

The company has provided the modern blueprint for how to rebrand a struggling business, and is a best-in-class example of how conventional consumer goods companies can transform their businesses by putting technology first.

Patrick Doyle left the company as CEO at the end of 2018, but Russell Weiner is still at the company, now serving as Chief Operating Officer. 

If the company's recent post for a Chief Garlic Bread Taste Tester is any indication, the antics that made them successful aren't going away anytime soon. 

10 stocks we like better than Domino's Pizza
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Austin Morgan owns shares of Amazon and Facebook. Dylan Lewis owns shares of Amazon, Apple, and Facebook. The Motley Fool owns shares of and recommends Amazon, Apple, Facebook, and Twitter and recommends the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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