NEW YORK (TheStreet) -- Fast-food pizza is still a relatively new concept among China's billion-plus residents but that could be changing very soon as pizza operators -- and Domino's (DPZ) - Get Domino's Pizza, Inc. Report in particular -- seek to overcome some major obstacles there.
"One challenge was they (Chinese) wanted to sit in a restaurant if they were going to pay money for a prepared meal. They wanted to come in and sit down, and that wasn't our model," explained Domino's Pizza President and CEO J. Patrick Doyle in an interview with TheStreet. Another problem is cheeseis not traditionally a part of the Chinese diet, with many Chinese being lactose-intolerant.
If the Chinese do go on to embrace pizza the same way Westerners have, it could open a huge growth opportunity for these players, particularly as the U.S. market reaches saturation. On a recent conference call, Domino's said it could only see the U.S. supporting an additional 1,000 or so locations, meaning growth will have to come internationally.
Most of the major fast-food pizza companies already have many outlets in all the major U.S. markets, so current franchisees opening up new sites may just end up cannibalizingsales longer term. Furthermore, the franchise model itself is under attack from labor groups in the U.S., who assert food chain operators should be considered as a joint employer along with their individual franchisees.
Franchising is "too big and an important part of the U.S. economy, and I don't think you will see dramatic changes," said Doyle.
Domino's and its peers are also likely peering over their shoulders at upstart "better pizza" chains such as Blaze Pizza and Chipotle (CMG) - Get Chipotle Mexican Grill, Inc. Report-backed Pizzeria Locale. Both chains have caught the attention of investors as long-term threats to the established fast-food pizza players, in part due to more inviting restaurant layouts and unique menus with a healthier twist.
But Domino's isn't sitting back idly and has moved to enhance the design of its restaurants to improve the perception of its pizza quality while also re-examining its menu. "We completely re-did our food five years ago. We're opening up our kitchens right now, we're in the process of 'reimaging' all our stores making it a better environment -- and we're fast," said Doyle.
Doyle also believes Domino's advances on the tech front, such as the ability to order the chain's menu from smartwatches and smart TVs, are a competitive advantage he has over the new crop of fast casual pizza chains that may lack the capital to develop such innovation.
Domino's has completed 1,000 redesigns in the U.S. into what it calls it's "Pizza Theater" concept -- which allows people to view their pizza being made -- and sleeker-looking signage. The company plans to redesign another 1,000 stores in 2015.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.