"While people still think of us as the delivery guys, the reality is that one-third of our business is done on-premise," explained Domino's CEO Patrick Doyle in an interview with TheStreet. To start reversing consumer perception -- and boosting sales in the process -- Doyle hinted Domino's is likely to better leverage its reams of data it's collecting from mobile users.
For example, imagine walking into a Domino's and getting an alert from the company's app to try a new product at a discount.
But hey, it's not like being the delivery guys hasn't worked out quite well for Domino's.
Domino's is still fresh off serving up one of the most mind-blowing earnings reports in the fast-food space last year. The pizza joint's third-quarter U.S. same-store sales surged 13% from the prior year, marking the 22nd straight quarter of gains. Earnings spiked 43.3% year over year to 96 cents a share, surpassing analysts' estimates of 90 cents.
For Domino's, its strong quarter -- against a backdrop of sluggish spending on fast food due to people eating more at home amid falling supermarket prices -- could be boiled down to several reasons.
First is a relentless focus on making pizza easier to order on mobile devices. The company now gets over 50% of its U.S. sales done via mobile devices. Toss in building momentum behind Domino's loyalty program, launched nationally late last year, and it's pretty easy to understand how the pizza chain has baked savor results for investors.
Not to mention a sizzling stock price: Domino's stock has surged about 51% to $166 over the past year, trouncing the S&P 500's 17% gain. McDonald's (MCD - Get Report) stock (Mickey D's still has no mobile ordering app, but is rumored to be nearing a launch) has risen a meager 2% over that same span, while Pizza Hut owner Yum! Brands (YUM - Get Report) has tacked on 29%.
TheStreet talked with Doyle about what lays ahead for Domino's in the coming year as well as broader discussion on the U.S. economy. What follows is a condensed and edited version of our conversation.
Domino's CEO Patrick Doyle has made running a restaurant chain look ridiculously easy.
TheStreet: Domino's has dominated the pizza space with its mobile ordering technology, from ordering food via a smartphone to ordering it through Twitter. What is the next frontier for the company, what could you possibly have left to do here?
Doyle: We have rolled out a lot of platforms, giving them access to the brand largely off site. It has really been about ordering when you aren't in a Domino's. Clearly voice ordering we got right, as the whole world is moving toward. But there is a lot you can do with the data we are compiling. Frankly, once you have people on your digital ordering platform getting them there is great, but what you do once they are there is even more interesting.
A lot of working being here on that. I think the new loyalty program is the best example of that. Additionally, largely what you have seen from us in terms of digital innovation is for off-premise, not a lot has been so far for when people go into the stores. While people still think of us as the delivery guys, the reality is that one-third of our business is done on-premise. We haven;t done a lot on that front yet, so there is a real opportunity there to give people a better experience in our stores.
TheStreet: How realistic is Domino's delivering pizzas via drones?
Doyle: The real answer on delivery, such as drones, is that we have to be looking at all forms of delivery. Things are evolving, and this isn't the place where the right answer is to decide it's only going to be drones or autonomous vehicles. You have to be trying things, understanding the pros and cons and how things are going to evolve.
Given our expertise around delivery, clearly it's an area where we have to make sure we are leading.
TheStreet: So what we have seen so far with pizzas being carried with drones isn't just a marketing stunt? Domino's could conceivably see a day where this actually happens?
Doyle: I can't tell you for certain what delivery is going to look like five or ten years from now, but what I can tell you is that Domino's is going to make sure that we are understanding things as it evolves so we can take advantage.
Secret recipe for Domino's success: all things digital ordering.
Doyle: How you define artificial intelligence is interesting. We already have algorithms at work that help us being more efficient. They drive up-sells, so there is a lot of work we can do there.
TheStreet: Is your tech team now the most important group inside the company?
Doyle: No, the most important people at Domino's are the people that deliver the pizzas to our customers and run the stores. But technology is certainly an area where we have invested heavily.
TheStreet: Domino's was out in front with ordering pizza by car info-tainment systems, but we haven't heard much from you on that front since. Fresh off the Consumer Electronics Show last week where connected cars were all the rage, any update on this front?
Doyle: That's all part of what we are looking at. Just like drones, we have got to be looking at these connected vehicles and understanding how those are going to play into our business model going forward. No updates yet, but we understand this type of ordering through cars will be disruptive and also a big opportunity.
TheStreet: President-elect Trump's controversial nominee in Hardee's CEO Andrew Puzder as Labor Secretary, you say?
Doyle: I know Andy, and obviously he knows our industry well. I think having in there that knows our industry has to be a positive for us. Obviously, there is a lot going on right now. But wherever things land, we are going to be listening and engaged. We look at tax reform and what not, and clearly there are big changes coming.
At its current pace of innovation, Domino's could be delivering by robot motorcycle soon.
TheStreet: All we have heard so far about the minimum wage hikes that kicked in this month is that they are restaurant killers. But might they be good as people have more money to spend on things such as fast food?
Doyle: The good news right now when it comes to minimum wage is that you have an economy where the unemployment rate is pretty low. What we think about more than anything else is that employed people buy more pizza than unemployed people. It's not simply because they have money in their pocket, but there is a longer term trend still going on in the restaurant industry. That is the labor force participation rate from the 1960s to about 2000 continued to go up, but that was largely due to women coming into the workplace.
More recently, the labor force participation rate has been flat to down. And what has driven the restaurant industry for decades was more people who were working outside of the home. They had no time to cook. So bringing this back to minimum wage, wages going up because the market is up is a good thing. If minimum wage were to hurt employment, I would get worried.
TheStreet: Is it still hard for a fast-food restaurant to get good talent right now? Walmart's (WMT - Get Report) wage increases -- and in other industries -- last year has to be making things tougher.
Doyle: Competition is absolutely still intense. I wouldn't call it a shortage, but I would say certainly there is more competition for good people to work in our restaurants than we saw five years ago. That's a positive.
TheStreet: Are franchisees being more hesitant to open more locations due to the minimum wage increases, and those set to kick in over the next five years?
Doyle: No. If you look at our numbers, our store growth has been continuing to go up over the past five years. That is ultimately the measure of optimism in the business and economy.