Why Domino's Pizza Will Never Be Great Again
Two-and-a-half hours later, my cold -- yet free -- pizza arrived. This is the way my Domino's Pizza (DPZ) horror story ends. Now let's rewind it 180 minutes.
I was heartbroken over the Philadelphia Eagles crushing my Miami Dolphins on Sunday. My eldest son and I had just returned from the game. It was 6 p.m., and "What's for dinner?" echoed through the living room.
Having recently joined ShopRunner, an online premium shipping service that inexplicably includes free Domino's delivery, I figured that pizza was a good call.
I go through the usual drill. I check the Dominos.com specials. I scour RetailMeNot.com for any additional coupon codes. I order online.
So far, so great.
The Domino's "Pizza Tracker" pops up as my order is confirmed, letting me know that Adam is diligently preparing my pizza. It's a virtual order-tracking app that Domino's rolled out three years ago. An email alerts me that my estimated delivery time is 24 to 34 minutes. I go about my business. The kids are getting hungry. NFL's Red Zone is jumping around the late games.
The Pizza Tracker appears to freeze at 6:31 p.m., during the next-to-last step. Adam's boxing up my freshly baked order, and all that's left is for the "delivery expert" to bring it home. It's 6:45 p.m. It's 7 p.m. It's 7:15 p.m. Something's not right.
I dial up the local store's phone number. The call's not going through. On my sixth try someone finally answers. I'm calling the actual store, but it's not the one fielding my call. It's a localized call center. I explain what's happening. They try to reach the store directly. Every five minutes they come back on to let me know that they haven't been able to get through. They don't have any more information than what I have on my virtual pizza tracker.
This goes on for 20 minutes, until they realize that we're going in circles. They ask me to call the number again in a few minutes. If a message explains that my call may be recorded I should hang up because it means that it got forwarded to the call center again. Any complaints or credit requests will have to wait until the Ann Arbor center opens on Monday.
It's now 7:45 p.m. and this "first-world problem" has become a quandary. The kids who were a little hungry are now ravenous. I'm ready to fire up the grill or head to the nearest drive-thru, but what if a "delivery expert" shows up at my door?
I do what I should have done earlier. I drive to the store. I need answers. If my pizza's been sitting there since 6:31 p.m., I'll either bring it home if it's free or cancel it altogether. It's been nearly two hours. I speak to the manager.
He asks if I have someone at home because a driver already left with my order. He lets me know that I won't have to pay for it. I call my wife, reminding her to tip the driver if he gets there before I do. I've been in the service industry. I know it's not easy.
I get home, and an incredible 40 minutes after leaving Domino's, the driver shows up.
Two and a half hours later, my cold -- yet free -- pizza arrived.
Kneading the Dough
This isn't a knock on my particular store. I have been ordering from it about every other month for years without a fail like this past weekend's. However, it's painfully obvious that the Domino's Pizza system isn't built to deal for moments when things go wrong, as they inevitably will.
The store manager told me that they were backed up by two hours. Why did the email tell me that it would be closer to half an hour for my order placed two hours earlier? Once it became apparent that the order would be substantially late, why can't an automated email or even a phone call let me know? You have my number, right? Why don't stores have a second direct line for the call centers, or at least the wireless numbers of the managers on duty to get to the bottom of these extreme lapses? Why was my pizza so darn cold, when it should have been made closer to the time when a driver would be available?
Dominos is Doing Great! At least According to the Numbers
The irony here is that shares of Domino's hit a new 52-week high this week. The stock has more than doubled this year. Domino's has beaten Wall Street's profit targets for three consecutive quarters, and analyst projections keep inching higher. During the week after Thanksgiving, Domino's topped a million orders placed online and through its mobile app for the first time in its history.
The numbers say that Domino's is getting better. Am I going to let a negative experience cloud my judgment when the financials tell a meatier story?
Eying a five-year chart isn't just a historical glimpse. It's a fashion statement, as long as you fancy V-necks. Holy decolletage! The last time that Domino's traded nearly this high was a little over four years ago. A year later the stock had fallen all the way down to $2.61.
I don't foresee a similar stumble, but it's important to remember that pizza delivery has always been victimized -- when you least expect it -- with commodity price spikes, cutthroat competitor pricing, and cascading share prices.
The same company that's coming off three consecutive quarters of market-thumping results had a five-quarter run of negative surprises during its recessionary downturn.
Papa John's (PZZA) and Pizza Hut parent Yum! Brands (YUM) also slipped during the recession, but their charts show more stable performers. No plunging necklines here!
One could argue that Domino's historically has bounced back even better than the competition. The company that dared to issue commercials a couple of years ago claiming that its pizza wasn't good enough has turned heads with its innovative pasta bowls and artisan pizzas.
Valuation hounds won't be happy once they view the stock from this week's summit. The shares are trading at a lofty 21 times this year's projected earnings and more than 18 times next year's forecast profitability. These are steep multiples for a company whose revenue is pegged to grow by less than 6% this year and less than 4% come 2012.
We've been here before. We know what happened last time.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Yum! Brands, Papa John's International, and Domino's Pizza. Motley Fool newsletter services have recommended buying shares of Yum! Brands.