Did you know that Domino’s carryout service is 45% of their total US orders? Dominos is incentivizing its customers to use carryout service as it is more profitable then delivery mainly due to high costs and competition from third party delivery apps. Domino’s is expanding its store footprint to get closer to customers, which is designed to shrink delivery times and save costs. The belief is that as 3rd party delivery apps continue to shrink margins for food operators, companies will eventually need to pass the cost for delivery back onto the consumer. The CEO of Dominos Richard Allison is quoted with this analogy “If you offer to mow my lawn for free, I’m going to say, yes. When you come and charge me for it, I might just go out there and push the mower around myself.”
The convenience of food delivery is no doubt a luxury! It is a service of which many consumers prefer but necessary don’t always want to pay for its cost. As this trend continues, expect some shake out and change as to how end users, consumers and 3rd party delivery companies approach this service. The cost of delivery is not going away it is just a matter of who pays and how much companies ultimately charge. The labor component is fixed; however, the convenience factor remains to be the variable. With food profit margins already slim, this added cost for delivery has a large impact on profitability. It will be interesting to follow this situation, as I foresee companies offering consumers some sort of free product or reward for picking up in store as this dilemma on cost continues.