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Dominos’ Expansion Plan in India: Lessons to be learned

Dominos India is the poster brand of Jubilant Foodworks. Jubilant FoodWorks Limited is an Indian food delivery company based in Noida, Uttar Pradesh which holds the master franchisee for Domino's Pizza in India. This case study covers how they expanded in India. It is interesting to know how the fast expansion rate was put to a halt due to several reasons and how the company changed their strategy to survive in the market.

Dominos India is the poster brand of Jubilant Foodworks. Jubilant FoodWorks Limited is an Indian food delivery company based in Noida, Uttar Pradesh which holds the master franchisee for Domino’s Pizza in India. Dominos was first established on December 9, 1960, in Michigan, United States.

On March 16, 1995, Jubilant Foodworks was incorporated as a private limited company with the name Domino’s Pizza India Pvt Ltd. It also started the franchise agreement for Domino’s International for north and west regions in India in the same year. In January 1966, the company opened its first Domino’s pizza store. In 2011, Jubilant Foodworks signed a franchise agreement with Dunkin’ Donuts.

Initiation of the Dominos’ Chain in India

With the onset of 2014, Jubilant Foodworks inaugurated the 700th Domino’s Pizza outlet. And within the next 24 months, they opened 300 more outlets. With this, India became the second country after the US to reach the 1000 store-mark for Domino’s Pizza.

Since the fast-food market in India is continuously rising, Dominos has enjoyed a fair share of profit as well. After being in operation for about 25 years now, Jubilant Foodworks has over 1000 Domino’s Pizza outlets in India and 20 outlets in Sri Lanka. It also holds contracts for both Bangladesh and Nepal. The company aims to double its outlets by 2021.

Dominos has continued to enjoy the success with its on-point marketing campaigns and the ‘buy 1 get 1 free’ offer. But the success we see today is the result of some major ups and downs and even a failed expansion plan.

Expansion of Dominos: The Rise

As mentioned earlier, Dominos have had some brilliant marketing strategies and offers. And hence, they attracted a large number of customers. But they increased their pace even further when competition began to rise.

Domino’s India was lagging behind McDonald’s India in 2012. But, by 2016, Domino’s doubled the outlets as compared to the latter. It also had a 16% of the market share in the Rs 100 Billion Indian Chained Food Service Industry. Dominos’ closest competitor in the pizza market is Pizza Hut India. Pizza Hut holds a meager 4.4 market share which shows the huge difference between the two.

As per Domino’s India, it enjoys a database of around 20 million unique customers which shows its hold on the Indian Pizza market. The ’30 minute or free delivery’ really helped to build a firm trust in the brand name. It even connected with the government when it started pizza delivery to railway passengers in 2015. Further, in March 2016, Domino’s announced that they would double their railway reach from existing 60 stations to over 130 in the coming months.

But like many other good things, the rise and the success was put to a halt when Dominos’ valuation dropped drastically in 2015-16.

Expansion of Dominos: The Downfall

In the ever-changing world, change is the only constant. And the same happened to Dominos. The Same Store Sales Growth (SSSG) of Domino’s declined consistently over time. Consequently, Jubilant Foodworks lost half their valuation. It dropped from a peak value of Rs 12,700 crores in mid-2015 to Rs 6,500 crores in mid-2016.

Those 12 months led to turmoil and many employees, including the Head of Marketing resigned. The company was losing money along with manpower. Hence, all these factors together caused increased instability with the company. However, the biggest shock wave came on 20th September 2016 when Ajay Kaul, the CEO of Jubilant Foodworks resigned after holding the position for 11 long years. Also, during September of 2016, Jubilant Foodworks lost 10% of its shares.

But the reason behind this downfall is also interesting. Quick and easy food delivery was the USP of Dominos. But the boom in technology robbed off Dominos of its USP. Suddenly, many options for ordering food started popping up. Also, with the huge increase in the number of restaurants, customers now had more options to choose from. The number of Food Startups also increased which led to a downfall in Domino’s sales.

Another big factor contributing to Dominos’ downfall was the increase in Pizza Hut’s growth. Pizza Hut offered a casual dining experience along with something everyone lives- Pizza! And since then, Pizza Hut has been giving a tough competition to Dominos.

Around the same time, Dominos witnessed the growth of several other restaurant chains like Burger King, Sbarro Pizza, Smokey’s BBQ & Grill, and Insta Pizza. Even their growth contributed to Dominos’ downfall. In fact, many other international chains entered the Indian market. And not just Dominos, other giants like McDonald’s and KFC were also shaking.

Major Results of the Downfall

With the beginning of the downfall phase, Dominos India increased the prices to cop up with the loss. But as the prices increased, the quality of food began to fall. This led to various customers shifting to other competitors like Pizza Hut to satisfy their pizza cravings. Dominos even introduced new and innovative lines of pizza like the Chef’s Wonder pizzas. Although, this was a desperate attempt that failed miserably.

On May 23, 2016, The Centre for Science and Environment (CSE) declared the results of research conducted by them. The study conducted tests on the products of 38 fast-food brands in Delhi which sold ready-to-eat bread. The study indicated that almost 84% of the brands including Domino’s and Subway sell bread which contains potassium bromate and potassium iodate. These components are banned in many countries as they may cause cancer.

This revelation was enough for Dominos’ stakeholders to withdraw their support. The company lost 3% of its shares and then again lost 10% of the remaining shares when CEO of Jubilant Foodworks resigned, as mentioned earlier.

Dominos’ improved Strategy for India

In August 2017, Dominos India decided that it was time when it has to improve the product and change the strategy. The revamp attempt included major changes like new soft and tasty crust, more and bigger toppings, more cheese and a new heavier tomato sauce made from imported Californian tomatoes.

Mr. Pratik Pota, CEO, Jubilant FoodWorks Limited said, “Earlier in the year, we had unveiled our new strategy for driving sustainable, profitable growth.” The key pillars of these were Product Improvement, Value For Money, Seamless Customer Experience, and Superior Technology all enabled by a focus on cutting costs and driving efficiencies.

The attempt to change was further supported by rigorous marketing over Television, Digital, Press, and Radio. The company even switched to a new blue and white packaging to highlight the changes.

Dominos even undertook the manpower optimization into account. And hence, it called off the ‘buy 1 get 1 free’ offer. Further, it reduced the number of staff per outlet from 25 to 22 and even closed some of their outlets. The company even decreased the expansion rate to 40-50 new outlets per year in contrast to the previous rate of 100 new outlets per year.

The Bottom Line

With over 1000 outlets, Dominos has continued to satisfy India’s pizza cravings over the years. It has clearly portrayed that standardization in quality and services always needs to be checked irrespective of the size of the enterprise. The improvements have definitely been appreciated the customers while the company continues its successful journey.

Read more: McDonald’s Beef Fries Controversy

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