Interview: Domino's chief executive
>> computer sciences won a $1.35 billion contract to manage phone and computer networks for ascension health. under the 10-year contract, computer sciences will run the help desk and manage main frame and desktop computers at 80 facilities. shares of computer sciences on the day were up .5%. three restaurant chains dominate the $32 billion pizza industries―papa john’s, pizza hut and domino. domino’s is 20% of the market . analysts say growth is slowing down in part because of the atkins diet and popularity of low carb meals. but domino’s expects to grow faster than peers. earlier, suzy assaad spoke to domino’s chief executive.
>> we were in the midst of the launch of our first new product since we became a public company in july, called double melt. we’ve been out for a couple of weeks in the marketplace and interestingly enough, new yorkers are buying this at a higher rate than any other market in the country.
>> why am i not surprised about that? what will you hope will be the financial upisside from this latest introduction?
>> this is a pizza product that came to us from our international markets where in fact started in asia and spread around the world. that’s an advantage of being a global brand as we get best practices and innovative ideas from the global and double melt is just that and we’re rolling out in the u.s. and expect great results.
>> what would be the financial upside?
>> the international upside for domino’s is significant.
>> not the international, the financial.
>> i’m sorry. from a financial perspective, domino’s pizza is a great 44-year-old brand and company that has had steady trend lines over the last several years, outpacing the industry in terms of consistent same-store sales and our cash flow growth and we’re really fast at work, continuing to extend those positive trend lines into the future.
>> with regard to the double melt, how many will you have to sell to break even after you pay for development expenses, promotions, advertising?
>> we basically believe that any of these kinds of innovative new specialty pizza products, if we achieve a 15% mix, meaning that 15% of the orders have that kind of a product included in it, it’s a big win because that generates a lot of excitement. interestingly enough, in first couple of weeks, 22% of the people who have ordered double melt are brand new customers to the domino’s brand so those are the things we look for, do we get new people involved, and it generate excitement and does it build the brand and that seems to be the case with double melt.
>> is this attention strategy for you, domino’s is one known for a simpler menu, one that you can deliver and expand upon. is this a change in strategy?
>> we’re the pizza delivery experts and everything we do in our stores centers around the concept of getting hot food delivered quickly, within 30 minutes. when we develop a new product like double melt, we make sure operationally it fits within the context of the store in such a way it doesn’t slow us down.
>> what about the overall industry? revenues have been going slowly for the entire industry. the pizza market overall grew about 2% between 1997 and 2002. what do you attribute this to and there are concerns about the impact from the low-carb diets?
>> the category has been slower growth in the last couple of years, no question about it. as the leader in pizza delivery in the country, we have the market share of about 20% so we continue to grow in terms of same-store sales as well as building new units. we have several hundred units to build in the u.s. and thousands internationally so we still see tremendous growth. as it relates to the atkins diet and low-carb craze, we haven’t felt the effects of that. we think that people look to the domino’s brand for convenience and great taste and sometimes they just want to indulge themselves and their families and friends in a great pizza evening and we haven’t seen any significant roll back in the way that people are using our brand and the way they continue to enjoy pizza. we d have a low-carb pizza on our menu but it sells at a low percentage.
>> that was suzy assaad speaking with domino’s chief executive, david brendan. domino’s shares up $2, finishing at about $16 a share. domino’s is up 14% in three months. still to come, another day, another record for oil prices. we’ll tell you what fueled today’s gains. plus, semiconductor stocks taking it on the chin recently. but some investors sense they have fallen far enough.
