Domino's: The greatest corporate turnaround of 2000s

This article explains the fall and rise of Domino's and how they were able to outperform every company you can think of.

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Domino’s shouldn’t be alive. Their business was crumbling in the 2000s, with an all time low share price, falling  revenue, and the worst pizza. People hated Dominos and they were on the brink of bankruptcy. But, today, Dominos is wildly popular, and profitable. They even became the 2nd fastest growing stock of the 2010s beating out tech giants like Netflix, Apple, Google, and Nvidia. Something happened, but what? How did Dominos escape oblivion, when they should have died?

It all began with one survey. On customer taste, Dominos ranked dead last in pizza taste. Why? Dominos had gone all in on a different strategy: speed. They created the famous “30 minute delivery guarantee”, where if your pizza was late, it was free. In their eyes, they didn’t have to be the best, just the most convenient. Everything was sacrificed in the name of speed. This might have worked for a while in the 80s and 90s, but in the 2000s, it wasn’t holding up. Consumer tastes had changed and wanted better. It didn’t matter if your pizza arrived fastest, if it was awful. People hated Dominos. This was their biggest problem, but it was far from the only one.

Around this time, when the fateful survey was released, the world was in an economic slump. The 2008 financial crash was only last year, and now the rest of the world was experiencing the impacts. With much less money, people valued it more than ever. Typically, this means people will try to buy cheaper, which means buying fast food but, not Dominos. It wasn’t good, and most didn’t want to waste money on bad pizza, even if it came slightly quicker. And while things were bad outside Dominos, internally things were terrible. Dominos had taken on a mountain of debt right before the financial crash, over $1.7 billion.

That might not sound like a lot for a fast food giant, but at the time, it was more than Domino’s revenue: about $1.46 billion in 2007. The revenues were falling. It went down to $1.42 billion in 2008, then to barely $1.4 billion in 2009. Their share price had also fallen to a measly $8. To make matters worse, employee turnover was at an all time high, which meant the restaurants were extremely inefficient and often understaffed. Their strategies weren’t working. If they wanted to survive, they needed drastic action. They needed to take a risk, and try something different.

First, they had to figure out what had gone wrong with their staff. They couldn’t overhaul strategy, while there was no one staying to implement it. The then CEO: David Brandon decided to dig deep and figure out why everyone was leaving. He participated in the same training program all frontline store workers did. He talked to these workers and what they thought Dominos should do. In his search, he found low morale from workers, and store managers without direction. There was a massive disconnect between corporate, and the people on the ground. This mattered as the frontline workers were the ones getting the customer complaints, and making the pizzas every single day. Before David could make major changes, he had to get these people on his side.

Dominos began to relax the strict dress code, so staff could be more comfortable while working. He introduced new leadership training for managers. But most of all - systems for tracking performance and gathering employee feedback. David Brandon began to reform Dominos’ culture, and his successor, Patrick Doyle, would take this to the next level. He continued listening to employees, but he was going to take a leap of faith, and revamp Dominos in its entirety. The thing that had to change the most, was the food. Plain and simple. To get to the root of the problem, he began to conduct research. They ran focus groups for honest feedback, and as he and leadership watched, the feedback was brutal. Comments like “cardboard crust”, “worst pizza”, “no flavour”, “artificial cheese” and many, many more negative remarks were common.

Dominos needed to start from scratch and overhaul everything. But fixing the pizza… was only half the problem. Remember, Dominos was ranked the worst. They needed to win customers back. They needed another chance, but that is an extremely hard thing to do. Most people won’t come back somewhere they had a bad experience. Dominos was facing an uphill battle so Patrick Doyle, the CEO, decided to make a massive gamble. He would go all in on transparency. Many businesses would quietly change their product, hope they slowly win back customers, but most of all: Never acknowledge the negatives publicly. This is Marketing 101.

Doyle was going to do the opposite. Dominos was going to be honest. The campaign was called “Sorry We Suck”. A massive marketing effort to show customers three things: 1. They had messed up. 2. They were changing. 3. Asking for another chance. It was an admission of wrongdoing, and acknowledgement of feedback. There were billboards in Times Square showing honest, real reviews from customers. Doyle even admitted in ads that Dominos hadn't been using real cheese in their pizzas. Terrible things to say about your company… but everyone already knew it, even subconsciously. Doyle explained that: "The old days of trying to spin things simply doesn't work anymore. Great brands going forward are going to have a level of honesty and transparency that hasn't been seen before."

Snippet of a news article about the "Sorry We Suck" campaign

Simultaneously, they were also showing that they had changed. Yes, they were using real cheese now. They needed this to work. Their very survival was betting on it and the tension at Dominos was sky-high. If this gamble failed, Dominos would be done for. So, how did it play out?

The first response was confusion. A brand, admitting their product sucks? In Marketing 101, this is considered “brand suicide”. You never admit past decisions were wrong or your product is bad, even if you're fixing it. But Dominos did it anyway. The media begun to report on the wild strategy, and Domino's honesty. One thing was quickly clear: people were taking notice. But was it the right attention, or the wrong kind? Would it just reinforce the existing negative opinions?

In the following year, 2010, US same-store sales jumped 9.9%, the first time they even had growth since 2007. That doesn’t sound like much, but, in a fast food market that is mature and very saturated, achieving even a 1-3% growth is impressive. Almost 10%, was unheard of. And, with a brand known for bad products? Something was happening. In 2010, Dominos’s revenue grew for the first time in almost 5 years, by about $170 million. But then, something interesting happened. That growth began to accelerate. More and more people were trying Dominos’ new pizza, and returning. Every single year for the next decade, Dominos’ revenue grew, and with it, their share price. The gamble had paid off.

But Doyle wasn’t finished. With problems fixed, he could now look ahead to the future. Dominos began introducing new technology for online orders, introducing mobile ordering, and better order tracking for customers. They hired more staff to analyse their digital data to better serve customers. In fact, pretty soon, half of the workers at Dominos HQ were software analysts. They had turned around the brand, and were now growing to new heights. Doyle’s strategy was paying off. In fact, it was one of the most successful business turnarounds in decades.

But that’s not all. The culture change led by David Brandon, then Patrick Doyle, was also paying off. Employee turnover was going down, and morale was going up. In 2015, the Detroit Free Press Top Workplaces surveyed over 61,000 employees on what they thought of their leadership. Doyle was named the best, and won the Top Workplaces Leadership Award. Employees loved his communication, his honesty, and his transparency. One employee in the survey wrote “Doyle knows how to make people excited about Domino's Pizza and continue to work hard for the company.”

Doyle's strategy was risky, but it had to be. It had to be bold, ambitious, and a bit crazy. The company was dying after all. You don’t get dramatic change, without dramatic risk. Doyle explained that "I think the vast majority of companies are far too conservative in how they approach risk. They simply spend too much time trying to figure out how to de-risk. Rather than dwell on avoiding mistakes, it's important to customers and employees of a winning organization to inspire through our action.” Luckily, this risk paid off big time, and it also showed something else. When companies are honest, transparent, and showing they’re changing, people give them a second chance.

Something for new-age leaders to keep in mind...