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To Grow or not to Grow

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Dominos V/s Pizza Hut
5/3/12

Matter of Discussion:

Expansion strategy of two pizza giants. taken by their CEO and a mix supportive and opposition response.

 Steps

5/3/12

Facts of Case 5/3/12 .

000 corporate and franchised stores in 60 countries and all 50 U. Michigan. . United States of America. in 1960. Domino's is the secondlargest pizza chain in the United States and has over 9. states. chicken wings and boneless chicken. is an international pizza delivery corporation headquartered in Ann Arbor. Domino's Pizza was sold to Bain Capital in 1998 and went public in 2004.About Domino's Pizza  Domino's Pizza.  Founded  The menu features both vegetarian and meat 5/3/12 pizzas.S. Inc.

Michigan. Michigan.About Domino's Pizza Cont…  Type  Industry  Founded Public Restaurants Ypsilanti. 1960) Ann Arbor. CEO . Founder  Headquarters United  Area  Key 5/3/12 served people J. United States (June 10. Patrick Doyle. States Worldwide Tom Monaghan.

Dominos  Pavan Bhatia the CEO of Dominos India went for expansion strategy which was not considered appropriate for the Company’s benefit.  The 5/3/12 . strategy included opening various outlets in small towns and cities.

Roller coaster ride with Pavan Bhatia:  1999 he joined Dominos as CEO and went about opening Domino's outlets across the country.  From 5/3/12 . an average of four stores every year in its first four years of operation. Domino's expanded to more than 100 outlets in 10 months across 30 cities.

 Between March 2000 to January 2001 from an average of four stores every year in its first four years of operation. Domino's expanded to more than 100 outlets in 10 months across 30 cities. B. 5/3/12 .  It  Domino’s entered into an agreement with a real estate consultant C. was the fastest growth Domino's had in any of the 63 countries it operated in. Richards Ellis to help with location feasibility studies and construction management.

into contract with Indian Oil Corporations to set up 7500 outlets across country. cinema halls and university campuses.  Entered 5/3/12 . to expand outlets via tie-up with airport. Domino’s  Wanted opened outlets at large corporate offices. railway stations and petrol pumps.

5/3/12 .

Inc. Inc.) is an American restaurant chain and international franchise that offers different styles of pizza along withside dishes including pasta. the world's largest restaurant company.000 Pizza Hut restaurants in the United States.. and more than 5. and garlic bread.  Pizza Hut is a subsidiary of Yum! Brands. buffalo wings.About Pizza Hut  Pizza Hut (corporately known as Pizza Hut.600 store 5/3/12 locations in 94 other countries and territories . there are more than 6. breadsticks. According to its corporate website.

(1958)  Founder(s)  Headquarters  Key people Chairman 5/3/12 Scott Bergren. President . Texas.[1] David C. Kansas Dan and Frank Carney Plano. U.S. Novak.About Pizza Hut Cont…  Type  Industry  Founded Wholly owned subsidiary Restaurants Wichita.

About Pizza Hut Cont…  Entered  Pizza India in 1996 and operated by company own outlets.  By March 2001. through franchisee route. By March 2001. Pizza Hut had 20 outlets. hut made a shift to franchisee run outlets gradually with time owing to incur huge investment in company own outlets. In the same month. Pizza Hut announced its plan of opening 30 more outlets in India by 2001 end. Pizza Hut had 13. 5/3/12 .000 outlets across 90 countries.

rather than franchisee route or a mix of both. was increase in overheads like salaries.  There  Opening 5/3/12 . inventory cost and marketing expenses. Domino's What went wrong for Domino’s operated on company-owned outlets basis. outlets in non lucrative markets for Pizza sales like Merrut and Ghazibad. because of this the operating cost increased and they were not able to meet expenses.

 Worst  For 5/3/12 . Some outlets were far from easily accessible commissary which hiked transportation cost and logistic lapse. mistake was investing U.S $ 2 mn to open up 6 outlets in Sri-Lanka this project to be viable the average footfall was expected to be 100-160 per day which doesn’t occurred.

to order pizzas. was spend lavishly on marketing by opening every outlet by a celebrity to create brand hype.  Money 5/3/12 . to order pizzas has made the situation worse as many cities were not having outlets but still calling up on the no. Strategy to have single toll free no.

In the opinion of experts: 5/3/12 .

all-India campaign did not justify the needs of specific outlets or regions.  The  The 5/3/12 . The combination of national advertising and the single toll-free number led to discontent amongst customers who were attracted to dial. but discovered that no outlet existed in their city or town. toll-free number would have worked if Domino's had 1000 outlets.

This was a globally accepted trend. “it was the advertising blitzkrieg that helped the company move to the first 5/3/12 place from the sixth in both Mumbai and . former Chief of Marketing. profitable stores cross-subsidizing the unprofitable ones was also a common practice globally.  The  Gautam Advani. Domino's explained. Domino's Pavan Bhatia supporter’s views: officials who supported Pavan Bhatia's expansion plan were of the view that only 5% of all stores were located in places where business was poor.

 Analysts 5/3/12 . at least in the metros. also felt that Domino's would be back on course soon. as pizza sales were growing despite new stores coming up near the existing ones. Pavan Bhatia's expansion plan would not have come under criticism had actual sales matched the projections.

What should Domino’s do? 5/3/12 .

pricing and promotion strategies. to meet the liquidity crunch.e. they should use that money on improving their product.  In  Along  Instead 5/3/12 . to give it a family restaurant look rather than pick up outlet with their owned Restaurants they should follow franchise model of approaching celebrities for inauguration. Closing the outlets which are not generating revenue and sell out them to obtain cash. order to increase the foot falls the ambience of outlet should be altered i.

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