Apparently, when companies prompt customers to visit their restaurants by giving them some free stuff, they’ll visit the restaurants.
That’s the lesson from Domino’s this year. The Ann Arbor, Michigan-based chain has regained its status as a taker of market share in the pizza business this year, and it can credit much of that to key changes made to its Domino’s Rewards loyalty program last year.
The company has had a loyalty program for years. And that program was easy to use and worked nicely with its digital app. But in many respects it was simply an electronic version of a punch card: You got a free pizza after you bought a certain number. The company only allowed customers to redeem points when they spent at least $10.
Customers that ordered low-priced items, such as its now-$6.99 Mix & Match deal, could not collect rewards.
Domino’s last year upgraded that program, modernizing it by enabling customers to redeem points with lower spending and allowing them to redeem those points sooner.
It was particularly important for carryout customers who have been a bigger part of Domino’s post-pandemic sales—and who tend to spend less.
“Our objectives for the program were to drive new users, particularly carryout customers, and increase the frequency of light users,” CEO Russell Weiner told analysts on Thursday.
It’s worked. Active members have been up “significantly” since the program was upgraded in September of last year.
“The loyalty program is delivering what we’d hoped,” Weiner added.
And orders with a loyalty redemption were twice as high in the first half of 2024 as they were in the same period a year ago.
That helped drive more carryout traffic. Domino’s same-store sales rose 4.8% in the second quarter, largely on higher customer counts, counts the company said were profitable for its franchisees.
But same-store sales increased 7.9% for carryout customers and 2.7% for delivery. “This is a multi-year driver of comps for us,” Sandeep Reddy, Domino’s CFO, told analysts.
The sales recovery this year has been key for Domino’s. The chain’s sales turned sluggish late in 2021 as driver shortages and reopening of dine-in restaurants hurt the company’s business.
Domino’s U.S. system sales rose 3.1% last year, roughly in-line with its pizza competitors.
But it has turned on the gas so far in 2024 and has resumed taking share from its rivals. Its domestic same-store sales outperformed Papa Johns by 760 basis points in the first quarter, and Pizza Hut by more than 1,200 basis points.
It remains to be seen whether the chain continued its outperformance last quarter. But getting customer count growth is key in an era in which U.S. consumers appear to be dining out less often.
And Domino’s believes that the increased membership in its loyalty program will pay dividends down the road.
“When you think about the health of this quarter, and how order counts came in so strong, all of those customers are going into the flywheel of this loyalty program,” Weiner said. “So today’s orders are really tomorrow’s sales. That’s why we’re so excited about how the loyalty program is working, with everything else that’s firing on the business right now.”
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