Mixed Fortunes at Domino’s Case Study
Introduction to Management Case Study: Mixed Fortunes at Domino’s
This case study is based on a compilation of investigative reports by Fairfax media.
Names of franchisees and employees have been changed. Domino’s is an Australian pizza chain with a network of franchises and over 600 retail stores nationally. It has been hailed as a success story since it was listed on the Australian Stock Exchange in 2005. In just over a decade, Domino’s shares have surged more than 2500 per cent, making it one of the best performers on the market and making a lot of people wealthy. In 2016 the company generated total revenue of $939,976,000.
Background of Domino’s
Domino’s has the world’s biggest pizza menu with more than 200,000 options, helping boost Domino’s sales to more than 90 million pizzas annually with a guarantee to deliver pizza within 15 or 20 minutes for an extra cost. Domino’s business model is based on franchisees growing sales, not profit, with head office taking a royalty from every sale as
Australians chomp through 1 million of its pizzas every week. Stores are bought and sold on a multiple of these sales, not on profit. The more stores in the network, means more sales are generated, which results in more profits for head office.
While the business is built on selling affordable pizza to the masses, with Group Chief Executive Officer (CEO) & Managing Director Don Meij Domino’s has transformed into one of Australia’s most intriguing tech companies with operations in New Zealand and Europe. Drones, cutting-edge IT, fast pizzas, happy franchisees and happy workers are all part of the Domino’s image. CEO Meij “lives the job” often working undercover in the stores to keep abreast of activities at the store level. To help managers keep track of their best and worst performers, Domino’s rolled out a new in-store computer system. The screens, which everyone in the store can see, constantly update statistics such as the average order size for each employee and how long it’s taking to get a pizza out the door. Store managers get a quarterly bonus based on how much they improve store earnings.
Domino’s selects its franchisees carefully, those who genuinely believe Domino’s is a highly profitable business. However, when the store is not profitable franchisees are held to blame for bad business management. The stress of making ends meet took its toll on many
franchisees who realised the business they had bought into was not viable, due to the
company policies, especially on labour costs and a perception that the head office was only
concerned about the welfare of people at the corporate level. Whilst Domino’s profit is
doubling the cost of pizzas is getting cheaper due to high competition in the fast-food sector.
However, this cheap cost of pizza is borne by the franchisees who are struggling to make a
decent profit due to them not being able to pass on the increasing high costs of running the
Understanding the CEO
Influenced by a business-minded father, Meij said he quickly developed an entrepreneurial
streak nurturing both his creative and analytical sides with a mix of arts and economics
education at university. This shaped his leadership style which is focused on helping staff
grow inside the business. Meij, who started his career as a pizza delivery driver in 1987, is a
calculated risk taker, regularly changing Domino’s business model to stay ahead of the
market. “I have been in the business for 25 years and we are in our third major change of
our business model,’’ he says. The latest revolution is the way the company has embraced
online retailing and social media. Page 1 of 3 Meij believes the only way a business can deal with challenges is to work out ways of turning
a negative into a positive. For example, legislation on employee conditions has forced up
Domino’s labour costs 100% over the next four or five years. “But that means people are
getting better paid, which means the company is holding on to its employees for longer”, he
says. The result: delivery times have reduced from 32 to minutes to 24. Also, there are fewer
mistakes in store and staff members are more engaged.
Meij uses encouragement and training programs to engage and motivate staff. “We
incentivise people through a range of systems to become better pizza makers, better dough
makers, to become more skilled delivery drivers. There are training classes and we time you
and you go through tests and you get different badges on your shirt and so on.” Domino’s
staff respond to his nurturing leadership with loyalty. As a reward every year Meij takes his
top team to Silicon Valley in the USA to view new technologies that could be introduced into
the Domino’s business.
Meij emphasises the big picture and getting managers to focus on the long term. “In some
cases, you have to be a benign dictator, because it’s in the better interests of the group. It’s
a combination of being directive on top of co-operation and bargaining and trading with
interested parties in the group, from boards to franchise owners, to managers to leadership
team members to business partners outside the business. You just have to go and sell your
Meij says his managers are champions of change. But running the team, he says, means
discussion, compromise and occasionally, admitting when you were wrong. “It’s important to
allow discussion. When you’re dictating n…
The assignment requires atleast 7 scholarly articles as references. the case study essay should include the following headers: introduction of the case study, background of the case study, Identification of atleast 3 issues and problems, atleast 3 Proposed solution, Recommendations and reference list.