Should Domino’s Work With Third-Party Delivery Apps?

Reversing its long-held stance against working with third-party delivery apps in the U.S., Domino’s Pizza has agreed to make Uber Eats its exclusive third-party delivery service.

America’s most popular pizza chain has been reluctant to work with delivery apps in part due to the profit hit. Restaurants are charged between 15% and 30% in fees for listing, payment processing, and delivery. Reputational risks of using an outside delivery service have also been an issue. In 2021, Domino’s ran a promotion giving away $50 million worth of free food to call out the “surprise fees” being charged by delivery apps.

Under the new agreement, orders placed on the Uber Eats platform will still be delivered by Domino’s drivers, allowing the chain to maintain control of delivery execution. Uber Eats will also share data with Domino’s on delivery efficiency and incremental sales.

Being listed on Uber Eats and its sister site Postmates enables Domino’s to reach new customers who are used to ordering there. Uber’s customers tend to be younger and more affluent than those ordering directly from Domino’s.

Domino’s CEO, Russell Weiner, acknowledged to the Wall Street Journal that direct orders from pizza chains have stagnated while those through delivery apps have accelerated over the pandemic. Third-party app loyalty programs also keep customers from ordering directly from Domino’s.

“It’s a multibillion-dollar marketplace that sells food and pizza,” Mr. Weiner said. “We need to play in a big category like this.”

Weiner declined to discuss the commissions Uber will charge but insisted noted that franchisees will profit from the incremental sales.

The partnership comes as Domino’s had flagged a slowdown in deliveries in April. Pizza Hut and Papa Johns have said their moves to start working with delivery apps since 2019 have broadened their customer reach and helped them find drivers amid the late-pandemic labor shortage.

Domino’s has no plans to use the apps to deliver pizzas in the U.S., but Mr. Weiner suspects the Uber Eats alliance will help franchisees overcome labor challenges because the locations will be busier.

The Uber Eats partnership is exclusive until at least 2024, indicating Domino’s may eventually make its menu available on other food delivery apps, like DoorDash and Grubhub.