ANN ARBOR, Mich. (AP) — Domino’s Pizza’s shares surged on Wednesday after the chain said customers could start using Uber’s (UBER.N) Uber Eats and Postmates apps for orders, as it tries to jolt its sluggish delivery business. Domino’s CEO says the move represents “an important step forward” in its efforts to differentiate its delivery service and help re-energize growth. The company has been working on several initiatives, including offering customers a discount for picking up their food instead of having it delivered. It’s also been raising wages for its drivers and promoting the fact that it offers a career path for those who stick with the job.
Investors like the news, sending the company’s stock up 10% at midday in New York after a steep sell-off since April. The pizza maker had flagged a slowdown in the delivery business, with sales at restaurants open at least a year declining 1% for the first quarter. That was worse than the company’s overall comparable sales, down 2.1%.
Domino’s says the partnership will allow it to reach a much wider group of potential customers who use these third-party apps for deliveries. It says the partnership will begin in four pilot markets this fall and will expand to most US stores by 2024. The deal will require Domino’s to pay a fee to Uber, but the company will still deliver the food through its drivers. The agreement also means that Uber One and Postmates Unlimited members will get free delivery on Domino’s orders within the Uber Eats app.
It’s a significant reversal from the company’s previous stance against third-party delivery services, which it has blamed for some of its labor problems in the past. But CEO Russell Weiner said it’s now clear that the market for third-party delivery services has reached a large scale, and it will help Domino’s compete with apps from rivals like Grubhub and DoorDash.
The two companies have 27 international markets in common, and the partnership could expand internationally. It also allows Domino’s to unify its global ordering platforms under a single agreement with the ride-share firm, helping it save money and speed up delivery times.
BTIG analyst Peter Saleh says the deal is good for Domino’s because it lets the company retain control of the ordering experience and access customer data. But he also expects the company to continue offering deals on its website to encourage customers to use it directly. He adds that the deal should also boost franchisee economics by reducing labor costs, which have squeezed higher input prices and a sticky cost of living crisis.
