Domino's Share Surges as Surprise Partnership Marks Shift in Delivery Strategy

Domino's Pizza, renowned for its independent delivery approach, has made a surprising move by striking a deal with one of the world's leading food delivery services. In a partnership announced on Monday, customers will soon have the convenience of ordering Domino's full menu through Uber Eats and Postmates, with nationwide availability slated for the end of this year.

This transformative decision marks a significant departure for the global pizza giant, which had previously insisted on direct orders. In fact, the company even conducted a public relations stunt highlighting the delivery fees charged by third-party apps, underscoring its reluctance to adopt such services.

The market responded with enthusiasm to the news, as Domino's shares (DMPZF) experienced an impressive surge of over 10% in early trading.

Domino's CEO, Russell Weiner, explained the rationale behind the unexpected partnership, stating, "Now that aggregators are at scale, the next logical marketplace for us to enter is order aggregation." Weiner further emphasized that teaming up with Uber Eats and Postmates will yield a substantial increase in delivery orders once the service is widely available. This marks a notable reversal from Weiner's previous stance, in which he expressed concerns about commission fees and their inability to address the company's labor challenges.

Earlier this year, Domino's took a proactive approach to combat the "surprise fees" imposed by delivery apps, offering $50 million worth of free food to customers. The company positioned itself as a transparent alternative to competitors, proclaiming, "We charge customers one straightforward delivery fee because we believe that level of transparency is what customers want and deserve."

While specific financial details of the Uber Eats deal, including the fee structure, remain undisclosed, Weiner clarified that Domino's own employees will continue to handle the delivery process instead of relying on Uber Eats drivers.

According to the Wall Street Journal, this partnership has the potential to contribute an additional $1 billion in sales.

Domino's has faced delivery challenges in recent years due to a combination of factors, including labor issues, escalating fees, and the growing popularity of third-party apps. In the first quarter of this year, the company's CFO, Sandeep Reddy, acknowledged the continued pressure on its delivery business, citing a 2% decline in same-store deliveries compared to the same period last year during the most recent earnings call in April.

The strategic collaboration with Uber Eats and Postmates represents Domino's concerted effort to overcome these obstacles and regain its footing in the fiercely competitive delivery market. With the potential for significant revenue growth and expanded customer reach, Domino's aims to adapt and thrive in an evolving industry.

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