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Pizzerias have a home delivery problem

2022-05-16T01:43:46.338Z


Pizzerias have always been experts in home delivery. But now they face a problem: there are not enough drivers.


Home deliveries adapted to modern times 0:48

(CNN Business) --

Pizza places have always been adept at home delivery, flexing their muscle with deliveries to remote locations and even robotic delivery cars.

But now they face a problem: there are not enough drivers.

In early March, then-Domino's CEO Ritch Allison warned that a shortage of drivers would be a drag on business.

“Delivery driver staffing may remain a significant challenge in the short term,” he said, noting a drop in deliveries in the final quarter of 2021 compared to a year earlier.

  • OPINION |

    If the shortage of workers continues, the US economy will not be able to recover

He was right, and the problem has continued this year.

In the first three months of 2022, delivery at Domino's stores in the United States open at least a year fell 10.7% compared to the prior year period, Allison said on an analyst call in April, and noted that he is "disappointed" with the delivery results.

Overall, sales at those stores fell 3.6% in that period, due in part to staffing issues.

Difficulty finding and keeping employees has hampered businesses in multiple sectors, but the restaurant sector has been hit particularly hard, leading to shorter opening hours and longer wait times for customers. .

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It's not just Domino's.

Pizza Hut, owned by Yum Brands, is also suffering.

The brand's U.S. same-store sales fell 6% in the first quarter due to "our delivery channel, where capacity constraints limited our ability to meet demand," said Yum Brands CEO, David Gibbs, during a call with an analyst to discuss the results.

"This was driven by staffing challenges, primarily the shortage of delivery drivers that has been felt across the industry."

Domino's has a home delivery problem.

Slow service is bad for business, and not just because of lost sales: A late pizza delivery from Domino's could send someone straight into the arms of Pizza Hut, Papa Johns, or another competitor.

So how do you solve the delivery problem?

Hiring more drivers is the obvious solution, but it's not easy.

The US labor market has not yet fully recovered from the pandemic, but it is doing so.

Of the 22 million jobs lost after covid-19 hit the United States in 2020, some 20.8 million have been restored.

And the job market appears to be cooling off this year, making hiring difficult.

Meanwhile, the demand for home delivery is through the roof.

Domino's noted that while its delivery rate is down compared to 2021, it is still up nearly 6% from 2019. Other restaurants are also reporting higher demand and predicting it will continue.

  • The restaurant business will probably never recover from the covid-19 pandemic

The driver shortage could also become a vicious cycle, said Andrew Charles, a restaurant analyst at Cowen.


"Drivers take the job because they want tips. If there are fewer deliveries to make ... that affects trying to get drivers," he explained.

"I don't think this is a very easy solution."

Pizza companies will have to do more than try to convince more drivers to deliver more pizzas.

Filling the gap will require other changes, such as outsourcing phone orders to dedicated call centers, leaning more heavily on technology and, if they can, charging more for pizza.

Call centers and delivery providers

One way to add more drivers without hiring more people is to reassign current employees.

Domino's hopes the call centers will help.

The company "faces a pretty severe staffing shortage," Charles said.

"So anything they can do to help alleviate that is under consideration."

He estimated that between 10% and 15% of Domino's orders in the United States are placed over the phone.

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By mid-May, Domino's expects 2,500 to 3,000 Domino's locations to use outside call centers in some way.

They should "allow stores to focus on production and delivery when they are short-staffed during peak hours," CEO Russell Weiner said during the April call.

In addition to leveraging call centers, Domino's is also working to make employees' jobs easier, including using technology that will improve hiring and training, a spokesperson told CNN Business.

Until now, Domino's has steered clear of third-party delivery providers like DoorDash, Uber Eats or Grubhub, which charge a fee, but "nothing is off the table," Weiner said.

Pizza Hut also faces staffing challenges.

Pizza Hut is also taking several steps to help fix its delivery issues.

"The team is prioritizing restaurant operations, including a focus on improving staff levels, restoring hours of operation, increasing the availability of online ordering and more effectively leveraging the use of our overwhelmed call centers," Yum Brands CEO David Gibbs said during an analyst call in May.

But Pizza Hut has also used third-party drivers to "augment our own drivers," he noted.

Gibbs hopes a technology acquisition will help improve the situation.

Last year, the company completed the purchase of Dragontail, which has an AI-enabled platform designed to make restaurant operations more efficient, including reducing disruptions due to driver shortages.

The brand is testing the platform in more than 100 of its thousands of stores in the United States to try to improve the delivery network.

Another way to reduce the impact of the problem?

Charge customers more.

The Papa Johns Solution

Papa John's grows again in the US after two years 1:02

Papa Johns has also faced staffing shortages, but "we feel pretty good about staffing," CEO Robert Lynch said during an analyst call in May to discuss first-quarter results.

In North America, sales at Papa Johns stores open at least a year increased 1.9% in the first quarter.

Lynch believes the company's partnership with third-party aggregators has helped, but what really gives him confidence is the company's pricing strategy.

"Our premium positioning is a different model than people talking about staffing" as a big deal, he said.

"We have premium pricing. We don't need as many transactions and therefore are less affected by the staffing challenges that we're all seeing."

In other words, Papa Johns doesn't care as much how many customers buy its pizza, because each slice carries a higher price than its main competitors charge.

Until the worker shortage eases, however, pizza lovers will have to wait a little longer for their slices.

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Source: cnnespanol

All news articles on 2022-05-16

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