Watch out Domino’s! Pizza Hut is coming for a bigger slice of the pie

The Domino’s Pizza share price has tanked in 2022. Meantime, rival business Pizza Hut Australia has a strategy to increase market share.

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A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price and Pizza Hut's threat to the business

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Key points

  • Pizza Hut Australia has sizeable growth plans for the long term
  • It’s focused on growing its delivery capabilities and is also working with service stations
  • Domino’s Pizza also has plans – including significantly expanding its store network -- but its share price has tanked in 2022

Shareholders of Domino’s Pizza Enterprises Ltd (ASX: DMP) may want to know about the plans that its rival Pizza Hut has to capture some market share.

Former McDonald’s Corp (NYSE: MCD) executive Phil Reed is at the helm of Pizza Hut Australia. He has been the CEO since 2018.

Pizza Hut Australia was bought by private equity business Allegro from Yum! Brands, Inc (NYSE: YUM) last decade.

While Reed has had experience at both McDonald’s and Burger King, he told The Australian that the Pizza Hut Australia task is the “most challenging” of his career.

The Pizza Hut Australia turnaround strategy involves a 10-year plan. The Australian quoted Reed about some of the things that are important for the business:

So often we are looking at data, looking at numbers, looking at all of the KPIs (key performance indicators), all of that scientific management approach. But at the end of the day, from a brand perspective, this business is about having fun.

So for our people, giving them belief is important and when they are given the opportunity to shine, showing them recognition.

You need to be clear with the team on what the KPIs are and have the ability to measure them so you know the progress you are making.

Pizza Hut’s plans

Comparing the performance of the same Pizza Hut stores that were open in the network four years ago, those stores now do an extra 48,000 transactions and an extra 32,000 deliveries a week. Pizza Hut Australia has reportedly seen 39 consecutive months of same-store sales growth.

At the moment, Pizza Hut Australia is only servicing 45% of the Australian population. There are 340 ‘trade zones’ in which it could open immediately. Reed points out that the business could open 500 new stores in five years and double the business. It has only just started recruiting new franchisees.

The Australian reports that Reed said Pizza Hut Australia can deliver high double-digit revenue growth for suppliers, which would help with inflation pressures.

One of the main goals is that, in five years, it will grow “fourfold” to reach $1 billion in revenue.

A key tactic is using technology to change the business from being restaurant-based to delivery-based.

Pizza Hut is also experimenting with new formats, including trialling a fast service kiosk concept at service stations. There are now 20 ‘full delivery’ Pizza Hut stores with EG Australia, one of the country’s major service station businesses.

Reed said: “That kiosk trial gave a perspective of the popularity of pizza within the service stations. But I have to say what they’re realising now is that our business is 90% digital and 75% delivery.”

The growth ambitions of Domino’s

The Domino’s Pizza share price has declined by about 50% in 2022. The company was a big pandemic winner as lockdowns encouraged more people to order takeaway food delivered to their homes.

But the ASX stock has experienced a massive fall from grace after hitting an all-time high of $167.15 in September 2021.

However, Domino’s Pizza has its own plans for growth. The company has long-term goals, particularly growing its store count.

In the Asia Pacific region, it currently has 1,959 stores and wants to grow this by 84% to 3,600.

In Europe, Domino’s had 1,368 stores at the last count and it wants to grow this by 123% to 3,050.

Domino’s also sees delivery as an important part of its longer-term growth. Reduced costs of delivery and growing advertising funds are key parts of the strategy.

Domino’s says its strategy is working to deliver operational growth.

Domino’s Pizza share price snapshot

The Domino’s Pizza share price has kept on falling since reaching its peak in September 2021. It opened on Tuesday at $60, down 3.86% from its closing price on Friday of $62.41.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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