Domino’s Pizza Wants to Be More Than Just a Pizza Chain

It seems the motto lately for many fast-food chains is "innovate or die." The latest chain to innovate is Domino's Pizza (NYSE: DPZ  ) with a new menu item called Specialty Chicken. This looks to be a good move for Domino's, as boneless chicken has been one of the fastest-growing menu items in the restaurant industry.

This move by Domino's certainly won't go unnoticed. Papa John's International (NASDAQ: PZZA  ) and Yum! Brands (NYSE: YUM  ) , which owns both Pizza Hut and KFC, will certainly be observing how well Specialty Chicken goes over with Domino's customers.

What is Specialty Chicken?
Domino's originally wanted to call its new menu item pizza chicken. The problem was that when the company tested the name, participants didn't know what the company meant by pizza chicken. To eliminate any confusion, the company decided to call it Specialty Chicken.

Specialty Chicken is unique in that instead of pizza dough, Domino's layers a combination of different toppings, sauces, and cheeses over 12 bites of lightly breaded whole-breast, white-meat chicken. The four varieties are Crispy Bacon & Tomato, Spicy Jalapeno-Pineapple, Classic Hot Buffalo, and Sweet BBQ Bacon.

Domino's will sell Specialty Chicken as part of its "[two] or more mix and match value menu for $5.99." To boost awareness, the chain is launching a national ad campaign on April 21. Domino's will also be giving away 25,000 orders of Specialty Chicken on its Facebook page.

An expanded menu is working
Besides Specialty Chicken, the expanded menu now includes sandwiches, pastas, stuffed cheesy breads, chicken wings, and chocolate lava crunch cake. The plan has been working, as U.S. same-store sales rose 5.4% in 2013. International same-store sales grew even faster and were up 6.2% for the full year. For Domino's, 2013 marked the 20th consecutive year of international same-store sales growth.

Same-stores sales are one of the best ways to determine how well a restaurant chain is doing. It measures how well locations that have been open one year or more are performing. It's also an easy way to see how a restaurant is faring against the competition. 

What's Papa John's up to?
Papa John's has been adding items to its menu as well. However, Papa John's focus has been on adding more inventive pizzas to its menu. In particular, Papa John's has been focused on limited-time offers for its specialty pizzas to boost sales. 

Last year, Papa John's specialty pizzas included the Buffalo Chicken Pizza, which won the Nation's Restaurant News MenuMasters Award for best limited-time offer pizza, and the Chipotle Chicken & Bacon Pizza. The latest specialty pizza from Papa John's is the Double Cheeseburger Pizza for $12.

The latest results prove that its strategy is working. In the fourth quarter, systemwide comparable sales rose 9% in North America and 7% internationally. For the full year, sales rose 4% in North America and 7.5% internationally. This year, Papa John's expects North American systemwide comparable sales to grow 2.5% to 4%. International growth is expected at between 5% and 7%. Papa John's expects to open 220 to 250 new restaurants this year, 70% of which will be in international markets.

How about Yum! Brands?
Pizza Hut is looking to be more than just a pizza chain now that it has rolled out its WingStreet concept to all its U.S. restaurants. In a press release, the company said: "[A] whole new chicken kitchen is available at Pizza Hut." Customers can get an order of eight WingStreet wings with their choice of sauce for $5 and have it delivered as well. The sauce flavors include Buffalo Mild, Buffalo Medium, Buffalo Burnin' Hot, Spicy Asian, Spicy BBQ, Lemon Pepper, and Garlic Parmesan. The wings come either Traditional, Bone-Out, or Crispy Bone-In.

In the U.S., Pizza Hut and KFC are lagging the company's Taco Bell chain. U.S. same-store sales for all of Yum! Brands came in flat for 2013, lead by a 3% rise at Taco Bell; that was offset by a decline of 2% at both Pizza Hut and KFC. The fourth quarter was even worse, with declines of 4% at Pizza Hut and 5% at KFC. Taco Bell managed to post an increase of only 1% in the fourth quarter. Yum! Brands is hoping that WingStreet will be able to turn around sales at Pizza Hut.

 

Forward P/E

Dividend Yield

Domino's Pizza

22.75

1.40%

Papa John's International

23.63

1.00%

Yum! Brands

18.01

2.00%

Source: Yahoo! Finance

Foolish assessment
I think Domino's Pizza is making the right moves by becoming much more than just a pizza chain. Today, customers have many choices when it comes to their dining options. By offering more than just pizza, Domino's is offering a little bit for everyone, and it's hard to go wrong with boneless chicken. I think Specialty Chicken will be a success that will help grow same-store sales and boost Domino's share price.

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