How far can the leading pizza delivery chains stretch their menus?
I was placing a lunch order with Domino's (NYSE: DPZ) today when I was asked if I wanted a baked sandwich with my pizza order. Sandwiches? Yes, Domino's now offers warm chicken, Italian, and cheesesteak subs.
This follows the recent marketing push by Yum! Brands' (NYSE: YUM) Pizza Hut to deliver family-style pasta entrees.
Am I the only one who remembers when the pizza chains were taking a bold departure from their pies by offering chicken wings? These days, it's a matter of how much a chain can offer without overtaxing its staff, confusing its customers, or diluting its brand.
Domino's busting its way into oven-heated subs may sting Subway, Quizno's, and to a lesser extent Panera Bread (Nasdaq: PNRA). If successful, the move into sandwiches may even take nibbles out of the top burger joints. Why waste time and gas waiting in a drive-through lane when the sandwiches can come to you?
Indeed, it's perhaps an even bigger assault on the fast food industry than what Pizza Hut is attempting with its pasta trays, and Italian casual dining chains like Darden's (NYSE: DRI) Olive Garden or Brinker's (NYSE: EAT) Maggiano's can't ignore the low-end competition on wheels.
Ultimately, this is about the pizza chains trying to be in the right place at the right time with the right product. Pizza-centric chains like Domino's, Papa John's (Nasdaq: PZZA), and Pizza Hut know that diners value delivered convenience. Even the mighty Cheesecake Factory (Nasdaq: CAKE) is expanding its experimental home delivery service this month.
Are the pizza chains breaking new ground? Of course not. Everyone has that really cool authentic mom-and-pop pizzeria that has been serving up pastas, sandwiches, and garlic rolls alongside their signature pies for ages. The key here is that Domino's, Papa John's, and Pizza Hut have the marketing dollars to hammer the menu diversification home. The publicly traded bellwethers will also welcome the opportunity to wean themselves from the margin-crippling swings in dairy prices.
The drive-to restaurants need to take notice. Pizza chains are finding new ways to turn dough into dough, and it will mean less dough for them.
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