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Domino's Technology Is Its Real Secret Sauce

By Motley Fool Staff – Updated Apr 25, 2019 at 4:21PM

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The pizzamaker's revenue and profits have soared thanks to huge investments in technology.

Domino's (DPZ -1.69%) is more than just a pizza company. The restaurant is a tech leader that now gets more than 65% of its U.S. orders from digital channels.

On this week's edition of Industry Focus: Technology, host Dylan Lewis and contributor Brian Feroldi discuss why Domino's is secretly a tech company in disguise.

A full transcript follows the video.

Check out the latest Domino's earnings call transcript.

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This video was recorded on Feb. 22, 2019.

Dylan Lewis: Brian, the last one that we're going to talk about today I think is undeniably the one that people are most familiar with. I know that I am intimately familiar with it. I actually ordered from it last weekend. We're talking about Domino's Pizza here to wrap things up.

Brian Feroldi: Yeah, this is probably the one that's going to have tech listeners really scratching their head as to what the heck we are doing talking about this on Friday's Tech show. Everybody knows that Domino's is a pizza company. It's actually the world's largest pizza chain by sales. They have about 16,000 stores spread throughout the world, with about 6,000 of those in the U.S. and 10,000 international.

The reason why I thought it was important to highlight this as a tech stock in disguise is that this company has hugely invested in its tech capabilities over the last couple of years. They've made tremendous progress with becoming a tech company. One number that just screams that to me is that 65% of this company's sales in the U.S. come through digital channels. That's the website or the app. That's huge!

Lewis: Yeah, you look at this company over the last couple of years, and they have done such an incredible job of finding literally any way to be a point of contact with consumers. Some of them have been totally ridiculous. If you tweet at Domino's and you have a saved order, they will kick it to you, and charge you for it if you have that set up. Some of them are much simpler and what people expect with e-commerce, and that's the standard app experience or standard mobile ordering or ordering online. It doesn't matter, though. They're trying everything. They're throwing it all at the wall and seeing what resonates with people. I think that kind of innovation is what has led to a huge rise in stock price for this company.

Feroldi: Yeah, this company has produced monster returns for shareholders. Another thing that they're trying is, they recently launched a voice ordering application that they're calling Dom. You can just order pizza by talking to your Alexa device. This company is heavily focused on making ordering and doing business with them as simple as possible. They currently have 20 million active users of their app and site, and that makes it very simple for this company to send out, "Hey, how about you order Domino's Pizza tonight?" And they make it so easy for customers. It's driving huge revenue and profit growth for them.

Lewis: That active user base is incredible. I think most restaurants would kill to have a fraction of that. For them to be at over 20 million is just unbelievable.

All told, it has really meant that they have gained share in their core market. They've gone from being a solid player in pizza to being pretty much the main player in fast pizza.

Feroldi: Yeah. To put some numbers on that, their market share was about 10% in 2008. Today, it's about 18%. Their international business, which is a sizable one, has put up 100 quarters in a row of same-store sales growth. That's an unbelievable track record. The story is very good in the U.S., too, it's been 31 quarters in a row of consistent same-store sales growth. A big reason why is because of their commitment to investing in their technology, to make it as easy and convenient as possible to order their products.

Brian Feroldi has no position in any of the stocks mentioned. Dylan Lewis has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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