Domino's (DPZ 0.50%) remains the world's biggest pizza chain, with global annual sales exceeding $13.5 billion in 2018, edging out second place Yum! Brands' Pizza Hut. You have to go all the way down to 14th place on Pizza Today's list of the top 100 pizza chains to find fast-casual Blaze Pizza. But that doesn't mean it's not looking to one day topple the industry leader.
With annual sales of $341 million, it still has a way to go before it can be considered a contender. But with sales growing at 23% per year according to Bloomberg, that could happen very quickly, and an IPO could be in its future.
Image source: Getty Images.
Buying into the fast-casual fad
Because of the seemingly effortless growth Chipotle Mexican Grill experienced, every niche player in the restaurant industry sought to become "the next Chipotle" of a particular meal category. From sandwiches and Asian food to burgers and Mediterranean cuisine, chains popped up exploiting the popularity of meals made from fresh, wholesome ingredients in assembly-line fashion.
Pizza was no different, and new pizzerias materialized seemingly overnight to either go public or attract big investor dollars -- so much so that even Chipotle got into the act by partnering with the small, fast-casual Pizzeria Locale chain.
While Chipotle's internal woes led it to eventually close almost all of the pizzeria's locations, other fast-casual concepts succumbed to the broader problems of a weakened dining environment. They now operate as smaller versions of their former high-flying selves or have closed completely, including Cosi, Zoe's Kitchen, Noodles & Co, Potbelly, and another closed Chipotle venture, ShopHouse Asian Kitchen. In the pizza space, Pie Five, Pieology, PizzaRev, and Papa Murphy's were all similarly hit.
Bucking the trend
But not every fast-casual pizzeria ran into trouble. In fact, a few continue to thrive, including MOD Pizza and Blaze, which may be the niche's most successful chain, with 316 locations in 42 states and five countries. Its founder is Rick Wetzel, who launched the mall-based Wetzel's Pretzels in 1994, and it has attracted the likes of basketball star LeBron James as an investor.
Despite the success, and although Wetzel says an IPO may be in Blaze's future, the fast-casual pizza shop is focusing on building its operations to effectively take on Domino's.
Blaze Pizza recently began adding more variety to its menu beyond its signature 11-inch personal pizza, such as 14-inch pies and online specials like a large pepperoni pizza for $8.95 and two large single-topping pies for $20 that are meant to be competitive with Domino's and Pizza Hut. Blaze is also investing in digital technology to improve its carryout business and now offers delivery.
Delivering the goods
Domino's is the king of pizza delivery, and few companies have parlayed investments in digital technology into profit-generating success as well as the industry leader has. It credits its investments with helping online orders and mobile apps to represent more than half of its global retail sales last year, while they account for 65% of all U.S. sales.
It also has a massive footprint with over 15,900 stores in 85 markets. It has developed innovative ordering platforms through Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter, and text messaging using a pizza emoji. It's testing self-driving pizza delivery with Ford and last year launched Domino's Hotspots, which enable it to deliver pizza to 200,000 nontraditional locations like parks and beaches.
The market wasn't impressed with its latest earnings reports because of fears that its growth is slowing. But Domino's was still able to record 10% retail sales growth for 2018 with a better than 6% increase in same-store sales, which is impressive for a pizzeria generating over $1 billion in annual sales.
Check out the latest earnings call transcript for Chipotle Mexican Grill and other companies we cover.
The key investment takeaway
Having an aspirational goal of taking on Domino's may serve as a motivational tool for Blaze Pizza and its employees, and the fast-casual pizza joint is cobbling together an impressive growth story in a weakened industry. But Domino's investors needn't worry that the industry leader will be toppled by its nearest rival, Pizza Hut, anytime soon, let alone by an upstart.
