Domino’s India – 30 min or free..creating the market

Domino’s India is a restaurant chain and international franchisee pizza delivery corporation that offers delivery within 30 min to the customer’s doorstep.

Note: Unlike the US, this delivery guarantee is still operational in India.

Why the 30 min or free guarantee was the foundation of Domino’s Indian business:

 

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While Domino’s had this guarantee in other markets, their Indian business was entirely built off this premise. As Ajay Kaul, CEO of Jubilant Foodworks, the company that holds Domino’s franchise in India, says, “In any other culture, it may not have created as much noise.” [1]

Before Domino’s, the concept of food delivery was not mainstream – Domino’s literally created the market for food delivery in India. The Indian consumer is extremely demanding and price conscious given the low level of disposable income. The 30 min or free guarantee did 2 things:

  • It incentivized Indians to try out food ordering as they were virtually assured extremely quick delivery.
  • In the rare cases that the delivery got delayed, consumers were more forgiving as they got the pizza for free.

The guarantee worked wonders. India is now Domino’s second largest market outside the US [2]. The top 10 stores in the world by the number of pizzas sold in a year are from India – and they’re all from Domino’s. [3]

Business model:

Domino’s India caters to the consumer’s need for “getting food delivered to their homes quickly and reliably”. They are able to charge a premium price for the pizza by ensuring quick delivery guarantee – something that no one else had been able to do.

Note: While Domino’s also offers dine in at their outlets, the business model is built off the delivery business, which comprises about 50% of total revenues [3]. The dine in business saw traction only after the brand built recognition as a result of the delivery business.


Operating model:

The entire operating model of Domino’s in India is designed to deliver in 30 minutes with a success rate of 99.6%. [3]. It is intriguing how they managed to pull this off given the lack of infrastructure in India.

1. Process standardization:

As an order comes in, it is flashed on the screen.

  • 4 min – Dough stretching, saucing, cheesing and topping
  • 6 min – Baking
  • 5 min – Cutting and packing in warm pizza delivery boxes
  • 8 min – Delivery time
    This leaves a buffer of 7 min for unforeseen traffic

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2. Outlet location:

Site selection for outlets involves scouting for locations with easy access to the largest number of buildings within 10 minutes. Mock runs are done on motorbikes during peak traffic to double down on the location.

3. Facilities and human capital:

The company owns motorbikes, which are able to navigate faster than a car during peak traffic on cluttered Indian roads. Each bike is well oiled and in great condition. The delivery boys are hired on both full time and part time basis. The part time employees are assigned to manage additional demand during peak hours.

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4. Localization:

Riders are required to know every street, pothole, traffic light, choke point, construction site and police roadblock in their sectors of fast-changing, densely populated cities.

A deliveryman and his ­manager plot out the route to be taken for each delivery. In areas without proper maps, district managers scout the streets and create hand-drawn maps to prepare for deliveries.

3039746-inline-i-3-192-inside-look-how-dominos-won-india

 

5. Technology:

Online ordering – Online ordering via website and apps account for about 30% (growing rapidly) of the orders [4] . Online ordering ensures that there is no discrepancy in the order placed by the customer, as often happens on the phone.

Innovative technologies – Domino’s is the first mover in using innovative technologies such as Zippr, which provides customers which digital, smart addresses that are easier to track. [5]

GPS tracking – The frozen trucks that carry supplies to stores are enabled with GPS trackers, which enables area logistics managers to access the temperature status and ensure that the supplies don’t go bad. [3]

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6. Product design, limited SKUs:

The menu has limited number of SKUs to ensure that the variability and time involved in making the pizza is reduced. Twice a year, the “new product development” team engages in a exercise called “customer to customer” to gauge what new products will work for customers and which products have been underperforming. This ensures a novelty factor of products.


7. Safety and contingency:

The delivery boys are called SDPs (Safe delivery persons). They are mandated to maintain a maximum speed of 40-45 km/h. In order to ensure that the delivery guarantee is manageable, it is not offered on orders greater than INR 300 ($15 in PPP terms) or bulk orders.

 

 

The operating and business models of Domino’s India have complemented each other phenomenally. The company holds a 62% share in the organized pizza market and 70% share in the pizza delivery segment countrywide [3].

 

References:

http://www.ft.com/cms/s/2/42134ce2-5f24-11e2-8250-00144feab49a.html#axzz3trJF6sqz

http://www.business-standard.com/article/companies/india-is-domino-s-2nd-largest-market-after-us-says-jubilant-115081200024_1.html

http://articles.economictimes.indiatimes.com/2013-03-22/news/37904259_1_domino-s-pizza-india-pizza-maker-pizza-store

http://www.business-standard.com/article/companies/will-food-throw-up-the-next-flipkart-115041301128_1.html

http://qz.com/554854/it-shouldnt-be-this-hard-to-order-a-pizza-soon-in-india-it-wont-be/

http://www.fastcompany.com/3039746/how-dominos-won-india

http://www.firstpost.com/living/listicle-post-food-independence-day-1658757.html

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10 thoughts on “Domino’s India – 30 min or free..creating the market

  1. Fascinating post. The immediate question that popped into my mind as I began reading was how they navigate the infamous traffic in India. It seems that motor bikes are a logical and practical solution for this. One question that looms is how scalable this business model is. As internet usage and the popularity of Domino’s pizza grows in India, do you think that the company will be able to maintain the 30-minute promise that you consider to be the primary driver of its growth? Understanding urban environment in India, the cities are incredibly populous, so I can see an overwhelming amount of incoming orders as a potential problem for a restaurant with limited numbers of delivery boys.

    1. Great question Peter! Motorbikes work beautifully to navigate the infamous traffic in India – moving swiftly between cars in the absence of a lane driving system.

      Given the standardization in the baking and delivery process (23 min + 7 min buffer), what needs to be done to manage increasing demand is to ensure that there are enough ovens and delivery boys to meet the demand.

      Delivery boys can be increased per outlet (part time human capital) until the oven capacity is maxed out. If the outlet doesn’t have enough capacity to churn out Pizzas as orders come in, the company can open multiple outlets in the same locality. This is already happening in densely populated areas of major cities. The unit economics of the business model work out at a standalone restaurant level – the individual outlets operate profitably. Hence opening new stores is not a problem, given that one store is unable to manage the demand. I draw a parallel to the ubiquitous Starbucks outlets in the US, many of co exist in the same vicinity.

  2. Thank you for your post Apurv. It is very interesting how a simple guarantee of delivery within 30 minutes can incentive so much business for Dominos, but it is a very complex system to implement as you noted. In Lima we had this same promotion and it was very successful, but the company constantly had problems to control the safety and speeding regulations for the deliveries in motor bikes. Even if they set a maximum speed, delivery boys constantly didn´t comply with this and this ended up being a complex issue for Dominos. I wonder how they manage this in a much larger operation like the one in India.

    1. Compliance with speed limits is always a problem Carolina – especially in developing markets. The company has made it a part of their operating model by adopting measures like: 1. Calling the delivery boys SDPs (Safe delivery persons) 2. Modifying the bikes to ensure that they cannot go past a certain speed (Reference 1). 3. Refusing to service any customer who lives outside the identified serviceable area for any outlet.
      Measures like these make adherence to speed and safety regulations a part of the company culture.

  3. Great post – Thanks Apurv. I’m interest in how Domino’s / Jubilant has adapted its offerings to the Indian market, given that Indian consumers’ tastes are very different from the US. I’ve heard that many Indian restaurants separate their vegetarian and non-vegetarian facilities, and that restaurants that do not separate vegetarian/non-vegetarian prep areas risk losing out on the sizeable part of the Indian population that is vegetarian. It seems like this business model works well for dense, urban areas – do you think Domino’s can expand into semi-urban areas in India? Even if the logistics could be worked out, do you think there would be sufficient disposable income in semi-urban areas to warrant such an expansion?

  4. Great example! The sheer investment in building scale and clustering stores in dense areas has really paid off for Dominos in that it is able to deal with a large volume of orders trickling in from different channels, especially with online ordering really taking off for them. What I worry about is the culture that this marketing gimmick drives. For while executives claim that late deliveries are cut from marketing expenses, the impact is felt on store level profits and hence salaries, leading delivery boys to take risks as Carolina mentioned. In India I guess the financial need outweighs any concerns they may have of doing so but in more developed markets, this has gotten Dominos negative publicity. I wonder if they will be able to maintain this tagline going forward in all markets or like other fast food chains will only provide this guarantee in certain areas.

    1. They have been able to have a 99.6% success rate with deliveries (Reference 2). As a result, late deliveries don’t eat too much into the bottom line of the stores. As I noted to Carolina, they adopt measures to ensure that the delivery boys drive safely. However I agree that as they expand going forward, they will need to be more stringent in ensuring that delivery persons adhere to the speed limits. One small incident could lead to bad press and legal issues, which is essentially what happened in the US.

  5. Great post Apurv! The same guarantee also exists in Malaysia so I find it fascinating! Some immediate questions pop to my mind though – 1) Given the customer guarantee that is offered, how does Dominoes manage demand and inventory required to meet that demand? For example, how do they ensure that they have sufficient drivers on staff to manage the fluctuations in demand? I would also wonder how geography plays into this i.e. is there a specific type of location where this model works and if so, is there a limit to their expansion in India?

  6. Great post! It seems that the urban landscape in India allows for the feasibility and practicality of the 30 minute guarantee. I definitely understand why the promotion is not available in the US, the 8 minute (average distance) delivery window is difficult to achieve in more suburban areas, offering the guarantee in specific areas only defeats the purpose of the guarantee.

  7. Amazing. Avid Dominos eater in India (it’s way better than here) and investor in Jubilant! I’ve always used the phone, I wonder if the website based is as good as in America. Also, do they have an app? I imagine it would be pretty easy to integrate, and absolutely necessary particularly an Android based one. I can personally attest to scores of on-time deliveries and shouting at the scooter-riding “Dominos-walas” all over Bombay.

    I completely agree that the 30 minute delivery is a winner. This was the first real home delivery option in India, and now even though there are other options nothing beats the brand, convenience and comfort of Dominos.

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