Since 1999, as the chairman, director, and CEO of Domino’s Pizza, David Brandon
has been at the helm of the largest pizza chain in the world. Though it provides
an inexpensive, internationally beloved product, the business is not without its
headaches—high-cost ingredients and the struggle for brand-differentiation present
constant challenges for the entire industry.
Domino’s ingenious marketing campaigns and technological innovations have made
it a household name, but its recession-resistant, franchise-heavy business model might be
the key factor in winning the pizza war in 2008. Brandon sat down with EQUITIES to
share his plan of attack.
EQUITIES: David, can you discuss for our
readers your background?
David Brandon: I went to University of
Michigan on a football scholarship back
in the early ’70s, graduated in 1974 and
went to work for the Proctor & Gamble
Distributing Company, and spent nearly
five years learning the packaged goods
industry and mass marketing and sales
and sales management at what I consider
to be a terrific company. I left there after
five years to join Valassis, located back
here in Michigan, which is my
home state. It was a business in the
printing and promotion business—
specifically a coupon company who
distributed four-color printed
coupons primarily through Sunday
newspapers. Valassis was a fairly
small company when I joined it,
but I believed that they had a wonderful
product and a great potential.
I ended up staying there for 20
years, and by the time I left, it was
a New York Stock Exchange-listed
company with a market capitalization
of slightly over $2 billion, and
it was a wonderful experience in an
industry that was fast-paced, exciting,
and one that taught me a lot. I
left that company and came to
work at Domino’s Pizza, and I will
be celebrating my ninth anniversary
as the chairman and CEO of
Domino’s in three or four weeks.
EQUITIES: You joined Domino’s
when it was purchased by Bain Capital.
How did that come about?
Brandon: Domino’s was privately held by
its founder, a gentleman named Tom
Monahan, for nearly 37 years. He decided
he wanted to sell out of the business
completely and move on and do other
things with his life. He put the company
up for sale and had bankers conduct an
auction, and there were a number of interested
parties. Bain Capital was one of
the private equity firms that became very
interested in the company and ultimately
won the bid. Once they reached a point
where they felt there was a likelihood they
would be the owner of Domino’s, they
launched a national search for a CEO to
come in and run the business for them.
There was not an internal candidate that
was prepared to move into that spot—Mr.
Monahan was going to be moving on. I
was contacted as part of that search
process. I knew Domino’s—being a local
Michigan guy who had seen the company
grow up virtually a few miles down the
road from where I grew up—and I was
interested and met with the Bain Capital
people and was incredibly impressed with
them and their view of what could happen
with this company. Over a period of
a few short months, the deal was consummated
and I was brought onboard.
EQUITIES: So you beat out a lot of people.
Brandon: Well, they told me that they actually
had 80-some candidates go through
the search process, so it was very much a
national process and they obviously
looked at a lot of people. I was very flattered
that they chose me, and, nine years
later, I hope if you talk to them, they
would feel glad that they did.
EQUITIES: What challenges does Domino’s
face, and what’s your vision for the company
for 2008?
Brandon: The challenges any of us in the
retail food business face are significant.
Whether we’re talking about 2008 or nine
years ago when I arrived, it is a business
that has what I refer to as a lot of “moving
parts.”We have a billion-dollar supply
chain business, which fundamentally provides
all of the dough balls, ingredients,
equipment and supplies that are required
for our stores to be successful. So in and
of itself, we have a very substantial distribution
company that needs to be
managed and needs to run and operate
efficiently and effectively.
We own and operate nearly 600
Domino’s Pizza stores ourselves,
which makes us, on a standalone
basis, one of the 10 largest national
pizza delivery companies. We have
our own corporate operations—it’s
a very substantial component of
the business—so we’re actually operating
our own stores. And we’re a
large franchisor, which means that
we have over 1,200 franchisees in
the U.S. that collectively own close
to 4,500 stores in the continental
United States. Our job is to take all
of those franchisees, all of their
entrepreneurial spirit, the experience
they have as business leaders
and owners and operators of their
own businesses and companies, and
bring all of that force together in a
united, focused effort to grow our
sales, to improve our profits, and to
become a bigger, more dominating player
in the category that we compete in.
EQUITIES: How many worldwide
Domino’s franchises are there?
Brandon: The other component is our international
business. We’re in nearly 60
countries around the world. We operate
using a master franchise model, which
means that we partner with local operators
in those various countries and provide
them with the expertise, the brand,
the operating platform, the oversight, and
the support they need to combine with
their capital and their operational execution
to create results. And for that, they
pay us a royalty of their sales. That’s fundamentally
how the master franchise
model works. We deal with virtually hundreds
of franchisees—both master franchisees
and what we call sub-franchisees—
around the world, which
comprise our international business. Our
international business represents nearly a
third of our profitability and of the
growth and substance of this company.
On a worldwide basis, we operate about
8,600 stores. About 5,100 of them are
located in the U.S., and the balance in international
markets.
EQUITIES: Is the international
pizza consumer different from
the American?
Brandon: Fundamentally, there is
no difference. People love pizza
all over the world. It seems to be
a product that’s widely accepted,
and the taste, and the convenience,
and the portability of
pizza is something that is embraced.
I’ve traveled all over the
world, and it seems to be embraced
in every continent and
every country I’ve visited. It’s
quite remarkable. I would also
add that we’re a pizza-delivery
company, so in addition to serving
a great-tasting pizza, delivering it to
you wherever and whenever you want to
consume it is really an important part of
what makes us successful and what has
driven our growth. In international markets,
as societies get busier and they have
more two-wage-earning households, they
have more time pressures, and they’re living
their lives at warp speed with all of the
real-time communication devices that
they rely on to enable them to do that, the
convenience of home-delivered pizza
products becomes a stress-free solution
for many of their needs. So the convenience
of our delivery system, the great
taste of our product, and the value—
pizza is a relatively inexpensive way to
feed a lot of people—that combination
seems to work all over the world.
EQUITIES: How has Web and mobilephone
ordering changed the business
landscape, and what other technologybased
changes do you foresee?
Brandon: Technology has transformed our
business. Fifteen years ago, people
thought it was a miracle that we had caller
ID in our stores. That we knew who was
calling before we answered the phone was
almost revolutionary. Today, we have technology
that has fundamentally changed
how we operate and the way we interact
with our customers, and it has made us
much more efficient and effective.
We are in a position where we can use
computers to schedule our labor, to communicate
with our customers, to make it
easier for our customers to place their
orders, and to know what they have historically
ordered. It allows us to databasemarket
to our customers, as we’re able to
find out what their purchasing habits and
profiles are so we can market into those
habits. We’ve provided opportunities for
our customers to order in many different
ways—they can talk to us through their
cell phones and order through their
portable devices, they can go online and
order from their laptops or their computers
in their homes. They have the ability
to access a variety of portals to make
the ordering experience as easy and convenient
as possible.
We are launching some very innovative
products. One that’s receiving a lot of attention
is the Pizza Tracker. It allows our
customers to go online, place an order,
and actually watch the status of that order
as it moves through our system. The
tracker actually shows when the pizza has
been prepared and is ready to be put in
the oven. It shows when it’s in the oven
baking, when it’s out of the oven and being
dispatched, and when the driver has
left the store. It provides the customer
with the ability to track the activity associated
with their order so they can plan
and understand clearly when their hot
meal is going to arrive.
EQUITIES: Are technological advances the
most competitive aspect of the industry
right now?
Brandon: The fun thing about
this business is that there’s not
one thing that’s important—
everything is important. Certainly,
it all starts with our operations at
the store level—if you haven’t
got that part right, you’re going
to fail. The operational aspect of
this business is critical. Then it’s
a mass-marketing business and a
branded business, and we need
to utilize all the tools—television,
print, Internet advertising,
all the various channels that are
available to us—to create a
strong brand message that hopefully
creates a desire on behalf
of not only our existing consumers, but
prospective consumers, to call our store
and place an order. And then, obviously,
technology becomes a very important facilitator.
Once we’ve got that customer
and we want to do business, that technology
can make it more fun, easier,
faster, and cheaper to do business, and
that all enhances our overall relationship
with our customers.
EQUITIES: Jim Cramer mentioned you a
while back on Mad Money, and he made
the observation that competitors in the
pizza business essentially offer the exact
same product with the same high-cost ingredients.
If this is true, how does
Domino’s distinguish itself ?
Brandon: Well, with all due respect to Mr.
Cramer, I think there are probably people
out there who’d say all those analysts on
Wall Street are pretty much the same—
they’re all looking at the same research
and getting the same data. And he’d probably
argue with that. So I’m not going to
accept that I’m any more of a commodity
than he probably would. But what I will
tell you is that we have to earn our brand
differentiation.We have to earn it through
the image that we project, through the
service that we provide, and through the
quality of our products. Whether that
comes through our technology breakthroughs,
like the Pizza Tracker, or
through our print and television advertising,
or just the fundamentally strong operation
that we provide, all of those are
ways we can differentiate. But we have to
get up every morning and go earn that differentiation
through our performance.
I think that an argument could be
made that, in any competitive industry,
there’s a certain level of commoditization.
But the reality is, there are all kinds
of ways to differentiate and create a competitive
advantage, as long as you execute
at a high level, you’re creative in your approach,
and at some point in time, you’re
prepared to take some risks. Toward the
end of last year, we decided we wanted to
reignite our brand positioning.We wanted
change, we wanted a bigger, bolder, more
in-your-face approach to communicating
our message to our customer. Our research
indicated that the consumer was
having a hard time differentiating our advertising
message from the other national
competitors’, and we didn’t like being in
that position.
We brought in a new advertising
agency, Crispin, Porter & Bogusky. We
really liked the work they had done for
other clients, some of whom are in similar
businesses, some whom are in very
different industries. But there was a commonality
in their creative approach that
left us with the impression that we had
found someone who was bold and edgy
and could grab the attention of consumers.
We launched that relationship at
the beginning of the year with our first
national promotion, which was the Big
Fantastic Deal promotion, and a set of
ads, which were the first work product of
our new partnership. And we’re very
pleased with what we’ve seen so far from
our new agency. They seem to be everything
we hoped and expected them to be
in terms of their creative energy and their
unique perspective on how to get a message
out. Obviously that relationship will
only get stronger and better over time, but
we’re very, very pleased with where we are
at this point.
EQUITIES: You were on The Apprentice in
2005. How did that come about?
Brandon: It’s an interesting story. We had
a very talented woman who worked in
our corporate communications and investor
relations area. This member of our
staff happened to see one of the earliest
episodes of The Apprentice and immediately
recognized that it was a very interesting
show that was gaining a lot of attention.
She came up with the idea that
perhaps they would be interested in partnering
with a branded business model like
Domino’s, because we could create a
competition that would be very much
akin to what they were attempting to do
on their own in the context of the show.
So she knocked on my door and came in
one day, and said, “I saw this show, The
Apprentice. I think you should write a letter
to Donald Trump and recommend
Domino’s Pizza as a brand that could be
used in one of their future episodes.”
Being a CEO who believes strongly
that I should listen to my team members
and reward those who come up with creative
ideas, I must admit, I internally reacted
negatively. My first assumption
was, I’ll send a letter to Donald
Trump and he’ll never see it, or
there’ll be 28 reasons why this
can’t happen. But I wanted her
to know how much I appreciated
her aggressiveness in coming
forward, so we went ahead
and put the letter together. I
signed it, I sent it to Mr. Trump,
and within two weeks, I heard
back from his office and he was
very interested in the idea.
We ended up sponsoring virtually
an entire episode that was
themed around Domino’s Pizza.
Our uniforms, our product, and
our packaging were featured throughout
the entire 45 minutes of the show. It was
almost like an infomercial in terms of the
amount of brand identification that was
created. It went so well, Donald asked
me to come back in a future episode and
participate in the judging, and our brand
and our company got even more recognition.
It was a very positive experience
that afforded us the ability to get great advertising,
great public-relations value, and
connect with something that was very
topical.
EQUITIES: Speaking of TV, what’s
Domino’s relationship with The Simpsons?
Brandon: I can’t tell you specifically the
extent that we’ve been an advertiser here
in the U.S. on The Simpsons, but a few
years ago, our master franchise
partners in the U.K. recognized
that The Simpsons was the No. 1
show in the U.K. They did a partnership
that was very deep and
very broad that afforded them
the ability to do a significant
amount of traditional advertising,
as well as use some of The
Simpsons’ characters in their print
and even around some of their
product innovations. So they
made a wonderful call in terms of
aligning themselves with something
that was very relevant, very
topical, considered very cool, and
they got connected to it in a way
that very positively impacted their
business.
EQUITIES: How much do market swings
affect Domino’s?
Brandon: We are almost completely a franchise
company, and that makes us a little
more insulated from some of these economic
swings because we make our
money off the top-line sales of our franchisees.
We like to describe ourselves not
as recession-proof—because I’m not sure
anybody is—but we’re recession-resistant.
There’s clearly a segment of our consumers
that, when gas prices go up, or
their mortgage rates go up, or they’re in a
situation where their credit cards are run
up, they cut back their spending, and that
cutback is going to negatively affect us.
The advantage is, we will also see customers
who, because of economic pressures,
may say, “Well, instead of spending
$100 at a restaurant, why don’t
we order from Domino’s, because
that’ll be $30, and we’ll
have food left over.”
EQUITIES: Like you said, it’s a relatively
inexpensive way to feed a
lot of people.
Brandon: Right. So at any point
in the cycle, we’re going to have
less volatility, not just because
of the way our business model
works and the way we collect
royalties from franchisees, but
as a result of the fact that the
value equation works in our favor. We
don’t root for recessions, nor do we
think it’s positive if consumers get into a
position where they are less inclined to
spend. That’s never going to be good
for our business, but we have much less
downside risk.
EQUITIES: Are you still considering running
for governor of Michigan?
Brandon: I’ve had a lot of people ask me
about whether I have an interest in political
office. I think that comes from the
fact that my grandfather and my father
were actively involved in Michigan politics
and both at various times were
elected officials at the local level. I also
did run on the statewide ballot many
years ago and was elected to a position as
a regent of the University of
Michigan, where I served an
eight-year term. I think the combination
of my family involvement
and the fact that I have run
on the ballot once and was successful,
has, from time to time,
spurned a lot of speculation as to
whether I have goals and aspirations
to run for political office. I
tell you, with great certainty, that
my goals and aspirations currently
are to make Domino’s
Pizza as big and as successful and
as profitable as I can for the betterment
of our shareholders,
team members, and franchisees,
and it is receiving 100% of my efforts
and energy.
— By Jon Thibault
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