Mixed Fortunes at Domino's - MKTG90011 | Case Study
Added on 2020-03-04
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Mixed Fortunes at Domino’s 1Case Study: Mixed Fortunes at Domino’s Student NameCourseProfessors NameUniversityCityDate
Mixed Fortunes at Domino’s 2IntroductionThe case study Mixed Fortunes at Domino’s is based on a compilation of investigativereports by Fairfax media. The case highlights some problems experienced at Domino’s. Some ofthese problems include the stress on the franchisees who think the investment is not workingwell for them as the costs of running the outlets increase while the prices of pizza decline due tocompetition. There is also a problem with employees’ unhappiness due to underpayment andworking for long hours without compensation. Some franchises consider the head office style asdictatorial putting pressure on the employees and the franchisees. This paper will discuss thebackground to the Domino’s case, suggested solutions and recommendations.BackgroundDomino’s is an Australian pizza chain comprising a network of franchises and over 600retail stores nationally. The company was listed on the Australian stock exchange in 2005. Thecompany has been very successful with the shares having surged 2500 per cent in over a decademaking it one of the best performing in the market. The company has the largest pizza menu withover 200,000 options. Domino’s offers service guarantee to the customers of deliver between 15to 20 minutes for extra cost. The business model is using franchisees to grow sales with the headoffice earning royalty from every sale as opposed to profits. The company encourages morestores being opened to increase the sales and thus royalties for the head office. The situationhowever has not been very rosy for the franchisees as a number of problems have been reported.These issues need to be addressed if the company is to continue with the success story. Theeffective management of restaurants lifecycle and the quality of life issues are important forgrowth and development of a restaurant (Parsa, Self, Njite & King, 2005 p 304).
Mixed Fortunes at Domino’s 3Identification of Issues and ProblemsThe first issue is on royalties taken by head office based on sales that encourage morestores in one region to increase sales. The franchisees are required to pay the royalties based onsales and not profits. This means whether an outlet is making profits or not, it has to pay royaltiesto the franchisee making the business untenable for franchisees and leading to their inability topay the operational costs and make a profit or recoup their investment. The Franchisees feel as ifthe head office is interested only in their welfare and not their welfare. The push for higher sales puts unnecessary pressure on the employees and thus burn out.The issue of quarterly bonuses to the store managers is a good motivator to increase sales.However it might do the opposite of low morale to other employees if they feel left out in therecognition. The CEO should not get engaged in the minute details of micromanaging employeesbut focus on the strategic part of the business.When a franchisee is not doing well, the store’s management is blamed for poorperformance. There is no evidence of any support to the franchisee from head office in order toimprove on performance. While the franchisee costs are increasing, their profits are decliningbecause the cost of pizza is declining due to reduced pizza prices as a result of competition.Domino’s profit is doubling while the franchisees struggle to make profits as they cannot pass ontheir costs of operating. The CEO is well educated, talented and experienced. He is focused on growing thepeople and the business. He knows how to deal with challenges and turning them in toopportunities. He takes risks in changing the business model with the current revolution onretailing and social media use.
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