Latest / Money News / Dominos CEO challenges Australia's productivity debate 🍕 👔 📈

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Dominos CEO challenges Australia's productivity debate 🍕 👔 📈 · Money News

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  S1: Now, Domino's is one of Australia's most well-known food chains.
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  S1: We've all had a pizza from Domino's. They have more
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  S1: than 880 stores across Australia and New Zealand. They employ
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  S1: over 2000 staff, and they serve millions of customers and
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  S1: backed by a large and loyal investor base on the
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  S1: ASX as well. In many ways, the company was ahead
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  S1: of its time building one of the most advanced food
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  S1: delivery tech platforms in the world, long before the likes
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  S1: of Uber Eats and DoorDash even existed. And I'm very
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  S1: keen to speak to our next guest because in a
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  S1: cost of living crisis, what happens in terms of fast
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  S1: food purchasing and the fast food industry can always be
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  S1: very telling. Merrill Pereira is a 30 year veteran of
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  S1: the global fast food industry and the CEO of Domino's ANZ.
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  S1: He's on the line for us tonight. Merrill, thanks for
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  S1: your time.
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  S2: Thank you for having me, James. Looking forward to it.
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  S1: And thank you for joining us. You've spent 30 years
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  S1: in the fast food industry. You've had high level positions
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  S1: at McDonald's, KFC, Pizza Hut. What is it, in general
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  S1: terms that makes a fast food business successful, and what
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  S1: has worked consistently for you along this journey?
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  S2: I think some of the principles are pretty much the same,
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  S2: but there's one thing I've realized over the last few
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  S2: years is the amount of black swan events that we have.
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  S2: I mean, you just look at what's happened this year.
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  S2: You know, we've had the crisis with Iran. It's affected
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  S2: fuel prices. You've got wage increases going in and you
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  S2: have a few more things that come through. But for me,
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  S2: when I look at the, uh, what what's worked over
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  S2: the last 20 to 30 years in my career is
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  S2: I'm a strong believer of the three legged stool. And
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  S2: the three legged stool is the most important thing for
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  S2: me in franchising in business. So the three legged stool,
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  S2: one of the legs stands for the franchisees or what
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  S2: we call the franchise partners. The second leg is the
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  S2: business partner, which is our suppliers, and the third is
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  S2: the corporation. So if a business is working very well,
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  S2: you can see those three legs are really strong. But
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  S2: when you see big brands globally collapsing, it's because one
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  S2: of those legs is a weak leg. So when you
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  S2: look at those principles, I think it's very consistent throughout globally,
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  S2: throughout all the franchising companies. But just with what's happening
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  S2: in the current climate in the last few years, uh,
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  S2: we've just got to be careful about how we go
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  S2: about planning strategies.
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  S1: Is the current black swan event with the added complexity
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  S1: of the fuel prices out of the Middle East, how
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  S1: tough has that been for your business and the fast
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  S1: food industry?
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  S2: It hasn't been good for for businesses from all sides.
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  S2: So as you know, in Domino's, we are the only
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  S2: QSR player that has our own delivery riders. So we've
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  S2: got our own own own on delivery systems. And so
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  S2: that of course, affects, you know, the cost of delivery
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  S2: because of the fuel prices going up. But then the
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  S2: other thing is also you've got to take into consideration
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  S2: is you've got our business suppliers who, you know, their
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  S2: costs have gone up too because of getting the goods
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  S2: delivered to us. So it has impacted a number of
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  S2: people with what's happened in the last few months. There's
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  S2: a lot of challenges that we've got to deal with.
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  S2: The biggest challenge is basically making sure that you're agile
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  S2: enough to look at what's happening and then make some
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  S2: changes straight away. We've got a team of people that
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  S2: are constantly looking at, you know, what's happening, what can
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  S2: we do? The last thing you want to do is
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  S2: when these things happen is, is throw the costs onto
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  S2: the customer. So we want to try your best to,
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  S2: you know, minimise your losses and at the same time,
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  S2: make sure you deliver that extra value to the customer.
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  S1: Just in general terms, I'm interested to know how you've
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  S1: kept your prices so low for so long, where you're
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  S1: still offering pizzas for under $10 in store when many
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  S1: of your competitors are often criticized or called out for
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  S1: a growing price list. What is the secret there?
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  S2: For us, it's, you know, we've gone back and looked
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  S2: at every aspect of of our business model. So we
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  S2: looked at everything from, can we sign up long term
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  S2: contracts with our suppliers? How is it better for us
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  S2: to use technology to minimize cost of labor that's going up?
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  S2: So you look at everything on the PNL, and the
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  S2: last thing you need to look at is basically saying,
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  S2: you know what? We can't afford to do this anymore.
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  S2: And we've got to give up on the cost to
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  S2: the consumer. So that's what we've done and that's what
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  S2: we'll keep doing, because the last thing we want to
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  S2: do is when these things happen, is the first thing
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  S2: you do is just move your prices up, you know,
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  S2: and Domino's, we want to make sure we've got we've
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  S2: got not great value, but everyday value. So we've been
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  S2: strategic about the way we've done our value meals And
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  S2: the offers that we give our customers.
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  S1: Pizzas are a hotly contested marketplace. There are many new
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  S1: popular chains at a number of different price points. How
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  S1: has Domino's been able to keep its market share?
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  S2: I would say the pizza business in Australia is one
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  S2: of the most highly penetrated businesses in the country. And
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  S2: you're not only dealing with these QSR players, you're dealing
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  S2: with even restaurants today that offer pizza. So they are
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  S2: competition too. So you've got to deal with the restaurants.
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  S2: And if you look at the Italian restaurants, 100% of
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  S2: them would have pizza on the menu. And then the
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  S2: other competition that you have is you've also got the
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  S2: grocery stores that offer, you know, uh.
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  S1: That's right.
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  S2: Frozen pizzas that you can take home and you can, and,
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  S2: you know.
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  S1: And a growing variety at the supermarket as well.
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  S2: Exactly. So our job is to make sure that, you know,
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  S2: we can, we can compete with that. And, uh, and
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  S2: that's what we constantly looking at right from our innovation
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  S2: point of view to making sure we can, we can,
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  S2: you know, when people talk to me about they've gone
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  S2: into a grocery store and they've bought a pizza and
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  S2: they say it's, you know, a lot cheaper or it's
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  S2: the same price as, as what we would have in Domino's.
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  S2: One of the things I tell them is, you know,
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  S2: the pizza that you get from Domino's is made for you.
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  S2: We don't have pizzas that are that are ready made
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  S2: and in our freezers that we just take out and
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  S2: pass through an oven. Every pizza that you order in
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  S2: Domino's starts from scratch with fresh dough, and it's made
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  S2: for you. So there's a couple of advantages to, uh,
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  S2: you know, having a fresh pizza than having a frozen pizza.
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  S1: Absolutely. Just tell me about the tech, because I think
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  S1: Domino's really led the way on that a number of
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  S1: years ago. And then all these different platforms came on board.
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  S1: And I know that your brand is used by a
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  S1: lot of them. You can get Uber Eats on Domino's
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  S1: and everything else, but given that it's now easier than
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  S1: ever to order take away food to your doorstep. How
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  S1: important is it for you to have that tech up
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  S1: and running ready to go? Constantly updating and making it
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  S1: easy as possible for customers.
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  S2: Yeah. No. Uh. Spot on. Good question too. For me,
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  S2: you know, digital remains the biggest growth area for us
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  S2: and we continue to invest in technology. And that enables
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  S2: us to optimize our operations. You know, the big word
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  S2: out today, the big sexy word today is AI. And
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  S2: we've integrated that into our business. Uh, you know, a
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  S2: year ago. We've got our own AI agent called Daria. Yep. And, uh,
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  S2: and that's what we use to basically give us valuable
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  S2: insights into, uh, comparing performance with our other restaurants.
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  S1: Just lastly, um, given that you've worked all over the world,
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  S1: how tough is it for people to do business in
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  S1: Australia and what are the key things, do you think
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  S1: specifically top of the list that hold a lot of
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  S1: businesses back from succeeding. Is it taxes? Is it regulation?
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  S1: Is it the cost of things like energy and gas?
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  S1: I'd just be keen to hear from you about some
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  S1: of those challenges in general.
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  S2: So like you said earlier, right. I've I've been in
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  S2: the industry for 35 years and I've done 23 geographies.
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  S2: But when you just look at the Australian QSR market, right,
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  S2: when you look at the CAGR for the next ten years,
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  S2: currently the QSR market sits at about close to $32
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  S2: billion this year, and you're looking at a growth of
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  S2: nearly 9.2% over the next ten years, which will take
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  S2: it to about $76.7 billion, which is which is which
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  S2: is a huge growth, growth market. When I look at
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  S2: the business out here in Australia, we will always have challenges.
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  S2: We've always got costs, labor costs going high. We will
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  S2: be one of the few countries in the world that's
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  S2: got one of the highest hourly rates in the world.
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  S2: But saying that we also one of the most highest
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  S2: productive staff in our restaurants. Yeah. And when you look
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  S2: at productivity, Australia would rank in the top maybe 2
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  S2: or 3 in the world. So I mean, if you
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  S2: just look at it right, you walk into a domino
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  S2: store here. And for the volume that you're doing, let's
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  S2: say you have ten people. If you walk into some
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  S2: of the other countries in Asia doing the same volume,
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  S2: you have about 25 people. Yeah. So, you know, uh,
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  S2: we are a race that's, you know, very, very productive. And, um, yeah,
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  S2: and you always have challenges, right? You always have challenges like,
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  S2: like the rest of the world. And one of the
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  S2: things I keep emphasizing is these black swan events that
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  S2: will keep happening. But you just got to be on
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  S2: top of your game and you've got to make sure
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  S2: that you constantly evolving and, uh, and making sure you're
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  S2: ahead of the game.
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  S1: Well, Meryl, we need to know the answer to that
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  S1: question because Australia has a productivity problem overall. And if
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  S1: those issues don't apply to the Domino's stores and the
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  S1: Domino's workers, we need to know why. Or is that
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  S1: information under lock and key?
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  S2: No no no no no. I think it comes down
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  S2: to a couple of things, right? I think the number
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  S2: one thing out here is people, you know, uh, finding
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  S2: a way to motivate your people. Uh, we have restaurants
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  S2: in the country where staff are incentivized, uh, into profit sharing.
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  S2: So whatever the profits are for the month, uh, there's
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  S2: a certain percentage left for the staff to basically get
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  S2: a share in it. But for me, it starts with people,
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  S2: you know, you hire the right people and you look
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  S2: after them and you treat them the way they want
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  S2: to be treated. Very often we say, you know, treat
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  S2: people the way you want to be treated. But I
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  S2: think the right way is, you know, treat people the
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  S2: way they want to be treated. Uh, we've offered a
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  S2: number of our franchisees to, they start off as delivery
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  S2: riders and I work through the system and now they've
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  S2: got their own stores.
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  S1: That's amazing.
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  S2: So it's a mix of a number of things, but
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  S2: I would say start with people, treat them the way
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  S2: they want to be treated, incentivize them, uh, to get
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  S2: a share in, in the benefits of, what you achieve.
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  S2: And for me, that's worked. It's always worked and it'll
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  S2: work and it'll work in this country too.
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  S1: Yeah. And it's very, very important to, to make those points.
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  S1: And obviously the big fear and the big consequence that
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  S1: people wonder with AI is how many jobs that it
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  S1: will take. But, um, I think with your business, I mean,
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  S1: it is so hands on. Have you got any predictions
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  S1: about where AI is heading with jobs?
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  S2: And no, AI won't take over any of the jobs
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  S2: that we have. AI will allow us to make better decisions.
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  S2: But at the end of the day, your pay will
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  S2: be made by by a human being. So it will
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  S2: help us to predict customer trends. It will help us
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  S2: to make better decisions on menu, on pricing, the way we,
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  S2: you know, the way we operate our stores. But at
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  S2: the end of the day, a pizza is going to
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  S2: be made by a human. So that's the way I
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  S2: look at it.
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  S1: It was lovely to talk to you, Meryl. I really
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  S1: appreciate your time tonight.
• 11:35
  S2: No worries mate, you take care. Thanks, James.
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  S1: Meryl Perera, the CEO of Domino's ANZ.