As it strives to energize its lethargic delivery business, Domino's Pizza announced that customers can begin using Uber's Uber Eats and Postmates services for orders. After that, the company's shares increased 10% on Wednesday.
Domino's stated that according to its "global agreement" signed with the ride-sharing firm, Uber Eats will be its sole third-party system in the United States until at least 2024.
The pizza producer announced that the relationship would start in four US pilot locations in the fall after signaling a decline in the delivery sector in April.
By the end of 2023, orders via Uber's delivery apps are anticipated to be available nationwide, with Domino's and its affiliates handling deliveries, according to the business.
Domino's had been reluctant to collaborate with outside delivery services, favoring rather its own website, app, and drivers.
However, now that Domino's has been added on Postmates and Uber Eats, it will be simpler for the restaurant to attract new customers who are accustomed to placing orders there.
While doing so, Domino's will continue to send out deliveries using the company's uniformed drivers, enabling it to keep controlling the quality of its food, image, and brand. Along with that, the agreement mandates that Uber give Domino's some information about consumer orders.
Following consumer preference for homemade meals during a difficult cost-of-living crisis, the business has been increasing menu item pricing and boosting delivery fees in an effort to protect margins against rising costs of input.
Domino's reported in April that its first-quarter same-store delivery sales had decreased 2.1% from the same period a year ago. On July 24, it will release its second quarter earnings.
According to BTIG analyst Peter Saleh, benefits from the agreement would probably only start to accrue in the final quarter of the year but will likely enhance franchisee economics and help Domino's sluggish domestic delivery business.
In 27 overseas regions, including the UK, Canada, and Australia — all of which the two firms share — Domino's said it will try to switch to using Uber Eats for deliveries this year.
According to Angelo Zino at CFRA Research, the partnership would allow Uber to gradually grab a larger portion of the online duopoly it currently shares with DoorDash over the coming quarters in the United States.