Joanna Wells explores Domino’s Australia’s decision to cut discounts to protect franchisee margins, and what it reveals about the challenges of pricing and promotion strategies in a changing market. Using Domino’s COVID-era growth, rising competition from delivery platforms and Australia’s declining pizza category, the episode examines why strong sales do not always mean sustainable growth.
This episode looks at how businesses can use smarter pricing and promotion strategies to balance customer demand, sales and profitability, while avoiding blanket discounts that give away margin unnecessarily.
TIME-STAMPED NOTES:
[00:00] Domino’s Pricing and Promotion Strategies
[03:34] How COVID Changed Domino’s Pricing and Promotion Strategies
[05:14] How Delivery Competition Changed Domino’s Pricing Power
[07:05] Australia’s Pizza Market and the Limits of Premium Pricing
[12:10] Why Global Pricing and Promotion Strategies Struggle in Australia
[16:18] Using Smarter Pricing and Promotion Strategies to Protect Margin
[20:41] Conclusion: What Domino’s Teaches Us About Pricing and Promotion Strategies
Domino’s Pricing and Promotion Strategies
[00:00] In 2021, Domino’s Pizza Enterprises Australia described itself as a technology company that happened to sell pizza. Their share price had gone from around $35 before COVID to over 160. At its peak, the CEO was talking about world-class digital infrastructure, artificial intelligence, and the future of food delivery.
[00:24] And on the numbers in front of them, that story made sense. But here is what was also happening. Australia was in lockdown. People couldn’t go to restaurants. They were stuck at home, anxious, comfort eating and wanting cheap food delivered to the door without human contact. Domino’s was one of those few food businesses fully operational at the time.
[00:50] They didn’t win because of their GPS tracker. They won because they had a captive market. And the numbers made it genuinely difficult to tell the difference. And it’s that distinction, captive demand versus earned demand, which is at the centre of everything that followed the public version of the Domino’s Australia story goes something like this.
[01:13] They cut discounting to protect franchise profitability. Sales fell. Now the US parent is unhappy. Should they have done it? But that’s the wrong question. And the framing misses almost everything interesting about what is actually happening, ’cause this isn’t a story about one pricing decision.
It’s a story about a business that misread why it was winning, built itself bigger on that misreading and is now dealing with the consequences in a market.
[01:43] The people running it from overseas do not fully understand. Let me take you through it properly. First, you need to understand what Domino’s Australia actually is because it’s not what most people think. Domino’s Pizza Enterprises, DPE, is an ASX-listed company. It’s not the US Domino’s. It holds the master franchise rights for the Domino’s brand across Australia, New Zealand, Europe, Japan, and Taiwan.
[02:12] It licences the brand from Domino’s Incorporated in the US, pays royalties up to the parent and then subfranchises, individual stores to local operators here. So there are three layers. US incorporated the DPE and the franchisee running the store. And every single one of those layers has a different financial interest.
[02:37] For example, the US Incorporated gets paid based on the DPE’s overall performance. They want Australia to look like a healthy market. DPE collects royalties based on store sales. Their incentive is volume. More pizza sold, more money flows up. The franchisee, the person actually in the store at 8:00 PM on a Saturday with three staff, gets paid on whatever is left.
[03:06] After ingredients, labour, rent, and royalties are all taken out. So for years, those three interests were roughly aligned. The deals drove sales and volume. Volume kept franchisees afloat. DPE grew us Incorporated, were happy, then COVID happened, and DPE made the mistake that would define everything that followed.
How COVID Changed Domino’s Pricing and Promotion Strategies
[03:34] So during COVID, Domino’s Australia did really, really well, and it’s worth understanding why. Because it looked like exactly the right place to be. Australians were locked in their homes for months. Restaurants were closed. People wanted cheap food, delivered fast with very little human contact. Domino’s had the infrastructure, the app, the drivers, and the price point.
[04:00] They were genuinely well positioned for that moment. The question that is easy to ask. In hindsight, though, and very hard to ask, when the numbers look that good, is this, is this growth real or is it captive? It’s an uncomfortable question to put to a board when the share price has gone from $35 to 160, but it is the most important question in commercial strategy.
[04:27] Instead, they took the COVID earnings as proof that the business model was exceptional. They raised capital, they expanded store count very aggressively. They made so many acquisitions. They described themselves publicly as a technology company. The share price went to $160, and the company sized itself accordingly.
[04:51] And then the doors opened. Australians went back to restaurants, back to the local Thai restaurant, back to the burger place down the road, and critically back to Uber Eats, which during those same lockdown years, had quietly become something Domino’s had never faced before. Real competition for delivery.
How Delivery Competition Changed Domino’s Pricing Power
[05:14] This is the part, the story that no one in the financial press has really been directly targeting enough. Domino’s built its entire competitive advantage on one thing: we deliver, and most others don’t. Before Uber Eats, if you wanted like hot food at your door, you ordered pizza. Domino’s owns that channel.
[05:36] The app, GPS Tracker, the 30 Minute Promise. All of it was built around owning delivery when nobody else had it. Uber Eats, DoorDash and Menu Log changed that permanently. They turned every restaurant- your local Italian, the Thai place, the burger joint, the sushi bar into a delivery business. And overnight, Domino’s went from being the delivery company to being one option among thousands on an app.
[06:07] And the real kicker here is that Uber Eats actually is a technology company. Their logistics, their pricing algorithms, their customer data is genuinely more sophisticated than anything Domino’s has built. Domino’s called themselves a tech company at exactly the moment a real tech company ate their lunch.
[06:29] The delivery moat was gone. And what remained was the product itself and affordable pizza in a country that has a very specific view of what pizza is worth. Here’s a fact we’re thinking about. Land. Piz opened in Sydney recently, and it’s one of the most famous pizzerias in the world. They charge $18 a pizza, $18, and that is the ceiling- the world’s best pizza in Australia at $18.
Australia’s Pizza Market and the Limits of Premium Pricing
[07:05] Now, compare that to what you would pay at a decent restaurant for a steak, a pasta, a piece of fish. The ceiling on those categories is completely different. Australians will pay 60, 80, a hundred dollars for a good piece of meat without blinking. But pizza, Australians have made a collective decision about what pizza is worth, and that decision is basically not much.
[07:31] Cross Pizza tried to push against this. They positioned as premium, better ingredients, gourmet toppings, higher price point. Roy Morgan named them Australia’s top premium pizza, and they’ve been losing stores consistently. Net 29 closures in the year to June, 2025. Customers’ reviews say the same thing: basically, it looks fancy, still stodgy, and not worth it.
[07:59] The Australian market is telling every pizza brand the same thing clearly and very consistently. We know what pizza is, we know what it tastes like, and we’re not paying a premium for it.
Now, that’s not a marketing problem; that’s a category belief, and no amount of rebranding shifts a category belief.
[08:20] Now I just want us to zoom out of the Australian pizza market for a minute, uh, and think about a pattern which I’ve seen emerge that no one really wants to name out loud. So, pizza chains in Australia have a lifespan, and it’s shorter than anyone building one would like to admit. Eagle Boys, founded in 1987, at their peak in 2013, they had over 340 stores across Australia, but by 2016, they were in administration.
[08:54] Gone three years from peak to zero, they were killed by exactly the same thing. Threatening Domino’s. Today, they competed on cheap pizza in a market where Domino’s and Pizza Hut were willing to go cheaper. When you have no motive except price, and someone beats you on price, you have nothing left. Pizza Hut arrived in Australia in 1970.
[09:20] They peaked in the eighties and nineties. They’re now down to around 310 stores and are still contracting in the United States. Pizza Hut still has thousands of locations. After 68 years in Australia, they’ve been in slow decline for three decades; the number of pizza restaurants and takeaways in Australia has fallen 3.3% every year for the last five years.
[09:49] In the last year alone, the category shrank by 7%. QOSR pizza sales went negative globally in 2025. This is not a Domino’s problem.
This is a category in structural decline, and Domino’s, sized up on COVID earnings that we’re never going to repeat, is the largest business sitting inside that declining category.
[10:15] So let’s look at it this way. The United States has 335 million people. Australia has 26 million. That’s, uh, 13 times the market size in the US. When a brand goes outta fashion, it can retreat. Pizza Hut loses California, but keeps Ohio. There are enough regional markets to sustain a business, even if it ages and contracts.
[10:44] The brand has decades of nostalgic equity with Americans, birthday parties, family dinners, memories attached to the food that slows decline. In Australia, there is nowhere to retreat to. When you go outta fashion, you go outta fashion everywhere simultaneously. And because the market is small, you hit the viability threshold fast.
[11:11] You need density to make the supply chain work to justify the marketing spend, to keep the franchise economics together; lose enough stores and the whole system becomes uneconomical before the brand has had a chance to reinvent itself. The peak-to-decline cycle for a pizza chain in Australia runs about 20 to 30 years.
[11:35] After that, the contraction is structural, not fixable by a new campaign or a better app or a coupon. Domino’s Australia arrived in 1983. The COVID peak was 2021. The maths is fairly uncomfortable, and none of this is visible from Ohio. Domino’s Incorporated CEO Russell Weiner has publicly named DPE as a specific problem dragging down international results.
Why Global Pricing and Promotion Strategies Struggle in Australia
[12:10] The CFO and the EVP of International flew to Sydney recently. They’re on the phone, as they put it, tops to tops all the time. They believe this is an execution problem. Return to value, get back to the formula, fix the promotional mechanics. More discipline, better operations. Now, they’re not wrong that the formula has worked globally.
[12:34] It has in markets with different cost structures, different competitive landscapes and different brand lifecycle positions. The Domino playbook still does deliver, but they are applying a global average to a market that is not average. Australian labour costs are among the highest in the world. Minimum wage, superannuation weekend, and public holiday penalty rates.
[13:01] The cost of making and delivering a pizza here is structurally different to making one in the USA. A price point that works in Ohio does not automatically work in Western Sydney. Australian consumers have a different relationship with pizza than an American consumer does in the US. There is genuine brand nostalgia for these changes here.
[13:26] There is not. Australians are more transactional. When something better comes along, they leave and something better in the form of every other type of food. Now, deliverable in 30 minutes has come along, and the category itself is contracting in a way that the US market has not experienced to the same degree or at the same speed, flying the CFO to Sydney to talk about promotional strategy.
[13:54] When the business is dealing with a category lifecycle problem in a structurally different market is not going to fix this. It might make the decline more orderly; it will not reverse it. Uh, before I talk about, um, discounts, um, I want to say something about the people actually trying to solve this.
The pricing team at Domino’s Australia is not sitting around making simple decisions.
[14:23] They’re in one of the hardest commercial positions I can think of. They are being pulled in three directions simultaneously, and every direction is legitimate. Marketing needs the promotional mechanics back because same-store sales are down and the deals drive traffic. That’s the real problem. Finance needs franchisee margin restored because people are running stores that are not profitable, and store closures are a worse outcome for everyone than lower volume.
[14:55] That is also a problem. And then you’ve got the US headquarters that need Australia to perform better because DPE’s underperformance is showing up in Domino’s incorporated global numbers. That pressure is quite substantial too. None of those three parties is wrong. None of them is asking for something unreasonable, and they’re pulling in opposite directions.
[15:21] At the same time, the pricing team can see the structural problems. Clearly the category decline, the cost structure, the Uber Eats displacement. They probably know better than anyone that a promotional calendar alone will not fix this. But they’re also the people who have to show up every week with a recommendation that finance, marketing, and the US parent can all live with.
[15:46] In a market that is contracting with a franchisee system that is under genuine financial pressure, under a microscope from overseas, that is genuinely difficult, and it deserves to be named as such. So should Domino’s Australia discount? Yes, because cheap pizza is the only thing they are selling. In a market that has decided pizza is cheap, there isn’t much premium to play with.
Using Smarter Pricing and Promotion Strategies to Protect Margin
[16:18] Cross prove it. The $18 ceiling proves it do not need to suddenly charge more for a product. The market is comprehensively valued. Domino’s has millions of app users in Australia. They’ve detailed purchase histories on every one of them. They know who’s ordered twice a week regardless of what’s on special.
[16:42] They know who only comes back when there’s a deal. They know which customers have not ordered in three months and which need a reason to return. That data should be doing the work, not a broadcast promotional price that hands margin away to customers who didn’t need it. Smarter discounting, targeted promotions built around the franchisee margin floor, not just the volume around d p’s needs for its royalty income, but I want to be honest about the harder truth underneath that answer.
[17:19] Even if they get the discounting right, even if they build a genuinely intelligent promotional architecture, they’re still a large ageing brand in a contracting category.
In a small market with a delivery moat that built the business no longer exists, a better discount strategy buys time doesn’t change the trajectory.
[17:44] The question DPE’s board should be asking is whether the traditional Domino’s franchise model is still viable in Australia at current labour costs and current category demand. Whether the unit economics can be made to work, whether the COVID windfall is inflating the numbers, and whether the store count they built to during the peak can be sustained in the market that exists.
[18:07] Now, those are structural questions, and they require structural answers, not a new promotional calendar signed off in a tops-to-tops call from the United States. Now I want to step back from Domino’s for a moment and ask you something different, because this story is not just about pizza. It’s about how much of your business growth in the last five years was real, and how much of it was a version of the captive market.
[18:36] COVID created artificial demand in almost every sector. Supply chain disruptions removed competition, government stimulus propped up consumer spending, businesses grew that would not have grown in a normal market, and many of them, like DPE, took that growth as a validation of their strategy rather than a product of their circumstances.
[19:02] The test is quite simple. When the conditions that created the growth went away. When rates go up, stimulus ends, competition returns. Does growth still hold up? Are you still growing? If you are, the strategy was real. If you’re not, you have the same problem.
Domino’s has a business sized for conditions that no longer exist with a cost structure built on earnings that we’re never going to repeat.
[19:28] Most businesses have not sat with that question honestly, because the honest answer requires decisions that are hard to make when things still look okay on the surface, and then by then those decisions are harder. In 2021, Domino’s called themselves a technology company. Their share price was at $160.
[19:51] The numbers justified the confidence. Four years later, DPE has reported its first annual net loss in 20 years as a public company. They have closed 200 stores. They’ve gone through two CEOs in less than 12 months, and senior executives from the United States are flying to Sydney to understand what has happened.
[20:14] What happened is worth understanding clearly: the COVID conditions that produced those earnings were not going to repeat. The delivery mode that built the business was basically dismantled by third-party platforms that arrived at scale faster in Australia than almost anywhere else, and the category itself- pizza in this country has been in structural decline for five consecutive years.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
Conclusion: What Domino’s Teaches Us About Pricing and Promotion Strategies
[20:41] Those are three separate headwinds hitting us all simultaneously. Any one of them is manageable together. They are the brief that Domino’s Australian team is working through right now. The discount question- should they protect margin or protect sales- was never the real question. The real question is always, what are we actually worth to our customers and why?
[21:07] If you can answer that clearly and honestly, the pricing follows. If you can’t, if the honest answer is that customers come because it’s cheap and there’s nothing else holding them, then you are one. Uber Eats launch away from finding out what your business is actually built on. Domino’s Australia. Found out.
[21:29] I’m Joanna Wells. See you next week.
Read This CEO Pricing Strategy To Improve Margin Management & EBIT
Are you a business in need of help aligning your pricing strategy, people, and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
You can also email us at team@taylorwells.com.au if you have any further questions.
