In a bid to spur growth and diversify its customer base, Domino's Pizza (NYSE:DPZ) has formed a strategic partnership with Uber (NYSE:UBER) Eats. This recent move is seen as a departure from the pizza chain's traditional model of direct customer interaction, which has been a cornerstone of its franchisee relationship, given that 99% of Domino's outlets are franchisee-owned.
The partnership aims to reach different demographics, including higher-income customers and potentially budget-conscious ones during economic downturns. To maintain control over customer relationships and uphold the value proposition for direct customers, Domino's will limit its Uber Eats menu and reserve the best deals for those ordering directly.
This move comes as investor sentiment cools in the post-pandemic world, pushing Domino's towards innovation to attract customers. While the Uber Eats partnership presents a risk to Domino's usual control over customer relationships, it carries the potential for business expansion by tapping into a wider market segment.
The strategy is also designed to provide a safety net for franchisees by expanding Domino's customer base. It is part of a broader effort by the pizza chain to leverage new strategies in the post-pandemic world where businesses are increasingly relying on digital platforms for growth.
InvestingPro Insights
InvestingPro's real-time data reveals that Domino's Pizza (DPZ) operates with a market cap of 12.46B USD and a P/E ratio of 24.06, indicating a high valuation compared to its near-term earnings growth. The company has also shown a high return on assets of 31.85% over the last twelve months as of Q3 2023.
InvestingPro Tips highlights that DPZ has consistently raised its dividend for 10 consecutive years, offering an attractive yield for income-focused investors. However, it's worth noting that 18 analysts have revised their earnings downwards for the upcoming period, which might be a cause for concern.
The partnership with Uber Eats could potentially boost DPZ's revenue growth, which stood at -0.43% over the last twelve months as of Q3 2023. This strategic move could also help in offsetting the recent quarterly revenue decline of -3.86% as reported in Q3 2023.
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