How Pizza Hut stopped innovating its pizza and fell behind Domino’s

[DallasCowboysFan]

And it's not just the pizza business. We're seeing the same better-tasting competition popping up everywhere in the burger business too. These days, nobody is going to McDonald's to get a burger if there's a Five Guys or a Burger Fi nearby unless that customer is so price-sensitive that every penny saved on food is critical to the personal finance bottom line. And what about the ice cream business? Who's going to go to dairy queen for a blizzard when you can go to Cold Stone Creamery or the specialty frozen yogurt place down the street with more topping options and better taste?

Burgers at 5 Guys and others have much better burgers. But they are twice as expensive and they are cooked to order and it takes a lot longer. A burger is like $7 and that does not include fries or a drink. The women behind the counter that I chat with while waiting are friendlier than the women at McD.

Mc D has a dollar menu for the value conscious. It's the familiar go to brand. But, look at the people that frequent McD and those that go to 5 Guys and Smashburger. It's a different crowd. Fewer families and no playground at 5 Guys. But, they don't offer breakfast, happy meals or drive thru's.

McD is doing better because they are replicating 5 Guys. Now, they offer several sandwiches with fresh beef and some places are experimenting with veggie burgers. But, 5 Guys still has a better burger.

 

[Overnight]

I believe there are two competing elements here.

The dude who came up with the McDonalds construct realized the most important secret for a fast-food franchise's success.

Consistency. It means that a Big Mac you get in Texas will taste exactly the same as one you get in Alaska, Colorado, NY or Florida. Like-wise with the Whopper, or Dave's classic Single, or a stuffed-crust pizza.

This consistency has to come at a cost, which is quality.

As we all know, quantity will always rise above quality, because people are averse to change.

The fact that the smaller burger joints have a better-tasting burger will never trump the consistency of the cheaper burger "with the taste you know and love." I.E., the one that you can go into at any single place all over the country and get with the same flavor, ingredients and taste every time. People expect a certain taste and experience, and will get it with each visit.

And then there is the cost factor, like Dallas mentioned. Anyone remember Roy Rogers? There is a smattering of them still around in the Northeast. Great burgers and roast beef that blew away the competition in taste like Arby's and BK, but they priced themselves out of the market. WAY too expensive.

USA peeps want their cheep shit!

It's tradition!

 

[lovethetrade]

Part of the reason for the "fast-casual" revolution is that people are now more health-conscious and happy to pay a small premium for better quality food—food with better bread and ingredients such as avocado. That's part of the reason companies such as Panera Bread have been so successful in recent years because they realized the first, and probably the most important consideration a customer makes when buying a sandwich or roll, is the type and quality of bread on offer.

Consumers are much more educated regarding grains and the health benefits compared 10-20 years ago when most people ate bread made from white flour—which consumers have now worked out is not good for your health at all and doesn't offer any nutritional benefit.

McDonald's is actually not that cheap anymore—when I was in the UK, McDonald's was one of the most expensive fast food places you could eat at. If you wanted an Angus Beef Burger, which is pretty much the standard these days—not the Big Mac which they try to offload for an additional £1 when you buy a meal, the cost was approx. £9 just for the burger which is US$11-$12

The fast food giants have improved their quality a lot over the past decade or so but not fast enough to keep up with changing eating habits and expectations of consumers and in particular the expectations of millennials.

Australia is seeing an influx of fast-casual businesses right now. Taco Bell just set up shop, Nando's is expanding and there are many others. Pizza is taking off because oven technology has improved—they can now cook a pizza in less than 180 seconds or something and the dough and toppings are healthier.

With each generation, consumers become smarter. If they stop eating something for whatever reason, it usually means there's an opportunity to do something better.

With regards to Pizza Hut, they were never really an innovator, they were simply first to market many decades ago and have focused on expansion and cost-cutting. As Baron stated, there's no need for Pizza Hut to change, they can just continue to expand into places where there's no competition rather than transform their business and increase their costs outside the US. It's a safer option for them until they are forced to change.

 

[SunTrader]

Just like traders seek out value, at any one particular moment in time, so do consumers.

For many that value is Micky Dee's, for others Five Guys, In-N-Out etc

There will always be new competitors that come along that do it better and some that no longer do it better that either change and adapt or become post mortem ECO 101 historical case studies of what not to do.

 

[vanzandt]

See, that's where Pizza Hut got it wrong. The reason why companies like Blaze are growing so fast is because their pizza tastes better than the old-school competition like Pizza Hut. Period.

See there... you guys never listen to me.

From 3 years ago:

It was awesome. For real. I can't say enough. $7.50 for as many toppings as you want (and they had yuppi stuff I had never even heard of lol) on made fresh daily dough and sauce with cheese that is cheese like cheese should be cheese. And it was quick. Frigging EXCELLENT.

Back in the day, I walked into one of the first 50 CMG's and was blown away. The next time I went back I inquired about franchising and whether or not it was publicly traded. That was probably about 3 or 4 years prior to the IPO (after MCD had bought in and then spun off). When they IPO'd I got in at $42 ish,... it went down to $38... and I bailed in the $60's... this was before I was an ADHD trader and more of a granny style participant in the market. The point is... Blaze has this potential.

There are a lot of CMG type knockoffs in several food categories. Sushi (Fusion), Spaghetti (Piada's), etc... just to name a few. They're OK....but this is pizza. And they are doing it right.

This one is going to be big. I chatted up the manager and he was telling me all week long they are busy from open to close. Albeit it was a prime location for millennial foot traffic. Employee moral was excellent... as was the ambiance. Very cool.

 

[destriero]

My oldest is in his first year in undergrad and loves Blaze. He likes Domino’s as well. I can’t say that I’ve had Domino’s in the last 20Y.

 

[ironchef]

See, that's where Pizza Hut got it wrong. The reason why companies like Blaze are growing so fast is because their pizza tastes better than the old-school competition like Pizza Hut. Period.

And it's not just the pizza business. We're seeing the same better-tasting competition popping up everywhere in the burger business too. These days, nobody is going to McDonald's to get a burger if there's a Five Guys or a Burger Fi nearby unless that customer is so price-sensitive that every penny saved on food is critical to the personal finance bottom line. And what about the ice cream business? Who's going to go to dairy queen for a blizzard when you can go to Cold Stone Creamery or the specialty frozen yogurt place down the street with more topping options and better taste?

I like to go to McDonald's. For their fries.

 

[Overnight]

My oldest is in his first year in undergrad and loves Blaze. He likes Domino’s as well. I can’t say that I’ve had Domino’s in the last 20Y.

That is because you are smart. Want Dominos? Get some pepperoni and cover it in MSG, with a tomato slice. Place on top of a piece of white bread with some shredded cheese from the supermarket aisle (Kraft recommended). Toast it. Done.

That's about it with these damned fast-food pizza chains. I hate the lot of them. Yes, they work, I get it. But they AIN'T REAL PIZZA!

 

[Overnight]

I like to go to McDonald's. For their fries.

I'm probably going to go there tonight because I have some coupons, and I don't feel like cooking something. Why not? It is convenient and cheep and fast. And I AM the master coupon whore. I cannot give up a good deal when the situation presents itself.

And it is soft food, so it won't break my tooth hole, which would lead to a dry socket, which is probably the most painful experience in the universe a human being can have.

 

[destriero]

My youngest is sitting here reading over my shoulder, so...