By now you have likely heard the comparison. Those that want to shrug off the incredible gains in stock price that many technology companies have like to show how Domino’s Pizza would have given the same return over time. If you compare their stock price to 5 years ago, Domino’s is up 282% while Google and Apple are “only” up by 122% and 140% respectively.
So how did they do it? How can a budget brand that is selling a commodity with huge demand variability and a minute shelf life? The answer might lie in their real estate. They have realized that, like any commodity, volume is key, especially when demand spikes during big events. They also came to realize that speed of delivery is a must in this on-demand market. To help on both of these fronts they call a “fortressing strategy.” It has them investing in popular locations and clustering their stores. They have also rolled out a number of more modern concept locations, with exposed kitchens and tableside USB ports.
All of this has helped Domino’s continue to beat expectations. Even last month when they announced lower than expected revenue, they were able to beat their earnings forecast by reducing expenses thanks to better operations. One of the ways that they have invested in their buildings to make their operations more efficient is investing in their building entry systems. To do so they have partnered with a company called Openpath, a mobile access control systems provider. Openpath’s co-founder James Segil talked to me a little about this partnership. “We were actually referred to them by one of our partners called, of all things, The Flying Locksmith. They were having a hard time keeping up with the pace of deliveries and drivers always often had their hands full. This made them a good candidate for a system that uses cell phones to grant access, for speed, and much more.”
It wasn’t just the few seconds that each driver might take to find his or her keys that was the problem. Domino’s was also worried about the security of their stores, which operate late at night in many dense urban areas. The fortress location strategy might have also played a role in the decision to invest in their access infrastructure. Since clusters often work in conjunction with each other many have a dedicated regional manager. “Putting all of their buildings onto one system allowed them to look at an entire region on one dashboard. This helps them track who is going when within the entire local network,” James told me.
We often tend look at the value of real estate as it applies to the actual property. But there is a huge amount of value that is being created for brands like Domino’s by the real estate that they own and lease. It is harder to quantify and a little more fleeting than the “real” value that we calculate now, but it is value nonetheless.