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The Origins of Cult-Favorite Fast Food Restaurants: Domino's


A college drop-out from Michigan topped the pizza business -- but his brother missed out on the dough.

The modern pizza may have been invented as a Neapolitan dish by the Italians, but a college drop out from Ann Arbor, Michigan pioneered the mechanism by which customers would receive it. The recognized world leader in pizza delivery, Domino's Pizza (DPZ), hand-tosses more than 1.3 million pies per day around the globe -- from Bogotá, Columbia to Minato, Japan -- and employs approximately 170,000 worldwide franchise and corporate team members in over 60 markets. The megabrand is the second largest pizza franchise in the US (behind Pizza Hut) and its drivers cover 10 million miles on American roads every week.

Now boasting roughly 9,000 stores, Domino's Pizza started with a single restaurant location in Ypsilanti, Michigan. In 1960, young brothers and former orphans Tom and James Monaghan purchased "DomiNick's," a small pizza parlor in Ypsilanti, Michigan with a borrowed $500. After co-running the restaurant for eight months, James' interests steered away from pizza and toward Das Auto and had his brother buy out his half share of the business which he used to buy a used Volkswagen Beetle. Thirty eight years later, when Tom retired, he sold eventually sold his stake of Domino's 93% to private equity firm Bain Capital, Inc. for $1 billion, or around one million used 1961 Beetles.

Under Tom's helm, the Domino's brand was born. In 1965 he renamed the business "Domino's Pizza, Inc." and officially opened the first Domino's Pizza franchise store two years later. He created the Domino's logo with three dots, representing the first three stores and planned to add a dot for every store he opened. In a little over ten years, Tom had built a franchise with 200 Domino's locations opening in the U.S. -- which would have made the dot-adding idea a bit cumbersome. He had to endure a few hiccups along the way like losing the company headquarters and commissary in a fire and being sued, albeit unsuccessfully, for trademark infringement by Domino Sugar.

The key ingredient in Domino's early success was the delivery system, especially focused in college towns, which proved more fiscally prudent than sit-down service. The production assembly line method using a belt-driven pizza oven and the insulated pizza box would set the standard in the pizza delivery industry. The boxes maintained a warm temperature during delivery and could be stacked without harming the pizzas, allowing more deliveries per trip. "When a new store opened, headquarters would send a truck stocked with everything from pizza ovens to forks and aprons," according to AlterNet.

"Store managers worked from a thick operations manual, known as 'the Bible,' which dictated every aspect of operations, down to the smallest detail."

While the eighties saw Domino's become the fastest-growing pizza company in the US with 5,000 stores, the decade also brought the brand's first expansion into overseas markets like Winnipeg, Canada, Queensland, Australia and Luten, England. In 1986, an advertising campaign was launched featuring a pesky gremlin-like character called the Noid who would try to sabotage Domino's deliveries. Then a real-life Domino's saboteur named Kenneth Noid, a paranoid schizophrenic who believed the commercial was somehow a crack at him, took a Domino's store in Georgia hostage for five hours. No one was hurt, aside from the pizza Noid ingested during the siege.

Domino's "delivery in 30 minutes or it's free" guarantee, established in 1979, met an abrupt end in 1993 after a series of lawsuits involving victims struck by Domino's drivers, presumably speeding to meet the half-hour delivery deadline, resulted in the company ponying up $90 million in damages.

In a news conference, Tom Monaghan denied any wrong doing but said the delivery policy would be discontinued over a "public perception of reckless driving and irresponsibility." Domino's instead instituted a "Total Satisfaction Guarantee" that promises customers it will re-make their pizza or refund their money if they are dissatisfied for any reason.

The pizza chain continued its steady growth in the 90s and by 1996, it had reached record sales of $2.8 billion system-wide and, a year later, opened its 1,500th store outside the US. Domino's opened seven stores in one day on five continents consecutively. Tom, who had aligned himself more with his conservative Catholic faith and had taken what he dubbed a "millionaire's vow of poverty," decided to relinquish his most prized possession -- his business. In 1998, he sold Domino's and pledged he would "die broke."

Domino's hit new sales benchmarks under new leadership, announcing record results for 1999, with worldwide sales exceeding $3.36 billion. But after ten years, the pizza giant's status had been taken down several notches. A public relations disaster hit the franchise when a YouTube video went viral showing Domino's hygienically-challenged employees taking liberties with pizza making. Then, according to a survey of pizza franchises, customers voted Domino's the worst tasting pizza. Domestic sales figures began to plunge. While the company certainly excelled in mass-producing pizza, after 50 years in the business, it hadn't quite figured out how to make it taste good.

Enter, Domino's brand new retooled pizza. In the company's words, "Our hand-tossed pizza is new. It's not a slightly altered version of the old pizza. It's not the same old product in a fancy new wrapper. It's a completely new pizza from the crust up." This revamped recipe, introduced in December 2009, includes 100 percent real mozzarella cheese, new sauce with a spicy red pepper kick and a buttery, garlic-seasoned crust -- all topped with a $12 million marketing campaign courtesy of Dairy Management and Crispin Porter + Bogusky.

The new pizza is a hit with consumers. Second quarter domestic same store sales rose 8.8% compared to the previous year. "Our strong sales momentum in the U.S. is evidence of the success of our improved pizza and focus on operations," said J. Patrick Doyle, Domino's President and Chief Executive Officer. "The increased sales were not just driven by trial, but by repeat orders from our new larger customer base."

But Domino's improved product isn't coming without a backlash. There's a reason why the stuff tastes better: cheese. And lots of it. Forty percent more, to be exact, with one slice containing as much as two-thirds of a day's maximum recommended amount of saturated fat. And, as the New York Times charges, it's the American taxpayer via Dairy Management, a marketing arm of the US Department of Agriculture, footing the bill for the extra cheese.

A Domino's spokesman denied these allegations, responding, "One hundred percent of these dollars come from America's Dairy Farmers and our partnership with Dairy Management, Inc. -- not the U.S. government or taxpayer money."
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