Thinking Inside the Box: The Story of Domino’s

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S1: My household was a non Domino’s household.

S2: Even when he was a kid, Scott Wiener was a pizza snob and he had a particular bias against a certain ubiquitous chain pizza brand. We never ordered Domino’s. I was raised to believe in the way that you’re raised with a religion or with political background, that I was raised to believe that Domino’s was not food.

S3: Scott hasn’t eaten a slice of Domino’s in years, but he can still recall his displeasure at the last time he did.

S2: I remember that the crust texture was quite leathery and that the sauce had this pasty density to it.

S4: I just remember being very different from my standard. It was a different food.

S5: These days, Scott Wiener runs a company called Scott’s Pizza Tours, which, when there is not a pandemic going on, leads groups on excursions to taste the very best pizza slices in New York City because he’s a pizza afficionado, even a pizza scholar. Scott feels a professional duty to study Domino’s as a company.

S1: Despite his deeply ingrained distaste for its offerings, Domino’s is so significant in the history of pizza in America that it doesn’t matter what I think about the quality of its product. It’s more about the quality of its influence over the industry. And I think that’s incredible. So many independent pizzerias have been started by former managers of Domino’s. They’ve learned the efficiency system from them. And my appreciation, or lack thereof of their food does not at all get in the way of my appreciation for their business model, which is quite incredible.

S5: Domino’s is such a major player in the world of pizza, the very definition of pizza for many people in America that even a big city pizza gourmet like Scott is forced to reckon with it. Scott’s read multiple books about Domino’s. He’s visited the location of the first Domino’s store in Ypsilanti, Michigan.

S1: I was so interested in understanding their whole deal that I got a job at my local Domino’s from one little store in Michigan open 60 years ago.

S5: Domino’s has expanded and expanded to the point that its executives now hope to have 25000 stores all across the world within the next five years. Meanwhile, Domino’s stock has zoomed up over the last decade, at times keeping pace with high flying tech companies like Amazon. During the current coronavirus pandemic, dominoes, with its focus on efficient food delivery, is finding itself uniquely suited to a new age of socially distanced dining. Its sales are actually up and the company is doing mass hiring as so many other restaurants shut their doors and face extinction. Well, dominoes remain on top as other food purveyors scramble to switch to more virus oriented operations. Or while everyone else is race to match Domino’s efficiency, put more focus on Domino’s less than vaunted taste. I’m Seth Stevenson. Welcome to Thrilling Tales of Modern Capitalism. Today on the show, we deliver to you guaranteed, and 30 minutes or less thinking inside the box. The story of Dominique. At the heart of the domino saga is Tom Monahan, a man who went from very unlikely origins to becoming one of the most successful business founders in American history. Here he is telling his story to a group of high school students several years ago.

S6: I was brought up very poor. My dad died when I was four years old. He was a truck driver. He had health problems. Soldiers died.

S3: Monahan was born into poverty in Ann Arbor, Michigan, in 1937 after his father died, his mother decided she couldn’t raise Monahan’s herself. So she placed him in a Catholic orphanage where he spent much of his early childhood. He later went to a series of foster homes and at one point a juvenile detention center. These tough surroundings made Monahan pugnacious and scrappy, bounced around as a young adult. He tried to go to college, but he had trouble paying for it. He enlisted in the Marines and after three years of duty, saved enough to afford the University of Michigan. But before he could enroll, he was swindled by a con man who stole his money with promises about an oil drilling scheme, an investment that was too good to be true.

S6: That turned out to be a total loss for me.

S3: So I got the money and started over taking a job, running a newsstand in Ann Arbor. He soon realized there was enough demand for the Sunday New York Times that he could launch a service bringing the paper to homes in the area. One of the first residential delivery services for the times outside the Northeast by driving fast and sprinting from his car to people’s doorsteps. Monahan managed to get the times to all his customers before new each week. Already, he understood two things that would prove important later.

S5: He knew what people wanted and when they wanted it, which was right now. The moment that would change Monahan’s life forever came in 1960 when he was 23 years old.

S6: He ended up having the opportunity to buy a pizza place called Dimer.

S5: His brother had been working part time at a pizza restaurant in Ypsilanti, Michigan, when the place closed and went up for sale. Monahan’s saw an opportunity and decided to take a gamble.

S6: My brother and I bought it with five hundred dollar down payment. We didn’t have the five hundred dollars, but we borrowed it from a credit union. And that’s how we got started. Then there’s become today. Domino’s Pizza.

S5: Things did not go well at first. They struggled. His brother lost faith after about six months.

S6: My brother wandered outside. I didn’t have a money, so I gave him my Volkswagen delivery car for 50 percent of the business. And at the time he got the better end of that deal.

S5: But Monahan persevered because his pizza place was tiny. There wasn’t enough room to do a lot of dining business. So he decided to embrace this as a virtue instead of trying to lure customers into the store. He concentrated on growing his delivery business. It worked.

S6: My first store became the busiest pizzeria in United States in the world, in fact, and it was the first one in the United States to totally focus on delivery. Probably the hardest part of the of the fast food industry.

S5: Monahan’s saw that with a dine in restaurant. Your sales are limited to how many people you can fit into your space with delivery. Your potential customer base is much, much larger. It’s anyone who’s within driving distance and is hungry. But he also realized that to do delivery pizza fast at scale, he’d need to simplify the process.

S1: Domino’s, from its inception, was not about making quality food.

S7: It was about making a product efficiently.

S3: According to Scott Wiener, Domino’s found early success by streamlining its menu.

S7: One of the first innovations that Tom made when he came in was they started with five sizes. He took those five sizes and knocked it down to three sizes of pizza. Now you have two sizes that you don’t have to inventory their dough. You don’t have to lag down the buyer with all these different options. People were buying this 10 inch pizza. That was the biggest selling item yet. He realized if he eliminated, that would force people to buy the larger sizes, which had a better profit margin. And so he did. It’s a brilliant move not done because of the food or the customer done because of the bottom line.

S5: At a business conference in the late 1960s, Monahan met Ray Kroc, the man who turned McDonald’s into a nationwide chain. Monohan was inspired and developed visions of a pizza empire. He started to expand Domino’s first with a couple more stores he owned in Michigan and then with a franchise model that would let the brand go farther afield.

S1: When Domino’s started to expand, they picked towns that had college campuses, and they did that because they knew that they could make a delivery to one building and have multiple customers in that one building. So was a pretty burly move because was quite efficient. Now, when they ended up expanding in the 70s into suburbs, that wasn’t such a good move because it was much less efficient than their college campus theory. So they ended up pulling back, closing stores and then altering their expansion model. Eventually, they, of course, figured out how to do the suburbs, which is why we have so many of them in America right now.

S5: Money hard hit setbacks along the way, including a lawsuit from the Domino Sugar Company over the right to the Domino’s name. There were moments of crisis. Some business partners steered Monahan in the wrong direction. There was the suburban overexpansion and the company fell into deep debt. That money needed to climb out of. But Domino’s just kept growing. 76 stores by the end of 1973, 159 stores by the end of 1978. And by the end of the decade, everything was clicking into place. The ascent of Domino’s was dizzying. It was at one point selling 54 percent of all pizza bought in the United States. By 1983, Domino’s had a thousand stores. It became the world’s largest privately held restaurant chain. Tom Monahan got rich enough to buy the Detroit Tigers for 53 million dollars. He bought more than 200 sports cars, including a single Bugatti that cost eight million dollars. He built a fancy seventeen hundred acre office complex that he called Domino’s Farms. But then he had a revelation.

S6: One day I picked up a book by by C.S. Lewis called Mere Christianity and had a chapter in that book and try to pride the greatest of all sins. As you know, if you take your catechism and chapter and me right between the eye.

S3: Had remembered the nuns at the Catholic orphanage she’d grown up in and he decided they wouldn’t like his fancy lifestyle. He started selling off his cars and jets and yachts. In 1992, he sold the Tigers. And in 1998, he sold Domino’s to Bain Capital, the private equity firm co-founded by Mitt Romney.

S5: Here’s Romney talking about the sale.

S8: I remember on one day, one of the most famous of our investments was getting a call from Domino’s Pizza, asking if we wanted some Domino’s. They weren’t asking about buying a slice. They were asking about buying the whole company. And I do remember quite distinctly signing the check for over a billion dollars to Mr. Tom Monahan. He’s one of my heroes, by the way. He signed the check over to a charitable group, Catholic Charities, so that he could devote himself to helping make a difference in the lives of children.

S5: Since then, Monahan has continued to focus on religious charities and causes, even founding a Catholic college called Ivy Maria University. Meanwhile, despite increased competition from rivals like Pizza Hut and Papa John’s, Domino’s mostly kept humming along.

S8: We brought in new leadership. We began analyzing the opportunities. The business has grown. It’s now a public company.

S5: Domino’s went public in 2004. The stock went up for a few years, then bottomed out in 2009 amid the Great Recession. It was at this point the Domino’s overhauled its recipe and took the unique step of confessing in TV ads that its previous product had tasted like, quote, cardboard.

S9: The cardboard complaint is the most common one. This we hear over and over and over.

S8: I mean, you’re right in the heart is what I’ve done for twenty five years now.

S9: I can either use negative comments to get you down or you can use them to excite you and energize your process and make it a better pizza.

S5: We did the latter in the wake of this ad campaign. Domino’s saw a big bump in sales and its stock rocketed higher over the next decade.

S10: There are now more than 17000 Domino’s stores spread across 90 countries. Last year, Domino’s sold 14 billion dollars worth of food, making an average of three million pizzas each day. And then came the Koven 19 pandemic. And amazingly, Domino’s business got better.

S3: Pizza is uniquely suited to the delivery business. It’s a flat box. You can stack them, you put them in the backseat of a car. Scott Wiener knows all about pizza boxes. He actually holds the Guinness record for the world’s largest collection of pizza boxes. He says pizza boxes didn’t always work as well as they do now until Tom Monahan’s started paying attention to them in the early 60s.

S11: Pizza boxes where these cardboard single layer paper boxes that were quite flimsy didn’t do a good job at retaining heat. But the corrugated box that was really introduced in a big way by Tom Monahan of Domino’s that was insulated. It traps heat. It had better structure, better rigidity and stackable. You could order 10 pizzas, stack them and not have to worry about the bottom pizza being completely crushed. So it’s a huge innovation to bring in the corrugated box to the pizza industry in the late 60s and early 70s.

S5: And it’s not just the boxes. Domino’s business is so tailored to delivery, especially designs its pizza recipes around the fact that the pies are going to spend time stuck inside a humid box. But it’s not just the pizza in the box either. What Domino’s really perfected was a system forgetting the box of pizza to the customer fast. When you think about Domino’s and quick delivery, you might think about their old 30 minute delivery guarantee of Domino’s Pizza.

S12: There is 30 minute left.

S5: The original slogan was half an hour or half a buck off. Domino’s had to end that policy in 1993 after facing lawsuits accusing its delivery people of driving recklessly.

S10: But Tom Monahan always said the real secret to an efficient delivery business happens long before the pizza gets put in a car. Domino’s centralizes its food prep in regional distribution centers that serve multiple stores. That keeps its menu simple to make the ordering process fast. It’s opened up new ways to order pizza online over social media or even via text message. Its chief digital officer now calls Domino’s an e-commerce company that sells pizza, all of which has prepared it to ably face the current moment as the Corona virus pandemic shutters, traditional restaurants and food delivery demand explodes. Domino’s says its sales went up more than 10 percent as Corona virus lockdown’s took effect. And that boost is coming from a new kind of clientele. While weekend and late night orders are down partly because there are no televised sports together, house parties around the weekday lunch and dinner. Business is booming. And what’s really driving the revenue uptick is that the orders have gotten bigger because families who are sick of cooking or have dreamed their pantries want to be sure they have enough Domino’s to have leftovers for multiple meals.

S5: Domino’s has introduced a new contactless delivery policy during the pandemic for a company built on being fast and efficient. That procedure is a bit of a speed bump.

S13: The cutting to delivery time. I mean, because every minute counts.

S5: Phil Parmenter is a delivery driver for a Domino’s franchise in Richmond, Virginia.

S13: Typically, a delivery would take me maybe 15 minutes, depending on where it’s at. Now it’s upwards of like 20 to 25, some guys. They’re taking my foot.

S5: The Domino’s store where Theo works adopted the new contactless delivery policy during the pandemic, which means that Theo now has to enact an elaborate ritual every time he gets to someone’s door. He puts the pizza down onto a specially designed cardboard pedestal that keeps it off the ground. He rings the doorbell. He steps away depending on the person.

S14: I mean, they might get it and they might, you know, go flawlessly and everything’s fine. But nine times out of 10 people are really confused when you knock on the door and you’re standing six feet away from their porch. What did they say? Full. And they answer the door. I’m usually try to be the first to get the word out. But a lot of times they just look really bewildered, in awe. We’ve had a couple customers complain about like, oh, why is my food here? Why it is on the floor. We have, like, these little cardboard box things for the car that’s just delivery. So it’s not directly touching the ground. But for a lot of people, that’s not good enough. And it’s like, I don’t know what else to do.

S5: And then there’s a whole dance around taking payment and making change as Deo tries to maintain six feet of distance from the customer. It’s not just a hassle. It’s bad for Theo’s personal bottom line because he makes more money when he can get in and out fast and make more deliveries in less time. But speed and money aren’t the only issues here. There’s also safety. Pizza delivery is likely safer than working at a fast food drive thru where there are constant hand-to-hand exchanges. But delivery workers are still interacting with dozens of different people every shift. And that brings heightened risk of exposure to Kova 19. Some Domino’s workers have contracted the virus. Some have gone on strike demanding better sick pay policies for those who get ill and better access to personal protection equipment. To help prevent that from happening, Theo says he now has a Domino’s mask. But it took a couple of weeks before he was provided with one source, really bright.

S13: Domino’s blue and the Domino’s logo is on the left side of the mouth.

S5: I was never expecting to have Domino’s branded mess, and Theo doesn’t receive anything to clean his hands with when he’s out on the job.

S13: No, we don’t get any personally hand sanitizer from the store. We’re responsible for that. I might wear gloves, but nine times out of ten, that’s usually just. I’ve got the mask. I do. The contactless delivery procedures were supposed to. And because I do have to touch some portion of the bag, actually the customers touch it. I’ll go back to my car and go, you know, sanitize my hands.

S5: You might think you would get treated like a hero, given the risk he’s taking to do his job. But he says it’s been just the opposite.

S13: People are just a lot more mean. It seems a lot more hostile. So I’m I’m a lot more on edge when I take deliveries.

S5: Do you think it’s stress about what’s happening or what’s driving it?

S13: I can be the stress. It could be envy that I’m working in there. Not because know there’s a lot of people that are really upset that they can’t go to work as a result of this. And I don’t know if that’s them taking that out on those that are working. And it’s really, really unfortunate because what they don’t realize is that we’re feeding them. I mean, I feel like they do realize it, but at the same time, I don’t think it’s really sunk in that it’s like we’re the reason why you currently have food in your mouth. How are your tips these days? I mean, I still get stiffed by people every now and then. I’ve said since roughly about the same.

S5: Despite the drawbacks, many Domino’s drivers continue to work, maybe in part because Domino’s is among the rare employers still operating at full throttle.

S13: The business has definitely been booming. It’s gotten a lot busier.

S5: In fact, Domino’s isn’t just surviving. It’s hiring. It says it’s looking to fill 10000 new jobs.

S9: Hi, I’m Molly Domino’s franchisee. I’m getting some former part time work during these tough times. Can I help you? Domino’s. That’s hiring because we’re not only committed to putting that on people’s tables. We’re committed to helping you grow.

S5: There’s been some media coverage lately of a new restaurant trend. It’s called virtual kitchens or ghost kitchens. The idea is that a lot of the people who order food from one of the popular delivery apps like Door Dash or Uber eats, they’ve never even seen most of the restaurants they’re ordering from, never been inside those restaurants, don’t even really know where those restaurants are. So if the physical existence of the restaurant isn’t important, why not just eliminate it, replace it with a little industrial backroom kitchen? A simple online menu, a name and a logo, and then gear the whole thing around being a delivery business where the delivery part of it is all outsourced to one of these apps, which take a big cut of the revenue.

S15: When I read about this, I think congratulations, you’ve replicated what Tom Monahan did with the first dominos 50 years ago, mostly took the dine in customer out of the equation and instead tailored the menu, the recipes, the whole process to the delivery guys. Two differences. First, Monahan created delivery expertise in-house instead of outsourcing it to someone else and having them take a cut and second money and make good money doing delivery. Most of those food delivery apps lose money right now and depend on venture capital just to stay afloat. Tom Honohan was ahead of his time back in the 1960s, and he was a master at making delivery profitable. If the coronavirus pandemic ends up making a lasting change to our eating behavior and if we can figure out how to maintain efficiency while keeping delivery people protected, Monahan’s vision for Domino’s might become the model. Everyone tries to emulate that one little pizza parlor in 1960, Ypsilanti might turn out to have been a slice of the future. That’s our show for this week. This episode was produced by Jesse Miller with help from Ashurst Lucja and Meghan Karlstrom, technical direction from Kevin Bendis. Gabriel Roth is Slate’s editorial director for audio. Alicia Montgomery is the executive producer of podcasts at Slate. June Thomas is senior managing producer of the Slate podcast network. Would you like to be able to listen to this and other Slate podcasts? Ad free? Consider signing up for Slate plus it’s only thirty five dollars for the first year and it helps us bring you all the great podcasts you get from Slate. Sign up now at Slate dot com slash. Thrilling plus. We’ll be taking the next few weeks to uncover some new thrilling tales. And we’ll be back later this summer. Until then, I’m Seth Stevenson. Thanks for listening.