Pizza restaurant Domino’s is relying on an existing strategy to combat minimum wage hikes in states throughout the U.S., in addition to the possibility of a potential nationwide increase under President-elect Joe Biden.
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The company engages in a strategy known as “fortressing,” which essentially means building new franchise locations in existing markets in order to better meet customer supply, reduce delivery times and ensure there is a storefront available for takeout customers.
“When we fortress and we’re closer to our customer, we deliver to their homes more quickly,” Russell Weiner, Domino’s Chief Operating Officer and President, explained during a virtual session with investors on Thursday.
Domino’s CEO Ritch Allison said fortressing is a key component to how the company plans to address rising labor costs.
“It really allows us to build that carryout business, which – while the ticket is lower on carryout – the cost to serve is significantly lower,” Allison said. “And then with delivery, the economics really are all around how many deliveries per driver, per hour we can execute and shrinking the radius of those delivery zones honestly is something that we have to do.”
Allison explained as labor costs rise to $10, $12 and $15 per hour, taking $20 worth of food 9 minutes away from a store becomes “economically very challenging.”
However, President-elect Joe Biden supports a federal minimum wage of $15 per hour. It remains to be seen whether such a measure would be able to pass what is largely expected to be a divided Congress.
The federal minimum wage currently sits at $7.25.