Rethinking Domino's Expansion Plan



Themes: MNCs in India
Period : 2001
Organization : Dominos Pizza India
Pub Date : 2002
Countries : India
Industry : Food, Beverages & Tobacco

Buy Now

Case Code : BSTR014
Case Length : 9 Pages
Price: Rs. 300;

Rethinking Domino's Expansion Plan | Case Study

"It is a lesson for every retailer. Unviable units should be shut down. A pizza joint or a burger joint should realize that in a fast expanding market, they are not just competing with outlets which have similar interests but also with other kinds of food outlets as well."

- Arvind Singhal, MD, KSA Technopak

Rethinking Domino's Expansion Plan

In May 2001, Pavan Bhatia, CEO, Domino's Pizza India Ltd.1 (Domino's) stepped down from his post. Earlier, in March 2001, at a board meeting, Domino's top management concluded that 'Pavan Bhatia's performance during his 18-month tenure was not up to the mark.' The board felt that Pavan Bhatia had initiated an expansion strategy that was 'reckless and not properly thought out.' However, many analysts did not agree with the board's conclusion. They felt that the board was not considering the possible long-term benefits of Pavan Bhatia's strategy. During March 2000-January 2001, Pavan Bhatia opened Domino's outlets in small towns and cities. Pizza consumption in these places was very low. Analysts felt that even those willing to opt for the product found the price unacceptable. The cost per meal was too high. In September 2001, due to low footfalls2 and lower volumes, Hari Bhartia3 planned to shut down Domino's outlets not only in some small cities4 but also a delivery outlet in the wealthy Gujranwala Town in North Delhi. One of the two outlets in Ludihiana was also planned to be shut down. (Refer Exhibit I for post Pavan Bhatia strategy of Domino's)

Sky is the Limit

In November 1999, Pavan Bhatia took over as the CEO of Domino's. He seemed to be very ambitious and wanted to make Domino's the largest fast-food chain in India. Pavan Bhatia went about opening Domino's outlets across the country. The number of outlets multiplied four fold to 100 between March 2000 and January 2001. It was the fastest growth Domino's had in any of the 63 countries it operated in. From an average of four stores every year in its first four years of operation, Domino's expanded to more than 100 outlets in 10 months across 30 cities.

Domino's entered into an agreement with a real estate consultant CB Richard Ellis to help with locations, conduct feasibility studies, and manage the construction. Pavan Bhatia said, "We are in the business of selling pizzas, not hunting for real estate. And one of the biggest impediments in retailing is real estate, so we decided to hand over the entire real estate operations to estate consultants CB Richard Ellis." Pavan Bhatia realized that fast track growth could be achieved only by focussing on the core business of selling pizza.

Next >>

1] Domino's Pizza India Ltd. was the Indian franchisee of Domino's Pizza Inc. Domino's, Inc. entered into a franchisee agreement with Vam Hari Bhartia Corp., (promoted by Bhartia brothers - Shyam and Hari) to enter the Indian market. Domino's entered India in 1996.
2] Number of consumers visiting an outlet
3] Co-Chairman, Domino's
4] Bareilly (Uttar Pradesh), Meerut (Uttar Pradesh ), Moradabad ( Uttar Pradesh)and Gwalior (Madhya Pradesh )