Italians are set to say farewell, or addio, to Domino's Pizza (NYSE: DPZ) as the American chain closes its remaining 29 branches in Italy.
Domino's botched attempt to introduce Americanized pizza to the ancestral homeland of the famed flatbread dish was short lived and tumultuous. Beginning in 2015, Domino's had planned to roll out 880 stores across Italy and shouldered a significant amount of debt to finance its ambitions.
Domino's collaborated with Italian company ePizza, which served as the "master franchisor" for the country, to gain an initial foothold of 33 stores in the country. Expansion seems to have been slow, as the company still had only 33 stores by Q4 2020, according to an investor report.
The COVID-19 Pandemic Enters the Ring
The rapid onset of coronavirus infections was a shock to the global economy, with no company spared from feeling the effects of consumers being locked inside, supply lines falling into disarray, and inflation rising through the roof. The conditions of the pandemic also created a veritable "perfect storm" to kill Domino's ambitions in Italy.
"As the year unfolds it is becoming evident that the Company will not reach its previously disclosed sales budget," The company wrote in the investor report. "We attribute the issue to i) the significantly increased level of competition in the food delivery market with both organised chains and "mom & pop" restaurants delivering food to survive and ii) restaurants re-opening post pandemics and consumers out and about with revenge spending."
In addition to Italians generally preferring the mom-and-pop shops in their hometowns, the rise of delivery apps allowed consumers to continue to patronize their favorite stores while obeying lockdown regulations. Despite being an innovator with online and in-app ordering, Domino's and its master franchiser found themselves rapidly outmatched by the likes of Just Eat (OTC: JTKWY) and Deliveroo (OTC: DROOF).
By Q4 2021, Domino's still had positive guidance for its Italian operations, somewhat ironically predicting profitability by 2022. Those hopes were dashed by ePizza filing for bankruptcy in April.
Domino's will survive the failed plan, even though it didn't have the best luck at Q2 and noted headwinds ahead due to staffing shortages. The company also continues to try and innovate its business model, such as its pilot program for robot-delivered pizza.
What do Italians Think?
To the surprise of nobody but Domino's, Italians didn't think highly of an American company's attempt to sell them an interpretation of their own dish. Reporters from Reuters took to the streets of Italy to gauge reactions to the news of Domino's failure.
When informed that an American company had tried to bring its own pizza business to Italy, one man exclaimed "Here? In Rome? So, they wanted to take the pizza to the place where it was invented!? Americans understand nothing."
"It didn't make sense," another man told Reuters. "It's like me going to England and making fish and chips...it's as if I went to China and open a Chinese restaurant, it doesn't make sense."
Domino's may take some solace in knowing that customers had still tried to place orders after the closure of its stores and had taken to social media to ask what had happened. At the very least, the chain had a few loyal customers.