Dive Brief:

• Domino’s Rewards, a reworked version of the pizza brand’s loyalty program that launched last fall, strengthened U.S. same-store sales in Q4 2023, Domino’s CEO Russell Weiner said on the chain’s Q4 2023 earnings call Monday.
• U.S. same-store sales rose 2.8% year over year in the fourth quarter, according to the earnings release. For all of 2023, domestic comparable sales jumped 1.6% compared to a 0.8% decline in 2022, which was driven by an extended slump in delivery sales that carried into 2023. 
• The redevelopment of the loyalty program in September accelerated the growth of Domino’s Rewards membership. The program added 3 million members in 2023, and 2 million of them joined after the September changes.

Dive Insight:

Domino’s Rewards has helped engage infrequent customers and carryout users, Weiner said. The program’s impact on sales was also strengthened by the chain’s emergency pizza promotion, which awarded loyalty members a free pizza at a later date when they placed qualifying orders online. Weiner described the promotion, which ran between Oct. 9 and Feb. 24, as a “powerhouse” that drove signups for the loyalty program.

The Domino’s Rewards changes launched last fall included halving the minimum order spend needed to accrue points from $10 to $5; adding 20- and 40-point redemption tiers; and expanding the type of foods customers could redeem with 60 points. Despite driving traffic and bolstering sales, this program effectively increased the discount rates to customers, contributing to a negative impact on margins at company stores, which fell 1.6% in the quarter. Some of that erosion was also attributable to higher insurance costs, however, CFO Sandeep Reddy said.

Reddy added that Domino’s plans to continue emphasizing its rewards offering this year, as “[loyalty] is a significant pillar of how we want to drive transaction growth in 2024, both in delivery, as well as carryout.”

Q4 was a difficult quarter for traffic at many restaurant brands across market segments, but QSR chains with strong loyalty programs navigated this challenge well. Starbucks, which faced boycotts by some consumers, saw its traffic actually grow because of the resilience of its rewards members. With many chains preparing to raise prices to preserve margins as labor costs increase, especially in California, loyalty and timely promotions will likely increase in importance as traffic drivers this year.