Inside Domino's: C-Suite with Jeffrey Hayzlett

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Nov. 5 (Bloomberg) -- With sagging sales, a declining stock price and a pizza that consumers ranked behind Chuck E. Cheese in taste, Domino's future was looking bleak in 2010. Their C-Suite took an unconventional approach to fixing their problems: They admitted their pizza wasn't good. Bloomberg's Jeffrey Hayzlett goes inside Domino's Pizza on this week's episode of "C-Suite with Jeffrey Hayzlett." (Source: Bloomberg)

What is it like to have customers come and tell you that your product wasn't that great?

There was a day when we woke up and realized we could not go any further i must we fixed things from a quality and taste standpoint.

We had to go out there and tell them that their old fetus sucked.

-- system sucked.

It was one of the last things we launched.

It is a new dominoes.

It is a new era.

? i am jeffery hayzlett and i am on a journey inside some of the biggest brands in america.

I have been a cm oh, cfo, and boardroom cowboy.

I am visiting executives in charge of the most powerful companies in the world.

I see how they tackle the challenges of the "c-suite." i'm in ann arbor, michigan four domino's. i'm sitting at home and watching a serial -- commercial.

Their pizza taste like cardboard.

The focus is on honesty.

How do they convince over 1000 franchisees to pay for this product have been selling for 50 years is horrible.

This is not something that companies normally do.

They are changing their brand promise from 30 minutes or less and now they are reinventing the pizza.

They are changing it up.

I want to know if that old adage is true -- honesty pays.

As a former cmo, i know every brand needs to play two extremes.

It is important to customers that you are better than the opposition.

But domino's took a very different approach.

When i first heard your story, the story of domino's and saw the commercials, who was the person that stood up in the meeting and said, our product sucks?

It wasn't one person that said that.

We were following marketing 101. for us, it was speedy delivery.

There was a day when we woke up and realistically could not go further unless we fixed the pizza.

What was that like?

You talked about market data.

I would have thought that the data show that.

Did you does not look at that section?

It is interesting.

We had from a quality and taste perspective -- it would taste of right if they did not know it was from domino's. in the middle of the downturn, 2007-2008, it stopped working.

We do not have great domestic cells -- sales.

We had to do something dramatically different.

It has been out there for a while.

We have to fix this.

This sound like a massive investment.

What kind of dollars are you looking at to basically retooled the company?

The range of 10 million or $15 million to work through the process of reworking the pizza.

What is more important is a gradient itself and the pizza itself costs more than it did before.

We have franchisees in the middle of the economic downturn.

Their sales have not been great.

We say we have got this great idea.

Persuading franchise owners to spend more money on the branch is always a tough sell.

Change is not supposed to be easy.

In the c-suite at domino's, their ability in the brand dependent on listening to customers.

Communication has been a big part of that.

Talk to me about the time in which he felt the product had to change.

What was that ha ha moment?

-- a-ha moment?

It was a nagging feeling.

We needed a catalyst and some reminders to change this.

It was one of those deals were we all knew it and everyone supported it.

It was a head scratch or as to how we would do it and get it done.

The brand is old and well- known.

A dramatic shift in operations and marketing is a tough sell in the c-suite.

He called for a massive change.

You're the chief marketing officer.

What is it like to have customers come and tell you in such honest ways that europe product was not a great -- and that your product was not that great?

It does not the one thing you want to hear, but the great thing about domino's, we had a lot to fall back on.

Our franchisees in the system knew what it was like to be at their best.

When i was in college, i ate domino's all the time.

We need to study what consumers think of us as a brand.

We were number six on the product.

You are below chuck e cheese.

I'm snickering about it because i find it hard to believe.

Was at the lowest point for you?

I think it was a trifecta.

I had just joined the company in september of 2008. the stock dropped low three.

It is what investors think of you.

I was -- as he started talking to consumers in focus groups, it hits you that.

It was that the -- trifecta.

People did not like our product.

We were losing people and franchisees.

The book "art of war low squibbers a discussion that if -- "art of war" there is a discussion that if there's a battle on an island, you blow up the bridge.

There is no turning back.

We have to go out there and tell them that the pizza sucked.

How did that make you feel?

The commercial upset me.

? it is easy for the c-suite to rest on their laurels while the profits go in.

But domino's had a problem.

Their brand was synonymous with bad pizza.

To keep the brand thriving, it was necessary to take a bold step and come clean to the customers.

How do you go about telling the team that we are finally going to tell the truth?

I remember russell had just gotten off the phone with the agency and the agency had given him the reasons why this would be the right way to do this, that america did not trust politicians and they did not trust corporations and they do not trust anything that they were told.

They trusted each other, maybe.

That was it.

Everybody was blowing smoke.

They say, we have to get out there and tell them that the old pizzas suck.

We know it.

Why would we not say it?

You could have ignored it and kept going with billions of dollars in revenue.

You might still be serving pizza that tastes like a cardboard box.

With good half, but we wanted to do more.

We do not want to be the new coke.

Remember when they launched the new coke and it was a big fizzle?

We did not want to be like that.

Wanted to be different and bold.

This is new.

It is a new domino's, new era.

They completely overhauled their brand.

In a heist date gamble -- hi skate -- high stake gamble, there's only one decision were a decision like that can be made -- the c-suite.

Good to see you.

Thank you for having me in the boardroom.

Is this where the big decisions are made?

Well, this is where the decisions are made.

We were talking today about the pizza turnaround and the new recipe.

This is where conversations happen.

When you sell that spot, you have been here for over half of the company's existence.

When you saw that, do you think he went too far?

It was pretty bold.

The commercial upset me.

We are a proud company.

50 years.

When thousand franchisees who put their hearts on the rand and the business.

--1,000 -- 1,000 franchisees who put their hearts into the brand and the business -- i personally watch this every night before i go to bed.

[laughter] i bet you do.

Let's roll it.

Domino's pizza crusts is like cardboard.

I hear what folks say about our stuff.

Your sauce tastes like ketchup.

Most companies hide the criticism and we face it head on.

The comes a time when you know you have got to make a change.

30% more herbs in the sauce.

More cheese on the cross.

We want everyone to try it.

If you do not like it, we will give you your money back.

That was like standing on the edge of the cliff and jumping off without any kind of rope.

Did it change the conversation that was going on in the room?

A change of conversation everywhere.

The change of conversation in the whole public domain.

It changed the way we thought.

Everyone felt more free.

They changed the way people talked about domino's. a change away people talked about each other.

A lot of press said the democrat should be more like domino's and that republican should be more like domino's. they call it doing a domino's . they were talking about a current product.

In the meantime, i will tell you right now, here is what is going on.

Gas is four dollars.

Starbucks closed some stores.

There will be a ton around -- stores need to be cleaner and franchisors need to be nicer.

And this pizza -- we will do all of these things.

We will be right on top of it.

Was there a moment in time in which, i was sitting here and this happened?

We've had a lot of moments.

I remember one of the early moments was when our many people came in and they were very proud and went back to the drawing board i worked on a new recipe.

They brought in these pies and they were beautiful and we tasted them and they tasted great, but they did not taste is certainly different from the old pizza.

Our ceo at the time said it is incremental.

It has got to be really different.

Decisions made in the domino's trickle down to every aspect of the company.

When the call is made to overhaul the menu, a came down on the shoulders of this man.

The head chef.

Hey, how are you?

Good.

Good to see you.

You are an important man and the one i want to talk to.

You are part of this pizza turnaround and one of the people responsible for that.

The pizza turnaround and reinventing the core recipe was the first thing we worked on a one alas things we launched.

It was high risk we wanted to get it right.

Are you sitting down and making a category of the ingredients?

Are you in the kitchen like this and you have bowls of the sauces and your tasting those kinds of things?

Absolutely.

We are whiteboarding a strategy.

We are sifting through our grandmother's recipes books.

We are consulting chefs.

We've even visited competitors.

Who is doing it right and who is doing a wrong and why?

When you have that final recipe, did you know it was the right one?

Absolutely.

How did you know?

We knew.

It is like when an artist looks at something and knows it is right.

That is it.

My team and i have this new pizza and said, that is the one.

They say the product sucks and you say, what?

You are right.

We were two days away from running out of pepperoni.

You have to keep on being a success.

? a lot of teams that -- a lot of changes that the corporate team is making at domino's. i'm going over to talk to her franchisee now.

I want to know what it was like during those days when they heard how bad the product was doing and what it is like today.

Hey, how are you doing?

Welcome to domino's. thank you for having me at your place.

Absolutely.

You're welcome anytime.

You have a long history in stuff.

I do.

How did you start?

A young age -- at a young age.

Have you pretty much done everything?

I had done everything i believe that you can do.

Is the sauce better today than it was five or 10 years ago?

Absolutely.

It changed in 2010. with the new sauce, the flavor profile is really attractive.

It has got tomatoes and sugar.

I'm not sure what you guys are putting in it.

A lot of people say you have got the basic ingredients.

What is the difference?

Why don't i show you and give you a better idea?

All right.

Here you go.

Ok.

rollup your sleeves.

All right.

This is the pizza that has been changed.

What did you think when corporate said, hey, our product sucks.

You guys said what?

You are right.

You knew that?

You have been telling them this and they were not listening?

I would not say that.

They went out to the consumer and asked what they thought about the product.

We agreed with the and we were together to make sure that we all rolled it out properly.

We hit a huge home run.

Let me ask about margins.

We increase in quality, something has got to give so stop -- give.

The increase in food costs.

When you look at the decision you made from what it was to what it is, on a scale of one to 10, how happy are you?

Extremely happy.

A nine on a? -- a 9 or an 8? i had to order two new sets of others because my sales have gone off the charts.

It was a huge impact.

I had to reinvest.

It was a great investment.

The bottom line, you needed to have the profits to pay for it.

Absolutely.

I did.

This is the magic pizza.

Tell me what you think.

Cheers.

That is not the old domino's, is it?

There is a big change, a difference.

It is the new recipe of our pizza.

The amazing thing for me and all of us -- and it is interesting.

We did this launch and the pundits came out.

A few people say this is brilliant and a few people come out and trash it and say this is the dumbest thing they have ever seen.

Our sales were up double digits the first week.

We went on air and it went like that.

That surprised us.

We go out when we do this and fall on the sword and say it was in great and then sales are double-digit.

You are sitting in a meeting and sales have been going down three consecutive years.

Then you put this program in place and then what happened?

The first year we are up 9.9%. overnight?

Overnight.

It was amazing.

My favorite chart is going to the back of the store and they are tracking the sales.

2010, it is hitting the ceiling.

It went up so high.

That was amazing.

We were two days away from running out of pepperoni.

We were up that quarter around a little bit 14%. who knows what the opportunity was lost there, but no one thinks it will be that big.

Because you have put this as a standard operating procedure, it has become that.

Do you feel freer to do other things now?

We have a direction.

The direction is to figure out what is broken and fix it in a nonessential spend way and roll it out.

It has become a rather easy job.

How does that fit into everything you do?

When we came up with the slogan, we came up with it for two reasons.

One, we went on air and said the pizza was not good enough.

We are changing it.

People were probably gasping.

Did domino's say that?

Oh yes we did.

That line became a benchmark.

Meaning if we cannot do something in a campaign that makes people say wow, did domino's do that?

Has this pizza company doing x, y, z -- it has got to be an oes we did.

-- oh yes we did.

You are only good as your last thing.

What is your next big thing?

What is the -- on the table that is being debated?

The trouble with being a success is that you have to keep on being a success.

I think there is nervousness now around the table than the people who screwed it up than it is to be the people who had to fix it.

There is a sense of responsibility, at least for me.

I feel more pressured now than i did when i came in.

The way we approach our initiative is we always talk about our pizza as being new and inspired.

It is new and inspired pizza.

Now it is new and inspired fill in the blank.

That is how we figure out what we will do.

What we learned that domino's is that the c-suite leadership works best when it is genuine and real and honest and helps us to get to better decisions.

When we take it out of the board rooms to the customers directly, it pays off on the bottom line.

All of the other c-suite leaders in an age of radical transparency.

There is a two-way dialogue with the customer.

It works.

The key question for most businesses is whether they learn from domino's example.

Engage in real, honest communication.

?

This text has been automatically generated. It may not be 100% accurate.

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