Domino's Pizza withdraws from Japan with closure of over 170 stores

Domino’s Pizza, the international pizza delivery giant, have revealed plans to close over 200 stores around the world.

The company has announced a significant restructuring of its global operations, signaling a strategic shift in its approach to growth and profitability.

As part of the plans, Domino’s will shutter 205 underperforming stores, with a staggering 172 of those closures occurring in Japan.

Dominos Japan offers pizzas such as Garlic Shrimp which may seem unusual to non-Japanese customers

This move reflects a reassessment of Domino’s expansion strategy, particularly in the wake of the pandemic boom and subsequent economic adjustments.

Domino’s Pizza Japan, a subsidiary of Domino’s Pizza Enterprises, currently operates approximately 1,000 stores across the country.

Dominos Japan is heavily focused on delivery and take out orders

The decision to close nearly one-fifth of its Japanese locations underscores the challenges the company has faced in maintaining profitability amidst changing market dynamics.

Many of the affected stores were hastily established to capitalize on the surge in demand for food delivery services during the peak of the COVID-19 pandemic.

Pizza and side combos are popular with Dominos Japan customers

However, as the initial fervor subsided and consumer behavior normalized, these newly established outlets struggled to sustain their financial viability.

The decline in demand post-pandemic has been further compounded by escalating operational costs, including rising prices for ingredients, labor, and energy.

Labor and ingredient costs have risen for almost every Japanese food retailer

These pressures have squeezed profit margins, making it increasingly difficult for some stores to remain competitive.

By consolidating its operations and closing unprofitable locations, Domino’s aims to streamline its network and focus on areas with stronger growth potential.

Dominos Japan still take a large number of orders in store

This strategic retreat is not limited to Japan. Domino’s Pizza Enterprises is also closing stores in other regions, including Europe, though the majority of the closures are concentrated in the Japanese market.

While Domino’s Pizza originated in the United States, Domino’s Pizza Enterprises is headquartered in Australia.

The company operates through a franchise model, granting rights to local operators in various regions across Asia, Oceania, and Europe.

Small dedicated delivery vehicles are common in the Japanese food delivery market

The company estimates that these closures will result in annual cost savings of $15.5 million Australian Dollars (approximately 1.5 billion yen).

This financial boost will provide Domino’s with greater flexibility to invest in initiatives aimed at enhancing its long-term competitiveness.

Dominos Japan has agreements with many hotels to provide delivery direct to hotel rooms or hotel lobbies

This decentralized structure allows for greater adaptability to local market conditions but also requires careful oversight to ensure consistent brand standards and profitability.

Mark Van Dyke, CEO of Domino’s Pizza Enterprises, emphasized that this restructuring is a necessary step to ensure the company’s sustained success.

Dominos Japan is still relatively affordable when compared with some of Dominos other international markets

By optimizing its store network and focusing on strategic investments, Domino’s aims to strengthen its position in the global pizza delivery market and deliver long-term value to its shareholders.

The closure of these stores represents a significant market correction after the rapid expansion during the pandemic.

Store closures may affect delivery services in some areas of Japan

While the closures may cause short-term disruptions, they are ultimately intended to pave the way for a more sustainable and profitable future for Domino’s Pizza Enterprises and Domino’s Pizza Japan.

By closing underperforming stores, the company hopes to solidify its position as a leading player in the global pizza delivery landscape.