Little Caesars Pizza is knocking at your door.
After 36 years of selling only takeout food, the country’s No. 3 pizza chain hopes to boost stagnant sales by entering the fiercely competitive delivery market.
Its competitors began offering deliveries--the fastest-growing segment of the pizza market--long ago. No. 1 Pizza Hut has delivered for a decade. No. 2 Domino’s Pizza built its business on a promise of fast delivery.
Little Caesars carved its niche with inexpensive carryout deals, such as its 2-for-1 “Pizza! Pizza!” standard. But sales were flat in 1994, while Domino’s and Pizza Hut posted gains.
After growing fat in the 1980s, privately held Domino’s cut costs and reversed a slide in sales and earnings in the last two years.
Pizza Hut, a PepsiCo Inc. division under new management, has broken sales records for four consecutive weeks since launching its cheese-stuffed-crust pizza, spokesman Rob Doughty said.
Caesars’ decision to offer delivery nationwide is likely to lead to further cutthroat competition, said industry analyst Gary Stibel of New England Consulting Group in Westport, Conn.
“I suspect what you’ll see is a price war, which will render Little Caesars unsuccessful in home delivery and will cost both Pizza Hut and Domino’s dearly,” he said.
Delivery requires a big initial investment in drivers, store renovations, advertising, insurance, more costly packaging and such items as insulated pizza pouches.
“Logistically, it’s a huge, huge undertaking,” Doughty said, noting that Pizza Hut’s delivery operation lost money for the first several years. “Now it’s a hugely profitable part of our business.”
Pizza Hut and Domino’s each have about 35% of the delivery market; independents share the rest.
Though Detroit-based Little Caesars will officially launch delivery next Monday with a nationwide advertising campaign, the service is already available at 85% of its 4,600 outlets. A year ago, only 155 Little Caesars stores offered delivery.