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REV: MARCH 19, 2012

"One time permission to reproduce granted by Harvard Business Publishing, 10/9/2012"

DAVID E. BELL
PHILLIP ANDR
EWS MARY SHE
LMAN

Domino’s Pizza
Before 2007, wheat prices didn’t have a pulse. We’d buy for the next six months and the price would be plus or minus 10 cents a bushel over the last six months. Then one day in 2008 wheat shot up $24 a bushel! Now, as a norm, we strategically consider corn, dairy, and wheat to better leverage our supply chain expertise and improve store economics.
— John Macksood, executive vice president, Domino’s
Pizza
On the morning of August 22, 2011, John Macksood, executive vice president for supply chain services at Domino’s Pizza, Inc. (Domino’s), was reading the daily headlines while sitting in his office at the Domino’s World Resource Center, the company’s global headquarters in Ann
Arbor, Michigan. Domino’s was the world’s second-largest pizza company and the largest pizza delivery quick-serve restaurant (QSR) chain. One item in particular jumped out at Macksood. An article, titled “Quiznos chain faces tough finance issues,” indicated that Denver-based Quiznos, a privately owned QSR sandwich company with 4,000 U.S. stores, was nearing bankruptcy due to
“sharpening competition, waning sales, and debt woes.”1 One of the problems cited was
Quiznos’ “protracted battle” with its franchisees over operating costs and profitability, with some franchisees blaming low or nonexistent store profit margins on Quiznos’ requirement that they buy food at “allegedly above-market prices from a Quiznos-mandated supplier network.”2
Analysts also blamed Quiznos’ problems on rising commodity prices, which had dramatically increased the cost of raw ingredients.
As Macksood finished reading the article, he felt proud to have been part of a team at
Domino’s that had proactively