revious year – predominantly attributed to rising prices rather than goods sold – Domino’s Pizza Enterprise EBITDA fell by 23.3 per cent, to $201.7 million. Domino’s  net profit also declined by about 74 per cent, with CEO and managing director Don Meij telling investors that the business would work to “rebalance the value equation.” Price increases are reportedly off the table for the current financial year.   Understanding what drove the fast food chain’s underperformance in FY23 will be key to determining whether Domino’s – which operates in 12 markets across ANZ, Asia and Europe – will be able to turn things around in the year ahead. But with consumer behaviour still in flux post-Covid, the future of QSR is anything but certain.  Staff cuts and cost savings Like other brands impacted by the current cost-of-living crisis, Domino’s attributed its subdued results to historically high levels of inflation, which affected food, labour and energy costs. The business sought to offset this with price rises, as well as a 6 per cent delivery fee. However, the reported figures reflected customer dissatisfaction with this move. “Clearly we are disappointed with the profitability of our stores. [We] rushed many ideas through to the market – some we got right – but in delivery we clearly got it wrong,” Meij said. “We have heard this feedback loud and clear and have now removed the majority of these fees. That said, some pricing decisions were accepted by customers, such as slightly increasing the price of our value range.”   As part of the group’s efforts to cut costs, Domino’s is exiting the Danish market – closing all 27 stores – with Meij explaining that its losses there were too deep, and would require too many years to recover. Domino’s has committed to shutting 56 locations globally which were “structurally broken,” and unable to achieve sustainable sales levels. It has also flagged staff cuts affecting about 200 people – with dismissals across Australia not yet specified. The retailer appears to have improved sales for the first six weeks of the 2024 financial year, with same-store sales growth of 6.6 per cent across Europe, Australia and New Zealand. However, sales in Asia were down by almost 8 percent.  It has forecasted $30 million in cost savings related to the restructure for the year ahead, one third of which will be passed on to franchisee partners.  “We’re quite optimistic about the short term, and resolute in the medium and long term. The last 18 months were incredibly challenging and we take full responsibility for [these]  initiatives,” Meij said. “But that’s the past, and we’re now in the future. We’re in that mode of recovery.” An extra tax Mark Field, director and founder of food and grocery FMCG consultancy Prof Consulting Group, told Inside Retail that Domino’s underperformance can be partly explained by macroeconomic challenges. But he believes that the business’ own decision-making, such as the introduction of a six per cent delivery fee, also played a role.    “Consumers can sometimes see this fee as an extra tax or a profit margin. [It’s] like going to your favourite café and paying a 15 per cent surcharge because it’s a weekend,” he said. As a leader in the takeaway pizza market, Domino’s retains a high level of customer loyalty, and Field believes that a renewed focus on product and pricing should aid its recovery. But questions remain about what consumers are looking for in the current economic climate. Some people may be opting for frozen pizza instead of Domino’s and prioritising premium products when they choose to eat out. “It’s probably why Domino’s don’t seem to have benefited so much at that end of the market,” Field said. Subway sale and the evolution of the pizza box One sign that QSR chains are well-positioned to weather the cost-of-living crisis is the recent acquisition of Subway by Roark Capital, for almost $15 billion. The sale follows 10 consecutive periods of growth and points to the long-term health of the broader QSR sector, according to Field. “It’s an established brand, one to watch and likely to be further accelerated under the new owners,” he said.  The lesson for other QSR brands looking to attract investment is that understanding your customer and meeting their requirements –from service and meal experience to sustainable packaging – is key. And while affordability will always be a priority for QSR brands, Field noted that food quality and speed of service is increasingly important as a means of building long-term loyalty, especially in an environment where more people are working from home. For brands looking to offset rising prices and reduce costs, Field suggested working strategically with suppliers, minimising wastage and considering more affordable substitutes, where appropriate.   “With the focus on ESG, and packaging in particular, it will be interesting to see the evolution of the pizza box from a value chain perspective,” he said. Appealing to new audiences While Meij acknowledged that Domino’s had a “terrible 18 months” which hit franchise profitability, he was confident that the business would bounce back through savings measures, new product rollouts, a focus on value and other initiatives. Domino’s has forecasted sales and earnings improvements for FY24, with the pizza retailer believing that its debts have peaked. However, progress for the first half of the 2024 financial year is in part dependent on improvements across Asia. Meanwhile, Field believes that Domino’s understands what went wrong, and has strategies in place to regain lost sales.