Domino's to start using Uber for food orders, shares surge - Reuters

July 12 (Reuters) - Domino's Pizza (DPZ.N) shares surged 10% on Wednesday after the chain said customers can start using Uber's (UBER.N) Uber Eats and Postmates apps for orders, as it tries to jolt its sluggish delivery business.

Domino's said Uber Eats will be its exclusive third-party platform in the U.S. until at least 2024, as per its "global agreement" with the ride-share company.

The pizza maker, which had flagged a slowdown in the delivery business in April, said the partnership would begin in four pilot markets in the U.S. in the fall.

Ordering on Uber's delivery apps is expected to be enabled across the country by the end of 2023, with Domino's and its franchisees handling deliveries, the company said.

Domino's had been a holdout in working with third-party delivery companies, preferring instead its own app, website and drivers.

But being listed on Uber Eats and Postmates means it will now be easier for Domino's to reach new customers used to ordering there.

A Domino's Pizza restaurant is seen in Los Angeles, California, U.S. July 18, 2018. REUTERS/Lucy Nicholson/File Photo

"Adding Domino's to Uber's U.S. marketplace will expand the pizza brand's reach to new customers," Northcoast Research analyst Jim Sanderson said.

At the same time, Domino's will continue using its own uniformed drivers for deliveries, allowing it to maintain control of its brand, image and food quality. The deal also calls for Uber to share some customer order data with Domino's.

The company has been raising the prices of menu items and increasing delivery charges as it looks to shield margins from high input costs after consumers turned to home-cooked meals during a sticky cost-of-living crisis.

In April, Domino's said its delivery same-store sales declined 2.1% in the first quarter, compared to a year ago. It is set to report second-quarter earnings on July 24.

"The partnership will likely boost Domino's struggling domestic delivery sales and improve franchisee economics," said BTIG analyst Peter Saleh, adding that benefits would begin accruing only in the fourth quarter.

Domino's said it will look to transition to making deliveries through Uber Eats in 27 international markets this year, including in the United Kingdom, Canada and Australia, which are common to the two companies.

The agreement would potentially allow Uber to take an incremental share over the next several quarters from the virtual duopoly it has with DoorDash (DASH.N) in the U.S., said Angelo Zino of CFRA Research.

Reporting by Granth Vanaik and Juveria Tabassum in Bengaluru; Additional reporting by Hilary Russ in New York; Editing by Janane Venkatraman, Pooja Desai and Sharon Singleton

Our Standards: The Thomson Reuters Trust Principles.

Granth Vanaik

Thomson Reuters

Granth reports on the North American Consumer and Retail sector, covering a broad range of companies from consumer packaged goods and restaurants to department stores and apparel retailers. Granth's work on the website usually appears on the Retail & Consumer page of Reuters Business section. He holds a post-graduate degree in international rela...