Increased competition for market share held by the nation’s largest pizza chains is coming from upgraded frozen pizzas in supermarkets, rapidly growing take-and-bake chain brands and fast-casual pizza contenders.
Amid those challenges, operators of Domino’s Pizza  and Papa John’s Pizza  outlets are waiting to gauge the effects of segment leader Pizza Hut’s latest marketing initiative, the promotion of a “new and improved hand-tossed-style” crust. The Yum! Brands  division is promoting pizzas made with that dough as taste-test winners over the No. 2 and No. 3 chains’ products.
And throughout all the jockeying for position among the first-tier players and their upstart rivals, regional and independent pizzerias continue to grab 56 percent of the nation’s pizza sales, according to Pizza Hut  estimates.
In a bid to reverse its recent record of six straight quarters of negative domestic same-store sales, 7,500-unit Pizza Hut is turning up the heat on Domino’s best-selling pizza, which is made with a hand-tossed crust.
Pizza Hut recently ran a full-page ad in USA Today that claimed its newly reformulated “hand-tossed-style crust” had been subjected to blind taste tests in which it beat out similar products from 5,129-unit Domino’s and Papa John’s, which has some 2,600 domestic units.
Pizza Hut gave away nearly 1 million samples of the product during a widely publicized two-hour promotion May 1. A spokesman declined to specify, however, whether the crust is made from fresh or frozen dough.
A Domino’s franchisee said he was not too worried about Pizza Hut’s new promotion and disputed its claim about tasting better than Domino’s handmade version.
“In a way, Pizza Hut’s attack is good because it gives us more attention to our best product,” said Glenn Mueller, president of 130-unit RPM Pizza of Gulfport, Miss., which operates Domino’s outlets in Louisiana, Mississippi and Alabama.
Domino’s signature hand-stretched crust is the foundation of many recent product rollouts, including the Brooklyn Style and Philly Cheese Steak pizzas and, previously, the American Classic Cheeseburger pizza.
David Brandon, Domino’s chairman and chief executive, blamed the 2.9-percent fall in first-quarter U.S. same-store sales primarily on franchisees’ attempts to micromanage labor costs, which resulted in slower delivery times, and on their reduced expenditures for local-store marketing. He also said that all big national chains had lost market share to regional and local pizza shops.
Consultant Darren Tristano of Chicago-based Technomic Inc. said: “There is more competition around pizza. We are seeing a return to eating in versus a strictly delivery model. Pizza Hut and Domino’s are focused more on value, and it will be harder to gain margin.”
The growing strength of such take-and-bake concepts as the nearly 1,000-unit Papa Murphy’s and the smaller Nick-N-Willy’s chain also has cut into the sales of the biggest and oldest pizza players, he said. He also suggested that better-quality frozen pizzas at grocery stores, such as the DiGiorno and Freschetta brands, are cheaper and more convenient alternatives to ordering pizza for delivery or take-out.
Fast-growing pizza chains that Technomic cited as having scored systemwide sales growth of 25 percent to 40 percent in the last two years are RedBrick Pizza , Famous Famiglia, Wolfgang Puck Gourmet Express , Pizza Patrón, Fox’s Pizza Den, Loop Pizza Grill and California Pizza Kitchen  ASAP.
Danny Malamis, chief executive of the Domino’s Franchise Association, agreed that increased competition, decreased local-store marketing and slowed delivery times had all contributed to sluggish sales. And he credited Pizza Hut with doing a better job of national marketing.
“We need to focus on what we do well—delivering pizza in less than 30 minutes,” Malamis said, adding that Domino’s operators “are working hard with corporate to make sure service is consistent and to improve delivery times.”
Domino’s chief Brandon noted during a webcast conference on the company’s first-quarter results that the franchisor had added field staff to help franchisees meet their common goals. “Sales are coming back,” he predicted.
“We’re aggressively going back to looking at our marketing and making sure it’s working well,” said Domino’s franchisee Mueller. The promotional offering of three medium pizzas for $5 each has been successful, he said. Traditional marketing methods like direct mail and door hangers continue to be effective, he added.
“We’re trying to execute better and faster and back that up with aggressive local-store marketing. It’s our ‘fast and nice’ program,” Mueller said. Also working in his company’s favor, he said, was its superiority over competitors in terms of the number of stores in his trading areas.
However, Pizza Hut continues to compete in all arenas: delivery, full service, buffet and takeout. The chain’s media blitz for the hand-tossed-style product will start with a limited-time offering of the pizza for $10.99 with unlimited toppings.
Pizza Hut also expects to introduce many new menu items in the next two years, a spokesman said.
Restaurant securities analyst Larry Miller of RBC Capital Markets said Pizza Hut is in a transitional phase in its strategic planning.
For its part, Papa John’s Pizza tries to differentiate itself from its chief competitors on quality—a strategy that some observers say is working. The chain’s “better ingredients, better pizza” tagline figures prominently in its marketing.
Still, Papa John’s same-store sales declined 0.5 percent for last year’s fourth quarter, though the chain expects to improve its performance this year.
“Customers have greater expectations and see pizza as more of a destination,” Technomic’s Tristano said in citing competitive challenges confronting the segment leaders. He also noted that more chains in other industry categories, such as Dunkin’ Donuts , Subway  and Panera Bread , recently have added or are testing pizza products.