Summary of Key Points
In recent years, Domino's China has been aggressively opening stores in non-first-tier cities (especially those at the third and fourth levels), achieving explosive growth through the "first-store effect" and targeted operational strategies. Revenue from these non-first-tier cities now accounts for over 58%, with a growth rate more than eight times that of first-tier cities. However, beneath this success lies some concerns: existing stores are experiencing weak growth, relying heavily on new store openings, and competition in the lower-tier markets is intensifying. The key challenge for Domino's is to convert customers who queue up just to experience the brand into regular repeat buyers.
I. Lower-Tier Markets Become the Engine of Growth
Domino's has clearly shifted its focus to non-first-tier cities, as the data speaks volumes:
- Number of Stores Surpasses: By the end of 2025, there will be 798 stores in non-first-tier cities, surpassing the 517 in first-tier cities for the first time; by June 2026, non-first-tier stores will account for two-thirds of the total.
- Revenue Outperforms First-Tier Cities: Revenue in non-first-tier cities grew by 43.4% in 2025, compared to only 5.2% in first-tier cities, with non-first-tier revenue accounting for 58.8% of total sales (nearly 60%).
- Fast Return on Investment in New Markets: The 111 new stores opened in 2025 generated an average daily sales volume of 26,800 yuan, meaning the investment can be recouped in just 12 months—this is much more profitable than opening stores in first-tier cities.
In short, Domino's is making faster profits and experiencing stronger growth by expanding into third- and fourth-tier cities, which has become the main driver of its performance.
II. Why Do First-Stores Succeed So Well?
Domino's' success in new cities isn't due to luck but to a well-developed strategy:
1. Optimal Location Selection: In first-tier cities, they often locate in office complexes or community malls (e.g., the Beijing Guomao store is on the ground floor of a Gemdale Plaza); in third- and fourth-tier cities, they secure prime locations in landmark malls like Wanda (even on the street level) due to effective brand marketing.
2. Creative Marketing: They create buzz before opening with social media campaigns ("expect long queues"), collaborate with local influencers, and use large-screen advertisements and opening events to create a sense of anticipation across the city.
3. 24-Hour Operations: Some first-stores (e.g., in Harbin and Guiyang) operate 24 hours a day, which not only distributes the heavy daytime traffic but also generates buzz on social media ("How can a pizzeria be open 24 hours?"), potentially boosting daily sales (e.g., the Dalian first-store record of 700,000 yuan in one day).
4. Temporary No Delivery: Although Domino's promises "30-minute delivery," new stores initially only offer dine-in and takeout services to avoid delays that could damage their reputation.
III. Hidden Concerns: Weak Growth in Existing Stores
Despite overall growth, Domino's faces challenges:
- Slowing Growth in Existing Stores: The annual sales growth rate for existing stores was -1.5% in 2025, indicating a decline in sales compared to the previous year, with average daily sales per store dropping from 13,100 yuan to 12,400 yuan.
- Dependence on New Store Expansion: Revenue growth mainly comes from new openings rather than repeat purchases from existing stores. For example, the initial excitement around some first-stores fades, leading to normal sales levels, and too many stores in the same city can compete for customers.
This suggests that Domino's current growth is driven by opening new stores, and if it can't retain customers after the initial hype, its future growth may hit a bottleneck.
IV. Lower-Tier Markets Are Not a "Blue Ocean": Competition Is Intense
Domino's isn't the only pizzeria brand targeting third- and fourth-tier cities; competition is fierce:
- Leading Brands Accelerating Expansion: Pizza Hut has three times as many stores as Domino's, covering over 1,100 cities (including counties); brands like Boba John and Zunbao Pizza are also entering the market.
- Price Competition: The proportion of pizzerias with prices below 30 yuan per person has increased by nearly 10 percentage points, with many local brands (e.g., Zhigenzhide) attracting regular customers with lower prices and franchise models. These customers may not be attracted to Domino's unique "first-store experience."
- Market Consolidation: The total number of pizzeria stores decreased from 44,000 in 2024 to 41,000 in 2025, indicating that weaker brands are exiting the market while leading ones are gaining share. If Domino's doesn't move quickly, it may lose its prime locations and customer base.
V. Domino's Response: Expanding Deeply and Widely + Boosting Repeat Purchases
To address these challenges, Domino's is adjusting its strategy:
- Upgrading Store Opening Strategy: In 2026, 50% of new stores will be opened in existing markets, 25-30% in new cities, and 20-25% in existing markets, aiming to both expand into new areas and strengthen its presence in current ones.
- Promoting Repeat Purchases: In the second quarter of 2026, promotional activities helped restore positive sales growth in existing stores. The goal is to convert first-time customers into regular buyers by improving products and the membership program.
In summary, Domino's has had a good start in lower-tier markets, but to sustain growth, it needs to address issues related to its reliance on new store openings and insufficient customer repeat purchases. Otherwise, its success may be short-lived.
In One Sentence: While Domino's has made quick profits in third- and fourth-tier cities through the first-store effect, long-term success requires converting temporary interest into regular patronage.