Domino's Pizza

Domino's Pizza wants to roll out self-driving delivery robots because human workers are too expensive.

The pizza giant is testing unmanned vehicles in Houston this fall as it looks to lower delivery costs and reduce its reliance on the labor market.

Rising minimum wages, record-low unemployment, and greater competition for drivers from restaurant- and grocery-delivery platforms have pushed up Domino's labor costs.

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Domino's Pizza wants to roll out self-driving delivery robots because human workers are too expensive.

The pizza giant recently partnered with Nuro to deliver pies using the startup's unmanned vehicles. The trial, set to take place in Houston this fall, represents "yet another step forward to try to get us to a place where we can reduce the dependency on the labor market and also lower our cost of delivery," Domino's CEO Richard Allison said on the earnings call this week.

Minimum-wage hikes in multiple US states and cities, record-low unemployment, and greater competition for drivers from restaurant- and grocery-delivery platforms such as Uber Eats and Instacart have inflated Domino's wage bill. Its labor costs rose 0.4 percentage points to 30.2% of store revenues in the first half of this year, meaning its operating margin inched up just 0.1% percentage point to 23%. "We're paying more to really attract and retain great team members," finance chief Jeffrey Lawrence said on the call.

Part of Domino's plan to combat wage inflation is to replace its drivers with robots that don't require salaries. It's also shifting away from cars to bicycles and electric bikes in the US, as they lower delivery costs and expand the pool of potential employees. "Not everyone has an automobile and increasingly young people, in that kind of 18-year to 28-year-old range, fewer of them seem to have cars," Allison said.

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