Papa John’s Digital Orders Top 60% in First Quarter, While Pizza Hut Needs a $130 Million Boost

Analyst says digital upgrade alone won’t cure Pizza Hut’s woes.




Papa John’s continues to build its brand around sports, embracing celebrity athletes like professional drag racer Leah Pritchett and Peyton Manning.

 

Digital orders could account for 80% of Papa John’s orders in a few years, according to Nation’s Restaurant News.

NRN reports that Papa John’s International presently receives more than six out of 10 orders from its mobile ordering app, and some markets report the number is as high as 70%.  The news came on a first-quarter earnings call last week. “We have an opportunity to get 80-percent-plus over the next several years,” company president Steve Ritchie said. 

Papa John’s also saw its same-store sales rise by 2% in the first quarter, which ended March 26. According to NRN, the chain’s revenue rose by 4.8% this past quarter to $449 million, compared to $428.6 million at the same time last year. Net income increased by 8.6% to $28.4 million, up from $26.2 million in 2016.

Papa John’s will continue to invest in mobile ordering, which produces larger orders, allows customers more time to ponder their options and consider add-ons, and saves money on labor. The company also has built its brand around sports, from its TV commercials featuring franchisee Peyton Manning to its recent Charity Challenge series of drag races in which Papa John’s founder John Schnatter burned rubber on the speedway against professional NHRA Top Fuel dragster Leah Pritchett.

Meanwhile, Pizza Hut, which has long held steady as the pizza industry’s No. 1 chain, continues to struggle, logging a 3% decrease in same-store sales in the first quarter, even as sister brands like Taco Bell and KFC saw increases. In the U.S. same-store sales dropped by 7%.

To reverse the downward spiral, Yum Brands CEO Greg Creed said Pizza Hut will receive a $130 million booster shot, which will include “a permanent system commitment to digital initiative contributions, alignment on marketing strategy and much more.”

One analyst told CNBC that Pizza Hut “plays third fiddle behind Domino’s and Papa John’s” among younger consumers. “This is one of the reasons why the chain has focused so much on digital initiatives, in an attempt to better connect with this cohort, which is driving much of the market growth,” Hakon Helgesen of GlobalDataRetail said. But he added that the chain’s leadership “will likely be disappointed, mainly because the success of other chains isn’t just about digital—it’s about brand perception, physical location and price. On all three, Pizza Hut currently falls short.”

He noted that reviving Pizza Hut’s fortunes will be a “tall order” and that some investors have called on Yum to divest itself of the brand.

 

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