A Smaller Piece of the Pie

According to a news report from online.wsj.com, “Times are tough in the U.S. pizza business.”

“Once synonymous with a cheap meal, pizza’s popularity among America’s fast-food consumers is waning. On the one hand, its reputation as a bargain has been eroded by pricey ingredients — some in the industry refer to cheese as “white gold” — and aggressive competition, especially from chains peddling cheap hamburgers,” said the story. “On the other hand, it is getting squeezed by changing tastes, as some consumers bypass pizza for fresher, more upscale dining options. Exacerbating the situation is the most precipitous economic downturn in decades, which has sparked a dramatic pullback in consumer spending.”

“Conditions late last year were “the worst I’d seen” since entering the business 32 years ago, says John Schnatter, founder and interim chief executive officer of the Papa John’s International, which is based in Louisville, Ky. The industry’s troubles are creating problems for franchisees of the three biggest chains: Papa John’s, Domino’s Inc. and industry leader Pizza Hut, a unit of fast-food giant Yum Brands Inc,” according to the article. “While hamburger chain McDonald’s Corp. has posted consistent gains in its domestic same-store sales, with 4% growth in 2008, U.S. franchised same-store sales at Domino’s fell 1.7% in 2007 and 5.6% in the first nine months of 2008. Papa John’s is predicting its same-store sales will be flat to down 2% this year, and Pizza Hut, whose same-store sales slipped 1% in the fourth quarter of 2008, is off to a slower start than expected this year, according to Yum, which has called the division its biggest challenge.”

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