Papa Johns reported a decline in same-store sales for the first quarter of 2024, with customers ordering more pizza but cutting back on sides and beverages. Meanwhile, the chain saw fewer first-party delivery orders while third-party delivery grew.

Papa Johns said its North America comparable sales were down 2% overall from the first quarter of 2023, with U.S. company-owned stores down 3% and North America franchised restaurants down 2%. International comp sales declined 3% from the previous year.

The brand’s global system-wide sales were $1.23 billion, a 1% decrease compared with Q1 2023 “due entirely to the 53rd week in 2023, which shifted the week between Christmas and New Year’s into the fourth quarter,” the company said.

According to content provided by Marketwatch, a Dow Jones company, to Morningstar, Papa Johns reported “the biggest quarterly revenue miss in more than five years, amid a decline in the number of transactions and deliveries.”

In a May 9 earnings call, interim CEO/CFO Ravi Thanawala said customers have responded positively to the brand’s new offerings, but “the highly competitive promotional environment has been a headwind to transactions.”

He said customers are thinking carefully about how much they’re paying when they’re placing orders, which reflects an overall industry trend as Americans worry about inflation. 

“In the current environment, we’re also seeing customers become more deliberate in managing their overall order costs,” Thanawala said. “So while our core offering pizza remained higher year over year, sides and beverages were lower.”

As QSR Magazine reports, third-party delivery represented 16% of Papa Johns’ sales in the first quarter of this year, up from 12% in Q1 2023. “We’ve been on the aggregators since 2019 and…what we’re seeing is that the pizza category continues to perform well and take share within the aggregator universe,” Thanawala said. “Second, the benefit of the aggregators is that they are highly convicted consumers that are ready to purchase when they’re on those apps.”

But Papa Johns wants to get more customers to order directly from its app and website. “Our objective long term is not to have our organic business decline” while only experiencing growth through third-party aggregators, Thanawala said, according to QSR.

That means pushing customers to Papa Johns’ loyalty program. With that in mind, the brand is testing different pricing and promotional strategies, particularly in carryout.

Prior to leaving the company for Shake Shack, Papa Johns former president and CEO, Rob Lynch, unveiled the company’s “Back to Better 2.0” plan in January 2024. Under that plan, North American franchisees agreed to increase their contributions to Papa Johns’ national marketing fund by 20% or 100 basis points of sales. The chain also intends to pursue more untapped and underserved markets while increasing the fixed operating margin that its U.S. commissaries charge by 100 basis points in each of the next four years, moving from 4% to 8% by 2027. To offset those higher costs, the chain will give franchisees new opportunities to earn annual incentive-based rebates as they grow their volume and open new stores.

The company will also invest more in consumer-facing technology, digital infrastructure and enhanced reporting. By expanding ordering capabilities through its website and app and leveraging analytics, the brand “expects to improve purchase conversion, increase customer retention and deliver faster consumer insights to franchisees.”

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