Papa Johns saw its North America same-store sales decline in Q3 2024 by 6% from the same period in 2023, suggesting that the brand hasn’t kept up with consumer demand for greater value compared to rivals like Domino’s. But the chain’s CEO, Todd Penegor, said he has a five-step plan to get sales back on track.
“In this current economic cycle, consumers have become more deliberate in managing their overall ticket and are showing a preference for brands that are offering a compelling value,” Papa Johns CFO Ravi Thanawala told investors in a recent earnings call. He added that the brand shifted its efforts “towards initiatives that improve our value perception while still protecting our brand positioning” in the third quarter.
Although Thanawala noted some positive trends in carryout and delivery, he added, “It will take several more quarters to further narrow our value perception gap versus others within the QSR segment. But the tests we are running within our company-owned restaurants give us confidence that we can produce incremental wins over time.”
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Penegor, who joined the company in early August, outlined a five-step plan to “accelerate positive growth.” The plan includes:
1. “Relentless” focus on Papa Johns’ core product proposition and innovation. “Additionally, we want to win the hearts and stomachs of customers with craveable menu items across occasions and value offers,” Penegor said. “Work is underway on core menu optimization to pave the way for more impactful product offerings. We need to make sure we deliver on our core menu offerings. New menu items resonate with our customers, and our margins work extremely well for the system.”
2. Amplifying the brand’s marketing message. “Our Better Get You Some campaign that was launched earlier this year has traction, but we must enhance the message [as to] why consumers should choose Papa John’s and highlight our pizza craftsmanship,” Penegor said.
3. Investing in the company’s tech stack to improve efficiency. That approach calls for “improvements in the end-to-end digital customer experience and our customer relationship management platform.” Penegor added, “We need to make it easier for our customers and franchisees to do business.”
4. Differentiating the customer experience to meet the demand for convenience, value and quality. “Our Papa Rewards loyalty program is a great example of how we can evolve our customer experience in the near term while investing in and building capabilities over the longer term,” Penegor said. He pointed out that “roughly one quarter of our active program members have not yet reached a reward due to the current thresholds.” Papa Johns plans to make sure loyalty program members can unlock rewards faster, “activating our members at higher rates to help drive transactions and frequency.”
5. Ensuring a more growth-oriented franchisee base. “Our teams have made substantial progress this year in identifying real-time cost savings throughout the development process, which enhances the value proposition for franchisees to expand their portfolio,” Penegor said. “Through these efforts, we now anticipate our remaining company-owned restaurant openings in 2024 will have an average build cost of approximately $500,000, excluding marketing incentives, and we are continuing to look for opportunities to further reduce these costs in the future.”
Papa Johns opened 49 new restaurants in the first nine months of 2024 while closing 28 stores, for a net gain of 21 stores.
“For fiscal year 2024, we continue to expect to open more than 100 new restaurants, while also anticipating closures of underperforming restaurants to remain well within our historical norms,” Thanawala told investors. “With this in mind, we anticipate 2024 net new openings to be between 50 and 60 restaurants, with a significant number of openings still to come in the fourth quarter.”
For the third quarter of 2024, Papa Johns’ global system-wide sales were $1.19 billion, a 3% decrease compared with the third quarter of 2023, while revenue totaled $506.8 million, a decrease of $16.0 million, or 3.1%.
