By Danny Klein
Todd Penegor spent more than a decade fending through the gauntlet of quick-service burgers. His tenure at Wendy’s included nearly eight years as CEO—an overall run that saw the brand vault into the No. 2 spot nationally (behind McDonald’s), eclipse 7,000 locations, and secure 12 straight calendars of same-store sales growth.
He joined Papa Johns in August, and it’s been a furious course in pizza since. The difference? It’s a scroll of things that have influenced Penegor’s plan to reboot the brand’s performance, which saw its 2024 North America same-store sales decline 4 percent, year-over-year, global systemwide sales slide 3 percent to $4.85 billion (down 1 percent taking into account a 53rd week last year), and total revenue fall 4 percent to $2.06 billion (2 percent decrease with the extra week factored in). There’s been chatter of a potential takeover, refranchising, and the generally crowded workings of any turnaround project of a public company.
Penegor, who as part of his 100-day plan completed a franchise listening tour, says Papa Johns shifted out of position on “value for the money.” There are a lot of ways to dissect what “value” means to today’s fast-food consumer, but that’s one you can’t hide behind a dollar menu. Namely, in recent, inflationary-strapped months, customers voted with frequency as much as spend. It’s been a challenge to drive visits amid a pool of shrinking customers staying home to save money.
Related: See How Papa Johns Stacked Up In the PMQ Pizza DELCO Report
There are typically a few key points where pizza separates from burgers (and most of quick service) on value and other fronts. For starters, Wendy’s spent years under Penegor getting its digital mix up toward 15 percent of sales. The day he got to Papa Johns, the brand welcomed 85 percent of its business digitally.
So, from a value angle, pizza is more a digital storefront where customers scroll brand-to-brand with fluctuations. There aren’t static menuboards where once a price goes up, it seldom comes down. Also, there is a large flow of data. The biggest ordering channel at Papa Johns comes through its app. Customers give their address, phone number, and name without much thought—an ask that requires deliberate leverage in other corners of quick service.
What Penegor also appreciated about pizza, in comparison, as it pertained to value, was the overall backdrop. In burgers, operators talk about food-at-home as their biggest invisible competitor. Not including delivery, people make the choice to either cook what they bought at the grocery store or roll through the drive-thru/dine in. Pizza, however, plays as a quasi-fresh prepared food-at-home role. It’s a wider category and different occasion set, Penegor says.
In turn, the goal for Papa Johns was to amplify why the value exists for the money. You can feed a family of four with a side, pizza, and drink, especially if its carryout, for $25 or so, depending on the deals. “That’s a pretty darn good value for the money in today’s world,” Penegor said.
The upspin, he adds, was Papa Johns didn’t lack for any of this on its menu. It was more about where the spotlight was directed. If you go back to April, it had launched a “Better Get You Some” campaign that centered on “pizza devotion,” premium pricing, and a more national view of the brand.
Penegor says pizza is a business you have to compete nationally but win locally. Papa Johns wasn’t doing that. Yet the pieces were there.
Papa Johns’ Papa Pairings ($6.99) were something Penegor says didn’t appreciate a ton of awareness. What he quickly did was shift to an always-on messaging for the offer at the bottom end of Papa Johns’ barbell. Management also had to rebuild the company’s day-to-day perception. That included presenting the XL New York Style pizza at $10.99 and Shaq-a-Roni at $11.99, both under former launch price points.
As part of Papa Johns’ Back to Better 2.0 plan, announced at the start of 2024, it elected to increase national advertising and make local optional. When it did so, Penegor says, all the co-ops vanished. “… not having the co-ops to be able to actually put the franchise community together in the communities that we serve, have the company sitting around the table, it’s a big miss in a business that is a very regional business, especially pizza being so localized,” he said previously.
Currently, Papa Johns is featuring its Epic Stuffed Crust platform at $13.99 nationally ($14.99 for the garlic version), while underscoring the reliable value (Papa Pairings) through its own channels and locally. Expect more offerings in the second half of the year on both sides.
Yet speaking to the larger change, Penegor says Papa Johns still has work to do to amplify marketing and return value and quality to steady footing. When it can effectively reach local consumers, particularly in a price-sensitive environment like the present one, Papa Johns wins, he says.
This year, Papa Johns will partner with “several” franchisees who put their hand up to run additional market tests to determine the appropriate mix of national and local marketing spend in the U.S. Papa Johns invested about $4 million in incremental dollars in Q4 to get things going. But based on learnings and performance, Papa Johns expects to deploy $25 million more in 2025, year-over-year. That will include funds toward CRM capabilities and its Papa Rewards loyalty program ($5 million of the pool), along with incremental investments in company-owned regions and national efforts as it continues to dial up share of voice, test optimal channel mixes, and pilot the right balance of spend.
On March 4, the brand unveiled a “Meet the Makers” campaign focused on people and “pizza craftsmanship.” Jenna Bromberg, a former VP at Carter’s Inc. who came onboard in November, said the platform was inspired by Papa Johns’ commitment to quality. It puts products and preparation front-and-center. This will hit the market via partnerships with food influencers and employees, offering a behind-the-curtain look as well as custom pizza creations. The first 30-second spot (below) goes inside a restaurant to amplify the steps of the process.
Simply, Penegor says, the redirect answers, “why Papa Johns.”
And elaborating on the “why,” Penegor had a lot of ground to cover with loyalty. In mid-November, the brand revamped its platform to enable more than 35 million members a chance to unlock “Papa Dough” faster.
Before, he says, the average Papa Johns customer ordered from the brand four times per year. So it would take them, give or take, three visits to reach the $75 threshold and earn a reward. That meant half of the company’s loyalty users never earned anything. Their progress would just age out.
Now, guests earn with nearly every order ($2 off $15). The first purchaser is getting to the second a lot quicker, the third to their fourth, and so on. “That’s a big deal,” Penegor says. “You can really then leverage the data and the understanding of that consumer to leverage one-to-one communication on our CRM program to bend trends. So if they become lapsed, how do I draw them back in? If they slow down, what’s it going to take to get them to the fifth or sixth [order]? Or if they age out and lose some Papa Dough, how do I send them a reminder or even a supplement to say, here’s a little top off, come back to us. We can drive a lot more engagement with all the data that we have.”
Penegor says about 50 percent of loyalty orders now redeem Papa Dough—a massive uptick from 21 percent a year ago. When that mid-November flip switched, the company essentially doubled consumers’ Papa Dough balances. Penegor says it drove lapsed guests back into the brand and showed a distinctive value proposition. It did, however, dampen ticket (down 2.5 percent in the first eight weeks of the quarter, with overall Q1 quarter-to-date comps negative 3 percent, and a 0.5 percent decline in transactions), but Papa Johns expects the pressure to abate as the year progresses. Regardless, it’s a short-term hit Papa Johns was willing to absorb as it aims to win back value guests and transactions.
Ordering and seeing Papa Dough in your account, Penegor says, is a compelling reason to go spend again. And the brand didn’t limit rewards to specific items. So people use “cold, hard cash” to bounce back and buy whatever they want.
CFO Ravi Thanawala added consumer counts rose, year-on-year, in the loyalty program in January and February. Total 12-month active members sat at 14 million.
The biggest positive impact showed in carryout. There’s also been a meaningful pickup with, as noted, lapsed guests returning and using delivery again. “So all things that are underpinned and how we thought about the business go forward, and we think we have a really big carryout opportunity, and we’re going to run really hard at that because we think our barbell of innovation puts a great value offering really well, positions us to take more share in that space,” he said.
A large portion of incremental Q4 investments went toward igniting carryout. Orders through the channel hiked low single-digits, year-over-year. Aggregator channel business grew as well, offsetting a decline in organic delivery. The latter saw sequential improvement of 200 basis points but remains a work in progress with the loyalty changes.
Papa Johns, overall, is getting more aggressive around trigger-based campaigns in its apps and email. The size of its app business in North America is 30 percent. “It is meaningful,” Thanawala said. “It is a way that we connect with our consumers very directly. So we’re very uniquely positioned as a digital company to be able to connect with our consumers, particularly our consumers who have a lot of brand advocacy.”
Penegor says Papa Johns touted a pretty standard CRM before he got here. It knew who its customer base was. It had an email blast with a relatively standard offer that ran out for the better part of two years. That’s now customized around different journeys. Still, Papa Johns hasn’t reached true personalization yet. “Those opportunities are all in front of us,” he says.
In other ongoing efforts, Penegor continues to refine the system in hopes of getting tighter on consistency. The company had multiple manufacturers of ovens and “probably” 15 different types when he embarked on the 100-day review. There were different time and temperature settings across restaurants. If you’re trying to streamline execution, he says, you simply need more operational rigor and discipline. Chief restaurant and development officer Joe Sieve and his team, Penegor continues, are tackling that and trying to calibrate ovens so the brand can not only ensure quality store-by-store but empower innovation “to be great bakers in our restaurants.”
Papa Johns also removed “rhythm breakers,” or complexity, so it can improve the core of its menu. The brand pulled upward of 10 SKUs out that were “low-hanging opportunities” and “another handful” on are on deck to depart in the coming months. Papa Johns also tested removing some of these during heavy promotional peaks. For example, during Valentine’s Day, it stopped Papa Bites to refocus on pizza making.
Penegor says there’s a lead goal now to support GMs and make sure they can direct teams and engage with communities. Doing so is how Papa Johns differentiates on quality.
The company is also realigning teams to be consumer centric and enhance its cross-functional collaboration, Penegor says. It’s expanding the pantry of LTOs, reinvigorating hero menu items, sharpening value through quality and competitive offers, and pushing innovation for new occasions and check drivers. There will be more robust market testing going forward, he adds.
As Papa Johns approaches spring, it’s going to return to a more traditional barbell—a menu approach Penegor honed at Wendy’s through deals like the 4 for $4, Biggie Bag, Made to Crave, and other entry points designed to either open the door or ladder up. Architectures to innovate around embedded, consistent value.
Penegor didn’t share what that will look like just yet, only to expect Papa Johns to roll offerings across the spectrum.
“We’ve had a big focus on transactions,” Penegor says. “The opportunity is now to work them up on check and we would start to see during the course of the year as we build some momentum in our business that we’re holding to gain and share, especially on the transaction front.”
Papa Johns ended 2024 with 6,030 locations, including 3,514 in North America (2,975 franchised) and 2,516 international (2,503 franchised). Overall for the year, it opened 112 North America stores and closed 31; 155 opened internationally alongside 112 closures, including 73 in the U.K. That totaled 310 openings overall and 186 shutterings.
Danny Klein is the editorial director of FSR and QSR magazines, sister publications of PMQ. This article was originally published on QSR.com.
