By Ben Coley
As part of its turnaround, Papa Johns is making major cuts across the business.
The chain announced Thursday that it plans to close 300 North America restaurants—200 in 2026 and 100 in 2027—and that it laid off about 7 percent of its corporate workforce. The brand also decided it will remove Papadias and Papa Bites from its North America menu in the second quarter.
“While transformations are not linear, we are managing the current environment while taking deliberate strategic actions to deliver long-term value creation for all of our stakeholders,” CFO Ravi Thanawala said during the chain’s Q4 earnings call.
Papa Johns took a hit financially last year. North America same-store sales fell 5.5 percent in Q4, dragged by a 5.5 percent decline in transactions. In fiscal 2025, North America comps dropped 2 percent, and the chain lost market share in the U.S. Average profitability of U.S. corporate restaurants decreased from $150,000 to $135,000.
The company believes optimizing its store footprint will ultimately lift sales. Thanawala said the restaurants up for closure are not meeting brand expectations or lack a path to financial improvement. In other cases, closing the unit would likely shift its sales to a nearby restaurant.
The stores are also mostly franchise-owned, have been open for more than a decade, earn AUVs under $600,000, and are mostly seeing negative profitability. For perspective, the top 50 percent of U.S. Papa Johns restaurants earn $1.4 million in AUV and a 12 percent EBITDA margin and the top 75 percent earn a $1.25 million AUV and a 10 percent EBITDA margin.
Papa Johns expects these shutdowns to boost overall AUV by at least 3 percent and improve franchisee profitability by freeing operators to focus on other restaurants and open more units.
“We took a pretty surgical approach of looking at quality of operations, quality of the trade zone, quality of the assets itself, and made a pretty clear determination in terms of restaurant by restaurant, which are the ones that we felt should close,” Thanawala said. “And we’ve had great partnership with the franchisees to make sure we’re thinking about each market holistically, that we’re setting ourselves up for a stronger system.”
The brand finished 2025 with 3,523 North America restaurants, meaning it will see a closure rate of well over 5 percent in 2026, along with 40 to 50 gross openings.
After 2027, the chain’s closure rate should return to 1.5 to 2 percent per year.
Papa Johns is encouraging growth by deploying development incentives in its highest priority markets. Also, the chain is accelerating its refranchising program, which will reduce its company-owned footprint to a mid single digit percentage of the North America system. Currently, the corporate fleet makes up around 13 percent. The company refranchised 85 units in November and is in negotiations to refranchise another 29 locations in the Southeast.
Referring to organizational restructuring, CEO Todd Penegor said certain moves are meant to “better align corporate and field resources with our transformation priorities” and are “designed to increase efficiency and simplify operations.” Papa Johns also identified at least $25 million in nonguest-facing corporate cost savings, which will be realized through 2027.
Additionally, the pizza chain plans to generate at least $60 million in systemwide supply chain cost savings for its company and franchise restaurants.
In terms of the menu, the elimination of Papadias and Papa Bites is projected to negatively impact 2026 North America comps by 1.5 percent. The long-term benefits are enhanced operations and room for more impactful menu innovation.
“We talked about pulling some of our rhythm breakers off the menu to really drive a focus on being not just the best pizza makers in the business, but over time being the best bakers,” Penegor said. “And the elimination of Papadias and Papa Bites will have an impact on our business, but it’s absolutely the right thing to do from an ops complexity to create great service experiences time and again moving forward.”
For Papa Johns, 2025 was a mixed bag of progress and challenges.
For instance, loyalty orders redeeming Papa Dough—cash back that guests can use toward future meals—increased from 24 percent to 48 percent year-over-year. Papa Rewards, with nearly 41 million members, increases frequency and engagement among all customer cohorts. In 2025, loyalty guests placed 2.5x more orders than non-reward members. However, the chain brought in fewer new customers last year.
The brand sold more pizzas and saw an increase in multi-pizza orders, though single-pizza orders declined in Q4 and total pizza sales fell by low single digits as the menu mix shifted toward smaller, non-specialty pizzas.
Carryout orders grew in the low single digits in Q4 thanks to a 50 percent carryout promotion in November. This was offset by a year-over-year drop in delivery orders, despite strength from Uber Eats.
Still, Penegor remains optimistic and emphasized to investors that “pizza remains one of the most durable food categories.” He added that Papa Johns’ two biggest opportunities to grow market share are value and premium innovation.
In Q4 specifically, the brand conveyed value with its 50 percent off carryout deal, a $9.99 create-your-own pizza offering, and Papa Pairings, which allows guests to pair two or more items—such as a medium one-topping pizza and boneless wings—for $6.99 each. Value perception scores lifted in the mid single digits during the fourth quarter. Penegor said Papa Johns is also bringing “promotional intensity” to its menus on third-party delivery platforms.
The brand spent $21 million more on marketing in 2025 to push its value proposition.
The chain’s latest menu innovation is Pan Pizza, which was brought back to life in late January after a years-long absence. It comes with a six-cheese artisan blend and a Garlic Parmesan Crust. Thus far, the product is exceeding expectations and performing well with younger consumers.
Additionally, the company piloted a protein crust pizza containing 55 grams of protein per serving, with 23 grams in the crust alone. Customer feedback during the test was “highly positive,” Penegor said.
Looking ahead, the CEO teased that Papa Johns will leverage “notable brands and strategic collaborations” to promote a new single-serving pizza.
Outside of pizza, Papa Johns is using North American trade areas to test toasted sandwiches, which are made with Ciabatta bread and garlic sauce. In pilot markets, these sandwiches are increasing sales of nonpizza items. In the U.K., the brand is testing chicken tenders and new dipping sauces, and Penegor noted the company hopes to “build upon these learnings for chicken innovation in the U.S.”
Penegor credited Papa Johns’ expanded innovation pipeline to recalibrated ovens, adjusted baking temperatures, and optimized bake times.
“We expect the benefits of a sharpened comprehensive value proposition along with consumer-led data-driven product innovation to win new customers, drive incremental orders from existing customers and improve order mix on the path to sustainable profitable top line growth,” Penegor said.
To strengthen local marketing, Papa Johns reestablished advertising co-ops in 50 key U.S. markets, covering most of its priority regions. The brand is also backing its product innovation pipeline with coordinated campaigns across online, social, TV, influencer, and press channels.
When it comes to technology, Papa Johns has invested in a faster, more reliable unified mobile app, transitioned to a modern POS system with PAR Technology, and expanded AI-powered ordering with Google Cloud.
In 2026, Papa Johns expects North America same-store sales to decline between 2 and 4 percent, a calculation that considers the benefits of innovation but also the cautious consumer environment.
“As we accelerate our transformation, we are making visible progress executing our strategy,” Penegor said. “We are confident in our direction and in our ability to deliver sustainable profitable long-term growth and capitalize on opportunities across the category.”
Quarter-to-date, comps are down mid single digits. Papa Johns expects to finish Q1 in this range. Comps are projected to be the softest in Q1 and sequentially improve throughout the year.
Thanawala said that while U.S. profitability has been pressured over the past two years by food costs, labor, and fixed cost leverage, Papa Johns expects to see at least 2 percent improvement over the medium term thanks to supply chain savings, operational efficiency, and market optimization. He added that better profitability will lead to accelerated unit expansion.
Internationally, same-store sales have been positive for five straight quarters, including up 6 percent in Q4. Comps lifted 5 percent in fiscal 2025. Papa Johns finished last year with 2,560 international restaurants.
