Papa Johns aims to improve value perception and increase repeat customer visits, as the Atlanta-based pizza chain reports sliding same-store sales, particularly in North America, which saw 4% comps decline for the second quarter ended June 30. The same-store sales decline was largely driven by lower traffic in organic delivery and carryout channels, which were bolstered by third-party delivery performance.
Papa Johns is navigating a double whammy of macroeconomic uncertainty and consumer demand decline as a new era of leadership begins: CEO Todd Penegor, formerly CEO of Wendy’s, just started his tenure at Papa Johns and led his first earnings call on Thursday morning.
“Our brand and core product remain in demand in the highly competitive pizza category, but we know there's more work to be done to realize the full potential of the Papa Johns brand,” Penegor said during Thursday’s earnings call. “We are sharpening our focus investing in digital and accelerating development through improved economics. We are also evolving our marketing to ensure we meet the consumers value expectations by prioritizing customer experience, franchisee success, and operational excellence.”
Currently, the average Papa Johns customer visits four times a year, Penegor said, and the executive team wants to improve those numbers by getting people to download the app, ramping up digital rewards and investing more in marketing, like the refreshed advertising campaign, “Better Get You Some,” which premiered last quarter.
Papa Johns’ strategy is about meeting consumers where they are, and according to company CFO, Ravi Thanawala, consumers are “pulling back and increasingly focusing on value.” In June, Papa Johns launched the $9.99 Cheesy Burger Pizza deal, and recently launched the NY-Style XL pizza at $10.99 to get customers in the door and improve that brand value perception.
“When Cheesy Burger was introduced as a promotion, the ticket was very healthy, and accretive to our average ticket at first,” Thanawala said. “The consumers only had a certain amount of money that they were going to spend, and that allowed them to make it into other [menu items] as well…. [The $9.99 deal] created excitement and made us more top of mind with our consumers, which we think draw a lot of value… We think this recipe of finding the right balance of premium innovations that only Papa John's can deliver, and then showing spots of parity in the market on more value offerings can drive more positive momentum.”
In the future, expect Papa Johns to lean in more to “unique and differentiated” promotional offers that balance menu innovation with appeal to consumers’ cautious spending habits.
Papa Johns also wants to get more people to download its app and spend time cashing in these offers to increase return visits and be able to take advantage of consumer data. Currently, one-third of the brand’s retail sales happen through the app so the brand is working quickly to improve digital customer experience:
“In July, we rolled out an app update that improves call to actions and navigation, elevates imagery and more prominently features loyalty rewards,” Thanawala said. “We are also actively evolving our holistic digital platform to improve conversion, drive repeat transactions and streamline customer insights.”
For the second quarter ended June 30, Papa Johns reported total revenues of $508 million, down 1% from $514.5 million the same quarter the year prior. Net income was $20.1 million or $0.61 per share, up from $19.3 million or $0.59 per share the same quarter last year.
Papa Johns closed net 31 stores in the second quarter, for a total of 5,883 stores systemwide.
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