LOUISVILLE Ky. Domestic franchisees in the third-largest pizza system are getting their own type of bailout package.
Franchisor Papa John’s International Inc. detailed this week numerous support initiatives, from royalty relief to corporate lending, all geared to help U.S.-based franchise operators survive, and hopefully expand operations, amid a bleak economic climate. Papa John’s, which has 2,128 domestic franchised restaurant locations within its global system of 3,317 units, said the plans would help it gain market share in the highly competitive pizza category that also contains national powerhouses Domino’s Pizza and Pizza Hut.
“Our solid financial position and conservative balance sheet allow us to offer this comprehensive support package to help our franchisees navigate through these challenging times,” president and chief executive Nigel Travis said in a statement late Wednesday. “We continue to believe that the real winners in our category will be those brands who have the fewest net unit closings during this time of significant consumer pullback. We believe this package will result in Papa John’s gaining market share.”
The franchisor’s initiatives include a continued reduction in the price of cheese charged to franchisees, which the company first announced in October. The reduced pricing, which will be calculated quarterly and based on the futures market projections, will remain in effect through next year.
Papa John’s also said it would provide additional national marketing support through the current fourth quarter and next year; provide targeted royalty relief and local marketing support to struggling franchisees; hold a lender’s summit of regional banks and other lenders to expand credit availability for franchisees; provide corporate loans to help strong franchisees acquire weaker operations; and for the first six months of next year, suspend collection of the 0.25-percent increase in royalties, which was set to begin in January.
The company said the impact of these programs on its operating income will total $3 million in the current fourth quarter and between $8 million and $10 million in 2009. The final cost of the initiatives is dependent on the number of franchisees who request the help, the company noted, and how much lending is taken on by the franchisor.
