What Happened To Papa John’s?

in early 2017 Papa John's was enjoying steady growth a high-profile partnership with the NFL and rapid international expansion later that year Papa John's reported its 28th consecutive quarter of positive u.s. same-store sales but it's winning streak didn't last by 2018 Papa John's future looked bleak North America's same store sales growth went negative in the fourth quarter of fiscal year 2017 and sales growth stay negative for six straight quarters after that not to mention the fact that it's been losing the Pizza Wars to Domino's Pizza Hut and Little Caesars in recent years which is quality so what went wrong a lot of the problems can be traced back to Papa John's founder John Schneider he blamed his company's weak sales numbers on declining NFL viewership which ultimately cost the pizza company its sponsorship deal with the league then in July 2018 Forbes broke the news that Schneider used a racial slur on a conference call that same day Snyder was out as chairman and the company's fortune went from bad to worse shares of Papa John's tanked along with sales at US stores open for more than a year customer sentiment towards Papa John's also fell but Papa John's is trying to rebrand and rebuild there's little trace of John Schneider left at the company he founded in his early 20s there's new management in place at the c-suite plus the company is partnering with third-party delivery services and introducing new products restaurant experts say it's still too early to tell if the new strategies have been effective but many in the restaurant business are optimistic that the turnaround will stick John Schneider started working in the pizza business at age 15 as a dishwasher at his local pizzeria seven years later in 1984 he started selling his own pizzas out of a remodeled broom closet in his father's bar his venture was successful and one year later Schneider opened the first standalone Papa John's in Jeffersonville Indiana the company grew fast by 1991 there were a hundred Papa John's restaurants less than a decade after launching Papa John's went public by 1994 there were 500 restaurants franchising was always key to Schneider's growth strategy and many early franchisees were actually people he knew personally Papa John's system-wide restaurant sales topped 1 billion dollars in 1998 and it started opening international stores that year - competitor Pizza Hut which held the number one spot in the u.s. pizza market at that time started to sense a threat Domino's Pizza Hut and Little Caesars were well-established in the u.s. pizza market when Papa John's came onto the scene in the 1980 Pizza Hut was the fastest growing chain capturing a quarter of the pizza restaurant industry in 1995 while Domino's focused on delivery Pizza Hut wanted people to dine in in addition to pizza it had a salad bar pasta dishes and sold alcohol Pizza Hut also prioritized innovation its head of marketing in the 80s declared Pizza Hut would release one new product every six to eight weeks Domino's set itself apart on speed it promised to deliver a pizza to your door in 30 minutes or less Little Caesars attracted customers with hits like it's every day $5 Pizza deal Papa John's plan to stand out in a crowded market by offering fresh ingredients to do that Papa John's focused its advertising on the idea that its pizzas were of a higher grade than its rivals some of these ads directly targeted Pizza Hut in one commercial Papa John's explained that it's tomato sauce supplier used a fresh pack method while Pizza Hut made tomato based paste and thinned it with water in another ad Papa John's claimed its Joe was better than Pizza Hut's version but the competition fought back Pizza Hut sued Papa John's for false advertising over Papa John's claim that he used better ingredients for better pizza a court of appeals ruled that Papa John's slogan was puffery which means exaggerated advertising blustering or boasting that a reasonable consumer wouldn't rely on so Papa John's got to keep using its better ingredients better pizza ads it worked customer satisfaction surveys showed that Papa John's ranked above Domino's and Pizza Hut from 1999 up until the start of the Great Recession in 2008 but later during the financial crisis none of the big pizza companies were immune to the fallout same-store sales at Papa John's Domino's and Pizza Hut were flat or negative in 2009 Domino's which had sacrificed quality in favor of speed released an ad in 2009 acknowledging that it's pizza tasted bad pizza was also losing its reputation as a cheap meal because the price of cheese and other ingredients kept climbing which meant that Pizza prices were rising Domino's and Pizza Hut turned to food deals and refreshed menus to try to boost sales like Domino's two items for $5.99 each or $5 pizzas at Little Caesars Papa John's struggled to offer competing deals it didn't sell enough pizzas to support razor thin profit margins on promotions franchisee profitability started to suffer instead of just selling Pizza Domino's and Pizza Hut menus expanded to include sandwiches pasta and dessert Papa John's on the other hand kept the focus on pizza Snyder feared that trying to make other products would affect the quality of its core menu item the recession Domino's leaned hard into tech and it worked in 2008 it was the first of the big four pizza chains to roll out a tracker that let customers follow the progress of their order since then Domino's has introduced voice ordering and 0 click ordering on its app and even experimented with drone deliveries in New Zealand while Domino's focus on technology Papa John spent the 2010s trying to set itself apart on the basis of using high quality ingredients but Domino's in Pizza Hut overhauled their products too and started offering higher quality pizzas Papa John's premise of better ingredients didn't resonate as strongly with consumers as it once did [Music] in fiscal year 2017 Domino's moved into first place in the Pizza Wars for the first time according to rankings from nations Restaurant News Domino's passed Pizza Hut in market share in 2017 - in other words Papa John's competed with the big chains but it never hit the number one spot according to any of the big metrics Domino's hot delivery Pizza Hut had cornered the Dinan audience and offered variety and Little Caesars offered great value Papa John's relied on superior quality and high profile advertising it also leaned heavily on sports sponsorships to set itself apart from the competition Papa John's was the official pizza of the NFL and MLB in addition to individual teams from both leagues Papa John's 2010 deal to be the official pizza sponsor of the NFL was the largest deal in Papa John's history but those relationships soured in November 2017 snotter criticized the NFL's reaction to football players who protested during the national anthem on an earnings call with analysts Schneider said declining viewership of the NFL negatively impacted Papa John's same store sales without a great deal of data at his disposal he said plunging viewership of NFL teams and this was in 2017 has created a problem for me because our sales are going down well there are a number of reasons his sales were handed down the National Football League played skewer roll and all paths two weeks after blaming the NFL for slumping sales Papa John's posted tweets apologizing for Schneider's comments but investors weren't happy the company's stock dropped more than 12 percent over those two weeks Snyder stepped down as CEO on January 1st 2018 and longtime executive Steve Ritchie became the new head of Papa John's Schneider stayed on as the company's chairman in February 2018 Papa John's and the NFL issued a statement ending their partnership saying it was a mutual decision one day later Pizza Hut became the official sponsor of the NFL Papa John's and John Schneider both declined CNBC's request for an on-camera interview this moment marked the end of Papa John's strong growth starting at the end of 2017 Papa John's North America same store sales started dropping dramatically in the fourth quarter of 2017 same store sales were negative 3.9 percent by the third quarter of 2018 they had plunged to negative 9.8 things got even worse for the company in July 2018 months after Schneider had stepped down as CEO Forbes reported he'd used a racial slur on a media training conference call in May of that year in a statement email to Forbes Schneider confirmed the incident I apologize simply stated racism has no place in our society the same day he issued this statement Snyder resigned as chairman of Papa John's leaving the company entirely but he didn't go quietly Snyder filed lawsuits against the company he founded in an effort to regain control snotter's resignation wasn't enough the company prohibited him from talking to the press and removed him from advertising materials Papa John's sales growth was a negative for the six consecutive quarters from March 2018 to June 2019 Wall Street seemed uncertain whether Papa John's could recover from November 2017 when Schneider made the NFL comments to July 2018 when he resigned as chairman shares of Papa John's slump 13.8% while Domino's enjoyed positive sales growth of 23% in fiscal year 2018 Papa John's sales declined eleven point eight percent from 2017 to 2018 customer loyalty at Papa John's slipped to from 2014 to 2019 Domino's ranked number one in customer loyalty according to an index from brand keys Papa John's slipped from number two and 2014 to number four in 2019 some experts speculated that a sale of Papa John's was eminent and question whether the brand would survive but the tide began to turn for Papa John's in 2019 activist hedge fund starboard value took a 200 million dollar stake in Papa John's in February 2019 star Birds big cash infusion was a vote of confidence for the company it thought a turnaround was possible new faces joined the board including NBA Hall of Famer Shaquille O'Neal the company was also able to finally put to bed it's very public and long-running feud with its controversial founder John Schneider in March of 2019 Snyder agreed to dismiss the two lawsuits he filed against Papa John's if the company appointed a board member that both sides were happy with in August 20 19,000 restaurant executive Rob Lynch took over the CEO job from two year veteran Richey Lynch came to Papa John's from Arby's where he helped the sandwich chain undergo its own turnaround he helped lead Arby's to record-breaking sales and profits in 2018 the Board of Papa John's is hoping he can do the same there Lynch has a strong background in brand marketing and product innovation he spent his career working with fast food restaurants and consumer packaged goods companies like Heinz Procter and Gamble and Taco Bell analysts say it's too early to tell whether or not the turnaround plan he's leading will work but there are indicators that Papa John's could return to higher growth in the third quarter of 2019 Papa John's reported its first increase in same store sales in two years but analysts say it wasn't all that difficult to beat there are signs that Papa John's will experiment with new product ideas a move that companies often turn to in order to stay relevant with consumers in November 20 19 pounds announced a new garlic parmesan crust marking the first time the brand has changed its pizza dough in company history Papa John's has also embraced third-party delivery services to increase productivity unlike its competitor Domino's whose CEOs that it has no plans to partner with third-party delivery app Lynch is also shaking things up in the c-suite in November 2019 the company announced the departure of its CFO and CMO among others and Lynch is adding a new chief commercial and marketing officer to oversee menu strategy product innovation and marketing plus achieve people and diversity officer Lynch says he plans a bigger role for board members Shaq came into gear for decades one man was the face of Papa John's John Schneider's image covered the company's branding from its TV commercials to pizza boxes to social media pages John just had a huge ego and he wanted to be on national television and he wanted his name linked with the brand linked with the company linked with the image and it was literally his picture that accompanied the brand and its advertising but there's been a dramatic change to Papa John's branding since Schneider was forced out today ads for the pizza company featured franchisees general managers and of course chef at the peak of Papa John's PR crisis it looked uncertain the company could recover analysts issued cell recommendations and dropped earnings projections same-store sales plunged for seven consecutive quarters today it's a mixed forecast for what comes next for Papa John's in 2019 the total sales gap between Willow Caesars and Papa John's widened from the previous year according to Nation's Restaurant News but according to Wall Street things are looking up since Lynch was appointed in August 2019 shears of Papa John's hovers at about 37.5% the recovery of Papa John's is happening even if it's not as fast as some have hoped

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Id: AmrApGE3yeU

Length: 15min 12sec (912 seconds)

Published: Tue Feb 11 2020