Dive Brief:
- Papa Johns should focus on producing its core pizza products, especially since menu innovation has not driven sustainable sales growth for the brand, recently hired CEO Todd Penegor said at an investor event on Thursday.
- Papa Johns has seen its comparable sales fall in recent quarters, while competitor Domino’s has emerged as the QSR pizza segment’s 2024 winner.
- Ravi Thanawala, Papa Johns CFO, said the chain was taking a slower approach to pricing — on a two-year basis, the brand’s pricing outpaced general inflation by 6% as of the end of fiscal 2024.
Dive Insight:
In the last few years, the chain has sold items like Papadias, including a Dorito’s Cool Ranch flavor, and Papa Bowls, which are bowls of pizza toppings. While these initially helped improve quarterly performance, they took away from the pizza chain’s core products. Orders for the brand’s medium and large original crust pizzas accounted for about 75% of orders in 2019. Five years later, that has dropped to 50%, in part due to menu additions and innovations, Penegor said.
“We've brought a lot of product on. It's driven some short-term sales. It's brought in new users, but it's not driven the frequency that we need, which a core pizza can do day in and day out,” Penegor said.
Original crust and pizza quality are the brand’s key strengths, Penegor said, and to refocus on them, the company will step back from LTOs or products that disrupt the restaurant’s rhythm.
Operational change due to menu additions sometimes “takes us away from making a great pizza,” Penegor said.
The company plans to simplify its operations and its marketing calendar so it can focus on its core pizza products.
“We're going to have to find the right balance and don't get me wrong, we're not moving away from innovation,” Penegor said.
The brand is also working on its value perception, which was hurt by menu price increases that outstripped inflation on a two-year basis, Thanawala said.
As its North American comps sales slid 3.6% during Q2 2024, Papa Johns began to refocus on value.
While its Q3 comps sales were still down, the brand started to see sequential traffic increases. This has given Papa Johns the impression that it has significant room for improvement.
“We think there's more share of stomach to go get,” Thanawala said. “And we know we can do it through winning in our core product proposition and layering in, at times, the right strategic innovation that drives consumer acquisition.”
To help improve customer acquisition and retention, the chain recently brought on Jenna Bromberg as CMO and is making changes to its digital channels and loyalty program.
One major change to its loyalty was to shift from a $75 spend threshold to a lower threshold, Penegor said. Now consumers who spend $15 dollars with the chain earn about $2 in Papa Dough, the brand’s rewards currency. This has helped drive the proportion of customers ordering through its loyalty program from about 20% to about 50%.
