Why COVID will catapult Papa John’s across the world
Two years ago, hardly any of Papa John’s national franchisees were talking about development, said CEO Rob Lynch.
And why would they have done it? In the second quarter of 2019, comparable store sales in North America fell 5.7% and total revenue fell 7.1% as the company continued to face a disrupted culture caused by feuds public with founder and former CEO John Schnatter.
The current environment is quite different as Papa John’s heads into the second half of 2021. North American lineups grew 5.2% in the second quarter, successfully breaking the record 28% year-on-year. last year. Internationally, same-store sales climbed 21.2%, or 27% on a two-year basis. AUVs in North America continue to grow beyond the $ 1 million level with much of the growth impacting the profitability of the unit.
With this type of economy at the unit level, it’s easy to see why almost all American franchisees are talking about growth today. Lynch explained that the channel last year mainly talked about building the right infrastructure to support a “sustainable and significant amount” of unit expansion. Papa John’s wanted not only to increase the number of restaurants he was building, but also the number of new net locations. The goal was to make sure these units were going to the right markets and had the tools they needed to be successful.
READ MORE: Excluding record year, Papa John’s is pivoting towards global growth
However, the strength of this infrastructure is starting to show. In the first two quarters of 2021, Papa John’s posted a record 123 net unit openings (68 in the first quarter and 55 in the second). The pizza chain finished the second quarter with 5,523 system-wide locations, including 3,309 in North America and 2,214 internationally. The company has opened a network of 176 units in the past four quarters.
“I think that brand had fallen into a bit of a behavior where we had opened a lot of restaurants, we had closed a lot of restaurants as well,” Lynch said during the brand’s second quarter earnings call. “With improving unit volumes as well as our ability to identify better real estate sites and help our franchisees set up restaurants, we anticipate significantly fewer closings going forward, which will allow us to maintain high growth. units on an ongoing basis. “
“We were a bit surprised by the number of units we opened in the first quarter, ”he added. “We thought maybe it was a little late from the pandemic, but it has continued and we are building momentum.”
Due to second quarter performance and growing interest from new and existing franchisees, Papa John’s has raised its global unit growth outlook to 220 to 260 net new units this year. About 80 percent of that will come from international markets, which is the ratio Papa John’s is constantly targeting. The chain operates in around 50 countries while its competitors have planted flags in more than 100.