Papa John’s plans more marketing and more locations

Papa John’s plans to increase marketing spending and increase development incentives. | Photo: Shutterstock.

Papa John’s franchisees plan to increase their contributions to the brand’s marketing fund to generate stronger sales as part of a broader strategic growth strategy the pizza chain announced Monday.

The initiative also includes new incentives for franchisees to add new units, including a five-year waiver on marketing contributions. This exemption is intended to reduce the time it takes for operators to generate returns at new locations.

Papa John’s also plans to increase fees for cheese and other supplies to franchisees. However, it also has provisions in place to encourage franchisees to add new stores.

Papa John’s, like many other pizza chains, operates a commissary business. It then charges the franchisee for those supplies at a specified margin.

The company plans to increase its fees so that its business has an 8% profit margin instead of 4%. These fees will increase by 100 basis points in each of the next four years until reaching a margin of 8%.

Papa John’s said the commissary fee changes will ultimately increase restaurant-level costs for franchisees by 100 basis points.

Franchisees who increase their supply purchases the most can earn annual rebates that ultimately reduce overall supply cost increases. The company said enhanced marketing and increased sales from the new unit could ultimately reduce shared costs in the system-wide supply chain.

“We are optimizing our investments in our data science and marketing technology stack to unlock both revenue and bottom-line value,” CEO Rob Lynch said in a statement. He said franchisees voted to increase their own marketing funding, “giving us additional fuel to accelerate comparable sales growth and increase restaurant profitability.”

Franchisees agreed to increase their marketing funding by 20% of sales, or 1%. The company is rethinking its marketing strategy to improve audience selection, offer differentiated solutions in the pizza category, improve return on ad spend and loyalty, and “create cultural buzz.” “We have identified a significant opportunity,” he said.

Increased spending allows companies to use their marketing funds as an incentive to promote development.

Papa John’s operates 3,200 stores in the United States, and the company has long argued that increasing sales domestically is worth increasing the number of restaurants. In fact, its unit numbers have yet to recover from its closure in 2017 and 2018, when sales declined in the wake of founder John Schnatter’s controversial comments.

The company has long used incentives to encourage domestic development, but the latest incentive is the largest in the company’s history.

Papa John’s also plans to change its business structure internationally to improve its position in key markets, encourage targeted investments and better serve customers and carriers. Stated.

The company plans to establish hubs to operate different regions around the world, with general managers working with franchisees in that market to share best practices, marketing and technology with local preferences in mind. Take the lead.

The company plans to increase its technology investments in international markets and also plans to improve its operations in the UK market, its largest international market. Papa John’s closed underperforming franchise restaurants in the fourth quarter and expects to close more low-volume restaurants this year. The company said the move will improve the profitability of its existing locations.

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