Substantial unit growth and menu innovation at Papa Johns in the fourth quarter

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Papa Johns International, Inc.’s growth spree continues in the fourth quarter of 2021, with same-store sales up 11.1% in North America, in addition to an accelerated pace of development, said the CEO Rob Lynch during Thursday’s earnings call for the quarter and full year ended December 26, 2021.

Much of Papa Johns’ momentum came from digital sales, which saw double-digit growth for the second year in a row, and now 90-95% of orders come through digital channels, Lynch said Thursday morning, a significant part of which comes from the growth of the loyalty program which increases the number of its members from six million to 23 million by the end of 2021.

Lynch attributes much of the Lexington, Kentucky-based pizza brand’s continued success to pizza innovation and an aggressive growth strategy, particularly the impact that more expensive LTOs like the Epic stuffed crust pizza and New York-style pizza, the last of which launched six weeks ago, to more customer buzz than expected. Due to the constant addition of these menu items, average control has increased along with traffic.

“Our check has increased significantly, and it hasn’t been a function of prices until recently when we [increased prices] to mitigate inflation,” Lynch said. “Almost all of that has been customer self-selection in our menu innovation. The average price per pie is just over $10, and the New York-style stuffed crust is $12-$14. […] our culture of innovation has shown that innovation in our menu can create growth.

In addition to menu innovation, Papa Johns has been busy accelerating development. In January, the pizza chain announced what it considers to be the biggest franchise deal ever in the pizza industry: a deal with Chinese private equity firm FountainVest Partners to open 1,350 new stores in southern China over the next two decades. In fact, Lynch thinks their international development may soon overtake US development.

“Our international business is accelerating even faster,” Lynch said. “The profitability from these restaurants will only grow. 20222 will be the biggest year of domestic and international growth as these development agreements come to fruition. Our development will be biased internationally in the next three to five years.

Lynch recounted those victories for Papa Johns while acknowledging the industry-wide challenges of inflation and omicron-related personnel issues. But he is confident that these issues are temporary and will not hamper performance in 2022.

“The staffing issues were mostly due to omicron, and the cases are almost disappearing at this point,” he said. “We are seeing staff return and we have nothing but confidence for 2022. We are in for the biggest year in company history.”

For the fourth quarter, the company’s total revenue increased 12.6% to $528.9 million. Net income nearly doubled from $13.2 million or 28 cents per share in the same quarter last year to $24.6 million or 67 cents per share.

Papa Johns opened 81 net new stores last quarter, supported by international growth, for a total of 5,650 restaurants systemwide.

Contact Joanna Fantozzi at [email protected]

Follow her on Twitter: @JoannaFantozzi

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