In 1996, Papa John's Pizza was barely 11 years old when its founder, John Schnatter, sensed the high-flying company was headed for trouble. The fourth-largest pizza chain in the world was growing too fast to maintain its high standards, and Schnatter knew that customers would pass on Papa's pizza if it failed to live up to its "Better Ingredients. Better Pizza." claim.
"I just knew we were going to blow this whole thing up (because we) could not figure out how to measure 2 million pizzas (sold) a week," Schnatter said. Papa John's, he added, could produce lots of pies and get them to the door, but the company couldn't tell whether it was doing both well. "It wasn't until we figured it out in '01 that we got a handle on things. Once we had a way to measure our performance, we had the science, we had the facts. We knew what to fix."
The years leading up to that epiphany were tough ones. The electrifying comparable-store sales runs of the early 1990s started to dim as repeat business fell off. The company recognized some bad franchisee choices and knew some markets wouldn't be developed as planned.
In 2001, when it
John Schnatter, founder and chairman.
All photos by Thomas Downs
created a means of measuring its store-level performance, Papa John's was shocked by its shortcomings. On a scale of 1 to 10, its pizzas averaged 5.1, customers waited on hold for an average 2.5 minutes and 24 percent of its pizzas took longer than an hour to be delivered. A nightmare was developing right before Schnatter's eyes.
"I thought we were going to close 1,000 stores," he said. Blaine Hurst, the chain's chief executive officer left the company, and Schnatter took over. "I didn't feel that the founder was the best choice for the CEO's job. But the people I go to for advice felt like I was the right guy to lead the franchisees back to better execution."
Bad times, good memories
In October, Papa John's reported negative comps — for the first time in 22 months. No one at its Louisville, Ky., headquarters was happy about it, but nobody was down. In fact, the slight drop spurred some reflection on the mess that was and the memory it is.
Schnatter called the fight to right the ship one of the most gratifying experiences of his life. "Any time you're having troubles, you've got to find out what's solid — in business, in life, in relationships. The one thing that Papa John's had that was solid was that people thought we had a better pizza. So we focused on that."
Bill Van Epps,
Bill Van Epps, president of Papa John's USA
president of Papa John's USA, said the company wouldn't be where it is now were it not for its struggles.
"The measurement system John put into place helped us in our ability to execute to a higher standard," said Van Epps. "What gets measured gets done."
In 2001, Papa John's first surveyed and corrected its company units and then took those best practices to franchise stores. Enforcing those standards in both areas was helped by cash-for-performance incentives provided by the company. Schnatter told franchisees he wanted them to spend 1 percent more on labor and 1 percent more on product to improve pizzas. To support the cause, Schantter put up $200,000 of his $600,000 annual salary for distribution to successful managers and corporate overseers.
The measurement-and-reward system improved sales and extended the chain's leadership of the quick-service category in the American Consumer Satisfaction Index. Papa John's has ranked highest in the nationwide survey for seven straight years.
Van Epps was over the chain's international division when he came aboard in 2001, but by 2004, he was appointed chief operating officer to address the front-burner problem of Papa John's marketing. The company added a testing methodology to predict the success of limited-time offers, and the knowledge it gained positioned it for strong product rollouts in the future.
Papa John's learned its customers wanted more variety, especially its long-term fans. And as it began rolling out new products, sales — especially of its specialty pizzas — gained momentum and comps turned positive. The 2004 launch of Papa's Perfect Pan, a square, pan-style pizza, was the company's most successful ever.
Jim Ensign, the company's vice president of marketing, led the company to launch innovative co-promotions with Universal Studios (Kong-sized Pizza and the movie "King Kong" on DVD) and Warner Brothers (The Superman Pizza and the movie "Superman Returns" on DVD). In November, Papa John's announced the sponsorship of the PapaJohns.com Bowl in Birmingham, Ala. The game will pair NCAA Division I teams for a Dec. 23 showdown.
Ensign said the company has made its promotions exciting, "because customers don't want to be in a rut." But the risk of innovative promotions, he added, is if consumers consider them a gimmick.
"If it's product news and it's variety, then it's not a gimmick," Ensign said. "If it's news and variety at a great price, then it's value to the consumer. We don't do gimmicks, we do extensions of our quality position. The consumer is smart enough to know what a gimmick is."
Papa John's also credits
Jim Ensign, vice president of marketing
its system-wide online ordering platform with helping comps. Ensign said the company's research found that customers who order online spend more per ticket than those who call the store.
But while higher tickets are fantastic, Ensign said there's much more to the online experience.
"We've found that customers who order online are more satisfied with their ordering experience, they're more loyal and more likely to recommend Papa John's to their friends," he said. "The customer feels very much in control of the experience because they can order as fast as they want or as slow as they want."
A few years before, the company considered pulling the plug on the Web outlet when some franchisees thought it wasn't helping. Other franchisees, however, convinced the company to stay the course. The gamble turned out to be a good one, Ensign said.
"I think we have nearly 100 percent support (among the franchisees) for online ordering now," he said, smiling.
Ensign said the company will continue to increase its online marketing efforts. Not only is it far less expensive than traditional advertising, e-mails are much more easily targeted and customizable by market and to end-user desires.
The new man in charge
Schnatter said as Papa John's got back on track in 2003, he and his advisors began considering his replacement. Hiring an outsider was key to taking the company to the next level, he said, plus he wanted to spend more time with his family and overseeing charitable activities supported by he and his wife, Annette. An executive search was launched, and about six finalists were considered before Nigel Travis was hired in 2005.
Travis, the former president and COO of Blockbuster Inc., had led Burger King's operations in Europe and Africa and was no stranger to quick service. He said he jumped at the offer to become CEO and president at Papa John's "because of the opportunity. I saw what had been worked on and what needed to be executed. ... I inherited a company that had been fixed operationally."
Knowing he was taking over a company that was speeding in the right direction has allowed Travis to focus on innovation. Three major opportunities he sees for Papa John's are its online ordering platform, increased penetration into non-traditional sites (such as stadiums, airports, amusement parks and toll ways) and international growth.
"We need a lot of work in international; it's so embryonic," Travis said. "China is number one for us in terms of growth potential. In Korea, we've done nicely, but the U.K. has been an issue for us. ... In Mexico, we've kind of started from scratch again, but we think we can do very nicely there, and Russia has the highest per-store averages of any of our international markets."
Travis also believes the United States can accommodate 1,500 more Papa John's units. Even in what some say is a saturated market, he sees much of that increase coming from real unit growth, though some will come at the cost of other pizza businesses.
While some suspected Schnatter
Nigel Travis, CEO and president
might struggle to turn over the reins to his new CEO, both men said the transition was not only amicable, but smooth.
"I was a new CEO, and John stepping back was a change for him," Travis began. "Because I'm relatively strong minded about the business, the board has had to adjust to me, and that makes life tough for everyone. But I'd say that John and I have the best relationship now than in the 19-plus months since I've been here."
Schnatter called Travis a quick study who has incredible acumen for the technical aspects the business. He said he also has brought new energy to the corporation.
"You can tell they're having fun here. The place is buzzing," he said. When Travis came aboard in 2005, Schnatter said he left Travis in full control and with his full support. "Nigel got my office, my desk, my conference table, our company, and he's done a hell of a job. He and I meet every other week. When he has a problem, he asks what I'd do. I like supporting as much as I do leading — especially when he's a great leader."