Papa John's reports big Q3 profits

Papa John's International Inc. today announced financial results for the third quarter and nine months ended Sept. 25, 2011, the former of which included a 42 percent increase in profit.

Papa John's Founder, Chairman and CEO John Schnatter said,"This is one of the best overall quarters in the company's history; one of the most solid, fundamentally sound and well-rounded quarters I can recall."

Net income for the quarter was $11.1 million, compared to $7.8 million for Q3 2010.

Revenues were also up to $305.7 million for third quarter 2011, an 11.9 percent increase from revenues of $273.1 million for third quarter 2010.

The report included a systemwide comparable sales increase of 5.3 percent for North America and 4.7 percent for international sales. Third quarter earnings per diluted share were 44 cents, compared to 30 cents for the same period last year.

Nine months period

For the year-to-date nine months ended Sept. 25, revenues were $911.7 million, an 8.6 percent increase from revenues of $839.6 million for the same period in 2010. Net income was $39.7 million for the nine months period, compared to net income of $37.9 million for the same period in 2010.

Diluted earnings per share were $1.55 for the nine months ended Sept. 25, compared to diluted earnings per share of $1.42 for the same period in 2010.

Unit openings

Papa John's opened 47 net units worldwide during the quarter. At Sept. 25, there were 3,780 Papa John's restaurants operating in all 50 states and in 32 countries.

"I congratulate our operators throughout the world on achieving one of the best overall quarters in company history," Schnatter said. "We've now surpassed 3,000 restaurants in North America and are closing in on 800 international units as we continue to grow the Papa John's brand throughout the world."

The company's development pipeline included approximately 1,650 restaurants (410 units in North America and 1,240 units internationally), the majority of which are scheduled to open over the next six years. Schnatter said the fourth quarter is historically the strongest for unit openings.

Report highlighted by international revenues

A breakdown of Papa John's revenues from the report includes:

  • Domestic company-owned restaurant sales increased $8.4 million, or 7.0 percent, and $20.4 million, or 5.5 percent, for the three and nine months ended Sept. 25, 2011, respectively, primarily due to increases in comparable sales of 6.3 percent and 5.0 percent, respectively.
  • North America franchise royalty revenues increased approximately $1.3 million, or 7.9 percent, and $3.7 million, or 7.0 percent, for the three and nine months ended Sept. 25, 2011, respectively, due to increases in comparable sales of 4.9 percent and 3.6 percent, respectively, and increases in the number of franchise restaurants.
  • International revenues increased $3.6 million, or 30.6 percent, and $8.4 million, or 24.5 percent, for the three and nine months ended Sept. 25, 2011, respectively, primarily due to increases in the number of restaurants and increases in comparable sales of 4.7 percent and 5.0 percent, respectively, calculated on a constant dollar basis. Through the first three quarters of 2010, the international segment included revenues from company-owned restaurants located in the United Kingdom, which were sold in the third quarter of 2010.

Earnings call highlights

Boosting the quarter's performance was a heavier focus on national media, thanks to a national marketing fund put into place at the beginning of the year, as well as the execution of a premium price point plan.

Papa John's is keeping an eye on the NBA lockout, as the games are historically popular pizza-eating occasions and the brand has some team rights across the country. The company said it is too early to tell the impact of the lockout, but it is still looking for ways to leverage its team rights.

Papa John's doesn't provide specific online guidance, but the company reported it now experiences digital (including online and mobile) sales "north of 30 percent."

The company is taking a conservative view on the 2012 commodities outlook, expecting them to remain high, and will report more specific guidance in December.

Read more about operations management.

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