Papa John’s franchisee: Trying to be everything to everyone is a bad strategy

 
July 8, 2014 | by Alicia Kelso

There aren’t many people in the restaurant industry who share Pierre Panos’ unique perspective. The South African native is the CEO of Fresh To Order, what he calls a “fast fine” dining concept. He also owns 50 Papa John’s units and a fine dining concept, Brookwood Grill, in Atlanta.

He’s been in the U.S. industry for 20-plus years and can break down P&L numbers, offer franchising advice, outline regulatory challenges and recite menu trends across all segments. PizzaMarketplace.com had the opportunity to talk to Panos about what it’s like to be both a franchisor and a franchisee in the post-Recession economy.

PizzaMarketplace: How do you juggle the different businesses, especially since they’re all in different segments?

Pierre Panos: Even though they’re in different segments, there is an overriding theme – every one of them has quality positioning. You could lose focus very quickly if you run any more than two or three brands. I only want to be associated with the top quality brands.

That includes Papa John’s, which, with its ‘better ingredients’ positioning, definitely owns quality in the segment compared to its top competitors. Papa John’s doesn’t try to be everything to everyone. They have it narrowed down and that’s why it interested me.

PizzaMarketplace: During the Recession, fine dining took a big hit. How did you fare with your fine dining concept, as well as your fast casual and pizza concepts?

PP: Fine dining definitely took a hit, but ours was only down 6 to 7 percent, whereas the overall segment was down 20 to 25 percent. Papa John’s was up. In tough times, even the great brands take a hit because people cut back from premium, but Papa John’s absolutely was doing great and continues to do so. 

PizzaMarketplace: In your 20 years of experience, what has changed the most about the restaurant industry?

PP: When I came to the U.S., I had a strong restaurant and accounting background. I knew numbers very well. But coming here, the food quality and the average restaurant concept just wasn’t very exciting or intriguing. I felt that we had better restaurants back home in South Africa because it blends so many different cultures and taste profiles.

Since then, a lot of areas are becoming much more sophisticated with their flavor profiles, and not just in Los Angeles and New York, but also in places like Denver and Atlanta. They’re birthing these concepts that are intriguing and on trend.

PizzaMarketplace: What do you see as the next big trend?

PP: Fast fine is going to explode – in pizza, Italian, Indian, Asian cuisines. Fast casual will continue to grow, no question, but a lot of fast casual brands are trying to elevate up.

And, consumers’ taste profiles are more sophisticated so you have to elevate. They want full-flavored food, they want to be seen and they want to feel that they’re eating healthy. You have to take the positioning of being better and better for you. That’s why the fast casual segment has been so successful.

PizzaMarketplace: What gives operators an edge in today’s competitive industry?

PP: Twenty years ago, the reporting engines and the way numbers were calculated weren’t great. Today, you can slice and dice those numbers, and truly get data that helps you manage data, manage food costs. If you don’t have that ability, that technology, compared to all the competition, your margin erosions will be so huge that a lot of places will just go out of business.

Margins have shrunk in our business compared to even just five years ago. But we now have the technology systems in place to tweak our programs and make better decisions. But, if you don’t have the food, service and facility, that technology is meaningless.

PizzaMarketplace: How big of an advantage does Papa John’s have over smaller brands because of its technology systems?

PP: It’s imperative, being early adopters of technology. We’re spending a little more to change our POS system because it enables us to be far more intuitive and interactive with our guests and enables us in real time to track what’s going on and working with our promotions.

PizzaMarketplace: How do you navigate the deep discounts in the pizza space?

PP: We don’t really play in the discounting business like the other guys because we perceive the brand to be at the very top end of big pizza chains. We don’t really worry about them unless they do something extreme, like offer a $10 pizza. But, as soon as they stop that promotion, what happens? It’s bad for them. If you look at Papa John’s comps, we’re a straight line, year after year. But look at the others and it’s up, down, up, down, all based on those promotions.

We’ll just stick to limited product introductions and execution instead of a different trick of the week. The competition is there, but we’re going to stick to a strategy that’s worked for us.

PizzaMarketplace: What pizza brands would you consider to be the most competitive, then?

PP: The take-and-bake pizza idea is growing tremendously. And, in some ways, that’s more competition for us. It’s driven by consumers wanting to be in control and they’re intrigued with food prep and making something themselves, and it’s perceived as fresh. It’s different.

They have a long way to go until they get to where the big brands are, but they have a tough hold. Take-and-bake was looked at hard by Papa John’s a few years ago and we said no. Let’s stick to what we do and not try to be everything to everyone.

PizzaMarketplace: Is that a piece of advice you would share with others?

PP: Yes. Look at Little Caesars. A few years ago, they were struggling because they weren’t happy owning the $5 pizza position. They wanted to get into delivery. Guess what? That’s such a different animal and it absolutely died. The quality, the service died. But then they went back to their roots, dropped delivery, and now they’re doing great.

PizzaMarketplace: Do you have tips for someone with a startup?

PP: If someone wants to get in, I would suggest they be well capitalized; most people open and run out of money because they put every cent into it.

A lot of people look at the restaurant industry and think it’s easy, but most restaurants fail within the first three years. It’s not rocket science, but there are 1,000 details every day that you need to focus on to drive traffic, and that’s when it becomes difficult. Focus on the guest, the service and the food, always.

PizzaMarketplace: What is your opinion of the growing fast casual, top-your-own, pizza subsegment?

PP: It reminds me of the frozen yogurt explosion when it went crazy. Every month one was opening 500 yards from me. The burger segment did the exact same thing, but now it’s shaking out. I think the pizza stuff will be the same.

Too many are popping up right now and trying to be a ‘me too’ and I think there will be a huge shakeout, with one or two national players taking the lead and the weak ones going away. I never wanted to be a ‘me too.’ I wanted to be the first concept doing it, hold that position and grow responsibly.


Topics: Food & Beverage , Franchising & Growth , Operations Management , Papa John's , Systems / Technology , Trends / Statistics


Alicia Kelso / Alicia Kelso has been a professional journalist for 15 years. Her work with QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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