Papa John's keeping it simple

May 18, 2009
While the other big pizza chains branch out into sandwiches and pasta, Papa John's seems to be sticking with what it knows best. But is that a good idea?
No. 1 Pizza Hut made a splash last year when it rolled out its Tuscani Pasta line. Over the past few months, Domino's has launched its Oven Baked Sandwiches, followed by Bread Bowl Pastas.
Papa John's officials, however, have made it clear that pizza is their main priority.
"We will remain focused on delivering a superior-quality pizza and a superior-quality experience," said Papa John's founder and CEO John Schnatter during the company's May 6 first-quarter earnings call.
"As a farmer friend of mine out West says, 'I reckon I'll dance with the one I brung,' and 'Better Ingredients, Better Pizza' is who we intend to continue to dance with at Papa John's," he said.
At this point it's hard to judge the wisdom of Schnatter's philosophy. Domestic system-wide comparable sales at Papa John's increased 0.3 percent for the company's first quarter ended March 29. Adjusting for the impact of the Easter holiday, comp sales were essentially flat.
Domino's domestic same store sales were up 1 percent during the same period. While Pizza Hut parent Yum Brands doesn't break out comps by brand, officials did blame its 2 percent decline in domestic comps on softer dinner sales at KFC and Pizza Hut.
Papa John's has been gaining market share. Although all of the top three chains suffered a net loss in the number of stores they operate, Papa John's only lost a net four stores, or a tenth of a percent of its domestic locations, compared with a net loss of 25 stores or 4 tenths of a percent for Pizza Hut, and 60 stores, or 1 percent of domestic locations for Domino's.
Papa John's store count still lags far behind those of its two main competitors, though. Papa John's has 2,788 domestic stores compared with Domino's 5,047 stores and Pizza Hut's 6,078 locations.
"We do continue to gain market share, but our competitors are good at what they do and we don't take them for granted," Schnatter said.
Speed of service a factor in changes 
While it's too early to tell how menu changes will affect the competitive landscape among the top 3 chains, the history of the quick service restaurant business offers several lessons from operations that grew too complex, and whose menu grew too unwieldy, to maintain quality and consistency.
Fast food chain Hardee's, for example, nearly went under in the 1990s in part because of the chain's complicated menu. The company offered a dizzying array of burgers and chicken meals that left customers overwhelmed with choices.
"I see a lot of places getting into the scenario of they do pizza, they do wings, they do sandwiches, they do desserts, they do salads, and they end up becoming mediocre at a whole bunch of things," said Gabe Connell, co-owner of Indianapolis-based HotBox Pizza.
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Delivery drivers posting on Internet discussion boards have voiced complaints related to the increasingly complicated menu at some of the major chains. Instead of having menu items stored in one location, they are now scattered around the store and the number of product boxes has swelled to as many as eight.
That's something Papa John's officials have taken note of.
"We are very consumed and concerned with how we get the best pizza out," said Papa John's incoming president and chief operating officer Jude Thompson. "One of the filters we run a new product offering though is what does it do to the store-level simplicity."
The company is, however, leaving the door open to the addition of items such as pastas and subs, at least as temporary menu additions. The company owes it to their franchisees and shareholders to keep all options open, Schnatter said.
"What the consumer tells us is that they like our pizza and they like it delivered, and that seems to be the backbone of the whole business, but we'll have products that come in and out, and subs and pasta may be part of that," Schnatter said.

Topics: Domino's Pizza , Marketing , Papa John's , Pizza Hut , Public Companies

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