Operations

Papa Johns lowers 2026 outlook, launches Unbox Better transformation strategy

Papa Johns lowered its 2026 financial outlook amid continued sales and earnings declines. The company also launched its Unbox Better transformation strategy to rebuild customer loyalty, improve restaurant execution, invest in technology and strengthen franchisee economics.

Photo: Shutterstock

November 5, 2026 by Valerie Gritton — Editor, Pizza Marketplace

Summarize with

Papa Johns is lowering its full-year 2026 financial outlook following another quarter of declining sales and earnings, while launching a broad transformation strategy focused on rebuilding customer preference, strengthening franchisee economics and improving restaurant performance.

For the third quarter ended Sept. 27, global systemwide restaurant sales totaled $1.15 billion, down 5.6% year over year. North America comparable sales fell 8.3%, including declines of 7.5% at company-owned restaurants and 8.5% at franchised locations. International comparable sales decreased 1.8%, according to the company's Q3 earnings call.

Revenue declined 10.5% to $454.8 million, compared with $508.2 million in the prior-year quarter. Net income was $3.3 million, down from $4.5 million.

Management attributed the sales pressure to an intensely promotional North American market, challenges acquiring new customers and weaker first-party delivery performance.

"For decades, customers chose Papa John's because we stood for something distinctive, not because we were the cheapest option, but because they believe we offered something worth choosing. Quality ingredients, great pizza, and a brand promise that sets us apart," Todd Penegor, president and CEO, said during the company's earnings call. "At our best, that promise earned trust and loyalty. But customer's expectations have continued to rise. Competition has intensified, and we recognize that we must move with those expectations in order to continue to earn that trust.

"While our third-quarter results reflect continued pressure in a competitive operating environment, we have aligned our company and franchisees behind a clear strategy for growth," he said.

The strategy, called Unbox Better, is intended to address the company's competitive challenges while reinforcing the quality and brand promise that have historically differentiated Papa Johns. It also is the company-wide blueprint for strengthening the brand, the system, and "earning the right to be chosen again and again," Penegor said.

Unbox Better has two priorities

Strengthening the brand.
Strengthening restaurant performance.

Unbox Better: Strengthening the brand

Papa Johns brand strategy centers on four imperatives: reigniting the food, bringing the brand promise back to life, resetting the value equation and deepening customer connections.

Tied to each, the company plans to improve core menu fundamentals, including dough optimization, bake consistency, toppings and presentation, with product and quality improvements expected to roll out through next year.

Papa Johns also is sharpening its value strategy, pairing signature products with price points intended to drive traffic and conversion. Penegor acknowledged that the company's previous focus on protecting margins over deeper discounting contributed to declining transactions.

"Value is not simply the lowest price," he said. "It is what customers receive relative to what they spend, including quality, convenience and trust."

Customer loyalty is another focus as the company is rolling out an AI-powered personalization engine within its customer relationship management platform. The goal is to deliver more relevant offers to its loyalty base.

Loyalty members generate comparable sales that outperform non-loyalty customers by 10 percentage points, have average tickets 4% higher and order approximately twice as often, Penegor said during the earnings call.

Unbox Better: Strengthening restaurant performance

The second priority focuses on improving restaurant execution, expanding customer access and strengthening franchisee economics.

Papa Johns plans to provide operators with more support through coaching, financial incentives and a regional franchise business director model as part of that strategic initiative.

"Customers judge us one order at a time, and we know that when we meet or exceed expectations, customers come back," Penegor said. "Closing that gap is one of our highest-return levers."

Technology investments also will support restaurant performance as Papa Johns is testing an AI-native point-of-sale platform in a small number of restaurants, with early results pointing to potential improvements in forecasting, labor scheduling and promotional flexibility. An initial wave of restaurants is expected to go live by year-end, with most of the U.S. system targeted for rollout in 2027.

Its AI ordering companion, Lou AI, developed with Google Cloud, is intended to simplify ordering. Penegor said customers using the platform are converting at higher rates and completing orders faster.

The company also is working to improve driver routing to support faster delivery and is expanding distribution through its Walmart Express delivery pilot. The company said it is the first national restaurant brand on the platform to fulfill orders entirely from restaurant locations outside Walmart stores.

Franchisee investment and supply chain savings

Improving franchisee economics is a significant part of the restaurant performance strategy. A new marketing framework received approval from 98% of votes cast, with local cooperative marketing investment increasing to 2% and national marketing spend set at 5%. Total marketing investment will rise to 7%, compared with 6% previously. About half of the U.S. system is currently supported by the re-established local cooperatives, with the remaining markets expected to join by the end of 2027.

Papa Johns also is reducing its targeted supply chain margin to 4% in 2027. The margin is expected to increase to 4.5% in 2028 and 5% in 2029. The company also plans to lower its technology fee from 1.75% to 1.5% in 2027. Meanwhile, approximately $35 million in supplemental marketing and franchisee investments is expected to continue into 2027 through reduced supply chain margins and digital fees.

"We view these actions as fuel for growth, strengthening the unit economics franchisees need to compete as a team in their local co-ops," Penegor said.

The company also captured approximately $21 million in supply chain savings through the third quarter, including about $7 million during the quarter. Management expects at least $25 million in savings for 2026 and at least $60 million by 2028.

Papa Johns has closed 239 restaurants across the system, including 146 in North America, representing nearly half of the 300 North American closures planned through 2027. Penegor said early results show sales transferring to neighboring restaurants following closures of underperforming locations.

International markets show mixed performance

International comparable sales declined 1.8%, with growth in the U.K. partially offset by weakness in other markets.

U.K. comparable sales increased 7.2% on a one-year basis and 16.3% on a two-year basis. Penegor attributed the performance to operational execution, increased media investment, core product improvements and franchisee ownership optimization.

The company continued to face pressure in the Middle East, where regional conflict has affected consumer demand, as well as in parts of Latin America and China.

Management said the U.K. provides a model for the renewed North American strategy, with operational execution, product improvements and marketing investment among the elements being applied across the business.

Papa Johns expects Unbox Better to support improved trends over time but has not included any benefits from the strategy in its 2026 financial outlook.

The company plans to report progress against the strategy each quarter, with execution and measurable results serving as benchmarks for the transformation.

"We know progress will not come from presentations or plans. It will come from execution," Penegor said. "It will come from better products, better experiences, better operations, and measurable results."