News

The NFL: What Papa John's giveth away, Pizza Hut picks up

February 28, 2018

A sales-hemorrhaging Papa John's last night announced it was cutting its NFL organizational sponsorship and designation as the NFL's "official pizza." Pizza Hut picked up the proverbial ball, however, announcing this morning that it is now the NFL's "official pizza."

In an end-of-day Q4 and FY17 earnings call Tuesday night, Papa John's announced its relationship with the NFL organization had ended and it will now continue only to promote specific NFL teams and players. The shift was announced by recently installed Papa John's CEO Steve Ritchie, who also said the brand's sales continued to slide by 3.9 percent in North America last quarter, though they managed a slight 0.1 percent gain for the year overall for the entire system, he said. 

It was all good news for the Hut.

"Pizza Hut has a history of bringing more entertaining food and experiences to the pizza occasion and we plan to continue that through our exclusive partnership with the NFL," Pizza Hut U.S. President Artie Starrs said in a morning news release about the new sponsorship. 

"NFL stadiums are packed every week but tens of millions of fans are also watching the game at home. We have an unmatched ability to bring those fans closer to the sport thanks to the power of our 7,500 restaurants and 150,000 football-crazed team members. The capacity for what's possible is endless and that's going to make this league partnership great fun for Pizza Hut, the NFL and everyone who loves pizza and football."

The reference to the packed stadiums and high TV viewership of NFL games directly refutes the statements Papa John's founder and former CEO John Schnatter made during a Q3 earnings call for his brand, claiming that the chain's sponsorship and relationship with the NFL was lending itself to a drop in sales for the brand. 

The NFL has been criticized by some for its actions related to the protests of some players during the national anthem,  which some have said were too lenient. Schnatter's attribution of the whole affair as having an effect on his chain's sales because it was the organization's sponsor, was followed by a huge decline in the brand's stock value and his replacement in December as the chain's CEO. 

Indeed, those sales continued to decline in Q4 2017, according to Papa John's earnings results for that period and FY 2017 last night, which showed North American sales dropped 3.9 percent in the fourth quarter. The chain's new CEO, Steve Ritchie, said on the call that the NFL relationship was over. 

"We have determined that there are better ways to reach and activate this audience," Ritchie said on an earnings conference call Tuesday. "We will shift our marketing for the broader NFL sponsorship to focus on ... 22 specific NFL teams, a significant presence on league broadcast and digital platforms and on our relationships with many of the league's most popular players and personalities."

Papa John's Global CMO Brandon Rhoten told CNBC that the partnership termination was a mutual agreement between the two parties. 

This morning Pizza Hut leadership said its multi-year NFL agreement gives Pizza Hut a vast array of exclusive marketing rights, benefits and designations that will "connect the brand with the NFL and its teams, players, events, partners, properties and experiences." 

"We know many of our fans enjoy pizza while watching NFL games and we are thrilled to have Pizza Hut, an industry leader and one of America's favorite brands, as an official league sponsor," said NFL Commissioner Roger Goodell. "With a focus on family, friends and fun, Pizza Hut has the creativity we are looking for in a partner and we look forward to working together with them to make the at-home NFL experience more exciting than ever for our fans."

The NFL partnership will first unfold for Pizza Hut during the 2018 NFL Draft, which will be held near its global headquarters in North Dallas, and includes the collective use of all 32 team marks. It also involves the NFL working closely with Pizza Hut to facilitate local, exclusive team partnerships. Pizza Hut will also be able to use game tickets and fan experiences during games in marketing and promotional campaigns throughout each year.

"The opportunity to align in an official capacity with the NFL is a tremendous opening for a brand and product that is so neatly aligned with the football-watching occasion like pizza and Pizza Hut," said Andy Rosen, Pizza Hut franchise owner and Franchise Board of Directors Chairman. "Our system is aligned behind and thrilled about this partnership. No one better understands the essence of Pizza Hut, including our consumers, than our group of owners and team members." 

For Papa John's however, the financial news for the year and quarter was pretty downbeat, though systemwide sales managed to gain 0.1 percent for the year. Other results include: 

• Adjusted earnings per diluted share fell 6 percent for the quarter, compared to the same quarter in 2016.
• GAAP earnings per diluted share were $0.81, with adjusted earnings at $0.65 in Q417. 
• Full year GAAP earnings per diluted share for 2017 were $2.83, with adjusted earnings at $2.62. 
• International comparable Q4 sales grew 2.6 percent  and FY17 sales grew 4.4 percent. 
• 105 opening for FY17, all international, with 98 net unit openings in Q4. 

"We know our potential is so much greater than our results, and we are taking significant steps to reinvigorate our record of profitable growth and value creation," Ritchie said in the call. "Actions are underway to improve our brand proposition, how we connect with customers, and how we operate at the unit level. 

"These actions build on all the strengths of the Papa John's brand and include a fresh perspective around marketing, driven by new media and creative partnerships, hiring a new PR partner, and bringing online a new engine to drive our Papa Rewards loyalty system. Based on these initiatives, we expect to see marked improvements in sales later in 2018. Our franchise partners in the US are fully aligned with our initiatives and are excited about this next chapter of the Papa John's brand."
 

Photo: iStock