In Q1, Papa Johns struck a deal with FountainVest Partners to open more than 1,350 locations in China by 2040. It also announced the strategic refinancing of its majority interest in a 90-restaurant joint venture, recording all related assets and liabilities as held for sale as of quarter’s close, to existing franchisee Sun Holdings. The transactions, Papa Johns said, “provide significant operational scale to help accelerate Sun’s current 100-unit development agreement.” That original deal, revealed in late September, represented the largest domestic development agreement in Papa Johns’ history, and with a group that doesn’t wildly toss projections about.
Sun Holdings, founded by Guillermo Perales in 1997, operates more than 1,000 locations in 12 states, including Taco Bueno, Burger King, Arby's, McAlister's, IHOP, Popeyes, T-Mobile, GNC, and a number of airport restaurant locations.
Lynch has touted Papa Johns’ runway since his arrival from Arby’s in August 2019, where he led the chain’s transformation into a “Fast-Crafted” brand and 16 straight periods of comps growth as president. On the edge of 2020, Papa Johns had about half as many restaurants as its two largest competitors domestically and roughly a third internationally. The “Big 2” compete in some 100 countries while Papa Johns resided in 48.
As of December 2021, the chain operated in 50 counties and had 3,164 U.S. units. Domino’s boasted 6,560 and Pizza Hut 6,548.
“We are getting huge interest in this brand, from a lot of well-capitalized, sophisticated franchisees,” Lynch says. “And so that’s why we had confidence to take all of our development numbers up. And that’s one of the things that I think really has transformed over the last three years.”
Moving forward, menu plan success
On current trends, Lynch says 2022 has hardly been smooth. All of the 20s, for that matter, continuously created “new environments and dynamics that we weren’t anticipating,” he says.
Where Papa Johns’ strategy held firm, though, is menu innovation, which is another conversation that stretches back a few years.
During Lynch’s first week on the job, he attended a meeting where leadership put a proposal for a significant value strategy on the table. Given the brand’s struggles to that point, it was a redirect some felt necessary to stem market-share bleed (sales dropped 12 percent in 2018, marking the first annual decline in nine years).
Papa Johns tested a $6 platform in several markets and had designs to introduce others throughout the second half of the year, with a possible national launch in 2020.
But Lynch didn’t see the upside. At Arby’s, he had a line he felt rang true here as well. “I told everyone [during my time with Arby’s], I said, we cannot beat McDonald’s by trying to be McDonald’s.”
Now, he asked the room if they thought Papa Johns could best Domino’s by trying to be Domino’s.
Lynch didn’t think so. Instead, he asked executives what was in the innovation tank. In just 2020, the chain launched six new products, pandemic or not—a journey that began with garlic parmesan crust about 90 days after Lynch joined. It marked the first time Papa Johns added to its six-ingredient, never-frozen original pizza dough in company history.