Outside the U.K., Spain, and restaurants in Luxembourg, there’s opportunity in France and Italy—big geographies that Papa John’s hasn’t tapped into yet. The three units that have opened in Germany are run by a franchisee that built out Russia, which gives Lynch much confidence. Papa John’s growth in Germany will allow it to enter more countries with current franchisees or bring in new franchisees that are already operating restaurants in those countries.
Beyond Europe, Papa John’s doesn’t have any stores in Australia or Brazil—big markets that can hold 200 to 250 locations, Lynch said. There’s also only 200 units in China, and the CEO believes that could rise to 1,000.
A significant factor to this growth is the notion many international operators are no longer pushing to open restaurants with big dining rooms.
“Now, in almost every market, our franchisees are opening delco [delivery/carryout] units almost exclusively,” Lynch said. “And what that’s going to do is it’s going to reduce the amount of capital necessary to open new stores. And so we are more bullish today than ever on the rate of development internationally, especially in the markets that used to really focus on those dine-in units. Moving to a delco model, they can open a lot more restaurants for the same amount of capital, and that’s going to benefit everybody.”
Lynch said going forward, the company will have a more stable growth rate. Papa John’s is leveraging site selection technology to increase the likelihood of profitability and lower the amount of closures. This means the chain won’t require as many openings to deliver the same level of net new unit growth. There’s no cap in terms of what Papa John’s thinks it can reach annually—it’s more about working with franchisees to find real estate and building a model that’s sustainable. Ideally, 80 percent of units will come from existing franchisees.
Papa John’s isn’t sitting back, either. The brand plans to open 20 to 30 company-run stores in the coming year to build a growth path that franchisees can follow. The chain is looking at highly penetrated markets like Atlanta, Louisville, St. Louis, and Orlando. Papa John’s wants to fill gaps where drive times are longer and the number of households exceeds the optimized number. Lynch said the next three restaurants are forecasted to be above the average AUV.
“We’re not going in and looking at just popping in restaurants that might or might not succeed. We are going in and building restaurants that can improve our customer service, but also generate profitable returns right out of the gate,” Lynch said. “And by doing that, we’re going to leverage that data and that model to help supplement the conversations we’re already having with our franchisees around building out their markets in a similar way."
“ … Once we build that model, is there an opportunity for us to refranchise company restaurants and get to more of a franchised model domestically?” he continued. "That’s definitely a possibility. We’re continuing to leverage the optionality we have with our company restaurants when it makes sense for us to seed franchisees who want to come in and develop.”