Fourth-quarter revenue grew 5 percent to $417.5 million, while annual revenue dipped 2.6-percent to $1.6 billion. In Q4, Papa John’s opened 19 restaurants in North America and closed 27, its lowest number of domestic closings in a quarter since 2017. It also opened 90 international units and closed 30 in the quarter. For the full year, the brand opened 312 restaurants and closed 220. It ended the year with 5,395 units.
The same-store sales track
- Q2 2016: 4.8 percent
- Q3 2016: 5.5 percent
- Q4 2016: 3.8 percent
- Q1 2017: 2 percent
- Q2 2017: 1.4 percent
- Q3 2017: 1 percent
- Q4 2017: -3.9 percent
- Q1 2018: -5.3 percent
- Q2 2018: –6.1 percent
- Q3 2018: –9.8 percent
- Q4 2018: –8.1 percent
- Q1 2019: –6.9 percent
- Q2 2019: –5.7 percent
- Q3 2019: 1 percent
- Q4 2019: 3.5 percent
Though updates to the menu may get the most attention, the concerted effort to innovate extends to operations, as well.
For example, the company greenlit a rollout of Papa Call, a centralized order taking system and customer service center across company locations. The rollout will be completed by the end of Q2 and Lynch noted that tests indicate Papa Call is incremental and increasing efficiencies. Franchises should expect the system in the latter part of 2020.
“That will eliminate the need for our people in the restaurants to answer the phones which can be a very distracting and challenging dynamic at your busiest time,” Lynch said. “So, it will allow us to more effectively utilize our labor and will result in a better customer experience and fewer drop calls, because people will not have to be put on hold anymore.”
The new equipment is in addition to the $80 million investment in marketing and financial support to domestic franchisees during 2019 and 2020, which helped the units through lower sales. Lynch said as the program winds down this year, he expects higher comp numbers and productivity.
Lynch noted that the changes instituted by Papa John’s has ignited demand for stores. The brand refranchised more than 20 units in Q4 to current operators, and the CEO said there’s an appetite for more.
“We're also right now actively working with some new large potential franchisee partners that we think could come in and not only operate current restaurants but build a lot more restaurants domestically,” Lynch said. “ … I can absolutely tell you that there are more franchisees today above what we consider to be the threshold of success, if you will, in our system than there were just three or four months ago. So there continues to be progress, both from a sales standpoint and a profitability standpoint, and frankly, a relationship standpoint.”
Regarding off-premises business, Papa John’s will have three third-party delivery partners integrated into its point-of-sales system by the end of Q2. About 66 percent of U.S. stores are supported by DoorDash and Postmates, and UberEats is on the way. That channel represents about 2 percent of sales, which Lynch said is incremental.
In 2020, Papa John’s expects comp sales to reach between 2.5 percent and 5 percent. Internationally, Lynch expects growth between 1.5 and 4 percent. The company is also projecting 100 to 140 net new restaurants.
Lynch said his goal since arriving at Papa John’s has been to innovate and continue to build the chain’s premium differentiated brand. The restaurant has a “pipeline of ideas” ready for 2020, and according to Lynch, those ideas can come from everywhere.
“If our franchisees and their team members have ideas and they send them to us and we believe that they are better than what we're currently doing, we are all ears,” Lynch said. “If the aggregators come in with ways for us to better utilize their capabilities and partner with them, we want every idea. … It's become a situation where we're having to get choiceful on what we do because we have so many people bringing their ideas for it.”