The good news for Papa Johns is that third-party delivery performed well to begin the year at a time when price-conscious consumers are pulling away from restaurants. These transactions represented 16 percent of sales in the first quarter compared to 12 percent last year. The chain is also seeing growth in third-party business quarter-over-quarter.

“We’ve been on the aggregators since 2019 and as leading in that space more broadly, what we’re seeing is that the pizza category continues to perform well and take share within the aggregator universe,” Papa Johns interim CEO and CFO Ravi Thanawala said during the brand’s Q1 earnings call. “Second, the benefit of the aggregators is that they are highly convicted consumers that are ready to purchase when they’re on those apps.”

The downside is those same lower-income guests caused a notable decline in first-party delivery and a flattish result in carryout sales during the first quarter. The difference shook out to a 2 percent drop in North American same-store sales for the first three months of 2024. Papa Johns saw lower traffic and consumer check management to kick off Q2 in April as well.

If orders remain at a similar level as the past four weeks, the company anticipates 2024 North America comps to be flat to negative low-single digits for the full year. 

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Papa Johns found that customers were more deliberate with their overall order costs. Because mix moved toward carryout versus organic delivery, the chain saw a slight decline in attachment rates, offset by an increase in sales of core pizza offerings. So while aggregators are giving Papa Johns a clear opportunity to connect with a younger, more diverse audience, the chain is searching for answers on how to boost its native channels and communicate value. However, Thanawala was encouraged by the chain’s performance during traditionally high-volume occasions for the pizza category, including Valentine’s Day, the Super Bowl, and the NCAA Tournament.

Thanawala attributed the accelerating aggregator business to consumer patterns. More specifically, pizza is taking more share in the third-party delivery segment, and the chain has “continued to perform well because we’ve executed well in that space.” He doesn’t have an answer on what the ideal mix is for third-party delivery, but he did emphasize that Papa Johns will be watching carefully to see how many customers migrate to those platforms. The chain has been tracking its performance on Uber Eats given the channel has become more competitive, and the consensus is that there’s enough volume for large chains to be on there.

“We’ve been continuing to feel good that we are on track in our business on that channel relative to what our expectations were,” Thanawala said during the brand’s Q1 earnings call.

As to how Papa Johns plans to bring more attention to its web and app, building brand awareness around the loyalty program could be one answer. Thanawala noted the chain has a “strong loyalty business” with a large base that’s highly active. He added that Papa Johns is also testing different pricing and promotional strategies—especially in the carryout business—to convey its differentiated service and value.

“Our objective long term is not to have our organic business decline and only our growth coming out of aggregators,” Thanawala said. “We believe that there is going to be opportunity for us to continue to focus in through delivering great service and offering great value to our loyalty that has unique value that you can only get on our organic delivery and carryout channels.”

News of declining sales comes a few months after Papa Johns announced its “Back to Better 2.0” initiative, which seeks to refine its business model and stimulate further growth. At the heart of this new strategy is a 20 percent increase in contributions from North American franchisees to the national marketing fund—a measure that’s expected to boost marketing effectiveness and overall profitability.

So far, the strategy has involved new brand platform “Better Get You Some,” a message emphasizing Papa Johns’ high-quality ingredients and celebrating the universal love for pizza. The campaign features dynamic visuals, a new soundtrack, and a hip-hop–themed multimedia experience created in collaboration with Grammy-winning artist Big Boi and director Dave Meyers, along with the Martin Agency.

Thanawala stressed that Papa Johns sluggish Q1 results shouldn’t be connected to the “Back to Better” plan. He pointed out that traffic challenges began before the company went live with its new marketing strategy. The interim CEO also said Papa Johns is seeing higher exit rates at certain points in the ordering process, which tells him that traffic declines are more about a value-conscious consumer as opposed to creative and media being ineffective.

“What I will say is we are five weeks into our creative and media strategy, new visuals, new tone, new media mix,” Thanawala said. “There’s obviously some ongoing calibration that we’re going to want to do. But as we’ve actually done the consumer testing work, we are absolutely seeing purchase intent go up as we’ve tested this new creative and media strategy. So we will continue to keep you in the loop and keep the investor community in the loop and following quarters of our progress, but we believe we are on the right track from a creative and a media standpoint.”

Papa Johns finished Q1 with 3,447 restaurants in North America and 2,467 internationally. The brand is on pace to achieve 20 percent net unit growth in North America in 2024 and open a gross of 100 to 140 new restaurants in other parts of the world. Part of the “Back to Better” initiative was unveiling the largest development incentive in company history. Papa Johns said it would “deliver significantly higher restaurant-level EBITDA margins during the first five years of operations through a waiver of national marketing fund contributions.”

Thanawala was appointed as interim CEO in March after former leader Rob Lynch announced his departure for Shake Shack. The board is conducting a comprehensive search process to identify a successor for the Papa Johns CEO role.