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A Deeper Look into Papa John’s Beth Brooke Southern New Hampshire University

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Papa John’s and their mission Papa John’s started in 1984 in a small broom closet in the back of his father’s tavern in Jeffersonville, Indiana. Papa John sold his prized possession, a 1971 Camaro zs8, in order to purchase the equipment needed to start making pizzas (Mental Itch). He started off by selling pizzas to the customers of his father’s tavern, and then in 1993 he went public with his work. After one year of business, there were 500 stores opened, and after four years, there were a total of 1,500 stores. As of 2016, Papa John’s became the 3rd largest take-out and delivery pizza chain in the U.S. With the success of his new business, John was able to buy back his dream car on August 26, 2009 for $250,000 (Mental Itch). Despite all the controversies surrounding Papa John’s, we are still one of the largest pizza chains in the U.S. There are now more than 5,000 locations and 45 countries and territories around the world. “Our pizza family is as hungry for perfection today as we were when we first opened our doors more than 30 years ago” (Papa John’s). Our core values include: Focus – we must keep the main thing; Accountability – we do what we say we are going to do it when we say we will do it; Superiority – customer satisfaction must be consistent; P.A.P.A. – people are priority always; Attitude – be a reflection of what we value; Constant Improvement – No matter how good we are, we will always get better. At Papa John’s, the focus is pizza and keeping people fat and happy (Papa John’s). We offer a variety of pizza and sides, which include breadsticks, cheese sticks, wings, chicken poppers, desserts, and our new papadias and jalapeno popper rolls. All items are available for carryout or delivery. A customer can place their order on our website, through the Papa John’s app, by calling the store and speaking with one of our customer service representatives, or they can just walk in and place an order in the store. With technology and new menu items I want to be able to show how Papa

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Johns can climb to the top of the pizza carryout/delivery business and be better than our competition of Dominos and Pizza Hut. You will be able to see that with new products and new ideas of how these products are presented to the consumer through television commercials, social media marketing and our own online application, we will be able to increase our sales and consumer base. Supply and Demand Supply and demand conditions, I take to mean things that affect the supply and demand curve of the product. In a general sense, demand can shift in varying ways the main beingincome, price of related goods, taste, expectations of the future and number of buyers. In a very BROAD sense, if people’s incomes were to increase we could expect to see more people purchasing pizza’s however if we were to fall into a recession people would buy less, similarly, if there were more buyers on the market then demand would increase. I have noticed during the current pandemic we are going through pizza delivery and carryout are in a high demand which should make pizza be considered a normal good. If the price of any of the substitutes (goods that could replace pizza) increased, then people would rather buy pizza than its substitute (Smith 1). To elaborate on the substitutes in the delivery service market (Waiter, Doordash ,and Grubhub) include a variety of restaurants having access to delivery of their products, these restaurants include a variety of fast food and dine in type places ( Wendy’s, McDonalds, Ruby Tuesday’s, O’Charley’s) and even some local restaurants are using delivery services (Ohana Poke, Ravenite Pizza, Gambino’s and Panini Petes). Even though their food is different the pricing will be higher than just ordering from Papa Johns and that is why having a consistent price point and online ordering deals consumers continue to order for the quality and value we offer. With the media continuing to provide information about the COVID-19 pandemic it is causing consumers

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to panic buy at the grocery stores which is causing a decrease in items which is causing a demand in takeout and delivery food options, so people have food to eat. Papa Johns has their own QCC (quality control center) and trucking fleet so they can supply the stores with product to meet the demands of the consumers. Over the past few weeks there has been a fluctuation in pricing of product form the QCC. We have maintained our prices to stay competitive with our competition. We do our best to offer a good quality product at a fair price.

Price Elasticity of Demand.

The definition of Price Elasticity of Demand (PED) is the responsiveness and elasticity, of the quantity demanded of a good or service to a change in its price. Papa Johns to me is considered elastic. There is flexibility in the price points we use depending on the current price of product, cheese being a product that can fluctuate due to dairy prices. Constantly staying informed on the product prices of our competition, Papa Johns can offer better deals than our competition, by doing so the quality of product that is sold will have the consumer coming back to us even if we do not have a deal at the time. We do offer on the online ordering system a rewards program that gives a point for every dollar spent online once a consumer reaches 75 points, they have 10 dollars of papa dough to use on their online order. I have seen some individuals have a 40-dollar order and only pay 3 dollars because of all the papa dough they have accumulated. When a new product is introduced it is introduced to the stores as a period promotion which last 4 weeks and the item is promoted at a special price to entice the consumer to try it. Sometimes the item is continued after that period promotion is over and it goes back to a

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regular menu price item or can stop, and we no longer make it and that is considered an LTO (limited time offer). By continuing to add new products but keeping it simple by just offering new specialty pizzas we can offer types (Bacon Cheeseburger, Philly Cheesesteak, Zesty Italian etc.) the competitors do not. The pricing structure stays the same for small and medium pizzas base price for small 1 topping is $8.99 and medium 1 topping is $10.99. A large 1 topping is $12.99 but we run specials at different times and the price can either be $9.00 or $10.00 depending on the promotion. The special price point for any specialty pizza is $ 14.00 and the regular menu price is $16.99 so they can receive a $2.99 savings when they order a large specialty pizza. These price points still allow for a good profit. Side items such as bread sticks wings and desserts do not have discounts very often so by upselling an order with these items increases the ticket average and profits go up.

Costs of Production. Papa Johns

When looking at the past 5 years of sales it shows a decrease of sales in 2015 and an increase in 2016 and 2017. The decrease in 2018 came about when John Schnatter pulled all

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sponsorship of the NFL when Colin Kaepernick chose not to stand for the National Anthem. This caused a decline in sales which carried over into 2019 where the decrease continued when John Schnatter was in a conference call training exercise that was recorded. The recording has John making a statement that Colonel Sanders said, but the media has it as John saying the “N word”. This caused a big uproar with the board and John was removed. Sales did not drop in all markets, but certain markets did see a significant drop that caused a few locations to close or go through restructuring. Papa Johns

Based upon the past 5 years of sales it is very clear a lot of things have happened to cause a decline after 2017. Towards the end of 2017 when John Schnatter pulled Papa John’s sponsorship from the NFL due to players kneeling when the anthem was played, this caused a decrease in some sales. In 2018 when John was on a conference call (that was supposed to be for training purposes) relating on how to handle various media questions. John was responding and was released as CEO for racist comments. Papa John’s went through a decline in business and

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some stores closed due to lack of sales. The franchise Say Cheese Inc. which I am a part of was voted franchise of the year in 2018 even during the restructuring of corporate officers our franchise still had an increase overall. As a franchise we can be more flexible with our pricing than a corporate store would be. Each month corporate releases a promotional item it could be a new pizza or side item that we as a franchise must offer. The promotional item is always set at a competitive price like our competitors (Dominos and Pizza Hut). The board of directors went through a lot of changes in 2019. Jeff Smith was appointed to the Board in February 2019 and currently serves as Chair. He is a Managing Member, Chief Executive Officer, and Chief Investment Officer of Starboard Value LP. Michael Dubin was appointed to the Board in March 2019. He currently serves as CEO of Dollar Shave Club, a role held since 2011. Robert Lynch was appointed as President and Chief Executive Officer in August 2019. Mr. Lynch joined Papa John’s from Arby’s Restaurant Group where he served as President since August 2017 and served as Brand President and Chief Marketing Officer from August 2013 to August 2017. Jocelyn Mangan was appointed to the Board in March 2019. She is the CEO and Founder of Him for Her, a social enterprise whose aim is to change for-profit boards of directors to include the world’s most talented women. Mr. Shaquille O’Neal was appointed to the Board in March 2019. His business career includes success in broadcasting, endorsements, music, television and gaming. Anthony Sanfilippo was appointed to the Board in February 2019. He is the former Chairman of the Board and Chief Executive Officer of Pinnacle Entertainment, Inc., an owner, developer and manager of casinos, resort hotels and horse racing facilities. https://ir.papajohns.com/corporate-governance/board-ofdirectors

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The board members that joined in 2019 continue to make changes in the pizza market for us and allow us to continue making sure have “Better Pizza, Better Ingredients”. (Papa Johns) As we continue to move sales forward by introducing new items to reach more of the takeout market. We can increase profits and customer base by increasing options with our food and carry out versus delivery. By using outside delivery services, we can save money on the insurance we have to have for drivers. That will put more money back into the stores to be able to open more stores in areas that are seeing more population increased by more subdivisions and an increase in people moving to the area.

Overall Market. Pizza chains like any other chain or business rely on the consumers. In a 2018 study, over 80 percent of consumers consume pizza at least once a month. Many pizza chains report an overall 60 percent increase in sales overall for the 2018 financial year. Papa John's, Domino's, and Pizza Hut sell pizza and other products that are similar such as cheese breads, bread sticks, wings and desserts. These three pizza companies are usually located near each other. Even though we sell similar products yet different we can charge prices above marginal costs. Monopolistically competitive. In a monopolistically competitive market, there are many firms, but each firm produces a differentiated product. In my area my franchise constantly markets my competitors which allows us to offer similar discounts to draw the consumer to order from Papa Johns. Offering a great value and variety to the consumer they will choose the company that offers the best product even if they must pay a higher price. Current market price for Papa Johns with NASDAQ NASDAQ:PZZA

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71. 57 0. 35( 0. 49%)

DayHi gh: 71. 96 DayLow: 69. 21 Vol ume: 610, 724 4: 00PM EDTMay1,2020 Copy r i ghtWes tLL C.Mi ni mum 15mi nut esdel a y ed.

Domi nos St ockPr i c e:DPZ( NYSE)$357. 304. 63( 1. 28%) Fr i ,May1,2020,4: 02PM EDT

Yum Brands (Pizza Hut) NYSE)$83. 812. 62( 3. 03%) St ockPr i c e:YUM ( Fr i ,May1,2020,4: 02PM EDT

If you look at the current NASDAQ trading even though Papa Johns is in the negative it is still higher than Dominos and Pizza Hut. (Yum Brands)

Recommendations.

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Papa Johns has always promoted “Better Ingredients Better Pizza”, (Papa Johns) that is what sets us apart from the others. We need to continue to support our communities’ sponsorships to the local schools and sporting events will set us apart from the others. Experiment with expanding delivery options with the “small town store” concept, which is just carry out only, we could use a third-party company for delivery. Our traditional stores offer delivery, however by supplementing a third-party service it could boost sales and delivery reach. If high commissions are a concern, negotiating a better rate or work with a smaller local third-party company. Papa John’s already offers a speedy delivery service, to make it better we could survey current customers on how to make it better. Managing our online reputation is important and being able to respond to customer concerns in a timely manner. There are more and more digital tools and companies that can help us take better advantage of these review sites. We currently have online surveys that go out to every customer that orders online. The General Manager has access to see all completed surveys. Complaints and praises are also sent to the General Manager, if a complaint is given it must be responded to and closed out within 12 hours. We can only get better by listening to our customers and learning from what makes them want to order our products.

References

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History of Papa John's Pizza. (n.d.). Retrieved March 28, 2020, from https://mentalitch.com/history-of-papa-johns-pizza/ About Us. (n.d.). Retrieved March 28, 2020, from https://www.papajohns.com/company/index.html Smith, D. P. (2011, February). The Fall of Pizza. Retrieved April 9, 2020, from https://www.qsrmagazine.com/growth/fall-pizza Singh, A. (2019, November 25). Price Elasticity of Demand of Domino’s Pizza. Retrieved April 12, 2020, from https://medium.com/@artis.isme1921/price-elasticity-of-demandof-dominos-pizza-9be0e2cf33f1 https://www.papajohns.com/company/index.html https://ir.papajohns.com/ https://www.papajohns.com/contact-us/

The 2019 Pizza Power Report: A State-of-the-Industry Analysis. (2019, June 11). Retrieved from https://www.pmq.com/the-2019-pizza-power-report-a-state-of-the-industryanalysis Papa John's International, Inc. (n.d.). Retrieved from https://www.referenceforbusiness.com/history/Oe-Pa/Papa-John-s-International-Inc.html Markets, R. and. (2019, August 1). Global Pizza Markets 2019-2023 - Accelerating Online Pizza Industry, Demand for Frozen Pizza 4.2.3 Expanding Topping Choices, Rising Preference for Gluten-Free, Growing Adoption of Social Media. Retrieved from

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History of Papa John's Pizza. (n.d.). Retrieved March 28, 2020, from https://mentalitch.com/history-of-papa-johns-pizza/ About Us. (n.d.). Retrieved March 28, 2020, from https://www.papajohns.com/company/index.html...