Coronavirus, new menu items help Papa John’s have its best month ever

Pizza chain has made record profits despite COVID-19 having kept dining rooms closed

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Papa John’s saw its best month ever, according to the company’s CEO Rob Lynch, who spoke in detail about the pizza chain’s April sales in a first-quarter earnings call Wednesday.

The company saw a near 27 percent increase in comparable sales throughout North America. A part of that growth can be credited to the current coronavirus pandemic, however, Lynch stressed that it wasn’t the only factor.

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Papa John's CEO Rob Lynch

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“In line with our original 2020 outlook, comparable-store sales were very strong, rising 5.3 percent in North America and 2.3 percent internationally,” Lynch pointed out. “January and February were particularly strong in North America, with North America comp sales up 7.6 percent and 5.4 percent, respectively, driven by successful new product and marketing innovation.”

Papa John’s has continued to innovate its signature fresh dough, and in February, the company introduced “Papadias” – a toasted sandwich alternative that has been set at a $6 price point and helped increase “lunchtime transactions and higher tickets.”

Likewise, the company launched its Jalapeño Popper Rolls nationally.

“And again, as with Papadias, our team's innovation is driving high customer satisfaction and higher tickets without adding material complexity or cost to our stores,” Lynch remarked.

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As millions of Americans stay home to avoid the coronavirus, Papa John’s has leveraged marketing and technology for consumer outreach.

“By moving dollars out of high-cost national sponsorships and into working media, we're able to reach a broader range of consumers more often,” Lynch explained. “We're still working closely with our local sports partners to activate in our local markets when sports return.”

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In March, Papa John’s experienced a slight dip with the loss of the NCAA Basketball Tournament and other major sporting events and large gatherings – all of which were canceled after the World Health Organization declared the coronavirus a global pandemic. Additionally, pantry-loading and families cooking at home were factors that suppressed sales during that time.

By April, the company saw “a wave of growth in North America” as dine-in restaurants remained closed.

“Delivery and carry-out food businesses became essential services,” Lynch explained. “As we perform this critical service, our business is performing at historically high levels.”

Papa John’s transaction size increased by 25 percent among Papa Rewards loyalty members and the brand was reportedly introduced to more than one million new and lapsed customers on its digital channels for the month of April.

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Lynch credits the success Papa John’s is seeing in North America to the strategies it applied in China and Korea, where the company has been managing the impact of the coronavirus since January.

“This experience and preparation have enabled us to act quickly, both to protect the health and safety of our customers and team members, and to ensure that we remain open for business and continue to serve our communities,” Lynch said. “In mid-March, applying what we learned in Asia, we launched no contact delivery, a complete reengineering of our ordering and delivery processes and technology conceived and executed in less than two weeks.”

When it comes down to the status of Papa John’s supply chain in light of several potential food shortages, Lynch told investors the company has not experienced ingredient disruptions.

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“Disruptions with meat or other key suppliers have not impacted our stores and based on the contingency plans that we have put in place, we don't anticipate any disruptions to our business,” he clarified.

Additionally, Papa John’s is working closely with franchisees and management of company stores to “reduce complexity and costs while heightening quality.”

Papa John’s has hired thousands of workers who have been displaced by the coronavirus and is partnered with three national delivery aggregators, which has allowed the company to scale more deliveries to customers during peak mealtimes.

The company also reinvested nearly half of its profit growth in the first quarter to support additional employee benefits, bonuses and incentives for corporate team members, helping employees throughout its supply chain and restaurants.

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“We've expanded our health and wellness benefits to include free virtual doctor visits for all employees and their families and increase paid time off policies,” Lynch said. “This, in addition to existing benefits of no-cost mental health support, affordable health care plan options, and access to Papa John's team member Emergency Relief Fund, if and when needed. We've also worked proactively with franchisees to help them expand their team member benefits.”