- Long-term strategic initiatives focused on driving comparable
sales growth and higher average unit volumes (AUVs) through
increased investments in North America marketing; improving North
America restaurant-level margins; increasing North America net new
unit development; and, strengthening international operational
effectiveness
- Preliminary global system-wide sales increase approximately
5%(1) for fiscal year 2023 on 210 net new units, including 57 in
North America, and a preliminary 1% increase in North America
comparable sales
- Papa Johns’ CEO, CFO and VP of Investor Relations plan to
discuss these items during an analyst-led fireside chat at the 26th
Annual ICR Conference tomorrow, January 9, 2024 at 8:00 am ET
Papa John’s International, Inc. (NASDAQ: PZZA) (“Papa Johns®”)
today provided updates on long-term strategic initiatives designed
to drive North America development, accelerate comparable sales
growth and restaurant-level profitability in North America, as well
as International profitability and long-term development. The
Company also reported preliminary sales and unit development
information for the fourth quarter and the full year ended December
31, 2023.
“It is our ambition to continue our positive momentum and to
become the QSR pizza brand of choice for customers and franchisees
around the world,” said Rob Lynch, Papa Johns president and CEO.
“We are excited about Papa Johns’ future as the initiatives that we
are undertaking, combined with our premium positioning in the
marketplace, supportive franchisee base, and proven leadership
team, will enable us to achieve our vision and deliver meaningful
long-term value creation for all stakeholders.”
North America Strategic Growth Initiatives
Commenting on Papa Johns’ North America operations, Lynch said,
“In 2023, our corporate and franchise teams delivered their fourth
consecutive year of positive North America comparable sales,
sustaining the sales growth that we experienced throughout the
pandemic. At the same time, we have made foundational improvements
in our restaurant operations, digital solutions and marketing
platforms as part of our efforts to evolve our business model for
the next chapter of growth. As we look to the future, we are
optimizing our investments in data science and our marketing tech
stack to unlock value for both the top and bottom lines. Building
on these marketing improvements, and in a strong vote of
confidence, our North American franchisees recently voted to
significantly increase contributions to our National Marketing
Fund, giving us more fuel to accelerate comparable sales growth and
increase restaurant profitability. We are also confident the
changes we are making to our commissary business and the new
development incentive program, which is the largest development
incentive in system history, will be mutually beneficial for our
franchisees and our corporate business model.”
Several strategic growth initiatives the Company is currently
undertaking in North America include:
- Enhance National Marketing Investment and
Effectiveness – To drive system-wide sales growth and brand
affinity, Papa Johns will be activating a new marketing strategy in
2024. Based on a comprehensive review of its creative and media
strategy in 2023, the Company has identified significant
opportunities to improve audience selection, offer differentiated
category solutions, improve marketing return on ad spend (ROAS),
sustain loyalty and create cultural buzz. Correspondingly, the
Company’s franchisees have voted to increase the contribution rate
to the National Marketing Fund by 20%, or 100 basis points of
sales. This will increase the productivity of their holistic
marketing contributions by leveraging the scale national
investments deliver. At the same time, the Company has made local
marketing optional for franchisees, resulting in a net decrease in
required marketing spend and an opportunity to increase the overall
profitability of their restaurants.
- Accelerate North America
Development – To pursue the significant untapped and
underserved markets the Company has identified in North America and
accelerate development in 2024 and beyond, it has designed a
development incentive that will deliver significantly higher
restaurant-level EBITDA margins during the first five years of
operations through a waiver of National Marketing Fund
contributions. This rich program is made possible by the improved
productivity and scale of the marketing investments highlighted
above. This new incentive will significantly improve cash-on-cash
paybacks for franchisees, add scale in key markets and attract
growth-driven franchisees.
- Evolve U.S. Commissary Business –
To drive profitable growth and overall supply chain productivity
that provides cost savings and incremental profit for the system,
the Company is evolving its commissary business. Beginning in 2024,
the Company will increase the fixed operating margin that its U.S.
commissaries charge by 100 basis points in each of the next four
years, moving from 4% today to 8% in 2027. In total, this change
will equate to approximately 100 basis points of cost at the
restaurant level. There will be multiple initiatives employed to
mitigate this cost. Firstly, the Company is offering new
opportunities for its franchisees to earn annual incentive-based
rebates as they increase volume and open new restaurants.
Franchisees who increase case-volume purchases at the highest
volume growth could realize target market rates lower than the
current 4% rate in place today. Secondly, the incremental volume
driven by increased marketing and additional development will
reduce the shared supply chain costs across the system. Lastly, the
company will be focused on driving continued productivity
throughout the supply chain through improved operations and
supplier relationships.
International Transformation Initiatives
Commenting on Papa Johns’ International segment, Lynch added,
“Over the past 10 years, we have more than doubled our
international footprint and now operate in 50 countries and
territories. As we pursue the next phase of international growth,
we are taking the necessary steps to evolve our business structure
to deliver an enhanced value proposition to our customers and
franchisees, ensure targeted investments and efficient resource
management, and better position our largest markets, including the
UK, for long-term, profitable growth and brand strength.”
Several transformation initiatives the Company is undertaking to
evolve its international business structure are:
- Establish International Regional
Hubs – To deliver a frictionless, locally-valued offering
with a recognizable and consistent customer experience, we are
establishing hubs in our key regions – APAC (Asia Pacific), EMEA
(Europe, Middle East and Africa), and Latin America. These regional
hubs will be led by experienced General Managers and their teams
who will partner with franchisees to create a holistic strategy to
boost performance in their markets. These teams will align global
best practices in operations, marketing and technology with local
preferences and needs to accomplish Papa Johns’ long-term objective
of increasing market share in key markets around the world.
- Increase Technology Investments –
To further its ability to deliver impactful innovations, targeted
marketing, and enhanced value in key international markets, Papa
Johns is increasing its investment in consumer-facing technology,
digital infrastructure and enhanced reporting. By investing in
expanded ordering capabilities through its website and app and
leveraging analytics, the Company expects to improve purchase
conversion, increase customer retention and deliver faster consumer
insights to franchisees.
- Optimize UK Business Model – In
order to set up its largest international market for long-term
success, the Company will continue to focus on improving
operational efficiency, enhancing the customer experience and
driving profitability. As a result, the Company closed multiple
low-performing, non-viable, franchised restaurants in the fourth
quarter of 2023. In 2024, the Company anticipates additional
strategic restaurant closures of low-performing restaurants that
will drive improved profitability of the remaining stores and
strengthen our franchisee base within this important market.
As a result of these transformation initiatives, the Company is
analyzing the potential non-cash lease impairments associated with
strategic closures and loan impairments, along with other costs
including employee expenses and professional service fees in
connection with the International transformation initiatives. The
Company expects that a portion of these costs will be incurred in
the fourth quarter of 2023 with the remainder to be recognized in
fiscal years 2024 and 2025.
Preliminary Full Year and Fourth Quarter 2023 Results
Preliminary sales results for the fourth quarter and full year,
as compared with the prior year periods, include the following:
- Global system-wide sales were approximately $1.3 billion for
the fourth quarter ended December 31, 2023, an approximately 12%(1)
increase from the prior year fourth quarter ended December 25,
2022. Excluding the 53rd week in 2023, global system-wide sales for
the fourth quarter were up approximately 3%(1). For the fiscal year
2023, global system-wide sales were approximately $5.0 billion, an
approximately 5%(1) increase from fiscal year 2022. Excluding the
53rd week, global system-wide sales were up approximately
3%(1).
- North America comparable sales, on a 13-week basis, were up 2%
compared with the fourth quarter of 2022 as transaction and ticket
growth delivered 2% comparable sales at both Domestic Company-owned
restaurants and North America franchised restaurants. For the full
year 2023, North America comparable sales, on a 52-week basis, were
up 1% from a year ago, driven by a 3% increase at Domestic
Company-owned restaurants.
- International comparable sales, on a 13-week basis, were down
approximately 6% for the fourth quarter. For the full year 2023,
International comparable sales, on a 52-week basis, were down
approximately 4% from the prior year.
- 210 net unit openings for the full year 2023 with 57 net unit
openings in North America and 153 net unit openings in
international markets. The lower-than-anticipated net unit openings
were primarily the result of additional unanticipated international
restaurant closures in the fourth quarter including 10 UK
franchised restaurants; 12 international units that were
re-classified as closed locations in the fourth quarter through a
review of temporary restaurant closures; restaurant openings moved
into 2024; and restaurant opening delays due to the ongoing
conflict in the Middle East.
The above results are preliminary and remain subject to the
completion of normal year-end accounting procedures and
adjustments. The Company expects to release final financial and
operating results for its fiscal fourth quarter and fiscal year
ended December 31, 2023, before the market opens on Thursday,
February 29, 2024.
(1) Excludes the impact of foreign currency
ICR Conference
Participation
As previously announced, Rob Lynch, president and CEO, Ravi
Thanawala, CFO, and Stacy Frole, Vice President of Investor
Relations will host a fireside chat at the 26th Annual ICR Investor
Conference tomorrow, January 9, 2024, at 8:00 a.m. Eastern Time. A
live audio webcast of the fireside chat will be available on the
Investor Relations section of the Company’s website at
ir.papajohns.com with a replay of the webcast also available
following the live event.
About Papa Johns
Papa John’s International, Inc. (NASDAQ: PZZA) opened its doors
in 1984 with one goal in mind: BETTER INGREDIENTS. BETTER PIZZA.®
Papa Johns believes that using high-quality ingredients leads to
superior quality pizzas. Its original dough is made of only six
ingredients and is fresh, never frozen. Papa Johns tops its pizzas
with real cheese made from mozzarella, pizza sauce made with
vine-ripened tomatoes that go from vine to can in the same day and
meat free of fillers. It was the first national pizza delivery
chain to announce the removal of artificial flavors and synthetic
colors from its entire food menu. Papa Johns is co-headquartered in
Atlanta, Ga. and Louisville, Ky. and is the world’s third-largest
pizza delivery company with more than 5,900 restaurants in 50
countries and territories. For more information about the company
or to order pizza online, visit www.PapaJohns.com or download the
Papa Johns mobile app for iOS or Android.
Forward-Looking
Statements
Certain matters discussed in this press release and other
Company communications that are not statements of historical fact
constitute forward-looking statements within the meaning of the
federal securities laws. Generally, the use of words such as
“expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,”
“forecast,” “outlook”, “plan,” “project,” or similar words identify
forward-looking statements that we intend to be included within the
safe harbor protections provided by the federal securities laws.
Such forward-looking statements include or may relate to
projections or guidance concerning business performance, revenue,
earnings, cash flow, earnings per share, the current economic
environment, commodity and labor costs, National Marketing Fund
investments and effectiveness, development incentives, U.S.
commissary system rate changes, International regional hubs,
technology investments, strategic store closures, employee expenses
and professional service fees in connection with the International
transformation initiatives, currency fluctuations, profit margins,
supply chain operating margin, net unit growth, unit level
performance, capital expenditures, restaurant and franchise
development, restaurant acquisitions, royalty relief, franchisee
support and incentives, the effectiveness of our menu innovations
and other business initiatives, investments in product and digital
innovation, marketing efforts and investments, liquidity,
impairments, strategic decisions and actions, investments in the UK
market and other financial and operational measures. Such
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions, which are difficult
to predict and many of which are beyond our control. Therefore,
actual outcomes and results may differ materially from those
matters expressed or implied in such forward-looking
statements.
Our forward-looking statements are based on our assumptions
which are based on currently available information. Actual outcomes
and results may differ materially from those matters expressed or
implied in our forward-looking statements as a result of various
factors, including but not limited to risks related to: our ability
to successfully implement and realize anticipated benefits of
long-term strategic initiatives designed to drive North America
development, accelerate comparable sales growth and
restaurant-level profitability, and International profitability and
long-term development; deteriorating economic conditions in the
U.S. and international markets, including the United Kingdom; labor
shortages at Company and/or franchised stores and our quality
control centers; increases in labor costs, commodity costs, supply
chain incentive-based rebates, or sustained higher other operating
costs, including as a result of supply chain disruption, inflation
or climate change; the potential for delayed new store openings,
both domestically and internationally, or lower net unit
development due to changing circumstances outside of our control;
the increased risk of phishing, ransomware and other cyber-attacks;
risks and disruptions to the global economy and our business
related to the conflicts in Ukraine, the Middle East and other
international conflicts; risks related to a possible economic
recession or downturn that could reduce consumer spending or
demand; and continuing risks related to outbreak of COVID-19 and
other health crises. These and other risks, uncertainties and
assumptions that are involved in our forward-looking statements are
discussed in detail in “Part I. Item 1A. – Risk Factors” in our
Annual Report on Form 10-K for the fiscal year ended December 25,
2022, as updated by those included in our Quarterly Report on Form
10-Q for the quarter ended June 25, 2023. We undertake no
obligation to update publicly any forward-looking statements,
whether as a result of future events, new information or otherwise,
except as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240105707056/en/
Investors: Stacy Frole Vice President, Investor Relations
investor_relations@papajohns.com
International Media: Georgia Wilkins Sr. PR Manager
georgia_wilkins@papajohns.co.uk WhatsApp: 07552192541
U.S. Media: Harrison Sheffield Sr. Communications Manager
harrison_sheffield@papajohns.com 470-751-4483
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