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Papa John's $80 million franchisee investment indicates sluggish turnaround: BTIG

Tonya Garcia

Papa John's International Inc. has announced an additional $80 million investment in its franchisee assistance program, which indicates that the company's turnaround isn't happening just yet, BTIG analysts said in a note. The investment will start in the third quarter of fiscal 2019 and will be used to bolster the brand by getting its newest ambassador and board member, Shaquille O'Neal, involved in the branding, and for royalty relief. The investment extends through 2020. "This suggests to us that any meaningful sales turnaround has yet to take hold and franchisees are not yet capable of standing on their own with regard to unit economics," wrote BTIG. "We continue to believe that menu and marketing are the two most meaningful levers for management to pull but expect a turnaround to take longer than initially expected as the bulk of these efforts is still to come." BTIG thought the company would begin to pullback on royalty relief in the second half of 2019, with a total of about $5 million per quarter invested in the last two quarters. Papa John's has struggled since its founder John Schnatter became embroiled in a racially-charged controversy and stepped down from the company. Papa John's shares are down about 2% in Thursday trading, but have rallied 21.1% in 2019. The S&P 500 index has gained 17.2% for the year to date.