Industry analyst firm BTIG shared some color around recent decisions made by Papa John’s restructured board in a new report released Wednesday — particularly the chain’s new formed partnerships with celebrity Shaquille O’Neal and delivery company DoorDash.
Following one-on-one meetings with Papa John’s last week, BTIG predicts Papa John’s will soon hire a new chief marketing officer, a role vacant since May 2018, and partner with more social influencers like O’Neal to improve customer sentiment around the brand, according to MarketWatch. Partnerships could also include celebrity chefs, analysts said.
The pizza chain additionally told BTIG that it will begin to deviate from marketing exclusively during sports telecasts, which works well for reaching older customers, but the company needs “a new approach that resonates with younger and minority consumers,” analysts wrote. Papa John’s shelled out $10.6 million in television advertising last month, according to iSpot.TV.
“Our creative and value offerings have not resonated with consumers in a heightened competitive environment.” Papa John’s CEO Steve Ritchie said on the company’s fourth quarter earnings call with investors Feb. 26.
Papa John’s launched a new marketing strategy earlier this month highlighting new ingredients on pizzas — instead of limited time offers and its new loyalty program. The Louisville-based chain is consistently behind market rivals Domino’s and Pizza Hut in ad spend, according to iSpot.TV data, with competitors spending north of $30 million in TV marketing alone in February.
Papa John’s, however, plans to close that gap in 2019 by using a portion of Starboard Value LP’s recent $200 million investment and increasing franchisee contributions to its national marketing fund. Storeowners are expected to contribute 5 percent of net sales to new advertising efforts, it says.
Lack of Delivery Drivers
Here’s a jarring statistic: Delivery driver turnover at Papa John’s is currently 220 percent, due largely to a decline in orders, Restaurant Dive reported. That explains why the pizza chain tapped DoorDash to takeover delivery operations in 1,400 of its stores. Papa John’s delivery is also available through Grubhub in select locations.
BTIG expects Papa John’s to leverage the new nationwide DoorDash partnership by giving operators more flexibility in staffing when business is generally slow. DoorDash will also allow the chain to expand its delivery area, while charging five dollars more per pie on new specialty pizzas thanks to added-on fees.
Papa John’s is not the only restaurant chain struggling with retention, but it is still a unique case. The company last month offered its employees full tuition to Purdue University online classes, in hopes of keeping workers through difficult financial times. Papa John’s also recently worked with a third party to facilitate a cultural audit of the company and ensure diversity and inclusion among staff. Chief People Officer Marvin Boakye was also hired shortly thereafter.
Yet the brand has still found retaining workers to be a difficult task following a 7 percent same-store sales drop in 2018, with more losses predicted through the end of the year.
“Our team has accepted the challenge of improving sales and operations to set the pace for the North America system,” said Ritchie. “We will continue to evaluate our company store performance by market to ensure that we are maximizing longterm value.”
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