Papa John’s CEO Robert Lynch joins Yahoo Finance Live to discuss company earnings, menu innovations, macroeconomic headwinds, being listed as a top employer for diversity by Forbes, expansion plans, and the outlook for Papa John’s.
Video Transcript
- Papa John's growth stalled in the first quarter, as the pizza chain faced high food and labor costs and battled with third-party delivery platforms. But the company continues to lean on menu innovations to drive in customers, most recently joining forces with PepsiCo to launch a new Doritos Cool Ranch menu item.
Joining us now to talk the business of pizza is Papa John's CEO Robert Lynch, alongside Yahoo Finance's Brian Sozzi. OK, Robert, I mean, since we mentioned it, like, I just have to ask. Like, what prompted the Doritos pizza?
ROBERT LYNCH: Well, it's a Papadia, which is our handheld item, right? So it's-- it actually is shaped kind of like a Dorito. And I think, you know, that might have spurred some inspiration with our culinary team. I think the other thing is, you know, our strategic focus about going after a little bit of a younger demographic, Doritos brings in a new kind of core customer for us, 18 to 25-year-old males who, you know, love Doritos, have loved Doritos for years. And we think this is a perfect marriage of our great brand with another great brand from Frito-Lay.
BRIAN SOZZI: Rob, PepsiCo-- good to see you-- PepsiCo has a lot of different flavors in that Frito-Lay portfolio. Is this a sign of things to come?
ROBERT LYNCH: Yeah, I mean, we're always looking for great ideas and great innovation. And we believe that innovation and ideas can come from everywhere, whether it's our culinary team, our restaurants, or from our strategic partners like PepsiCo. So yeah, we've been delivering great new products for the last three and a half years-- stuffed crust, New York style pizza, garlic parmesan pizza.
All these things are new to our brand and new to our customers. This is just the latest in that. But it's one of our biggest. We've put more support behind this. We think it's a platform that we can continue to grow off of. So that's what we're focused on right now.
BRIAN SOZZI: Rob, I've been following your CEO journey at Papa John's literally since day one. And we talked that day you got announced as CEO. Where are you at in the turnaround of this company?
ROBERT LYNCH: Yeah, I think we've definitely turned around this company. We've gone from about 850,000 to 900,000 per-year sales per unit, and today our system averages almost 1.2. Our franchisees are healthy. Our franchisees are developing. So, you know, the last couple of years have been two of the best years in the company's history. Obviously, over the last 9 to 12 months, we've had some challenges on the cost side with the global macroeconomic environment, but our customers have stuck with us.
All those sales that we drove during the pandemic have stuck with us. We've-- you know, last year, we were the only global pizza company to deliver positive comps in North America. So even Q1, I-- we're really proud with Q1. We lapped over a quarter last year that had kind of the last fight of the COVID pandemic. Omicron was in January of last year, so we had a really big lap in January, and we've continued to sequentially improve since then. So we're excited about 2023 and beyond.
- Rob, I'll be real with you. I was out of the customer base with Papa John's for a while, and after the John Schnatter events came to light. However, had the opportunity to speak with Shaquille O'Neal, who is still on the board of Papa John's, and got on the board as a result of an investment. I wonder, for the other consumers like myself, who may have taken themselves out of the equation for a while, what you're doing to win them back.
ROBERT LYNCH: Well, we're trying to be a company and a brand that we can all be proud of. You know, this is the third straight year we've been named one of Forbes magazine's top employers for diversity. I mean, think about that journey, from where we started and what you're referring to where we are today.
And when I interviewed for this job, I met with Shaq. And he told me, Rob, I really want you to come here on this journey with me because we're going to do some really amazing things, not just from a business standpoint, but from a company standpoint, from a people standpoint, from a culture standpoint. And I fundamentally believe that we've achieved that. Obviously, it's a never-ending journey. We can always get better. But the progress we've made, there's a lot of pride back at Papa John's, and both with our employees and our customers.
BRIAN SOZZI: Rob, that's good to hear. I know that's been a focus by you and the team for sure. Let's go overseas a little bit, because you have also now started to push into India, or are looking to push into India. It didn't work in the past, prior to your arrival. What are you doing now to ensure that does work, and how big could that market get for you?
ROBERT LYNCH: Yeah, it's a huge market. I mean, 650 restaurants committed over the next 10 years, that's a really big number. 65 new units per year, on average. And so what we've done differently is we've been more strategic about this entry into this marketplace. We picked the right franchisee in PJP, who's been an amazing partner for us in the Middle East for the last five years. They run and operate 100 great restaurants in the UAE, Jordan, and throughout that region.
And we fundamentally believe they're the right partner. And we've worked with them for the last year and a half to build the business model to go in there, from a supply chain standpoint, from a penetration standpoint. The last time that Papa John's went into India-- it was before my time-- was kind of a scattered approach. They went into multiple markets. They kind of tried to take the model that had been planted everywhere else and just kind of bring it in to India.
India is a unique market, has different, you know, price sensitivity, has different components of the business model there. Our team worked with our franchisee team to build a lot of insights and knowledge into how we launch there. So we're going to go market by market, penetrate a market, build a foundation there, and then expand. So that's a little bit different than how we approached it the last time.
- Rob, we've heard some companies call this year a year of efficiency. Some of them call it a year of rebuilding. What would you call this year? What would you frame this year as for Papa John's?
ROBERT LYNCH: This is a year of growth for us. Last year was a year-- was a challenging year for Papa John's. Once again, we were able to deliver positive comps, but we made less money last year than we did the year before because of the inflation. We own a lot of restaurants. We've been hit by the wage inflation in our own company restaurants. So we're kind of in the trenches with our franchisees on the commodity inflation and the labor inflation that they're facing.
But we've built a model now that is set up to deliver great margins on top of the great revenue that we're going to generate this year. We're really bullish on some of the innovation we have. Doritos Papadia is just the-- kind of the first foray into some of the great items that we're going to be launching this year. So if we can continue to hold on to those customers and drive topline revenue growth, we're going to see some margin enhancement through some of the commodity deflation that we're already starting to experience.
BRIAN SOZZI: Rob, real quick, before I let you go, are you using AI at all to better customize the orders on your app? You have, what, over 30 million rewards program members? That's huge. Are you using this technology anywhere?
ROBERT LYNCH: Yeah, I think we've just scratched the surface. You know, I think that it's an opportunity for us. We've got to be careful with it. We've got to make sure that we're doing it the right way. But driving, you know, insights out of our analytics is a big opportunity for us to get better and drive more frequency.
You know, as you mentioned, Brian, almost 30 million customers in our loyalty program. We get all their first-party purchase data. I mean, they've opted in to allow us to get that data so that we can better meet their needs. And I think we have a big opportunity to do that. And that's going to be a key differentiator for us from the rest of the restaurant industry-- pizza, order ahead, different behavior, different level of data that we need to make sure we're taking advantage of.
- Really good conversation here today, Rob. Really appreciate the time, as well, here, breaking down some of the quarter results, as well as the future pathway for Papa John's here, as well. Robert Lynch, Papa John's CEO, as well as our own Brian Sozzi. Thanks so much.
ROBERT LYNCH: Thank you for having me.
