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Papa Johns growth spree continues.

Papa Johns claims bigger slice of pizza category, thanks to substantial unit growth and menu innovation

Same-store sales were up 13% as consumer demand grew, despite labor and supply chain issues

Papa Johns International, Inc.’s growth spree continues in the fourth quarter of 2021, with same-store sales up 11.1% in North America, on top of an accelerated development pace, CEO Rob Lynch said during Thursday’s earnings call for the quarter and full fiscal year ended Dec. 26, 2021.

Much of Papa Johns momentum came from digital sales, which saw double-digit growth for the second consecutive year in a row, and now 90-95% of orders come through digital channels, Lynch said Thursday morning, a significant portion of which comes from loyalty program growth which increase its membership by six million to 23 million by the end of 2021.

Lynch attributes much of the continued success of the Lexington, Ky.-based pizza brand to pizza innovation and an aggressive growth strategy, particularly the impact that pricier LTOs like the Epic stuffed crust pizza and New York-style pizza, the latter of which launched six weeks ago, to more customer buzz than anticipated. As a result of these menu items constantly being added, average check has grown in tandem with traffic.

“Our check is up significantly, and it has not been a function of pricing until recently when we [increased prices] to mitigate inflation,” Lynch said. “Almost all of it has been customers self-selecting into our menu innovation. The average price per pie is a little over $10 and New York-style and stuffed crust are priced at $12-14. […] our innovation culture showed our menu innovation could create growth.”

Besides menu innovation, Papa Johns has been busy accelerating development. In January, the pizza chain announced what it believes to be the largest franchise deal ever in the pizza industry: an agreement with Chinese private equity firm FountainVest Partners to open 1,350 new stores across South China over the next two decades. In fact, Lynch believes their international development could soon outpace U.S. development.

“Our international business is accelerating even more rapidly,” Lynch said. “The profitability driven from those restaurants will only grow. 20222 will be the biggest year for growth domestically and internationally as these development agreements come to fruition. Our development will skew internationally in the next three to five years.”

Lynch recounted these wins for Papa Johns even while acknowledging the industry-wide challenges of omicron-related inflation and staffing issues. But he is confident these issues are temporary and won’t hinder performance in 2022.

“Staffing issues were mainly driven by omicron, and cases are almost going away at this point,” he said. “We’re seeing staff coming back and have nothing but confidence for 2022. We’re lapping the biggest year in the company’s history.”

For the fourth quarter, total company revenues increased 12.6% to $528.9 million. Net income nearly doubled from $13.2 million or 28 cents per share the same quarter last year to $24.6 million or 67 cents per share.

Papa Johns opened 81 net new stores last quarter bolstered by international growth, for a total of 5,650 restaurants systemwide.

Contact Joanna Fantozzi at [email protected]

Follow her on Twitter: @JoannaFantozzi

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