Papa Murphy’s Holdings Inc. is looking to traditional pizza chains in a bid to jumpstart falling same-store sales: It plans to test delivery.
The Vancouver, Wash.-based take-and-bake pizza chain, presenting to investors at the ICR Conference Tuesday, said it will test delivery this year through third-party providers.
“We have an opportunity to do delivery different than anybody else does it, with no quality compromise whatsoever,” Papa Murphy’s CFO Mark Hutchens said.
Papa Murphy’s is hardly the only chain testing or moving forward with delivery, a strategy more companies are using thanks to the growth of third-party providers.
Indeed, numerous chains at ICR mentioned delivery in their presentations, ranging from quick-service Jack in the Box to polished-casual Kona Grill. Fast-casual Zoe’s Kitchen said it’s testing just about every form of delivery, including using its own drivers.
But for Papa Murphy’s, delivery would open up a business that it has eschewed for much of its history to date, even though just about all of its major competitors already provide it.
Papa Murphy’s believes its customers would use delivery. At the presentation, the company said 72 percent of its customers indicated in a survey that they would use delivery, and 53 percent would order pizza more often.
“There’s strong consumer demand,” Hutchens said.
Hutchens said Papa Murphy’s would avoid one of the major pitfalls of delivery: The reduction in quality that comes from the 15 minutes it often takes to get a pizza from a restaurant to a home.
Because customers bake the pizzas themselves, Papa Murphy’s argues the quality would be better.
Delivery isn’t the only strategy in which Papa Murphy’s is working to catch up with competitors. The company is working to build its online ordering mix, which exceeds 50 percent at chains like Domino’s Pizza Inc. and Papa John’s International Inc. At Papa Murphy’s it’s about 8 percent.
Online ordering is important because customers who order online tend to order more — average check is 20 percent higher — and it’s more efficient than orders taken by phone.
Such strategies are important to Papa Murphy’s, which is coming off one of the toughest years in its history, and one that culminated in a 7.8-percent decline in fourth-quarter same-store sales and the departure of CEO Ken Calwell.
“2016 was challenging,” Hutchens said.
Jean Birch made her debut as Papa Murphy’s interim CEO at ICR. And she revealed another key strategy in the chain’s bid to reverse its fortunes: Refranchising.
Over the years, Papa Murphy’s bought restaurants from franchisees and built its own units in a bid to develop markets. As such, the traditionally franchise-heavy business went from 95 percent franchisee owned to 90 percent.
Birch wants Papa Murphy’s to get back to the 95-percent mark, so the company plans to sell roughly 100 units to operators. It plans to use funds from that sale to pay off debt.
“We’re traditionally 95-percent owned, and we’ll be getting back there in the next few years,” Birch said. “We make our money through the franchise business model.”
Contact Jonathan Maze at [email protected]
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