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Papa John's is dropping its 2020 fiscal outlook during the pandemic.

Ex-CEO John Schnatter now owns just 4% of Papa John’s; company posts preliminary Q1 same-store sales increase

Papa John’s founder John Schnatter has all but dropped out of the company, while Papa John’s reports strong preliminary first quarter results

Papa John’s embattled ex-CEO John Schnatter has all but left the company entirely as he dropped his stake in the company down to just 4%, a threshold low enough that he will no longer have to file public disclosures of further sales or buys, according to the SEC filing. Over the past 10 months, Schnatter has shed 87% of his remaining shares in the company, dwindling from a 30% stake in May 2019 to under the reporting prerequisite of 5% the week of March 30.

As Papa John’s controversial ex-CEO, who was ousted as chairman in 2018 following accusations of racist language use and subsequently locked in a court battle with his former company over the next eight months, all but drops out of the company completely, Papa John’s has separately updated its financial outlook during the coronavirus crisis. The company has withdrawn its financial outlook for 2020 in light of the uncertainties surrounding the COVID-19 pandemic.

“As we all work together to manage through the COVID-19 pandemic, I am incredibly proud of the tireless work of Papa John’s team members and franchisees, who are stepping up to serve our communities in these unprecedented times,” Papa John’s CEO Rob Lynch said in a business update. “From delivering meals to healthcare workers, first responders and families, to supporting blood drives and the organizations on the frontlines of this crisis, the Papa John’s family has already served tens of thousands of meals to our neighbors in need.”

Here's what we learned from the Papa John’s business update during the COVID-19 pandemic:

Same-store sales are up 5.3% systemwide, and delivery business is thriving in lockdown

As most of the restaurant industry struggles, delivery-focused businesses like pizza franchises are doing better than expected. Papa John’s is reporting for preliminary results for the first quarter ended March 29 that same-store sales have increased 5.3% systemwide in North America, and 2.3% internationally.

“There’s a lot of factors here [when it comes to positive performance],” a representative for Papa John’s told Nation’s Restaurant News. “We’re seeing more demand because people are stuck at home having cooked for a week to 10 days and they really want to order in food again. The company also started the quarter with a lot of positive momentum with the introduction of the Papadias.”

The most challenging part of the quarter was the third period, from Feb 24 to March 29, during which time COVID-19 picked up in momentum and government lockdowns were put in place. During the third period of the first quarter, North America same-store sales were up 3.6% and down 0.6% internationally.  

March sales were hit hard by cancelation of sporting events

Although sales were surprisingly strong for Papa John’s, particularly during a time of global crisis, the company took a hit with the cancelation of sporting events in March, particularly March Madness.

“During March Madness a lot of pizza is delivered and eaten, so that’s had a negative impact on the quarter which offset some of the positive factors,” the Papa John’s representative said.

The company is expanding healthcare benefits for employees

Papa John's has introduced free virtual doctor’s visits, and emphasized its already-existing free mental health support, health insurance plan options, and access to the employee-supported team member emergency relief fund.

The company has not commented on whether or not the company will change or increase its paid sick leave options in light of the global health crisis.

Papa John’s has stepped up training resources for franchisees during the pandemic

As Papa john’s introduces new contactless delivery policies and ramped-up sanitation procedures to stores systemwide, the company is also supporting its franchisees and employees with extra communication and training.

“We’re helping [franchisees] grow and prioritize the safety of theirteam members,” a representative for Papa John’s said. “We put out a training video for example, that shows a delivery person going to the door, ringing the doorbell and leaving the food. We’re training team members to implement these resources and introducing policies like handwashing every 30 minutes.”

Almost no stores have closed in North America, but the situation is different overseas

As most of the industry is laying off employees and closing down stores temporarily or permanently, Papa john’s is accelerating hiring during COVID-19 and has only shut down specialty stores in places that have already been closed by umbrella businesses or government organizations, like college campus and mall locations.

However, overseas, around 17% of stores remain closed out of 2,100 franchised international stores, closed mostly in Ireland, Peru and the Philippines, due to government restrictions. A few franchise locations in China and Korea also remain closed.

Contact Joanna Fantozzi at [email protected]

Follow her on Twitter: @JoannaFantozzi

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