Papa John’s International, Inc. announced Wednesday a 100-store development deal across Texas through 2029 in partnership with franchisee operator, Sun Holdings, Inc. This is the company’s largest U.S. franchise deal in its history.
“We’ve had some big wins over the past 6-8 months, and now this is the first major franchisee that has come into our system, which really lends credibility to the model we’re building,” Papa John’s CEO Rob Lynch told Nation’s Restaurant News. “Guillermo [Perales, founder of Sun Holdings] loves the unit economics, the low investment level, especially relative to traditional drive thru QSR with similar AUVS. He came into our company with the intention to build rapidly.”
Lynch and Perales have been in business together for years since they were both at Arby’s. At the time, Lynch was impressed with how Perales was able to rebuild a market that was not doing well for Arby’s and develop it into a strong presence for the brand. He’s hoping Sun Holdings will be able to build up the Texas market nearly from scratch, and Perales is currently looking into markets all over Texas to begin filling in the Papa John’s whitespace.
“He approached us about the opportunity and said, ‘I’ve been thinking about getting into the pizza business for years and I thought being in Texas I’d love to buy a bunch of Pizza Huts, but I’m excited about the story you have with Papa John’s,” Lynch said. “So we said we’d love to explore an opportunity for you.”
This major deal is a direct result of continued growth for the once-struggling brand. Throughout the pandemic, the company thrived, posting record-breaking same-store sales. Their last major franchise deal was announced in Sept. 2020, when Papa John’s signed a 49-unit franchise deal in Philadelphia, the company’s largest franchise deal in North America at the time.
“We’re becoming more restrictive in who we allow into our system,” Lynch said. “We want someone that is well-capitalized, with operating experience and is prepared to grow. [Perales] checked every box.”
Moving forward, Lynch said, Papa John’s plans to pursue a “symbiotic relationship between new and current franchisees.” They want to continue supporting the franchisees that have been a part of their system for years, but also want to tap into the “significant whitespace out there.”
Currently, Papa John’s has about half as many locations as Domino’s, their largest competitor, and Lynch sees plenty of room to grow both nationally and internationally (abroad, Papa John’s is in 50 countries, which is about half the international presence of Domino’s).
A significant part of that strategy is to continue growing in tandem with the third-party delivery aggregators. Last quarter, Papa John’s announced a new partnership with Grubhub, and they are now fully integrated with all four major third-party delivery platforms.
“We want to be where our customers are,” Lynch said. “If they want to order through those platforms, we want to be there. […] The aggregators have provided us with access to new customers and we provide them with trips for their drivers. It’s a symbiotic relationship.”
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