Papa John’s: 3Q one of best in brand’s history


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Commodity price increases

Papa John’s officials also would not forecast anticipated hikes in commodity prices for next year.

Domestic commissary sales rose 17 percent in the third quarter compared with a year earlier, increasing to $41.1 million. The gain in commissary revenue reflected not only increased volume from Papa John’s stores, but also a spike in block cheese prices, for which Papa John’s takes a fixed mark-up when selling to franchisees.

“At this point, we’re expecting commodity prices to remain high,” said Tony Thompson, executive vice president of North American operations and president of the company’s PJ Food Service commissary.

Schnatter said this past quarter saw some of the highest commodity prices in the brand’s history, and yet Papa John’s had one of its best overall quarters ever.

“So, commodities jump around, and the competitors are good at what they do, they’re big, and you never know what they’re going to do next,” he said. “We’re trying to produce consistent earnings growth in an inconsistent world.”

Doing that requires growing store counts and earnings methodically, he said, whether through managing the commissary with a long-term view or leveraging digital marketing, which now accounts for more than 30 percent of domestic sales.

Tucker said Papa John’s would continue to offer franchise development incentives like royalty rebates available to franchisees that meet certain store or sales growth targets, which were passed this year in exchange for higher contributions to the brand’s national marketing fund. Those arrangements will continue into 2012 and 2013, he said.

Papa John’s plans to open its 4,000th restaurant in the first or second quarter of next year, Schnatter said. The development pipeline includes 410 units in North America and 1,240 international units to open over the next six years.

“This is a scale game,” Schnatter said. “We’ve never been in any market where, once we get scale and get on top as the leader, we don’t stay the leader. We’re going to use our healthy balance sheet to build restaurants and achieve scale.”

Louisville, Ky.-based Papa John’s operates or franchises 3,780 restaurants in all 50 states and 32 countries.

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