A dmit it: Your favorite pizza joint might be the family-owned
place that's been around for decades, but when you want a pie
delivered quickly and cheaply, you dial up one of the big chains
such as Papa John's International.
Papa John's (
) operates more than 4,600 namesake restaurants worldwide. It has
operations in all 50 states as well as in 36 countries and
territories. The vast majority of its restaurants -- more than
80% -- are franchised.
With $1.6 billion in annual revenue, a market value of roughly
$2.7 billion and a stock price that touched a record high of
68.49 on Tuesday, Papa John's is one of the biggest pizza
delivery chains in the world.
Along withDomino's Pizza (
),Yum Brands ' (
) Pizza Hut, and Little Caesars, Papa John's is one of a small
number of chains that dominate a highly fragmented market.
In terms of the number of stores worldwide, Pizza Hut leads
the way with more than 13,600. Domino's is next with about
11,700, followed by Papa John's. Privately held Little Caesars
has just less than 4,000 units, according to the Pizza Today
industry news website.
Pizza Players Aplenty
You can expect those store count numbers to keep rising in
coming years as the large chains carve out a bigger share of the
market in the U.S. and elsewhere, analysts say.
"It's a very fragmented industry with lots of small players,
and there's a lot of consolidation going on," Feltl & Co.
analyst Mark Smith told IBD. "More mom and pops are going out of
business, so you're seeing more market share gains by the big
chains, especially Domino's and Papa John's."
Papa John's officials were not available to comment for this
article. On a first-quarter conference call with analysts, the
company said that it plans to open 220 to 250 new stores this
One of the advantages large chains have over smaller
operations is that the big boys have more money to invest in
technology -- an increasingly important part of the pizza segment
as more customers order either online or through mobile apps.
"Online ordering is moving to 50%-plus of overall sales,"
Smith said. "This gives Papa John's a better opportunity to
upsell. Mom and pops have a hard time competing with
Customers can order online from the Papa John's website using
their computers or through apps available for theApple (
) iPhone as well asGoogle (
) Android devices. Customers can also sign up to have coupons and
other deals sent via e-mail or text.
Last month, Papa John's expanded its digital offerings even
further with the introduction of PayShare, a digital service that
lets customers split their pizza bills immediately.
Apps Sort Out Orders
PayShare, powered by money transmitter Venmo, is designed to
give customers a secure way to split the check on mobile or
"PayShare will change the mindset of our customers as they
begin to think less of a $20 order and see it more as a $5 meal,"
Bob Kraut, Papa John's chief marketing officer, said in a
Meanwhile, the company has "substantially completed" the
rollout of its Focus point-of-sale system, Papa John's Chief
Operating Officer Steve Ritchie said on the Q1 conference
"Over time we expect the new system to have a very positive
impact on systemwide store-level operations and to drive multiple
store-level efficiencies," Ritchie said. "We have only had the
system in place for a short time, but many stores have already
experienced improvement in order speed, accuracy, delivery
service and team member training."
Advances in technology have helped Papa John's maintain steady
if unspectacular financial growth in recent years. Another
business boost has come from expansion internationally, where
almost all of the company's units are franchised.
During Q1, Papa John's international revenue came in at $25.4
million, up 7.6% year over year. The company opened a net total
of 35 new international restaurants during the quarter.
Same-store sales at international restaurants climbed 7.7% in
Q1 from a year earlier, as opposed to 6.5% comp growth for North
"While domestic same-store sales was the big surprise in 1Q,
we continue to get more excited about PZZA's international
business, where it is rapidly growing its franchise base of
stores, seeing strong same-store sales and improving margins as
it repositions its co-owned China business," Jefferies analyst
Alexander Slagle noted in a recent research report.
All The Pies In China
China is seen as a particularly inviting market for Papa
John's as well as Domino's and Pizza Hut. Papa John's has a mix
of company-owned and franchised stores in China. On the Q1
conference call, the company said that its business in China
showed "modest improvement" during the quarter.
Overall Q1 revenue grew 7.7% from a year earlier to $432.3
million. Earnings gained 22.2% to 55 cents a share. Both results
topped consensus estimates. Analysts polled by Thomson Reuters
expect full-year earnings to climb 18% in 2015 and 16% in
Papa John's has an IBD Composite Rating of 94. It belongs to
IBD's Retail-Restaurants group, which ranks No. 55 out of 197