Papa John's Pizza

Papa John's International, Inc.
Public
Traded as NASDAQ: PZZA
S&P 400 Component
Industry Pizza, Pizza Delivery
Founded October 2, 1984 (1984-10-02)
Founder John Schnatter
Headquarters Jeffersontown, Kentucky, U.S.
Number of locations
 5,199 (December 2017)[1]
Key people
 Steve Ritchie
(President and CEO)
Revenue Increase US$ 1.78 billion (December 31, 2017)[1]
Increase US$ 151 million (December 31, 2017)[1]
Increase US$ 102.292 million (December 31, 2017)[1]
Total assets Increase US$ 555.553 million (December 31, 2017)[1]
Total equity Decrease US$ 105.954 million (December 31, 2017)[1]
Number of employees
 20,700 (December 31, 2017)[1]
Website papajohns.com

Papa John's Pizza is an American restaurant franchise company. It runs the third largest take-out and pizza delivery restaurant chain in the United States, with headquarters in Jeffersontown, Kentucky, a suburb of Louisville.

History

The Papa John's restaurant was founded in 1984 when "Papa" John Schnatter knocked out a broom closet in the back of his father's tavern, Mick's Lounge, in Jeffersonville, Indiana.[2] He then sold his 1971 Camaro Z28 to purchase US$1,600 worth of used pizza equipment and began selling pizzas to the tavern's customers out of the converted closet.[3] His pizzas proved sufficiently popular that a year later he moved into an adjoining space. Dipping sauce specifically for pizza was invented by Papa John's Pizza that same year, and has since become popular when eating pizza, especially the crust.[4] The company went public in 1993. A year later it had 500 stores, and by 1997 it had opened 1,500 stores.[5] In 2009, Schnatter reacquired the Camaro back after offering a reward of $250,000 for the car.[6]

PMQ Pizza Magazine said in December 2016 that the company was the third-largest take-out and pizza delivery restaurant chain in the United States.[7] (According to PMQ, Little Caesars is the third-largest pizza chain; however, it does not deliver.[8])The company's net profitability though, is far behind its main competitors. In 2014 its net margin was 4.6% of total sales, whereas Domino's Pizza's net margin was 8.2% and Yum! Brands, which owns Pizza Hut, was 7.9%.[9] Company headquarters are in Jeffersontown, Kentucky, a community within the merged government of Louisville.[10][11][12] Its slogan is "Better Ingredients. Better Pizza. Papa John's."

Papa John's has over 5,199 establishments—4,456 franchised restaurants operating domestically in all 50 states and in 44 countries and territories. Papa John's operates 246 "company owned stores" under joint ventures and 35 units in Beijing and North China. [1] In September 2012 the 4,000th Papa John's Pizza restaurant opened, in New Hyde Park, New York. The company celebrated the event by giving away 4,000 free pizzas to customers throughout New York City.[3][13][14]

The company announced on December 21, 2017, that John Schnatter would step down as CEO of Papa John's Pizza on January 1, 2018, to be replaced as CEO by current company President Steve Ritchie with Schnatter remaining chairman at the time.[15] In February 2018, Papa John's and the NFL mutually agreed to end their sponsorship agreement, making Pizza Hut the new official sponsor of the NFL.[16]

On July 11, 2018, news outlets reported that during a conference call with Papa Johns' marketing agency Laundry Services, Schnatter had used the word "nigger" by saying "Colonel Sanders called blacks niggers and Sanders never faced public backlash." Schnatter alleged that referencing the quote by the KFC founder was meant to convey his dislike for racism. [17] After the call, the owner of the marketing agency moved to end their contract with Papa John's. Schnatter resigned as chairman of the board on the same day the incident was reported. [18]

On July 26, 2018, John Schnatter filed a lawsuit against Papa John's Pizza to give him access to the company's books and records after they fired him from the company after the teleconference call scandal. He describes the company's procedures as an “unexplained and heavy-handed way” to cut ties between him and the company that he founded. In addition to preventing him from accessing information, the corporation has also implemented a poison pill strategy in order to limit Schnatter's chances of buying back a majority stake in the company.[19]

Operations

A Papa John's in Front Royal, Virginia
Countries with Papa John's Pizza (as of 2017)
Papa John's in Springboro, Ohio, built specifically for home delivery
Papa John's in Santo Domingo, Dominican Republic

Papa John's primarily takes carryout and delivery orders, although some stores have tables and chairs for dining in.

Franchise owners pay a one-off franchise fee of $25,000 per restaurant, then a royalty fee of 5% of net sales, plus a charge for advertising of 8% of net sales. The company requires franchisees to have net worth of at least $250,000, the approximate amount of investment needed.[20][21] Corporate operations look over franchisees to ensure brand consistency. Papa John's International is a publicly traded company, with 25% of its shares owned by John Schnatter.[22]

In January 2002, Papa John's became the first national pizza chain to make online ordering available to all of its U.S. customers.[23] Most other national chains later added online ordering to their services. On July 10, 2004, Papa John's controlled an estimated 6.6% of the market, according to Technomic.[24]

In February 2017, it was reported by the Associated Press that the company was testing a "Papa Priority" $2.99 fee that lets people jump to the head of the line for their pizza order.[25]

Franchises outside the U.S.

Papa John's has operated in the United Kingdom since 2001. In July 2015 the company had 300 shops in the UK,[26] although in 2010 it had plans for the number rising to between 400 and 500 within the next five years.[27]

Papa John's operates throughout Ireland, with its head office at Ballybrit, County Galway. The company has over 50 locations and operates mobile units around the country. The franchises are often located adjacent to Supermacs fast food outlets.[28]

Spain is the second most important European market for Papa John's. The chain has been operating in Spain since 2016, and due to its fast growth it already had 42 restaurants by late 2017.[29] In particular, the restaurants achieved a significant presence in the Madrid province with more than half of the Spanish restaurants being located there. Papa John's expects to open at least 100 restaurants just in the province of Madrid, as well as expanding to other regions across Spain.[30]

A Papa John's Pizza restaurant in Hoofddorp, Netherlands

Papa John's restaurants in Portugal have closed or no longer operate under the brand name. Some of these locations still serve pizza, though the master-franchise Rest-Smart filed for bankruptcy.[31]

Sponsorships

On March 30, 2006, Six Flags announced that its parks' pizza would exclusively be from Papa John's. In turn, Six Flags received an annual sponsorship and promotional opportunities from Papa John's. Papa John's is also the official pizza supplier of the Olympic Speedskating Oval in Calgary, Alberta, Canada.

In November 2006, Papa John's signed with ESPN Regional Television to become the title sponsor of the annual PapaJohns.com Bowl, a college post-season football bowl game in Birmingham, Alabama, which Papa John's continued to sponsor through 2010.[32]

In 2010, Papa John's signed an agreement to be the Official Pizza Sponsor of the National Football League and Super Bowls XLV, XLVI and XLVII.[33] In 2011, Papa John's became the official Pizza Sponsor of the NFL in Canada, Mexico and the United Kingdom.[33] In October 2012, Denver Broncos quarterback Peyton Manning became a franchisee in the Denver area for Papa John's, and also purchased 21 franchises in the area.[34] In July 2013, Papa John's announced it had become the Official Pizza Partner of The Football League in the UK.[35] The sponsorship ended after the 2017 season when Pizza Hut became the official pizza of the NFL in February 2018.

The company was the former beneficiary of the naming rights to Papa John's Cardinal Stadium used by the University of Louisville's football team, in exchange for Schnatter personally donating $5 million for the rights.[36] Schnatter made a further $10 million donation for the stadium's expansion,[36] and extended the naming rights to the year 2040. The Papa John’s name was taken off the stadium in July 2018, after Schnatter’s resignation from the company.[37]

Media coverage

Papa John's received attention in May 2008 when a Washington, D.C. franchise distributed T-shirts making fun of Cleveland Cavaliers star player LeBron James at a playoff game against the Washington Wizards. Photographs of the shirts quickly spread from the Internet[38] to Cleveland television. Increasing awareness of the controversy prompted an apology from the Papa John's national headquarters on May 5.[39] To apologize, Papa John's offered large single-topping pizzas for 23 cents (matching James' jersey number) at all locations in Greater Cleveland and throughout northern Ohio. The chain sold over 172,000 pizzas at 23 cents a piece, with customers waiting in lines outside of some stores for as long as three hours.[40]

Papa John's also received media attention on January 6, 2012, when an employee typed the phrase "lady chinky eyes" on a receipt issued to an Asian American customer at a restaurant in New York City.[41] The employee was fired and the company issued a formal apology.[42] A manager at the restaurant where the incident occurred told the New York Post that the cashier, a teenager, did not intend to offend saying, "It's a busy place, and it was a way to identify her and her order. You know, we do stuff like that sometimes. We'll write 'the lady with the blue eyes' or 'the guy in the green shirt.' I think the lady put it out there just to get some attention, some people like that type of attention."[43]

Papa John's CEO John Schnatter informed shareholders that his business's costs would increase due to the additional expenses associated with the implementation of the Affordable Care Act, and that franchisees would pass those expenses on to the consumer.[44]

John Schnatter's claim that a reverse in NFL viewer ratings (supposedly because of the NFL kneeling controversy)[45] had directly led to decreased same-store sales across Papa John's franchises was extensively reported in November 2017.[46] It was estimated that Schattner's personal holdings in the chain had lost millions of dollars in value.[47] Papa John's disavowed statements by white supremacist groups expressing support for the brand in the wake of Schatter's comments.[48]

A media report surfaced on July 11, 2018, claiming that Schnatter had used the word nigger in a conference call the previous May, along with graphic descriptions of violence against racial minorities. Forbes magazine reported that a media agency working with Papa John's severed its relationship with the company following the report. Steve Ritchie, who had replaced Schnatter as CEO, responded with a memo stating that "racism has no place at Papa John's," and a company spokesman wrote in an email that Papa John's "condemns racism".[49] The same day, Schnatter admitted to using the racial epithet during the conference call and resigned as chairman of the company's board of directors.[50][51] On July 13, 2018, top executives of the company decided to remove Schnatter's image from marketing materials.[52]

Litigation

In 1997, Pizza Hut filed a lawsuit against Papa John's based on a series of advertisements that compared the ingredients of Papa John's and its competitors. At trial, the court agreed with Pizza Hut's argument that Papa John's slogan did not constitute statements of literal fact – that "fresher ingredients" do not necessarily account for a "better" pizza; this ruling was overturned in 2000 when Papa John's appealed the decision. Although the jury's decision on the misleading advertising was upheld, the appeals court determined that Pizza Hut failed to prove, under the requirements of the Lanham Act, that the misleading advertising and puffery had a material effect on consumers' purchasing decisions.

We conclude that (1) the slogan, standing alone, is not an objectionable statement of fact upon which the consumers would be justified in relying, and thus not actionable under section 43(a); and (2) while the slogan, when utilized in connection with some of the post-May 1997 comparative advertising – specifically, the sauce, dough and stuff campaigns – conveyed objectionable and misleading facts, Pizza Hut has failed to adduce any evidence demonstrating that the facts conveyed by the slogan were material to the purchasing decisions of the consumers to which the slogan was directed.[53]

In 2012, the company was the subject of a class-action lawsuit for allegedly sending over 500,000 unwanted text messages to customers. The suit sought over $250 million in damages, though the company settled to pay $16.5 million, awarding members of the class up to $50 in damages, and a free, large, one-topping pizza.[54]

In August 2015, Papa John's agreed to pay $12.3 million to settle a class-action lawsuit, filed in 2009, in which the company was accused of undercompensating 19,000 delivery drivers in the states of Arizona, Florida, Illinois, Maryland, Missouri and North Carolina. The complaint, which stated that drivers were typically paid a flat reimbursement amount per delivery that was less than the usual recommended mileage rate, had a "net effect" of the company "willfully fail[ing] to pay the federal minimum wage to their delivery drivers."[55]

In July 2016, Panera Bread filed a lawsuit with the U.S. Eastern District Court in Missouri accusing Papa John's of stealing digital trade secrets and proprietary data management strategies by hiring Michael Nettles, a former Panera executive who was in charge of the chain's corporate digital technologies deployment.[56] In August, a Federal judge issued a restraining order, preventing Nettles from reporting to work at Papa John's while the case was active.[57] Later that year, Panera told the Federal court that it had agreed to drop the lawsuit in December 2016. Details that led to the lawsuit being dropped were not made public.[58]

See also

References

  1. 1 2 3 4 5 6 7 8 Papa John's International, Inc. Form 10-K for 2017. U.S. Securities and Exchange Commission (Report). September 3, 2018.
  2. ↑ Wolfson, Andrew (January 13, 2013). "The real Papa John: Pizza entrepreneur John Schnatter makes no apologies for wealth, success, Obamacare remarks | Math whiz mixed pizza passion, finance". The Courier-Journal. Retrieved March 22, 2017.
  3. 1 2 "The Papa John's Story". Papa John's (GB) Ltd. Archived from the original on July 10, 2013. Retrieved August 2, 2013.
  4. ↑ Shrikant, Adit. "How Dipping Sauce for Pizza Became Oddly Necessary". Eater. Vox Media. Retrieved July 28, 2017.
  5. ↑ "This Marketing Insight Made Papa John's A Household Name". Business Insider. May 21, 2014. Retrieved July 15, 2018.
  6. ↑ "Found: Papa John's Long-Lost Camaro! Kentucky Man Receives $250,000 Finder's Fee" (Press release). Papa John's. August 25, 2009. Retrieved January 17, 2015.
  7. ↑ "Pizza Power 2017 - A State of the Industry Report". PMQ Pizza Magazine. December 2016. Retrieved April 20, 2017.
  8. ↑ Sarah Whitten (May 31, 2017). "This is why Little Caesars won't be investing in delivery". Cnbc.com. Retrieved July 24, 2017.
  9. ↑ Ralph Nathan (December 10, 2015). "Papa John's Marketing and Promotional Strategies: What's in the Oven?". Market Realist. Retrieved July 15, 2018.
  10. ↑ Otts, Chris (November 7, 2007). "Jeffersontown to dedicate new bike and walking path Saturday". The Courier-Journal. p. C7. Archived from the original on March 26, 2014. Retrieved December 6, 2012. (Subscription required (help)). Papa John's office is in Jeffersontown
  11. ↑ "Papa's Specialty Pizza Challenge". Papa John's Pizza. Archived from the original on August 1, 2010. Retrieved December 6, 2012. Papa John's International Inc., 2002 Papa John's Blvd, Louisville, KY 40299
  12. ↑ 2010 Census – Census Block Map (Index): Jeffersontown city, KY (PDF) (Map). U.S. Census Bureau. 2010. Retrieved December 7, 2012.
  13. ↑ "Papa John's Celebrates Opening of 4,000th Restaurant Worldwide". Papa John's International, Inc. (Press release). September 13, 2012. Retrieved September 16, 2012.
  14. ↑ "Papa John's Int'l. Inc. Franchise Information". Entrepreneur. Retrieved September 16, 2012.
  15. ↑ Zlati Meyer (December 21, 2017). "Papa John's CEO, pizza titan John Schnatter, steps down". Retrieved December 21, 2017.
  16. ↑ Boren, Cindy; Flaherty, Bryan (February 28, 2018). "Pizza Hut scores NFL pizza sponsorship deal after Papa John's bows out". Washington Post. ISSN 0190-8286. Retrieved March 1, 2018.
  17. ↑ Kirsch, Noah (July 11, 2018). "Papa John's Founder Used N-Word On Conference Call". Forbes. New York City: Forbes Media.
  18. ↑ Meyersohn, Nathaniel. "Papa John's founder resigns as chairman after using N-word on conference call". Retrieved July 15, 2018.
  19. ↑ "'Papa John' files lawsuit against Papa John's pizza chain".
  20. ↑ Hayley Peterson (May 22, 2015). "How much it costs to open a Papa John's - Business Insider". Business Insider UK. Retrieved July 24, 2017.
  21. ↑ "U.S. Franchising Opportunities – Requirements & Fees – Papa John's Pizza". Papa John's International, Inc. Archived from the original on May 2, 2012.
  22. ↑ "Ownership Profile". Papa John's International, Inc. Retrieved January 1, 2016.
  23. ↑ "USA: Papa John's first pizza chain to offer nationwide online ordering". Just Food (Press release). January 10, 2002. Retrieved February 18, 2007.
  24. ↑ Barbaro, Michael (July 10, 2004). "Domino's Prepares to Go Public as Pizza Chains Are Challenged". The Washington Post – via HighBeam Research. (Subscription required (help)).
  25. ↑ Staff, Writer (March 1, 2017). "Papa John's testing $2.99 fee for priority orders". Associated Press. Retrieved March 1, 2017.
  26. ↑ Swatman, Rachel (June 29, 2015). "Papa John launches 300th UK store by leading army of staff to pizza making world record". Guinness World Records. Retrieved June 3, 2016.
  27. ↑ Wilson, Amy (August 29, 2010). "Papa-Johns after slice of Domino's pizza action". The Daily Telegraph. Retrieved April 5, 2011.
  28. ↑ "Supermac's". Archived from the original on February 2, 2016.
  29. ↑ "Pizza cerca de mi - Papa John's España". www.papajohns.es.
  30. ↑ "Papa John´s International celebra la inauguración de su primer restaurante en Madrid (España) - elEconomista.es". Retrieved July 15, 2018.
  31. ↑ "Processo: 1028/09.0TYLSB Insolvência pessoa colectiva (Apresentação) Data: 11-01-2010" (PDF). Diário da República (in Portuguese). 2 (20): 4440. January 29, 2010. Retrieved January 17, 2015.
  32. ↑ Marcello, Brandon (December 15, 2015). "What's the future hold for Birmingham Bowl without title sponsor?". Birmingham News.
  33. 1 2 "Papa John's Pizza Expands Relationship with NFL by Signing Multi-Year Deal to Be Official Pizza Sponsor of NFL in Canada, Mexico and United Kingdom" (Press release). October 20, 2011. Retrieved September 18, 2016.
  34. ↑ Kercheval, Nancy (October 27, 2012). "Broncos' Peyton Manning to Own 21 Papa John's Pizza Franchises". Bloomberg News. Retrieved October 29, 2012.
  35. ↑ "Papa John's announces Football League sponsorship". The Football League. July 15, 2013. Archived from the original on July 18, 2013. Retrieved August 2, 2013.
  36. 1 2 George, Stephen (March 10, 2015). "Papa John, Koch brother give multimillion-dollar gifts to U of L". Insider Louisville. Retrieved September 18, 2016.
  37. ↑ Staff, WKYT News. "University of Louisville removes Papa John's name from Cardinal Stadium". Retrieved July 15, 2018.
  38. ↑ "Does Papa John's Pizza Hate the State of Ohio?". So Good Blog. May 3, 2008. Retrieved January 17, 2015.
  39. ↑ Eick, Jon (May 28, 2008). "How Papa John's averted a WOM disaster". iMedia Connection.
  40. ↑ Zicari, Peter (May 9, 2008). "Editors' Picks for Friday from The PD". Cleveland Plain Dealer. Retrieved January 17, 2015.
  41. ↑ Mandell, Nina (January 7, 2012). "Papa John's customer: Pizza joint called me 'lady chinky eyes'". New York Daily News. Archived from the original on July 11, 2012.
  42. ↑ Chittley, Jordan (January 10, 2012). "Papa John's employee fired for racial slur on receipt". Daily Buzz. Yahoo. Retrieved January 17, 2015.
  43. ↑ "Papa John's Fires Employee For Using Racial Slur To ID Korean Woman On Receipt". WCBS-TV. January 8, 2012. Retrieved January 17, 2015.
  44. ↑ Tau, Byron (August 7, 2012). "Papa John's: 'Obamacare' will raise pizza prices". Politico. Retrieved August 14, 2012.
  45. ↑ "William Rivers Pitt - The Year Since Trump's Election, as Explained by Bad Pizza". truth-out.org.
  46. ↑ "Papa John slams NFL for 'poor leadership' after player protests lead to sales slump". Business Insider.
    "Papa John's boss: NFL protests hurting sales". ESPN.com.
  47. ↑ Kirsch, Noah. "Papa John Loses Dough: Pizza Chain Founder Loses $70 Million In Hours, Blames NFL". Forbes.
  48. ↑ Coren, Michael J. (November 30, 2017). "A complete list of brands white supremacists have given their unwanted endorsement". Quarts. Atlantic Media. Retrieved July 14, 2018.
  49. ↑ Giammona, Craig; Boyle, Matthew (July 11, 2018). "Papa John's slides after founder finds himself in hot water again". Bloomberg. Retrieved July 11, 2018.
  50. ↑ Lee, Sarah Whitten, Yen Nee (July 12, 2018). "Papa John's shares surge after founder John Schnatter resigns as chairman following N-word comment". Retrieved July 15, 2018.
  51. ↑ "Papa John's founder Schnatter resigns over N-word use - BBC News". BBC Online. July 12, 2018. Retrieved July 12, 2018.
  52. ↑ "Papa John's to remove founder's image from ads - CNN Money". July 13, 2018. Retrieved July 14, 2018.
  53. ↑ Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 495 (5th Cir. 2000).
  54. ↑ Mirando, Sarah (May 20, 2013). "Papa John's Agrees to $16.5M Text Spam Class Action Settlement". Top Class Actions. Retrieved January 17, 2015.
  55. ↑ McNair, James (August 7, 2015). "Papa John's To Settle Claims It Underpaid Delivery Drivers". WFPL. Retrieved August 7, 2015.
  56. ↑ Downs, Jere (July 21, 2016). "Panera: Papa John's exec took trade secrets". The Courier-Journal.
  57. ↑ Downs, Jere (August 13, 2016). "Papa John's exec out pending Panera secrets suit". The Courier-Journal.
  58. ↑ Perlman, Matthew (December 22, 2016). "Panera Agrees To Drop Noncompete Suit Against Papa John's". Law360.
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