Struggling Pizza Brand Is Reducing Corporate-Owned Units
- Papa Johns is refranchising 28 corporate units in Orlando. The new owner is an existing franchise owner, Wade Oney.
- Oney formerly was chief operating officer of Papa Johns during a high-growth period for the brand.
- Like many U.S. pizzerias, Papa Johns has been struggling financially.
- Refranchising North America units is a part of Papa Johns’ turnaround plan. Last December Papa Johns refranchised 85 units in Baltimore and Washington, D.C.; it has a new partner in Mexico that took over 44 existing south-of-the-border franchises.
Papa Johns has sold 28 corporate-owned Orlando-area restaurants to two of its franchisees, PZZA Group and Magic City Pizzerias, both of which are owned by Wade Oney. That increases Oney’s Papa Johns holdings to 120 restaurants; he had opened 10 of those units in Central and South Florida just last year, according to reports posted by RestaurantDive.com, Yahoo Finance, Nation’s Restaurant News and BusinessWire.com.
Oney has worked at pizza restaurants since 1981 and has held leadership positions at major pizza companies, including serving as chief operations officer for Papa Johns from 1995 to 2000. During the period when Oney was COO, Papa Johns grew to 2,000-plus restaurants.
“Over my 35 years as part of the Papa Johns family, I’ve learned how the brand offers a great place to work, equips franchisees to grow and overall presents a solid investment opportunity depending on economic times and how well you operate and take care of the customer,” Oney said in a news release. “We’re excited to expand our portfolio of Papa Johns restaurants and look forward to serving even more customers in Central Florida.”
Reaction from Papa Johns Executives
John Matter, the franchise’s global chief development officer and assistant corporate secretary at Papa Johns said Oney and his team are “a leading example to other franchise partners of operational excellence, customer service, team culture and community support.” Oney’s team has been named Papa Johns Franchisee of the Year multiple times, and he has been inducted into the Papa Johns Hall of Fame.
Christopher Collins, Papa Johns’ interim chief financial officer and senior vice president of corporate finance, said that the Orlando units’ sale makes up part of Papa Johns’ plan to reduce corporate ownership to a mid-single-digit percentage of its North American stores, RestaurantDive.com reported Wednesday. The publication also quoted Collins as saying that “we expect these [refranchising] actions will support incremental growth opportunities and strengthen our franchise network by transitioning select restaurants to high-performing franchise partners.”
The refranchising began big-time last December when Pie Investments acquired 85 locations in the Washington, D.C., and Baltimore markets. The terms of that sale also specified that Pie Investments would open 52 more locations in those markets and in Philadelphia by 2030.
Impact on Revenue
Collins said the Orlando transaction will reduce Papa Johns’ consolidated revenue by $4 million. During the second quarter, company-owned restaurant revenue decreased by $37 million because of the 85-unit refranchising deal as well as lower overall comparable sales among its restaurants.
The brand has suffered sales declines in eight of the nine previous quarters. During the second quarter of this year, the decrease was 8.3%, RestaurantDive.com said.
Papa Johns is far from the only pizza brand on the ropes financially. Bloomberg has noted that many U.S. pizzerias are suffering because of tariffs and sluggish consumer traffic resulting from inflation. Case in point: Pizza Hut sales declines had dragged down the overall performance of umbrella restaurant franchisor Yum! Brands, which sold the brand in June. (Yum! still owns KFC, Taco Bell and The Habit Burger Grill.)
More Turnaround Moves Expected
Papa Johns leaders have said they aim to further increase ownership by experienced franchise operators in order to shed more corporate units in North America. More than 3,000 units are located in the United States.
CEO Todd Penegor said earlier this month that “we believe that refranchising, with strategy-forward, well-capitalized, growing franchisees, strengthens the long-term health of the Papa Johns system and unlocks future growth opportunities,” according to NRN.
In addition to refranchising, the franchise has rolled out several other initiatives as part of its turnaround plan. Those include publicizing value meals via personalized offers, enhancing customer experience, expanding marketing outreach and controlling costs.
About Papa Johns
Papa Johns has headquarters in both Louisville, Ky., and Atlanta, and it has roughly 6,000 restaurants in about 50 countries and territories. This month the brand announced it had a new franchise partner in Mexico, KM Capital, which would take over the operation of 44 existing franchised restaurants there.
Papa Johns International Inc. was founded in 1984. The brand is known for its slogan Better Ingredients, Better Pizza. Its marketing emphasizes that it uses fresh, never frozen, dough and that its meat contains no fillers.
